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March 22, 2011 | By | Posted in General News

Liquor stores want to be more like private businesses

PLCB asking for fewer restrictions on pricing and hiring
 

By Eric Boehm | PA Independent

 
HARRISBURG — Facing increased scrutiny from those calling for the privatization of Pennsylvania’s state-owned and operated liquor stores, the Pennsylvania Liquor Control Board (PLCB) is asking the Legislature to let it operate more like a regular business.
 
The leaders of the PLCB are seeking legislative assistance to make changes they say will enhance customer service, boost efficiency and, ultimately, translate to more sales and revenue for the state. The changes would include longer hours, more stores open on Sundays, more flexibility in pricing and freedom from state civil service laws regarding hiring.
 
Collectively, the changes could net the PLCB an estimated $50 million in additional revenue, said Joe Conti, the board’s chief executive officer. Conti said the estimate was on the conservative side, and the funds would not be available until the 2012-2013 budget year.
 
The changes, which the PLCB’s heads requested at Tuesday hearing of the Senate Appropriations Committee, would require legislative action.
 
Some lawmakers questioned whether the changes to PLCB policy would be better carried out by the private sector through the privatization of the state stores.
 
State Sen. Jake Corman, R-Centre, chairman of the Appropriations Committee, said the proposals sounded a lot like what a private business would want.
 
“You’re trying to increase the quality and the price for the LCB, which is the right thing to do,” said Corman. “But it begs the question, why don’t we just privatize the industry like 31 other states have done and allow the marketplace to go?”
 
The PLCB operates the 630 state-owned liquor stores in Pennsylvania and manages the licensing process for restaurants, bars and other establishments that serve liquor.
 
Pennsylvania is one of only two states with a full monopoly on liquor and wine sales; Utah is the other.  Nineteen states have some form of control on liquor sales.
 
There has been growing support for ending Pennsylvania’s liquor monopoly though no legislation has been introduced this year. House Majority Leader Mike Turzai, R-Allegheny, has promised privatization legislation this spring, and Gov. Tom Corbett created a special commission to review the costs and benefits of privatizing the state stores. 
 
In one of the major proposals discussed Tuesday, the PLCB asked to be released from some of the state’s restrictions on civil service workers, which is designed to identify bureaucrats, not salesmen.
 
The civil-service test "wasn’t created to find us the best-skilled employees,” said Stapleton. “We would like to be able to make hiring decisions on our own.”
 
The board also asked for legislative assistance in changing the rules regarding the state’s mark-up on liquor, which is currently 30 percent. If the liquor code is changed, the PLCB would have more flexibility with the prices of some products, though all would have to be sold at the same price statewide.
 
The board’s leaders also asked for greater flexibility with the state’s procurement requirements pertaining to inventory and store rentals.
 
“In both personnel and procurement, we want to work with the committee on appropriate controls,” said Conti. “What we have to go through in the current state bureaucracy is just very, very difficult for our agency and, ultimately, does take money from our bottom line.”
 
State Sen. Lloyd Smucker, R-Lancaster, said many of the PLCB’s requests would double as arguments in favor of privatization.
 
“Those decisions are perhaps best left for business. It can be more nimble with decisions to be made in reaction to market conditions,” said Smucker.
 
The board also is planning some cosmetic changes to the state stores in the coming months. Next year’s proposed budget includes a $1.8 million contract for advertising and branding, which includes giving the liquor stores a uniform store front across the state.
 
Conti said the PLCB is spending $4.3 million during the next two years on advertising.
 
Another cosmetic change was proposed by state Sen. Jim Ferlo, D-Allegheny, an opponent of the privatization effort. He suggested the Legislature rename the controversial “Johnstown Flood tax,” an 18 percent levy applied to all alcohol sales in the state.
 
Originally a 10 percent temporary tax meant to help Johnstown rebuild following the devastating 1936 flood, it now goes directly to the state’s general fund. The tax produced an estimated $284 million in state revenue this year.
 
“We should at least call it what it is," said Ferlo. "It’s part of the essence of the state budget that provides for all kinds of state programs.”
 
Ferlo said the Johnstown Flood tax is being used by supporters of privatization to cast the PLCB as backwards and overreaching.
 
Stapleton said the tax could possibly be changed or done away with entirely if the PLCB had more flexibility in pricing. 
 
The PLCB turns over about $100 million of its yearly profits to the state general fund as well.
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