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October 6, 2011 | By | Posted in Legislature

High ranking GOP Senator joins privatization battle as Corbett reviews crucial report

Unions, Democrats oppose plan, other Senate Republicans on the fence
 
By Eric Boehm | PA Independent
 
HARRISBURG — A move to privatize Pennsylvania's liquor store system that could net the state a windfall of cash gained a key ally Thursday, as a top state senator endorsed the plan to eliminate the post-Prohibition Era model.

State Sen. Pat Browne, R-Lehigh, the third ranking Republican, publicly backed a plan being pushed by House Republicans and Gov. Tom Corbett to privatize the retail operations of the Pennsylvania Liquor Control Board, or PLCB, which regulates and sells wine and hard liquor. 
 
Browne said privatization would leave the PLCB, a holdover from the Prohibition Era, in the appropriate role of enforcement and regulation while letting the private sector operate the stores.
 
Quoting from pro-prohibition former Gov. Gifford Pinchot, who said the PLCB’s goal was to make the purchase of alcohol “as expensive and inconvenient as possible,” Browne said the PLCB’s recent attempts to operate more like a “quasi-commercial” agency contradicts its original purpose.
 
“If you’re going to function like a private retailer, you might as well be one,” Browne said. “It is time for the commonwealth to divest of its operations into the private sector. It no longer serves a legitimate public function.”
 
Last year, the PLCB brought $496 million to state coffers through sales taxes, liquor taxes and profit transfers.
 
Pennsylvania and Utah are the only states that control liquor sales directly.
 
House Majority Leader Mike Turzai, R-Allegheny, wants to sell the 625 state liquor stores, replacing them with about 1,200 retail licenses auctioned off to the highest bidder. Turzai also would replace the state’s multi-level tax system on alcohol with a revenue neutral tax based on volume. Generally, it would create higher prices for low quality wine and liquor and lower prices for more expensive brands.
 
Turzai’s plan would leave the PLCB in charge of alcohol enforcement and education, which Browne said was more in line with the original intention of the agency.
 
But the plan also will eliminate the jobs of the 3,500 state workers in the state liquor stores, said Wendell Young IV, president of the United Food and Commercial Workers Local 1776, which represents state store workers. Based on other states’ experiences, large retailers who will buy the liquor licenses are unlikely to hire additional workers, he said.
 
“If you look at the state of the liquor industry today, it’s large retailers that dominate the landscape, and they are not going to hire many, or any, new people,” Young said. “They are just going to reallocate the shelf space and reallocate the existing workforce.”
 
Browne’s endorsement of Turzai's bill is particularly important for proponents of the liquor privatization plan, because other top Senate Republicans have been hesitant to jump on board.
 
During the summer, Senate President Joseph Scarnati, R-Jefferson, said the state should hold off on privatizing the PLCB and instead remove regulations — “handcuffs” — from the agency so it can operate more like a private-sector business. 
 
In September, he continued to question the privatization plan, but hinted that he would go along with it in return for support from House Republicans on other issues, such as a natural gas impact fee, which Scarnati supports more strongly than House Republican leaders.
 
State Sen. John Blake, D-Lackawanna, said he was concerned about the negative impact of privatization on the state’s finances, the state store workers and public safety, since the Turzai plan would double the number of liquor stores in the state. 
 
“I understand the philosophical argument about whether it is an appropriate function of government, but let’s be very clear, alcohol is basically a controlled substance and that means it is a public safety issue,” Blake said. “I don’t think that our system is broken, and I think it can be made better.”
 
Blake also doubted whether the state can expect a windfall of cash from selling the stores, but that question should be answered shortly.
 
Philadelphia-based Public Financial Management, a business research firm, submitted a report to Corbett this week detailing the potential revenue from the sale of the state liquor stores. The report has not yet been made public, and Corbett said Wednesday that he had not read it.
 
Proponents of the plan say the state will net about $2 billion, but Young has said the total will be as little as $600 million.
 
State Sen. Bob Mensch, R-Montgomery, joined Browne on Thursday in Allentown to call for an end to the state liquor store monopoly. He suggested using the revenue from the one-time sale of the state liquor stores to fund transportation infrastructure projects.
 
“This is a perfect way of getting a jump on some of the repairs that have been ignored for the last few years,” Mensch said.
 
 
Asked on Wednesday if he had any ideas for how the revenue from selling the state liquors could be used — in the event the sale netted a large lump sum — Corbett said he was sure special interest groups would be “banging on my door” to get at it.
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