Avoiding Liquor Privatization Disaster

HARRISBURG, Pa., July 6, 2015 /PRNewswire-USNewswire/ -- The following is a statement issued by Independent State Store Union:

When the state of Washington privatized its liquor distribution system, consumers were promised better selection, cheaper prices and improved convenience.  Similar arguments were used over the last four years during the liquor privatization debate in Pennsylvania to persuade legislators and consumers to support privatized sales of liquor and wine.

It is now a well-documented fact that those promises failed to materialize in Washington and, given the similarities between the Washington privatization plan and the version recently passed by the Pennsylvania legislature, House Bill 466, there is clear evidence that the same three empty promises – better selection, cheaper prices and improved convenience – would never have materialized in Pennsylvania either.

A report published last month by the Alcohol Research Group (ARG), an independent research organization based in California, found that while accessibility to liquor increased in Washington, so did prices.  The report found that while Washington went from less than five hundred stores that sold liquor to 1,600, prices rose by as much 15.5% for spirits.  Another key finding was that the formerly state-owned liquor stores, now owned by mom-and-pop private interests, have struggled to compete against supermarkets and new liquor superstores with a number of these smaller stores failing and closing.  

According to recent media reports, researchers with ARG said that there were broad lessons to be learned from the Washington experience for Pennsylvania.  

ARG said the reason that Washington saw an increase in the price of alcohol was that the state structured taxes on private liquor sales in a way intended to ensure that the state brought in the same amount of revenue as it did under its monopoly.  When private retailers added their own mark-up for profit, it meant that retail prices were ultimately higher than under the state monopoly.

Since the tax structure under HB 466 not only sought to protect current revenue but was designed to generate an additional $220 million annually, Pennsylvania's consumers would likely have seen an even more dramatic price increases than experienced under the Washington privatization model. 

ARG also found that a number of Washington's formerly state-owned liquor outlets, auctioned off to private mom- and-pop business interests, are now struggling and closing their doors because the competition from big box stores and the supermarkets is so great.  Limited competition negatively impacts convenience and is yet another undesired result potentially applicable to Pennsylvania under HB 466.

Finally, another well-documented result of privatization in Washington is limited product selection.  Costco, the largest player in the Washington alcohol retail market, frequently stocks under two hundred alcohol items in their stores – this includes beer, wine and liquor.  In comparison, the smallest Pennsylvania wine and spirit shoppe stocks over 1,200 items of just wine and liquor.

During the closing days of the debate on HB 466, to their credit, Senators Scarnati and McIlhinney acknowledged that HB 466 would likely not produce the much promised talking points of better selection, cheaper prices and improved convenience.  Senator Scarnati admitted that constituents in his rural district would most likely experience less convenience and Senator McIlhinney unequivocally announced that prices would definitely increase under the provisions of HB 466. 

With the trilogy of privatization lies – better selection, cheaper prices and improved convenience – debunked by both an outside independent research group and the leaders of our own Senate, it becomes abundantly clear that HB 466 was nothing more than an effort to pass privatization for privatization's sake.   

Thankfully, Governor Wolf vetoed HB 466 and thus avoided the liquor privatization disaster experienced in the state of Washington from playing out in Pennsylvania at the expense of our consumers.  House Bill 466 – as was the case with the other liquor privatization plans introduced over the past four-and-one-half years of this debate – was bad for the consumers, bad for the taxpayers and bad for our communities.  

With liquor privatization cited as a legislative priority by a mere 2% of voters in the most recent polling data, it is abundantly clear that liquor is not an issue that dominates conversation around the family dinner table.   

It is now time to put liquor privatization to rest and address the issues identified by the remaining 98% as important to them – issues that have a real impact on the lives and livelihoods of all Pennsylvanians, including both the drinker and non-drinker alike.  Grabbing a bottle of Captain Morgan when they purchase a box of Captain Crunch is not one of their priorities.  

SOURCE Independent State Store Union