Young Says PFM Report Should 'End Farce' of Privatization

Oct 25, 2011, 17:15 ET from UFCW PA Wine and Spirits Council

PLYMOUTH MEETING, Pa., Oct. 25, 2011 /PRNewswire/ -- The Public Financial Management report on proposals to dismantle Pennsylvania's Wine and Spirits shops confirms what many observers have understood for months now: taxes and prices for wine and spirits will increase, especially for those Pennsylvanians living in rural areas, said Wendell W. Young IV, President of United Food and Commercial Workers Local 1776 and Chair of the UFCW of PA Wine and Spirit Council.

Young said that the PFM analysts did not take into account the negative impact that the elimination of up to 5,000 jobs would have on the state's economy. Also, they were not aware of or ignored the fact that the U.S. Centers for Disease Control in April recommended against the further privatization of the retail sale of wine and spirits.

"We have to review the entire report, obviously, but the executive summary alone raises enough red flags to put an end to this farce," Young said.  "Rep. Mike Turzai's bill would raise taxes and prices – and we know this from media and witnesses who have testified before the House Liquor Control Committee.  The PFM people have reached the same conclusion.  In order to match the revenues we already have today, taxes are going to go up and consumers will be forced to pay more.  That makes no sense whatsoever."

Young cited the following excerpt from the Executive Summary of PFM's report:

"It is possible to achieve Fiscal Neutrality through a combination of fees and taxes, and the choices, depending on many factors, may have an impact on consumer prices.  As noted in the section on taxes, the order of operations (where taxes are calculated in relationship to the price of the product) can have a material impact on the tax burden and final price to consumers (emphasis added)."

The summary also notes, "A converted gallonage tax to raise the same amount of revenue as existing taxes would be the highest in the nation for wine, and for spirits would rank 14th."

Young said:

"It appears that Mike Turzai wants to make Pennsylvania one of the top states for taxing wine and spirits.  I'm not sure that will resonate well with his caucus or most Pennsylvanians."

The PFM summary also makes it clear that rural Pennsylvanians will lose out under the privatization scheme.  It states:

"Currently, 18 counties make up approximately 82 percent of total sales in Pennsylvania.  These 18 counties are also among the top 20 counties in population density.  There is a strong expectation that these will be the counties most likely to experience competitive price pressures. As a result, for the majority of sales in Pennsylvania, the product prices will be at or slightly lower than the results from the static model."

But Young pointed to concerns already raised by several lawmakers from rural areas.

"You won't have this competition in Punxsutawney and you won't have it many other small towns and rural counties. Even if you believe that competition will drive down prices – and that hasn't happened in states that have gone down this path - you'd end up with only 18 counties that are winners versus 49 losers," Young said.  "Lawmakers who support this idea will have a lot of explaining to do."

Young also took issue with the PFM finding that research on the social impact of privatization was 'mixed.'  "The scientific, peer-reviewed evidence is consistent over time and overwhelming.  I have yet to hear anyone with any credibility question the independence or the expertise of the CDC, for instance, and they have told us that privatization is not smart public policy," he said.

Young said that the UFCW would welcome the opportunity to participate in the public hearings on House Bill 11 and the PFM report that are to be scheduled by the House Liquor Control Committee.  He stated:

"Chairman Taylor and his colleagues have done a very good job of bringing in folks from across the state to testify on this critical issue.  We're looking forward to the next round of hearings and we're confident that, in the end, lawmakers will reject the idea of putting 5,000 jobs at risk while raising prices and taxes and opening the possibility of liquor stores on every corner."

SOURCE UFCW PA Wine and Spirits Council