The Associated Press February 15, 2011, 8:13AM ET

Pa. senators hear liquor privatization arguments

A state Senate panel got the ball rolling Monday on what could become one of the hottest legislative issues in Pennsylvania this year: privatizing the sale of wine and liquor.

Senators on the Law and Justice Committee heard testimony on the experience of other states that have liberalized liquor laws. But without a bill before the committee, senators found few answers for their questions and sometimes didn't like the answers they heard.

"As you can see, this is a very complex issue," said committee chairman Sen. John Pippy, R-Allegheny.

Representatives of free-market-oriented think tanks and researchers focused on alcohol policy went before the committee.

House Majority Leader Mike Turzai, R-Allegheny, is working on a privatization plan and has said it would bring $2 billion in one-time revenue into Pennsylvania by selling wholesale and retail liquor licenses. Proponents say privatization could bring a financial windfall that would help erase the state government's projected multibillion-dollar deficit.

But there are a number of ways to privatize the state liquor store system, and lawmakers have no up-to-date and independent analysis about what Turzai's still-developing plan -- or any plan for that matter -- would mean financially.

Plus, privatization opponents, such as the union representing liquor store clerks, say Turzai has wildly overstated the potential financial benefit because he has based his projections on a flawed figure from a study completed in the 1990s.

Republicans appear to have no plans to introduce a bill in the Senate and seem to doubt that any liquor store privatization plan could be advanced far enough to be booked as revenue in an on-time budget for the 2011-12 fiscal year that begins July 1.

"That would be difficult," Pippy said in an interview after the hearing.

Pippy said his committee will study the financial benefit of privatization and whether it can improve customer service without compromising public safety.

Newly elected Gov. Tom Corbett supports the idea and told reporters Saturday at the Republican State Committee meeting that he remains committed to privatization and is monitoring discussions on the topic in the Legislature. But, he said, policy makers need to get a clearer picture of the potential revenue for the state.

"The studies that have been quoted are probably 10 years old, so we need to update that," he said.

With other states searching for ways to close huge deficits, privatization is a major topic. However, Washington state voters rejected two ballot measures last year that would have gotten Washington state out of the liquor business. Meanwhile, Virginia Gov. Bob McDonnell's plan to sell off the state's liquor monopoly has stalled in that state's General Assembly.

In Pennsylvania, one major unanswered question is how many retail licenses would be issued. Another is whether liquor and wine will be sold by retailers such as beer distributors or grocery stores.

The state has about 620 state liquor stores, but Sen. Lawrence Farnese, D-Philadelphia, questioned how many licenses would need to be sold to bank $2 billion.

Selling 625 store licenses, or even the 750 that Turzai proposed in a bill that died last year, would mean a per-license cost of well above $2 million, Farnese said.

"Where else in the United States are they getting those types of amounts for the cost per license?" Farnese asked. "Show me somewhere else, point to me somewhere in the United States where those kinds of numbers are sustainable."

Public safety also will be a major point of debate.

James Sgueo, president and CEO of the National Alcohol Beverage Control Association, referred senators to research that found falling crime rates across Canada's provinces in the 1990s. But in Alberta, researchers found alcohol-related crimes rose after the privatization of liquor stores made alcohol more widely available, he said.

Another researcher, economics professor Antony Davies of Duquesne University, told senators that he found significantly lower alcohol-related traffic fatality rates among people of legal age in states where liquor is sold in private stores.

Told by another researcher that clerks in state-controlled stores are more likely to check IDs and prevent sales to underage customers, Sen. Gene Yaw, R-Lycoming, responded sharply, saying, "I just don't believe that at all."


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