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The Associated Press October 26, 2011, 10:03AM ET

Pa. gov recommends limiting private liquor stores

Pennsylvania Gov. Tom Corbett on Tuesday released a long-awaited consultant's report that projects the privatization of liquor and wine sales in the state would generate as much as $1.6 billion from the sale of wholesale and retail licenses alone.

The governor also said he prefers a system that limits the number of wholesale and retail licenses -- an approach advocated by the Legislature's chief privatization advocate, House Majority Leader Mike Turzai -- rather than an alternative approach suggested by the consultant that would limit the number of wholesale licenses but allow unlimited retail licenses.

Corbett called Turzai's proposal "the place to start" in the simmering legislative debate over privatization.

"We need a proposal that limits the number of retail outlets to protect our neighborhoods," the governor said in a prepared statement. "At the same time, the state needs to exit a business it should never have been in to begin with. Captive markets do not make for a free people."

Corbett noted the state Liquor Control Board advertises its products to the public.

"While they're enforcing and regulating, they're encouraging everybody to drink more," Corbett said. "You see the inherent conflict in that?"

The Republican governor advocated privatization in last year's election campaign, but he has not endorsed a specific proposal. He had originally promised that the study by The PFM Group would be done by summer.

The report estimates that about 3,200 state workers, from a workforce of 80,000, would lose their jobs if the sales of liquor and wine were privatized.

The report suggested that a private system could result in competitive pricing for customers and fiscal neutrality for the state, but it noted that even the decision on how to privatize would take many months and the full process could take several years.

One option would limit retail liquor outlets to 1,500, which would be auctioned off along with between 10 and 30 major wholesale licenses. That approach could result in higher prices in some markets.

Another option would let the open market govern the number of retail liquor stores. Each would pay an annual license fee of $10,000, plus $10,000 for Sunday sales. Wholesalers would pay a $50,000 annual fee.

Turzai said Tuesday that the PFM report supports his arguments that privatization would enhance customer convenience and provide a significant fiscal windfall for the state treasury.

Turzai's plan, among other things, would replace the more than 600 state stores with twice as many stores in 750 retail zones around Pennsylvania. The Allegheny County Republican has said the sale of the retail licenses and a much smaller number of wholesale licenses could generate a windfall to the state treasury of as much as $2 billion.

"Obviously, having the governor's backing is significant," Turzai spokesman Steve Miskin said.

The head of the largest state-store employee union contended that privatization will lead to higher taxes. He cited, among other things, the consultants' finding that imposing a per-gallon tax -- an element of Turzai's plan -- to raise the same amount of revenue as existing taxes would be the highest such tax in the nation for wine and 14th-highest for liquor.

"We're confident that, in the end, lawmakers will reject the idea of putting 5,000 jobs at risk while raising prices and taxes," said Wendell Young IV, whose Local 1776 of the United Food and Commercial Workers represents 3,500 people.

Turzai's Democratic counterpart, House Minority Leader Frank Dermody called privatization "a bad idea whose time has not come."

"Privatizing liquor sales in Pennsylvania does not raise enough money to make it worth giving up one of the state's most valuable assets," the Allegheny County lawmaker said. "It will cost thousands of Pennsylvania workers their jobs and pensions. It means higher prices and reduced selection for consumers who want to buy wine and liquor, and it does nothing to change the way beer is sold."



Liquor privatization analysis final report:

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