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March 22, 2013

Liquor privatization passes state House

MEADVILLE — The House of Representatives voted 105-90 Thursday to dismantle the state monopoly on liquor sales after an eight-hour debate worthy of a controversy 80 years in the making.

“Today is truly a historic day,” Gov. Tom Corbett said. “Never before has a liquor privatization bill passed through either chamber of the legislature, and I am extremely proud of the hard work and commitment the House and their leadership have shown to the people of Pennsylvania today.”

“The fact of the matter is,” said House Majority Leader Mike Turzai, R-Allegheny County, “the proposal as amended is an A-plus product.”

Republicans estimate that the legislation would provide more than $1.1 billion in upfront license fees. The increased taxes would mitigate a $50 million decrease in ongoing revenue — between the $80 million in profits that the Liquor Control Board had funneled into state coffers and the $30 million expected to be generated by reoccurring fees.

With the passage in the House, the legislation moves to the Senate, where Republicans have a 27-23 advantage.

Senate Majority Leader Dominic Pileggi told reporters that the legislation will almost certainly be changed. “I don’t think anyone expects the Senate to just take up the House bill and move it to the governor’s desk as-is,” Pileggi told reporters in a Thursday conference call conducted shortly before the House debate began.

“I think the focus should be on what the system would deliver to the citizens of Pennsylvania,” and particularly convenience, selection and competitive pricing, Pileggi said.

House Republican lawmakers said that amendments added this week to give preferential treatment to existing beer distributors was a much more palatable approach than the plan laid out by Corbett in his budget address.

There is also another key difference between the governor’s plan and the measure approved by the House: The House bill does not specify that the upfront revenue be devoted to education. Instead, the legislation would put the money into an account until the Legislature determines what to do with the money.

The legislation would create 1,200 wine and liquor licenses — one for each beer distributor in the state. Beer distributors would have first opportunity to acquire those licenses and then a year without competition from other stores. Any licenses that are not claimed by beer distributors would then be sold to any other private businesses. In addition, the legislation would create another 820 grocery store wine licenses. But beer distributors would be the only location where consumers could buy all three — wine, liquor and beer.

Whenever the number of wine and liquor licenses doubles the number of state stores in the county, the state stores will close. When the number of state stores across the Commonwealth drops below 100, the entire system will be shuttered.

Republican Rep. Brad Roae of Crawford County said that under the original plan proposed by Corbett, beer distributors would have had to pay $150,000 to become one-stop shops for liquor, wine and beer.

The new plan creates a fee-scale based on the location of the beer distributor, so that distributors in rural areas will pay a smaller fee and have four years to completely pay off the cost of the license. For a beer distributor in Crawford County, for instance, the cost of the enhanced license would be $52,000 — $15,000 for the cost of a wine license and $37,000 for the cost of the liquor license.

“A lot of people, they would have been crushed” if the state had required a $150,000 license fee for beer distributors, Roae said.

“The role of state government is to provide services to residents,” he said. “It is not the role of state government to provide unionized state jobs for people.”

Republican Rep. Michele Brooks, whose constituency includes Crawford County, said in a statement that “the question surrounding this legislation is whether the advertisement and sale of alcohol should be a core function of government or whether the private market should provide that function. Government should focus its efforts on the enforcement, rather than the promotion and sale of liquor, which is a conflict of interest when the same agency does both.”

Democrats questioned the fiscal impact of the move and argued that the social costs of privatization have been ignored.

“We have a system that favors small businesses and has led to the lowest rates of alcohol related deaths in the nation,” said Democratic Rep. Bryan Barbin of Cambria County, during his comments on the House floor. “Some say we should eliminate this system for convenience. I disagree.”

Rep. Mark Longietti, D- Mercer County, noted that when his local newspaper ran a story on this issue a couple days ago, the customer photographed in the liquor store was from Ohio.

“You can see from that random experience,” he said. “People in Ohio are coming to my district to buy wine and liquor because they are getting a better price.”

Finnerty reports from Harrisburg for Community Newspaper Holdings Inc.’s Pennsylvania newspapers, including The Meadville Tribune. Follow him on Twitter @cnhipa.

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