Meadville Tribune

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State News

June 30, 2013

Amendment's OK boon to liquor privatization effort

HARRISBURG — An amendment approved by the state Senate in the early morning hours of Saturday is a victory for proponents of privatization as it agrees to take a greater step relinquishing control of the lucrative wholesale liquor business.

The amendment authored by Senate Majority Leader Dominic Pileggi, R-Chester County, passed on a straight party vote 27-23. The amendment vote came at 1:30 a.m. Saturday morning as the Legislature continued its desperate push to complete a budget while also accomplishing as many of its other big ticket priorities, including liquor privatization, as possible.

“We are on the verge of making improvements to our system that consumers have wanted for decades,” Pileggi said.

The original Senate version of the bill provided that the state would maintain the wholesale operation based on the assumption that the value would increase as privatization drove new stores into the market. But that set up a standoff with the House where more ardent proponents of privatization argued that the original Senate plan didn’t go far enough.

The new language would allow the Liquor Control Board to lease the wholesale side of the liquor monopoly for a 10-year period. The lease deal would only be allowed if the state determines that it will get more money from having someone else operate the wholesale operation.

A representative of the Distilled Spirits Council of the United States, a liquor wholesalers trade association, testified before a Senate committee that the commonwealth would get more than $500 million by selling its wholesale operation.

The handling of the wholesale side of the liquor monopoly has been largely overlooked with most of the focus being centered on what kind and how many retail outlets would be created. But the wholesale side of the liquor monopoly is extremely valuable. Critics of privatization have cautioned that it will be difficult for the state to generate enough money to offset the lost revenue without compelling wholesalers to pass along their costs to consumers.  

Proponents of privatization have argued that the other components involved in liquor privatization will create so many more stores selling wine and liquor that if the state doesn’t unload the wholesale operation it will have to invest heavily to cope with demand.

The Distilled Spirits Council of the United States has estimated that the Liquor Control Board would have to spend $54 million to increase capacity to satisfy demand if another 1,200 retail outlets are created by privatization. If all the bars and taverns and hotels in the state would expand liquor sales, the LCB’s cost of satisfying that increase demand would top $700 million, the group’s analysis found.

Democrats consistently argued against privatization. On Saturday, Sen. Jay Costa, D-Allegheny County, said he is “troubled” by the societal costs of broader availability of wine and liquor. Democrats also questioned the need to pass the controversial measure in the middle of the night.

“This conversation should not be happening at 12:40 in the morning,” Costa said.

Finnerty works in the Harrisburg Bureau for Community Newspapers Holding Inc. He can be reached by email at jfinnerty@cnhi.com or on Twitter @cnhipa.

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