Pros and Cons of Governor Corbett’s LCB Privatization Plan

All I wanted to do was drink at brunch.

A friend and I both usually work on Martin Luther King Day, but both of our media jobs had given us off this year. We picked a BYO brunch place, and before meeting up I was tasked with bringing a bottle of champagne for mimosas. What better way to honor Dr. King! Despite knowing it was a holiday, I wasn’t thinking. I walked up to the shiny new state store on the 700 block of South Street and pulled the handle. It was closed, with a little placard saying it was closed for MLK Day. Duh. Government employees have off on state holidays.

It wasn’t a big deal, but the story is typical: Buying liquor or wine in the commonwealth of Pennsylvania is a hassle. In a vacuum, the state stores aren’t so bad: It’s certainly possible to get good liquor or wine at a fine price. But compared to other states where private businesses sell liquor, beer and wine all in one place, Pennsylvanians have to jump through unnecessary hoops for hooch. The only other state like us is Utah. Utah! It’s enough to drive a man to go to New Jersey to buy his beer.

This isn’t surprising. When Gov. Gifford “No Relation to Bronson” Pinchot created the Liquor Control Board in 1933, it was designed to “discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible.” To be fair, this isn’t the worst idea: Drunkenness has social costs, and even today much alcohol is probably taxed a little too low. I didn’t get drunk on Martin Luther King Day! A net positive for me and for society.

That isn’t reality, though. Putting the state in the business of selling liquor means it’s going to try to maximize profits. The state ought to be encouraging its citizens not to drink to excess, not selling them handles of high-proof liquor. (But not grain alcohol, unless you fill out a form promising not to drink it.) So get the state out of the business!

Governor Tom Corbett talked up his plan to privatize the state system in yesterday’s budget address. “Selling liquor is not a core function of government,” he said. “Education is.” Yes, it was obnoxious politician speak, analogous to the lottery benefitting older Pennsylvanians. But Corbett would direct the $1.1 billion the state expects from the sale of licenses and of key components of the LCB to education around the state. Want some more? “We need to put our liquor system into private hands,” Corbett said. “Pennsylvanians have waited too long… this is our opportunity, and our children’s opportunity.”

Unfortunately, Corbett’s plan is kind of stupid.

• It creates six new categories of licenses, essentially expanding the convoluted system Pennsylvania already has.
• It continues the pointless limits on alcohol purchases at one time at corner delis and similar businesses—e.g., two six-packs at once—forcing customers to do what I like to call the Pennsylvania Beer Shuffle: Buy a 12-pack, step outside the store, then walk back in and buy another 12-pack. It’s a dance those preparing for a party in Pennsylvania are all too familiar.
• It does little to address the negative effects of alcohol. The state ought to be instituting a gallonage tax on wine and spirits. This makes cheap spirits more expensive and might actually do something to cut consumption. (Yes, like high cigarette taxes it’s a little paternalistic and hurts the poor more in the pocket; unfortunately, it’s probably the best option we have.)

There are good things about the plan.

• Beer can be sold at grocery and drug stores.
• Beer distributors could buy a license to sell wine and liquor.
• The state stores go away, so the state’s no longer the wholesaler and selection should improve. (No more going to Jersey to buy Rittenhouse Rye whiskey!)

If this goes through many union workers would likely lose their jobs, and if you believe those workers deserve protection that is a valid a reason as any to oppose privatization. Yes, current beer distributors are opposed because they don’t want competition, but they’re right: This would simply be a one-time windfall for the state and would end a constant, unending revenue stream. (The strongest argument against privatization: The hilarious, awesome phrase “beer distributor” could go away.)

But it’s time for the state to get out of the alcohol business. Lew Bryson’s Why the PLCB Should Be Abolished blog—which, if you couldn’t tell, is in favor of privatization—says it’s the best plan for pro-privatizers he’s seen. Sure. It’s just a shame that Corbett’s plan continues so many of the same pointless regulations—ones that do little to nothing to combat the ills associated with excessive drinking—in the current system.

Other highlights of Corbett’s budget address

• Governor Corbett rejected Obamacare’s Medicaid exemption. The federal government picks up 100 percent of the tab for the first three years, and still pays for 90 percent of it in future years. Uninsured people tend to put off preventative care, and only go to the hospital when necessary. Hospitals don’t turn away patients, which raises medical costs for everyone, so rejecting an expansion of health insurance mainly funded by the federal government seems like a silly stand to take. “Governor Corbett chose to pander to the far right and willfully inflict damage on Pennsylvania’s economy—he has undermined any promises he makes about jobs,” State Rep. Dan Frankel said. Corbett says the Medicaid expansion would force a tax hike down the road.
• Also of note: Corbett wants 25-cent gas tax, phased in over the next five years. He wants to cut state pensions for current workers (but made sure to note the old people voting bloc would not be affected), and also wants to nix the cap on the Oil Company Franchise Tax.
• Republicans seemed mildly enthused, I guess. But Democrats had stronger words. “This was the worst-received budget address I’ve ever been at,” said Rep. Mike Sturla, who’s been a legislator since 1991.