Senator Ferlo Floor Remarks: Jan. 30, 2012 on Liquor Control Plan

Remarks offered on Senate Floor Wednesday, January 30, 2013

“Mr. President,

Today, at 2:00 PM, Governor Tom Corbett is anticipated to divulge his already widely reported wine and spirits privatization plan. As has become his standard practice, he doing this before an invite-only crowd by permitting only “credentialed” reporters in to see his road show.  I guess he does not want to have to rub elbows with the proletariat, despite his often-repeated calls for transparency. Who is more credentialed than the taxpayers? But let’s focus on the details of what has leaked out of his administration so far.

In a nutshell, the Governor will announce a plan to close the Wine and Spirits Stores, permit every type of retail storefront in the state to sell beer and wine, create somewhere between 1,000 and 2,000 private licenses for the sale of liquor, and forsake a well-balanced system of alcohol sales. Here’s a step-by-step of the impacts of the Governor’s plan:

Step one: Eliminate middle class jobs. The first step of the plan is to close all of the retail Wine and Spirit Stores, over 600 of them, and eliminate the wholesale operations run by the PLCB. So, from day one, our Governor plans to eliminate 5,000 union, family-sustaining, living-wage, middle class jobs with benefits. This doesn’t factor in the 20,000 jobs that will be threatened at beer distributors because of step two of his plan.

Step Two: Alcohol proliferation. Governor Corbett will announce that, instead of limiting the availability of alcohol in order to protect public health and to keep it out of the hands of minors, he envisions Pennsylvania as the Wild West of booze sales. Quick estimates based on the leaked proposal are that 20,000 new retail outlets will be permitted to sell beer and wine.  Not only grocery stores, but Target and Wal-Mart, Rite Aid and CVS, 7-11 and Sunoco, and even your neighborhood convenience store already found in the struggling part of town will now be permitted to sell malt liquor and cheap wine. At least one Republican in state government has gone from social conservative to bootlegger.

Step three: Undermine all existing licensees. Say what you want about the confusing system of alcohol laws in Pennsylvania, they still have permitted many local businesses to thrive. Distributors, restaurants, and taverns have all found a way to make a good living within the existing constructs of the Liquor Code. Governor Corbett’s plan seems to threaten the existence of each of these entrepreneurs and small businesses in favor of large retail establishments. He seems to be throwing them a bone in the plan, but we all know what will become of our distributors and taverns that rely on beer sales and have adapted in order to compete in a closed system. They will fail and those local businesses that support our little league teams and volunteer firefighter organizations will be lost, replaced by indifferent big box stores run by huge corporations.

Step Four: Undercut the state budget. Governor Corbett has proven over and over again that he doesn’t care about the revenue side of the state budget, unless it is to give money back to big business contributors or the oil and gas industry. The truth of the matter is that we have a state to run that relies on bringing money in. The Wine and Spirit Stores generate up to $500 million per year for the General Fund in tax revenue and profit. Surely Governor Corbett will raise some amount of money by selling or auctioning liquor licenses, but he will almost just as certainly squander that money away on pet projects to boost his sagging polling numbers. To be clear: this will be a one-time windfall, which is not a price worth paying for eliminating a long-time, successful, revenue-generating system that is already in place.

Where does all this leave our state? We will have eliminated tens of thousands of jobs, opened up a system of alcohol sales that will be rife with abuse by people with drinking problems and children, will have killed many small businesses that currently thrive in our communities, and sold off an unrecoverable, revenue-generating asset for a price well below its value.

So what’s the alternative? The alternative is to follow the path that my esteemed colleague on the other side of the aisle, the President Pro Tem, has publicly embraced. Let’s use the asset and the system that we have today, which has provided good jobs, protected the public health, and helped us fund state programs for decades and continue to improve upon it. We have seen enormous enhancement in the Wine and Spirits Stores in the past 15 years and I believe that we have options on the table to offer an even better product to consumers, while continuing its core mission, and not sacrifice consistent funding and family-sustaining jobs.

I have proposed legislation that will free the PLCB to make more improvements to its operations and to act more efficiently. These include allowing the system to price its products more competitively, fill specialty positions with expert recruits, and buy products and sign leases that enhance the agency’s bottom line. I will also be proposing legislation that encourages the LCB to choose retail locations in and near grocery stores and high traffic areas, improve the hours of operations, and allow better product promotions.

Estimates are that modernization will generate up to an additional $100 million per year for the General Fund. That would be a total of $200 million per year in profit from the PLCB. Assuming an income of $1 billion from the privatization effort, an amount I think to be high, especially due to the number of licenses that are to be given out for beer and wine in the Governor’s plan, it would only take the state 5 years to begin losing money under privatization.

We do not need to tear down a system that works, provides good paying, middle class jobs, and generates essential revenue for the State as the Governor is proposing. We need to improve that system to the benefits of consumers while continuing to benefit from the important resources and public health protections the system provides today.

If I might just add, this is the continuation of an agenda driven by ideology, not practicality, reality, or feasibility. The Governor continues to pursue policies of centered on disinvestment rather than strategic investment in human and social capital. The big targets have included basic education funding, health care, and economic development. But the general disdain that Governor Corbett has for the important role government plays in supporting the everyday lives of citizens is leading to disastrous policy making. I’m really looking forward to 2014.

Thank you, Mr. President.”

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