Math supports modernization of liquor sales

By Gene DiGirolamo

I continue to be amazed, amused, and somewhat frustrated by the hype and misinformation surrounding House Bill 228, my proposal to modernize the Pennsylvania Liquor Control Board (PLCB). Ultimately, I hope that facts, common sense, and basic arithmetic count for something.

It is a pretty straightforward proposition: The state has a valuable asset that is poised to do more for taxpayers. At the same time, the state can give consumers what they want by making the stores more convenient.

I recognize that any legislation dealing with the LCB is politically charged. I also recognize that there are a number of people who would prefer to see the system privatized. However, alcohol continues to be the No. 1 drug of addiction in America. And with that in mind, I would also point out that the Pennsylvania Chiefs of Police Association, the Fraternal Order of Police, and the Pennsylvania Professional Fire Fighters Association have all written strong letters of opposition to privatization. As our first responders, they cite public health and safety as their overriding concerns - concerns that I feel are justified.

For those reasons, I prefer reform to privatization. And to explain why my proposal would work, let's stick with basic math.

Consider:

In the last fiscal year, the LCB generated record sales, profits, and transfers to the state treasury, returning more than $565 million to taxpayers.

Through the first six months of this fiscal year, sales were up 4.6 percent, with interim net income up 3.9 percent over the same period last year. The LCB returned more than $247.2 million to taxpayers during this time.

Sales - net of taxes - have grown at a compound annual growth rate of 4.3 percent over the past five years, while net income (profit) has grown at an astounding 25.5 percent over the same period, including a profit of more than $123 million this past year (a profit of 6.92 percent for that fiscal year).

In the last five years, the agency has provided more the $2.51 billion to the treasury, $111 million to the Pennsylvania State Police, $9.8 million to drug and alcohol programs, and $22.5 million to local communities.

Any suggestion that the LCB is not profitable is just ridiculous. Any suggestion that the agency loses money is demonstrably false. The math is the math. Now, looking ahead, modernization is fiscally sound and, frankly, overdue.

My legislation, which mirrors other proposals that have been introduced in the state Senate, is good for consumers and is based on very simple and verifiable math. In all, modernization would generate at least $185 million a year in new profit after the first year of enactment.

The total would increase in future years as full modernization is implemented. Specifically, the provisions in my legislation (and the fiscal impact associated with each) call for:

Allowing more LCB stores to open on Sundays (currently only 25 percent can) and expanding the hours of operation on Sundays. Projected annual profit: $22.5 million.

Allowing the LCB to locate more stores inside or next to grocery stores, beer distributors, and other high-traffic areas. Projected annual profit: $25 million.

Giving the LCB more flexibility in pricing, which would allow the agency to more quickly change prices to reflect market demand. Projected annual profit: $75 million.

Speeding up the state process for reviewing leases for the state's Fine Wine & Good Spirits stores. This is a critical piece of the puzzle because it will allow the agency to more quickly open new stores in more convenient areas. Projected annual profit: $25 million.

Allowing direct shipment of wine to Pennsylvania consumers while also permitting the LCB to ship products out of state. Projected annual profit: $25 million.

Installing lottery ticket kiosks in the stores. Projected annual profit: $3 million.

Allowing the LCB to join large purchasing consortiums to help lower the purchase price of wine and spirits. Projected annual profit: $10 million.

Some critics have questioned these projections, and I welcome the debate - provided it is an honest and transparent discussion that extends beyond sound bites.