State stores won't fix the budget
By Wendell W. Young IV The myth that Pennsylvania can sell its Wine and Spirits shops to the private sector for $2 billion has to be debunked before it does serious damage.
By Wendell W. Young IV
The myth that Pennsylvania can sell its Wine and Spirits shops to the private sector for $2 billion has to be debunked before it does serious damage.
State Rep. Mike Turzai and his fellow privateers have whipped themselves into a frenzy with unsubstantiated claims that the state's liquor stores represent a huge financial windfall.
Turzai (R., Allegheny) starts with an outdated, discredited study by Price Waterhouse that was prepared for Gov. Tom Ridge's administration in 1997. It found that the Wine and Spirits stores could be sold for about $600 million.
Turzai concludes - with no additional evidence - that if the stores were worth that much nearly 15 years ago, then selling off the state's retail and wholesale liquor operations could bring in $2 billion or more now.
But the auditing firm based its study on flawed figures provided by the Ridge administration. After taking another look, it revised its price estimate downward to between $230 million and $300 million, according to published reports.
If Turzai hopes to raise $2 billion from 850 store and wholesale licenses, as he says, the average price of a license would have to be more than $2.3 million. But comparable licenses have not been shown to be worth anything close to that anywhere in the nation. They simply haven't sold for that much before, and they won't do so now.
Turzai's claim that selling the stores will give "mom and pop" a chance to jump into the liquor business is equally flawed. How will mom and pop come up with $2.3 million in today's economy? Does Turzai know a bank that's willing to lend them that kind of money right now?
If the privateers do their homework, they'll see that selling the Wine and Spirits stores can't replace the nearly $500 million a year they generate for Pennsylvania taxpayers. And they'll see that selling the state stores would be a onetime money grab at the expense of an asset that generates reliable, growing revenues.
In making their case, the privateers are fond of describing the Wine and Spirits shops as we knew them 50 years ago. But these aren't our fathers' state stores.
Pennsylvania has a modern, competitive retail system that serves and benefits all its residents. It features full-service stores in supermarkets, competitive pricing, online ordering, and a selection of more than 28,000 products - more than is found in most commercial stores, and far more than any mom-and-pop store would be able to stock.
The state employs trained, experienced store clerks whose record of preventing sales to underage drinkers is unmatched anywhere in the nation and the private sector. In doing so, it also provides 4,500 family-sustaining, tax-generating jobs held by Pennsylvanians. The alternative, under privatization, would be part-time jobs with no benefits.
And the privateers conveniently ignore the fact that these men and women make money for taxpayers. They are an asset, not a cost.
When the costs taxpayers have borne to generate jobs in other industries are considered, privatization of liquor sales makes even less sense. In 1997, for example, the same Ridge administration that wanted to gut the Wine and Spirits stores sank $492 million in taxpayer money into what's now the Aker Philadelphia Shipyard, hoping to create and preserve 1,000 jobs. The state isn't due to recoup its investment until 2017, and officials now say the project needs another $42 million in state money to keep it afloat.
Meanwhile, year after year, the Wine and Spirits stores have continued to generate hundreds of millions of dollars for Pennsylvania taxpayers. And their staffs pay for themselves instead of soaking up subsidies. How much would Rep. Turzai invest in private employers for the same 4,500 jobs and related economic impact?
The privateers' real motive is to grab profits that are currently going to taxpayers. And the media's motive in supporting them is to grab more alcohol-industry advertising money, which is one of the largest sources of revenue for struggling publications and broadcasters in states that don't have liquor control.
Selling the state stores is an irresponsible, risky scheme that won't fix Pennsylvania's budget. Only a few private interests stand to gain from it, and most taxpayers stand to lose.