Fontana Discusses Liquor Privatization Proposal

Privatization could result in job loss and reduce revenue from profits and taxation, Robinson-area state Sen. Fontana says.


The current state store system that Pennsylvania has in place began in 1933 after the ending of Prohibition. Many attempts to privatize our system have occurred over the years with the earliest effort taking place during the Thornburgh Administration in 1983. Governor Ridge continued with the privatizing endeavor throughout the 1990s and Governor Corbett has been the most recent advocate. Up until this point, all attempts by these administrations have failed.

Last week, Governor Corbett announced a proposal to privatize the state’s liquor system. Under the Governor’s plan, the more than 600 state-owned liquor stores would be opened up to the free market with the Commonwealth auctioning off up to 1,200 wine and liquor licenses to a variety of retail businesses. Current beer distributors, which are now limited to selling cases and kegs of beer, would be eligible to apply for these enhanced licenses to allow them to sell wine, liquor and smaller amounts of beer like six packs. An unlimited number of licenses for groceries and other retail outlets would also be available to permit a store to sell just wine and spirits.

The Governor estimates that the plan would generate approximately $1 billion over the next four years. Specifically, $575 million from selling wholesale licenses, $224 million from the auctioning of the 1,200 licenses to replace the current state stores and $112.5 million from the licenses to expand offerings for existing beer distributors. The plan would maintain the current tax structure for alcohol sales, including the Johnstown Flood Tax.

The Pennsylvania Liquor Control Board (LCB) would retain regulatory authority over liquor in the state, and enforcement would be increased, including higher fines for serving minors, under the Governor’s proposal. Additional money from license surcharges and increased fines would be allotted to the Pennsylvania State Police’s Bureau of Liquor Control Enforcement.

Proceeds from the selling of the various licenses will be earmarked for public schools in the form of a learning block grant. Schools will be given the choice to decide whether they want to use the money for school safety, early learning, individualized learning or an educational program called STEM (science, technology, engineering and math courses).

Consequently, such a privatization plan will result in the loss of good, family sustaining jobs and a reliable revenue stream for the Commonwealth. The closing of the more than 600 state stores will leave an estimated 5,000 employees without a job. Additionally, after the initial sale of licenses, many anticipate that privatization will impact the state budget negatively by reducing the overall revenue from profits and taxation in the out years. Some rural lawmakers are concerned that this proposal would leave some residents with less accessibility and fewer options as state stores in those areas would close.  Another concern is that this will provide increased access to alcohol for underage youths without the trained LCB employees monitoring attempted purchases

With so much uncertainty behind this proposal, I believe our efforts should be focused on improving and modernizing Pennsylvania’s liquor store system. Several proposals were advanced in the General Assembly last session that would begin reconstructing the way Pennsylvania’s state store system operates. These were good first steps and we need to continue with that approach.

There is a reason why so many attempts to privatize have failed. Rather than dismantling the current system, we need to find ways to grant the LCB more flexibility so that they are able to make stores more efficient, consumer-friendly, profitable and competitive while at the same time maintaining controls over things like underage drinking and purchasing of alcohol as well as protecting existing jobs in this current poor job market. In addition to providing flexibility to our state stores, we can also assist local beer distributors by adopting real package reform such as allowing the sale of six-packs.

I find it puzzling how an Administration who has cut funding for education so severely in the last two budget cycles has chosen to link the sale of liquor stores to money for a new program that will be left without funding at the end of the four year phase-in period under this plan. This particular proposal is not a viable long-term solution that is in the best interests of Pennsylvanians.


—Senator Wayne D. Fontana

42nd Senatorial District



M. R. Birkos February 08, 2013 at 12:24 AM
Here are the last four states that privatized elements of their liquor sales. Iowa went private with retail operations of wine in 1985, and liquor in 1987. West Virginia privatized liquor retail operations in 1991. Both states earned less than $20 million each. In 1986, Iowa earned $71.6 million. In 1987 - $43.6 million. Cash flow did not return to pre-privatization levels until 2004. http://www.pennlive.com/editorials/index.ssf/2010/12/dont_toast_yet_to_pa_liquor_st_1.html: http://voices.washingtonpost.com/virginiapolitics/2010/09/as_we_reported_this_weekend.html: In 2004, Maine earned $125 million for a 10 year lease of their wholesale operations, but since, has lost over $100 million due to revenue sharing with the wholesale distributor. http://www.mainebiz.biz/article/20110725/CURRENTEDITION/307259998: In 2011, Washington’s liquor sales contributed $461 million to their general fund, roughly equal to our PLCB. When they privatized in 2012, we know that Washington only earned $150 million for wholesale rights, $30.8 million for their existing stores, and a new liquor/wine/beer license fee is only $166.00. They exploded from 300 to over 1,400 retail outlets, many open until 2:00 AM. Unit sales only increased by 8%. Since 2011, the governor’s windfall estimate has been $1.6 billion. Today it is $1.0 billion. Ironically, the governor’s billion dollars and the real market comparables are both deal killers.


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