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Top GOP state senator is cool on privatizing liquor stores
Senate President Pro Tem Joe Scarnati pushes other priorities
Friday, July 22, 2011

HARRISBURG -- Supporters of a plan to privatize the state's liquor stores may not want to pop those champagne corks just yet.

A top Senate Republican had critical words Thursday on the proposal from House Majority Leader Mike Turzai to auction off liquor store licenses, saying the state first should boost the value of that system.

Senate President Pro Tem Joe Scarnati told reporters that several issues, including redrawing the legislative districts and increasing oversight of gas drilling, need to be addressed before taking up a privatization measure.

Mr. Scarnati, of Jefferson County, said he'd review a bill on selling the state stores, which Mr. Turzai has called a top fall priority. But he questioned whether the state would be able to maximize profits if it sold the licenses now, given what he sees as constraints on the profitability of those stores.

"I don't think that we have allowed the Liquor Control Board to run like a business," Mr. Scarnati said. "We're the ones with the handcuffs on them, and then we're out there saying, 'Well, this is an archaic, terrible system and doesn't work.'

"Well, take the handcuffs off of them, get the bottom line better, and you'll get a better price."

Mr. Turzai said he wasn't discouraged by Mr. Scarnati.

"We're full steam ahead," he said in an interview. "Privatization is widely supported by the citizens of Pennsylvania. Both chambers have to work together to do what's best for those consumers."

He also contested the view that reforms should be the first step, saying that he's confident the licenses would draw a significant figure at auction.

Mr. Scarnati suggested allowing those stores more flexibility in pricing, based on the product and geography, as initial changes.

He said he will review details of the proposal if it passes out of the House. But he and Senate Majority Leader Dominic Pileggi questioned whether the many details could be resolved amid the multitude of pressing issues this fall.

"No one would argue that it's a core governmental function, but we can't ignore that we have this history," Mr. Pileggi said. "We have to decide -- where do we go from here, and how do we get there?"

A spokesman for Mr. Turzai, R-Bradford Woods, said reforming the system is more important than raising revenue.

"Whatever you get monetarily is just icing on the cake," said Steve Miskin, a spokesman for Mr. Turzai and the House Republicans. "It's not about getting the money. It's about, 'Should government be in this business?' "

Gov. Tom Corbett, who supports privatization, has made a similar philosophical argument about alcohol sales. He hasn't taken a position on Mr. Turzai's bill specifically, saying he'll work with the Legislature on how that process should be done.

Mr. Turzai's proposal would auction off 1,250 licenses to retailers, replacing the current 621 state stores. The current markups and fees would be swapped out for a tax based on volume and alcohol content.

With the state out of the retail side, Mr. Turzai has said officials could then focus on their proper role of regulating the industry.

Democrats and unions representing the store employees immediately rejected the plan, saying it would slash jobs and make it easier for young people to illegally access alcohol.

The Liquor Control Board has remained neutral but last week defended its ability to keep prices low for consumers through the system's bulk purchasing.

"This is an issue that the Legislature and the governor will debate fully," LCB spokeswoman Stacey Witalec said. "We look forward to a spirited conversation whenever they are ready."

Estimates on how much the state could receive for those store licenses have reached as high as $2 billion. The Corbett administration has contracted with a firm to analyze how best to privatize the system and how much revenue could be raised.

Referencing his years running a restaurant, Mr. Scarnati said any sale should be done so the state gets the most value.

"The liquor system is worth what somebody is willing to pay for it, and they're going to pay for it based on upon how much they can make," he said. "I'm just not so sure we've done the best job in getting that bottom line before we sell this business."

Debate on the proposal will begin in the state House next week, when the Liquor Control Committee will hold its first hearing. Rep. Mark Mustio, who heads that panel's subcommittee on marketing, said that won't be a speedy process.

"It's going to take a lot of time -- probably longer than we have in the fall -- to get anything done, anyway. I see a lot of hurdles," said Mr. Mustio, a Moon Republican. "There are a lot of players that don't want to see change."

Laura Olson: lolson@post-gazette.com or 717-787-4254. Harrisburg bureau chief Tracie Mauriello: tmauriello@post-gazette.com or 717-787-2141.

First published on July 22, 2011 at 12:00 am