A need to privatize: Selling the LCB can solve a host of problems
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State Rep. Mike Turzai may have found a sales pitch for privatizing Pennsylvania's wine and liquor monopoly that lawmakers will buy.
The House Republican whip, from Bradford Woods, says Pennsylvania should sell licenses for as many as 750 retail stores and 100 wholesale distribution centers for alcoholic beverages, excluding beer, in order to raise at least $2 billion. That would go a long way toward resolving the state's looming pension crisis, or filling some other funding gaps.
Many of the earlier efforts to abolish the antiquated remnant of Prohibition were based on the perfectly reasonable attempt to make it more convenient for adults to buy wine and spirits, but the arguments never won the day. The most vocal opponents were employees of the state stores and Mothers Against Drunk Driving and other groups that fear widespread abuses without state control over the sale of alcohol.
Mr. Turzai's proposal contains provisions aimed at addressing the opposition -- the state Liquor Control Board would retain oversight and enforcement responsibilities for alcohol sales, tax credits would be available to businesses that hire former LCB employees and they would be given a leg up in applying for other state jobs.
But the best argument in favor of Mr. Turzai's proposal is found in the numbers.
The state is facing a $472 million hole in its budget for road and bridge maintenance and mass transit because the federal government rejected its proposal to place tolls on Interstate 80. Federal stimulus funds that have bolstered state programs will run out next year. And, on top of that, by 2012 the pension plans for thousands of retired state and public school employees could cost up to $5 billion without a large infusion of cash, and soon.
The legislator would auction off stores -- the state operates 621 now -- and distribution centers, which would mean the state also would no longer be a wholesaler. Besides the one-time payments those auctions would bring, Mr. Turzai proposes changing the taxing structure.
Currently, the liquor system pays for itself and funnels $466 million into the state's General Fund. Mr. Turzai said under his proposal, the new private system would provide a similar amount, which he estimated at $500 million a year. The 30 percent markup now charged by the state stores, along with the 18 percent so-called Johnstown Flood tax, would be replaced by a per-gallon tax varying from $2 to $6, which Mr. Turzai said 26 states assess today on liquor and 35 states impose on wine. Retail customers would continue to pay the 6 percent sales tax, but restaurants, clubs and bars would not, imposing the tax when they sell drinks instead. In addition, the 850 new businesses that would be created would be paying either corporate net or personal income taxes, too.
The Post-Gazette long has advocated for liquor sales based on the belief that safeguards against abuse can be built into a private enterprise system and that it shouldn't be complicated or inconvenient for adults to legally purchase alcoholic beverages. We're glad to see Mr. Turzai pushing this issue, even as too many candidates for statewide office are resigned to the status quo.
Maybe this time his fellow lawmakers will be won over by the numbers.
First Published April 26, 2010 12:00 am