Wolf Proposes Leasing PA’s Liquor System To Private Manager

By Andrew Staub | PA Independent

Hoping to help break a budget impasse threatening to drag into fall, Gov. Tom Wolf proposed Wednesday the leasing of Pennsylvania’s government-owned wine and liquor system to a private manager, but free-market advocates cautioned it would do little to end the state’s monopoly on booze sales.

The plan simply “replaces a government monopoly with a government monopoly managed by a private corporation” and would keep in place the current conflict of interest in which the state sells and regulates alcohol at the same time, said Nathan Benefield, vice president of policy analysis at the Commonwealth Foundation, a right-leaning think tank in Harrisburg.

“This plan retains the one-size-fits-all model that Pennsylvania consumers have come to hate — and drive to other states to avoid,” Benefield said Wednesday evening. “This doesn’t provide consumers any new choice or any real competition, which drives prices down.”

Wolf, speaking tersely during an impromptu afternoon news conference, characterized his plan as a long-term lease of both wholesale and retail wine and spirits operations, with the agreement running between 10 to 25 years.

The private manager would have discretion over the number and locations of liquor stores, as well as substantial flexibility in setting prices, according to the administration. Stores would be open from 8 a.m. to 11 p.m. seven days a week.

The deal would include protections for employees who work in state-run liquor stores — in fact, whoever landed the lease would have to retain current employees, a big win for the public-sector union that represents them — as well as consumers, Wolf said.

“It would have protections for the citizens of Pennsylvania so that we’re not just giving this away to some crony somebody, but that we’re actually getting something in return,” he said.

Though Pennsylvania would still technically own the system, John Hanger, Wolf’s director of planning and policy, called it a “historic reform,” and one that privatization-wary Democrats have had a difficult time embracing.

“Frankly, the governor, and this is based on his business experience, well knows that this asset is greatly under-performing and it needs private management in order to make sure that the taxpayers and the consumers have a much better experience,” Hanger said. “Taxpayers should be getting a lot more money, consumers should be getting much better service and pricing, and the governor’s proposal would have allowed us to achieve those things.”

Benefield countered that consumers won’t see better selection, prices or service, unless the state divests itself of both the wholesale and retail liquor operations. Republicans who control the General Assembly put legislation doing exactly that on Wolf’s desk earlier this summer, but he vetoed it, along with the GOP budget and a pension reform plan.

In the months after that, Wolf focused most of his liquor reform talks on modernizing the existing state-run system. He supported lifting restrictions on Sunday sales and affording the Pennsylvania Liquor Control Board more flexibility in pricing its products and allowing wine sales in grocery stores.

The governor’s idea to lease the management of the system is a departure from his previous modernization proposals, but it’s still drastically different than the privatization bill Republican lawmakers passed in June. That legislation would have removed the state as the wholesaler of wine and liquor and phased out the about 600 state stores as the private sector took over.

It marked a major win for House Speaker Mike Turzai, an Allegheny County Republican who has long pursued privatization. Republicans hailed it as a victory for consumers, too.

Wolf was never sold on it, worried the state might be erring by selling a valuable asset.

While discussing the leasing idea, Wolf also broached the possibility of having beer and wine sales in supermarkets, as well as six-pack sales in convenience stores. Some of that is already happening anyway, as grocery and convenience stores find creative ways to obtain restaurant liquor licenses to sell beer.

Still, Wolf’s newest plan has added another layer to the ongoing liquor debate, and one that lawmakers were just starting to understand. Steve Miskin, a spokesman for House Republicans, said leadership just received the proposal and had not had time to evaluate it.

“What are the pros? What are the cons? Who’s it affect? Are you trading just one state monopoly for a private-sector monopoly? What? Who knows?” Miskin asked.

A single private manager would mimic the current system, in that one entity would choose which products can and cannot be sold in Pennsylvania, Benefield said, noting that arrangement has been susceptible to corruption. Mandating the retention of the current workforce also would limit a manager from instituting efficiency measures, he said.

However, that would also eliminate one of the biggest concerns about privatization — the loss of thousands of jobs.

That’s an important component, considering the United Food and Commercial Workers Local 1776, which represents state store employees, has been a stalwart opponent of legislation that would privatize the system.

Wolf’s leasing proposal could even mean adding jobs, said Wendell Young IV, president of the union.

“I think it’s an interesting idea that might work depending on the details. I actually think it can work if it’s done right,” Young said.

The PLCB’s role in a leasing arrangement also wasn’t immediately clear, either. For its part, the board released a statement saying its job is to regulate the sale of wine and spirits based upon current law, and that policy discussion about the agency’s future is between Wolf and state lawmakers.

“Our goal, as board members, has been and will continue to be to run the PLCB as efficiently and effectively as we can to benefit the people of Pennsylvania,” the statement said.

With Wolf also offering another public pension reform proposal to Republicans, Young said it’s time for the GOP to compromise with the governor. The plan to lease the wine and spirits system “should put the issue to bed forever,” Young said, before acknowledging Republican opposition is likely to come.

Even with Wolf’s latest plan, it’s a keg of a policy debate that’s hardly close to being kicked.