02.26.2015  
 

Ending Pennsylvania's Wine Monopoly?

State representatives vote (again) for privatization of liquor stores; governor's veto likely

 
by Linda Jones McKee
 
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The licenses of state-run Fine Wine & Good Spirits retail locations in Pennsylvania, like the one seen here, would be up for sale if a privatization bill is passed into law.
 

Harrisburg, Pa.—The Pennsylvania House of Representatives voted 114-87 today to pass a bill that would end the state’s monopoly on the sales of wine and liquor.

It is only the second time since the Pennsylvania Liquor Control Board was established in 1933 that either legislative body in the state has passed a bill to privatize the more than 600 state-controlled stores. On March 21, 2013, the Pennsylvania House passed such a bill, and those in favor of privatization were hopeful that the Senate would concur and pass it so that the bill could be signed by then-Governor Tom Corbett. But those next two steps never happened, even though the Senate, like the House, had a Republican majority and Corbett was a Republican governor who supported privatization.

Now, two years later, the majority of legislators in Pennsylvania’s House and Senate are still Republicans, but the new governor, Tom Wolf, is a Democrat who has openly voiced his opposition to fully privatizing Pennsylvania’s state stores.

Instead, Gov. Wolf has said he would prefer to “modernize” the current state store system and has said he would veto any measure that would get the state out of the business of selling wine and liquor. The new political reality, however, did not deter Republican lawmakers from introducing House Bill 466, which is almost identical to the privatization bill that passed the House in 2013 by a 105-90 vote.

The bill, introduced Feb. 12, was referred to the House Committee on Liquor Control. On Feb. 23, the committee voted 15-10 in favor of privatization without conducting any additional hearings, and the bill was sent to the House for consideration Feb. 26.

Highlights of House Bill 466 
The bill passed by the House would allow 1,200 wine and spirit licenses, with beer distributors having the first opportunity to purchase those licenses. This is one point where the current bill differs from the bill that was introduced two years ago. The 2013 version originally called for auctioning off the licenses for the 1,200 wine and liquor retail stores.

In addition to beer distributors, supermarkets would be permitted to buy licenses to sell wine between 7 a.m. and 11 p.m. except on Sundays, and shoppers at those supermarkets could purchase up to a case of wine at one time. After 12 months, the licenses left would be available to the public for purchase. The Liquor Control Board stores would close gradually, depending on the number of wine and spirit licenses and supermarket licenses sold.

The proposed law would allow restaurants to purchase permits to sell up to six bottles of wine to their customers to take home. In addition, restaurants, hotels and eating establishments could get permits to sell 6- and 12-pack bottles of beer. With a special permit, beer distributors would be allowed to sell beer in 64-ounce growlers and 6- and 12-packs. They could be open from 9 a.m. to 11 p.m. except on Sunday, although Sunday permits could be purchased for $1,000 annually.

Twelve months after being passed into law, the measure would require the Liquor Control Board to divest its wholesale distribution operations to privately-owned and operated wholesale licensees.

Employees displaced by the closing of LCB operations would be eligible for a two-year grant for “attending a program of instruction at an institution of higher education,” with $1,000 per year for attending part-time and $2,000 per year for full-time. In addition, displaced employees successfully passing a civil service exam would be granted three additional points above the grade given for the exam.

After the retail and wholesale operations were completely privatized, the LCB would continue to oversee licensing, regulations, and enforcement of liquor laws. Taxes, including the 6% sales tax and the 18% Johnstown Flood Tax, would continue to be accessed on wine and spirits.

Governor supports “modernization”
While Gov. Wolf has declared his opposition to privatization, it is not entirely clear what he and other Democrats mean when they say they support “modernization” of the system. Earlier in February, Wolf stated: “I’m for Sunday sales. I’m for figuring out how we can open up state stores in supermarkets. I’m for direct sales. I’m for finding ways to make this better for our consumers.”

This statement may sound very similar to different items in the privatization bill, but it still leaves the state of Pennsylvania in the role of selling the products they are regulating. It doesn’t give small wineries in Pennsylvania any options if the only distributor, the PLCB, decides not to accept their wines. Consumers might have more hours to shop at state stores, but the diversity and choice of wines would not necessarily improve. And most likely, potential Pennsylvania customers would still travel to New Jersey, or Delaware, or Maryland to buy from stores with a better selection of wine at cheaper prices. Their tax dollars won’t be supporting Pennsylvania, but neighboring states instead.

The Chairman of the House Liquor Control Committee, Rep. Chris Ross, R-Chester, noted, "At the end of the day, this is a private retail and wholesale business that in every other state except for one is managed by the private sector. We don't have state grocery stores. We don't have state gas stations."

Dave Reed, House Majority Leader, has said that House Bill 466 will be a “starting point” for negotiations with the Senate and the governor.

The state system 
When Prohibition ended, Gifford Pinchot was Governor of Pennsylvania. A prohibitionist who was a member of the State Board of Trustees for the Anti-Saloon League for almost ten years, Governor Pinchot succeeded in passing legislation that established the Pennsylvania Liquor Control Board and made Pennsylvania a strict control state for the sale of wine, beer and liquor. He once stated that the mission of the Liquor Control Board was to make the purchase of alcohol “as inconvenient and expensive as possible.”

Under Pennsylvania’s strictly controlled system, wine and liquor are sold only at the approximately 600 state stores located across the state. While it was legal to make wine in Pennsylvania, all wine produced had to be sold through the state store system or out-of-state. Beer distributors are allowed to sell beer by the case, but beer in 6-packs could only be purchased from a bar.

It was not until 1968 that the legislature passed the Limited Winery Act that permitted small wineries – those producing less than 200,000 gallons of wine per year – to sell directly to consumers and also to other state licensees such as restaurants. 

 

 

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