Open Letter to all PA Senators: Liquor Privatization Hearing on Social Impacts

To:         All PA Senators

From:     David N. Taylor, Executive Director
              Carl A. Marrara, Director of Government Affairs

 RE:        Open Letter to all PA Senators: Liquor Privatization Hearing on Social Impacts

The roster of testifiers at Tuesday’s Senate Law and Justice Committee hearing on liquor privatization seems intended to generate ill-will towards privatization because of perceived negative “social impacts.” Testifiers will inevitably tug at heart-strings and assert that selling off our Soviet-style liquor system will bring nothing but ruination, despite a plethora of data saying otherwise. Even as lawmakers must examine all the facts surrounding privatization, we must also rethink how we define a social impact.

First, we must refute the claims made by organizations opposed to privatization on the grounds of what they perceive as a “negative social impact.”

They will try to tell you that privatization will increase the amount of underage drinking. This is false. According to the U.S. Department of Health and Human Services, 29 percent of those ages 12-20 consumed alcohol in Pennsylvania. Compare this to states that have light government control such as West Virginia and the number decreases to 24 percent. In fact, the United States average is 27 percent. If government controlled liquor is effective in curbing underage drinking, why are we 2 percentage points higher than the national average and higher than almost all our neighboring states?

They may also tell you that privatization will result in more drunk driving, cause more alcohol related accidents, and more alcohol related fatalities. In fact, the opposite seems to be true. Pennsylvania is once again worse than that national average in two of these three categories. In alcohol related traffic fatalities in 2010, Pennsylvania was at 33 percent with the national average being 31 percent. If the current government monopoly is better suited for curbing drunk driving, why are we not ahead of the national curve? Furthermore, MADD ranks the states in order of DUI-related accidents per capita. Pennsylvania ranked 35th best – lower than New York, New Jersey, New Hampshire, West Virginia, Virginia, and Ohio. Obviously the median here is 25; Pennsylvania being 10 states away. In overall alcohol related deaths, Pennsylvania is also surpasses neighboring states. Pennsylvania reported 26 per 100,000 residents. Compare this to 24 in Delaware, 22 in Maryland, 20 in New Jersey, 20 in New Work, and 25 in Ohio.

But, what about the unspoken positive social impacts of privatizing our state liquor monopoly?

What about the social impact of new jobs? As President Ronald Reagan used to say, “The best social program is a job.” The labor union UFCW 1776 will tell you that this plan kills jobs, but they are wrong. More than doubling the amount of outlets for wine and spirits can only mean more jobs. It’s common sense. If anything, the UFCW saying there won’t be jobs for their members is tantamount to saying they don’t believe their members are employable in the private sector. The ability for these employees to use their previous knowledge to specialize in this new industry could actually increase their earning power.

What about the social impact of increased revenue for essential government programs? A 2010 study commissioned by the Wine and Spirits Wholesalers of America found that 23.6 percent of the wine purchased by consumers in Pennsylvania comes from out of state, resulting in the loss of $17.3 million in excise taxes. A more recent study conducted for the PLCB showed that 45 percent of residents in Philadelphia and its surrounding counties purchase some or all of their alcohol outside of Pennsylvania. The PLCB's own numbers showed that consumers purchased approximately a quarter of their wine and spirits in other states. This border bleed equals more than $180 million in lost sales, and more than $40 million in lost state tax revenue annually from just a handful of counties. These are lost dollars that could fund programs that are essential to our Commonwealth, but that are instead funding Delaware, Maryland, New York, and other border states with lower prices and increased selection.

What about the social impact of divesting the conflicting interests of PLCB sales and enforcement? Quite simply, our current system is a house divided. The same entity charged with licensing vendors and enforcing liquor laws is marketing, selling, and producing alcohol. Under the Governor’s proposal, penalties and fines become much stricter as the PLCB’s conflicted mission would be resolved. In the new, fully privatized system, the PLCB would license, enforce, and educate; which is the appropriate role of government.

What about the social impact of renewing the people’s faith in their government? Distributing and selling liquor should not be in the hands of a state-run monopoly, which is clearly not a core function of government. According to a comprehensive poll conducted by nationally-renowned pollster, FM3, more than 3 out of 5 Pennsylvania voters support privatization. Furthermore, consumers who make regular purchases at the state stores favor change by more than 70 percent. The lack of reform in the face of overwhelming public support leads citizens to conclude that state government is distant, unresponsive to their wishes, and captive to selfish interests. By responding to the will of citizens and consumers, lawmakers can show that Pennsylvania state government listens and responds to the will of the people they are elected to serve.

We ask that you consider all the social impacts when casting your votes in Committee and on the Senate floor. Please also note that the perceived negative social impacts could actually be mitigated in a privatized system. The Pennsylvania Manufacturers’ Association is in favor of HB 790 as reported from the House and we ask for your continued and timely support.