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House bill would partially privatize Pennsylvania liquor sales system

| Wednesday, Dec. 14, 2011

HARRISBURG — A House committee on Tuesday approved a proposal for a public-private liquor sales system as an alternative to the completely privatized model sought by the House majority leader.

The hybrid is a serious proposal that "has, possibly, a chance of passing this House and possibly the Senate," said Rep. Scott Petri, R-Bucks County, a committee member.

"I think it has a shot at getting a little momentum," said House Liquor Control Committee Chairman John Taylor, R-Philadelphia, who called the plan the first liquor-store privatization bill to move out of legislative committee since Prohibition.

His proposal would keep the Liquor Control Board and allow state stores to continue selling liquor and wine. The stores would be the only place selling liquor.

But the legislation would add 1,200 "enhanced distributor" licenses that would allow beer distributors and others who pay $50,000 for a license to sell beer and wine. Taylor said the stores would compete with the LCB on wine sales.

Grocery stores would be able to buy a wine and beer license, provided they sell alcohol in a separate area. Bars, restaurants and anyone else with a beer license also could sell a customer up to 30 beers at a time.

Wholesale wine licenses would sell for $100 million each, half the price of a casino license. Taylor said he arrived at that figure by asking several groups what they would pay for a license to sell wine to retailers and then adding a few million.

Wendell W. Young IV, president of the United Food and Commercial Workers Local 1776 in Philadelphia that represents state store clerks, said he expects large conglomerates would be willing to pay for those licenses.

Young said building a parallel liquor system "creates an unfair playing field" for private retailers that will lead to state stores closing, job layoffs and a reduction in state revenue.

He called the committee's action a "clear and precise defeat for (Rep. Mike) Turzai's privatization offensive."

Turzai, the Republican majority leader from Bradford Woods, authored the bill (H.B. 11) that Taylor amended. Turzai's bill would have auctioned off the state stores and wholesale licenses for a totally private system. It has been pending since July.

Turzai said the committee vote's is an acknowledgment the state store system is broken.

"This is a huge step for Pennsylvania consumers," Turzai said. "Time and time again, the Pennsylvania Liquor Control Board has proven how antiquated and out of touch the current system is -- Pennsylvanians understand this and want change.

"The time has come to get government out of the alcohol business."

But Taylor said he envisions dozens of amendments on the House floor. Some amendments will likely propose the type of privatization free market lawmakers envisioned. Turzai would like to do that as soon as possible, said Taylor, who had concerns about eliminating up to 4,000 state jobs under the Turzai bill.

"I was certainly never in favor of a radical dismantling of the state system," Taylor said.

Gov. Tom Corbett has said he supports privatizing the state store system.

A separate amendment was added to H.B. 11 that:

• Expands state stores' Sunday hours to 9 a.m. to 9 p.m.

• Allows more state stores to open on Sundays

• Allows the LCB to offer a coupon and reward program

• Allows the LCB to avoid going through the state procurement code

• Gives the LCB flexibility in pricing

The committee approved the overall bill along party lines on a 15-10 vote.

The hybrid system is similar to the way liquor is sold in Ontario and Virginia, committee officials said. The exact number of states using this model was not immediately available.

"This measure does nothing to address the dangerous conflict of interest that sees government selling both the ailment and cure at the same time, all on the taxpayer dime," said Jay Ostrich, director of public affairs for the Commonwealth Foundation. "It's time government stops creating more problems by picking wine winners and liquor losers, because taxpayers and consumers are tired of picking up the tab."

The free-market think tank endorses the full removal of government from the wine and liquor sales business, arguing it would create jobs, save taxpayer money, remove government from costly conflict of interest arrangements and allow consumers to buy what they want at a fair price.

Taylor said his plan lessens the conflict by moving alcohol education efforts from the LCB to the Office of Drug and Alcohol Education at the Department of Health.

His bill keeps state taxes on alcohol including the so-called Johnstown Flood tax.

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