Hearing Privatization 4 2011

Testimony from the Pennsylvania House hearing on the privatization of the PLCB.
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    1 Hearing  –   Privatization of State Liquor Stores House Democratic Policy Committee April 14, 2011 Testimony of the Pennsylvania Liquor Control Board: Joe Conti Chief Executive Officer Chairman Sturla, Vice Chairmen, Members of the House Democratic Policy Committee, distinguished guests, good morning. On behalf of the Pennsylvania Liquor Control Board, thank you for the opportunity to  provide testimony today. In the next few minutes, I will briefly give you an overview of the PLCB’s current sales an d revenue information, and an overview of three of the agency’s legislative initiatives which we believe would make the agency more efficient and even more profitable for the Commonwealth and the PLCB’s shareholders, the residents of Pennsylvania. As a preliminary matter, earlier this week, the U.S. Centers for Disease Control (“CDC”) , Task Force on Community Preventive Services, announced its decision and rationale against further privatization of alcohol sales. After completing a systemic review of available research, the task force determined there was clear evidence to show that privatization ultimately results in increased consumption, which so often  brings unnecessary and senseless harm to families and tragically their children, not  just here on our home soil, but all across the world. The issue of whether to divest the PLCB from its legislative mandate to operate wine and spirits stores for the benefit of all Pennsylvania residents in favor of a more deregulated, privatized system is an extremely important public policy issue which requires careful deliberation after reviewing and evaluating all relevant facts. I am    2 here to offer the assistance of the PLCB to the General Assembly, and to the Governor’s Office , on this important matter, and to serve as a resource for any information regarding the PLCB’s operations, its employees, and the profits and tax revenue generated for the benefit of the Commonwealth. Despite the continued weakness in the economy, PLCB sales continue to increase. Through its operation of six hundred forty-five wine and spirits stores, consisting of six hundred twelve brick and mortar stores, thirty-two wine kiosks and one e-commerce site (current as of April 11th), the PLCB generated more than 1.5 billion dollars in (pre-tax) sales during Fiscal Year 2009-10. This represents an increase of 3.65% in total sales over the previous fiscal year. Sales continue to trend upwards in 2011; in fact, the PLCB experienced 7% sales growth in March of this year, due in  part to significant savings offered by the PLCB on items which were recently delisted. The PLCB transferred one hundred five million dollars to the General Fund, and more than three hundred seventy-six million dollars in tax revenue, in Fiscal Year 2009-10. Further, the PLCB contributed more than twenty million dollars to the Pennsylvania State Police, Bureau of Liquor Control Enforcement, and more than two million dollars to the Department of Health in Fiscal Year 2009-10. Over the  past five years, the PLCB has contributed nearly 2.3 billion dollars to the State Treasury. These figures do not include local tax revenue collected and transmitted  back to Philadelphia and Allegheny County. To view it from a different perspective, the Distilled Spirits Council of the United States (“DISCUS”) ranks states both by consumption rates of beer, wine and spirits and by revenue per gallon. This information has also recently been cited by Pennsylvania State Treasurer Rob McCord and was recently published in April 8,    3 2011 special edit ion of the “McCord Report,” available on Treasury’s website. In 2008, Pennsylvania ranked thirty-sixth out of fifty-one jurisdictions in wine per capita consumption and forty-second out of fifty-one in spirits per capita consumption. It ranked first out of fifty-one in revenue per gallon of wine and tenth out of fifty-one in revenue per gallon of spirits. It seems that the current system of state owned wine and spirit stores does an excellent job of maximizing the financial benefits of the sale of alcohol for the Commonwealth while minimizing the social costs associated with such sales. 1  Based on information received from the National Alcohol Beverage Control Association (“NABCA”), “control states,” like Pennsylvania, are readily able to appropriate moneys through their wholesale or retail operations to fund various alcohol and drug-related prevention and enforcement initiatives. In 2010, for example, in addition to the monies contributed by the PLCB to the Department of Health’s Drug and Alcohol Programs, the PLCB awarded grants totaling nearly   one   million dollars   to municipalities and universities to support initiatives aimed at  preventing underage and dangerous drinking, impaired driving, and other alcohol-related problems. “Open states,” in contrast , must often look to divert funds from general tax revenues or rely upon the strained resources of privately-funded non- profit entities to pay for such initiatives. It should be further noted that Pennsylvania stands in a relatively unique position among control states, due to its wholesale and retail functions, its licensing function, and its alcohol education function. It is this unique combination of roles, coupled with the agency’s mission statement, which allows the PLCB to play a central, if not 1  This point is made ever clearer in the April 8 th  edition of the McCord Report, which examined the data from DISCUS  by comparing Pennsylvania with its to neighboring states (i.e., Delaware, Maryland, District of Columbia, New Jersey,  New York, Ohio, and West Virginia), Among its neighbors, Pennsylvania ranked seventh out of eight jurisdictions in wine per capita consumption and sixth out of eight in spirits per capita consumption, while ranking first out of eight in revenue per gallon of wine and second out of eight in revenue per gallon of spirits.

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