State representative analyzes privatization plan
There has recently been a lot of buzz surrounding Gov. Tom Corbett's liquor privatization proposal that would auction retail licenses to the private sector in an effort to provide a greater consumer choice and convenience.
This proposal is merely a framework for my colleagues in the House and Senate to consider, and the governor's proposal will likely evolve as it goes through the legislative process.
According to a recent Franklin and Marshall College poll, in general, 84 percent of voters believe the state legislature should approve the privatization of various state functions and a majority of voters specifically support selling the state-owned liquor stores to private companies.
Even while polls reflect support for liquor privatization from residents of Pennsylvania, we must continue to carefully examine this latest proposal to inject competition into the marketplace, provide convenience for Pennsylvanians, and produce ongoing revenues.
Moreover, it is also essential to consider the plan's safety measures, and be mindful of our current state store employees.
As a staunch supporter of free enterprise, I support efforts to add competition to the marketplace and remove government where adequate competition in the private sector can thrive. In order for this plan to be executed effectively, my philosophy would need to be in line with the legislative proposal and the economic realities of carrying out such a privatization plan.
Pennsylvania and Utah are currently the only two states in the country still clinging to this type of state-run system, which is growing more expensive to operate.
Under the governor's proposal, privatization would help transition Pennsylvania to what every state around us has: The ability to conveniently buy wine, spirits and beer at locations such as Wawa, Wegmans, Giant and local beer distributors.
Measures under the governor's plan include selling the state's 600 wine and spirit stores and auctioning off a total of 1,200 retail wine and liquor sale licenses that could be bid upon by existing retailers, including grocers, big box stores and beer distributors.
The sale of liquor store licenses would bring in an estimated $1 billion to be used for education grants, without raising the taxes of our hard-working Pennsylvanians.
Here's a breakdown of the one-time $1 billion in revenue that would be generated by privatizing liquor sales in Pennsylvania: The wholesale license brokering process is projected to yield $575 million; the retail auction process is projected to generate $224 million; the application process for beer and wine licenses is estimated to bring in another $107.3 million; and the application process for the enhanced beer distributors' licenses is projected to yield $112.5 million.
The $1 billion grant that would be generated would go toward creating a "Passport for Learning Block Grant" for our public schools to invest in school safety, early learning and individualized programs, as well as science, technology, engineering and mathematics programs. As these would be one-time revenues, the education community would be guided to use these funds for non-recurring expenditures and not include them in their operating budgets.
This money would be distributed over four years, and would be based on a formula that considers the school's enrollment, student population and wealth.
It is also important to note that this funding for education is being proposed in addition to the funding included in the governor's annual budget, which includes a proposed $90 million increase for basic education – which would result in the highest amount of state funding for basic education in our state's history.
Measures in the governor's plan would also attain fiscal neutrality on an annual basis, through a combination of license and regulatory fees and assessments, as well as additional income and sales tax revenue generated by the privatized system.
This addresses the concern that the state would lose a major source of revenue generated through the state's wine and spirit stores.
When you dig into the numbers from the last fiscal year, the state Liquor Control Board system generated $525 million in state revenue, but $422 million of that was generated through the taxes on liquor and sales tax on those items. These revenues would continue to be collected on the sale on wine and spirits by private retailers. Therefore, only $103 million of the $525 million is actual profit that would be replaced through license and regulatory fees and assessments on the owners of private licenses.
To ensure the safety of all residents across commonwealth, this plan would increase monetary penalties for all liquor violations, require all new licensees to use an ID scanner before selling alcohol, and increase funding for the state police's Bureau of Liquor Control Enforcement.
Additionally, regarding the current state employees, the governor's plan includes the creation of a multi-agency committee to assist displaced state employees with finding new jobs, and providing tax incentives to businesses that hire former state store employees.
Separated employees will also have civil service hiring preferences, individual employment plans and educational grants provided to them through the governor's proposal.
As always, it is an honor and a privilege to serve all residents of the 134th Legislative District. As the liquor privatization plan evolves in the House and Senate, I welcome any questions and comments you might have pertaining to this topic or any other issue facing our state.
For all liquor privatization proposal information, including other areas addressed under the governor's proposed 2013-14 state budget, visit PABudget.com or visit my website at RepMackenzie.com.