Booze by the ballot: Pa. Republicans look toward referendum to privatize wine, liquor sales

Julian Routh
Pittsburgh Post-Gazette (TNS)
Purchases are delivered curbside at Fine Wine & Good Spirits Premium Collection in Springettsbury Township, Tuesday, April 21, 2020. Dawn J. Sagert photo

Hoping to bypass the veto of a Democratic governor who’s already used it before on a similar proposal, Republicans in Harrisburg are considering the use of a constitutional amendment to privatize the state-run liquor system.

Republicans have been trying to hand over the wine and spirits business to the private sector for years, and their latest effort is taking place in the House’s Liquor Control Committee, where they held a hearing on Monday to discuss the topic with business and labor leaders.

The idea is taking shape in a bill by Upper St. Clair Republican Natalie Mihalek, who introduced the concept in legislation last week and says voters should get to decide if the system the GOP calls “archaic” is what they actually want.

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“It would seem to me that the government monopoly on liquor is an anti-consumer relic,” Ms. Mihalek said at the top of Monday’s hearing in Harrisburg.

Democrats have routinely countered that Harrisburg should keep modernizing the state business by making incremental changes, and that such undertakings have been successful so far. Those who spoke in favor on Monday of keeping the business in the state’s hands said it delivers more than $750 million in economic benefit to Pennsylvania while costing taxpayers nothing.

Ms. Mihalek, in her opening statement, called back to a time nearly a century ago, when Gov. Gifford Pinchot — who created the state’s monopoly on the sale of liquor and put tight regulations on the purchase of alcoholic beverages — labeled liquor a moral wrong and economic mistake, as she recalled.

His legacy lives on, Ms. Mihalek said, and the time is now to privatize it by a citizen vote. She said the past two years have made it clear that the government is asserting its control in far too many aspects of Pennsylvanians’ everyday lives.

That theory has led Republicans in Harrisburg to consider using the constitutional amendment process more, arguing that it brings the voice of the people into the legislative process.

Gov. Tom Wolf, a Democrat, has used his veto power to shut down GOP efforts on privatization before; in 2015, he said closing the state’s liquor stores and permitting private sales was not a “responsible means” of overhauling the system and would hit Pennsylvanians in the pocketbook.

Wendell Young IV, the president of UFCW Local 1776, which represents workers in the state’s wine and spirits stores, said this constitutional amendment question does not give voters a real choice because it doesn’t offer a plan. He noted that in 2013, when Republicans were shaping bills to privatize alcohol sales, the legislation was upwards of 200 pages, not counting amendments.

The only clues of how this would proceed if passed by voters, Mr. Young said, come from Ms. Mihalek’s co-sponsorship memo, which is a standard explainer accompanying bills in the state legislature.

In her memo, Ms. Mihalek wrote that the state-run liquor system is outdated and inept and said it’s time to modernize it.

“While the General Assembly has taken some gradual steps to modernize the sale of wine and spirits in the Commonwealth, consumers are still facing arbitrary and capricious rules and an outdated system that limits access to desirable products,” Ms. Mihalek wrote.

Mr. Young said the system has changed lately, and that old-fashioned counter stores were rapidly replaced by modern, self-service stores. He warned that Pennsylvanians would have to pay higher taxes to make up for lost revenues, and that the selection of alcohol would be limited and more expensive.

Tim Holden, chairman of the Pennsylvania Liquor Control Board, said his entity — created under state law to sell wine and spirits as a retailer and wholesaler and regulate the state’s alcohol industry — will not get involved with the political side of pushing through privatization. He told the committee that the board was able to return $764 million last year to the state’s general fund to support schools, health and human services and law enforcement.

Responding to warnings that revenue will be lost, Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, said the 18% sales tax will continue to come in, and said the current system is not consumer friendly. Monopolies, he said, are “inherently anti-consumer.”

The private sector has proven time and time again that it can deliver, Mr. Barr said. Zak Pyzik, director of government affairs for the Pennsylvania Restaurant & Lodging Association, said members unequivocally support privatization, believing it would reduce the cost of alcohol for consumers and for the 19,000 active liquor license holders.

Mr. Pyzik said many of the 26,000 restaurants and 1,500 hotels his organization represents have said recently that they find the current system to be inconvenient, limited and unreliable.

“Long before supply-chain issues, they’ve repeatedly noted limited product availability and fulfillment issues,” Mr. Pyzik said.

Mr. Young repeatedly warned of the jobs at stake if liquor sales are privatized, putting at 7,000 the number of workers who are employed with the state’s stores. He said very few would find employment in the private sector, anticipating that stores would simply reorganize their shelves and redeploy their employees.

Mr. Barr said his members in the private sector are “desperate” for more workers and that he has a “high degree of confidence” that the 7,000 will find jobs post-privatization.

Democrats on the committee complained that there’s no time to digest the legislation and that it should go through the legislative process, not a constitutional amendment.

Democratic Chair Dan Deasy, in a statement released after the meeting, said a ballot question would be a “disaster in the making.” He asked how Pennsylvania would get back the $765 million it would lose in revenue if this passes.

“That’s not a one-time contribution but is provided annually by a state-owned asset,” Mr. Deasy said. “That money would have to come from somewhere. There are too many questions still unanswered. More needs to be done to vet this process.”