Pennsylvania Liquor Control Board (PLCB) partisans are quick to defend the agency as an asset for the state, but the PLCB’s finances—and the entrepreneurs who deal with the booze bureaucracy—tell a different story.
On the financial front, the board reported $117 million in net income this past fiscal year, representing a decline of 5.41 percent from 2013-2014. The decline coincided with the agency’s best sales year to date. Though, a monopoly reporting record sales isn’t exactly groundbreaking. No one would be particularly shocked if a private business was able to outlaw its competition and increase sales.
The decline in the liquor control board's "profitability" shouldn't come as a shock either. The agency forecasted the possibility in a July 30 memo last year, noting the decline was due to rising operational costs (driven mostly by pensions). The agency proposed increasing product prices by more than 16 percent to boost its profitability, but they quickly abandoned the idea.
Finances are only half the story. The board also causes constant headaches for entrepreneurs.
Ray Hottenstein, testifying in front of the House Liquor Control Committee on behalf of The Pennsylvania Restaurant & Lodging Association (PRLA), said the board's uncompetitive pricing structure is the biggest source of irritation for PRLA members:
It should be no surprise that pricing is the number one frustration of licensees in Pennsylvania. The five levels of mark-ups not only make Pennsylvania uncompetitive with other states but it makes it difficult and sometimes impossible for licensees to resell the product at a fair and reasonable profit. Licensees are not able to purchase wine and spirits from where we can get the best price, we are forced to pay whatever the state dictates with only a 10 percent discount.
Competitive pricing isn’t the only problem, according to Mr. Hottenstein:
The second largest complaint we have heard from our members is the lack of selection and poor customer service they receive at their local state store. Many of our members in less populated areas have said that their store is not regularly stocked and in some cases have to wait weeks for an order to be shipped from another store.
Unsurprisingly, the PLCB's inefficiency isn't confined to product availability. Jason Malumed, President of Chalkboard Wine + Spirits, gives his firsthand account of the state's disorganized liquor monopoly:
There have been many times when a several thousand dollar invoice of mine is at 120+ days past due (the PLCB also pays their invoices net 60, despite the industry standard being net 30), and we have not heard anything fiom the PLCB about why we have not been paid, only to go to the store ourselves, dig through piles of old, cancelled wine that has been sitting in a non-temperature controlled room, and discover an order of ours that was supposed to be returned back to us months ago.
The PLCB’s declining profitability along with its inability to provide true convenience, choice and competitive pricing to consumers and entrepreneurs make the agency a liability, not an asset, for Pennsylvanians.
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