Liquor Privatization's Dual Purpose

State lawmakers have yet to agree on a plan to balance last year’s budget (2016-17) or this year’s budget (2017-18), despite authorizing large spending increases both years.

In a recently released policy memo, Elizabeth outlines how the state can balance both budgets without tax increases. One recommendation in particular—liquor privatization—is a popular idea with the potential to generate more than $1 billion in revenue without raising taxes.

A 2011 PFM Group study found selling off the state’s retail and wholesale liquor system could raise between $1.1-$1.6 billion in up front revenue. And if the state finally were to leave the booze business altogether, taxes and fees would still generate approximately 83 percent of what the Pennsylvania Liquor Control Board (PLCB) transfers to the state annually.

Furthermore, liquor privatization would likely increase annual revenue to the commonwealth. For starters, liquor tax revenue—the source of almost all the revenue the PLCB contributes to the state budget—would likely increase under privatization. A private system offering better selection, convenience, and lower prices would reduce the sales and taxes lost to border bleed ($220 million in the southeast alone).

The state would also collect revenue through annual license fees charged to private retailers and wholesalers.

While total privatization should be the goal, lawmakers can also choose from several incremental reforms short of full privatization. The spectrum of options, which we detail in a new fact sheet, could raise anywhere from $1 million to $329 million. Of these options, the authorization of private wine and liquor licenses would be the most transformative (excluding full privatization).

Lawmakers passed a privatization plan back in 2015, but Gov. Wolf vetoed it for tenuous reasons. Still, that shouldn’t deter the push to bring Pennsylvania out of the dark ages of alcohol prohibition. The PLCB has failed both consumers and entrepreneurs across the state. In short, the reasons to privatize continue to mount as defenders of the system continue to dwindle.

CF has never taken the position that privatization should be pursued solely for revenue-generating purposes. But it’s becoming increasingly obvious that moving toward private sales of wine and liquor is necessary to protect Pennsylvanians from another round of devastating tax hikes.

If special interests don’t rule the day, Pennsylvania can finally have a system that reflects a modern 21^st-century market. And as an added bonus, the commonwealth would raise a significant amount of revenue to chip away at the state’s nagging deficit.