There hasn’t been much to praise in this year’s budget battles. However, the governor’s announcement that he won’t try to borrow $1.25 billion against Pennsylvania Liquor Control Board (PLCB) revenue is good news.
The plan made no sense for many reasons. First of all, the PLCB is a debt-ridden agency that fell way short of projected revenues following last year’s “modernization” efforts (Act 39).
Second, if the PLCB could manage its own debt and pay off the new loan – which could take up to 20 years according to Wolf – it would require a reduction in the PLCB’s periodic transfer to the General Fund. Lawmakers would have to raise additional revenue elsewhere to make up for the lost transfers.
However, the biggest flaw in Wolf’s plan was that a long-term loan against the PLCB would make privatization efforts vastly more difficult. Fully privatizing the PLCB isn’t just a matter of ending the border bleed caused by residents purchasing alcohol across state lines, it is about creating more economic opportunity for Pennsylvanians. Today, the PLCB’s archaic regulations make it nearly impossible for small producers to stay afloat.
McLaughlin Distillery near Pittsburgh is one such example. Owner Kim McLaughlin calls off-site sales, which were legalized by Act 39, a game-changer. “We wouldn’t still be in business” without them, he says. However, the cards are still stacked against small producers like his. For example:
- While McLaughlin is technically allowed to sell up to 10 products in 10 state liquor stores, the LCB would pocket 66 percent of his gross sales. If he sold a bottle of vodka for $30, he would see just $10 from it. That $10 would have to cover his supplies, production, federal taxes, etc. He can’t just raise the price in the state stores to increase his revenue from the sale, because the LCB forbids producers from selling for a lower price elsewhere. These rules make it nearly impossible for a small producer to sell at a state store.
- Under the distillery license, producers can open up to five satellite locations for tastings and sales. However, they must secure a location before applying for the satellite license. Earlier this year, McLaughlin leased a place in Ligonier. It took the LCB four months to deny his application (because his landlord happens to own a beer distributor). This means he will be leasing the location for a year without being able to use it.
- Farm market permits allow producers to sell at an unlimited number of farm markets throughout the year. However, there is a special license needed to sell at other venues, like arts and craft shows and music events. These licenses can be used just 100 times in a year. McLaughlin Distillery often turns down requests to participate in local events because of this arbitrary limit.
Instead of borrowing from the PLCB, state government needs to exit the liquor business. The outdated rules are creating undue hardship on small Pennsylvanian producers and stalling economic growth. Kim McLaughlin doesn’t want special treatment or a handout from anyone. He just wants the freedom to sell more of his product, grow his business, and hire more employees.
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