The Tribune Democrat, Johnstown, PA

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June 18, 2013

Senate plan would expand liquor sales

HARRISBURG — Republicans in the state Senate on Tuesday announced a plan that would replace the existing state store system by allowing beer distributors and businesses that sell six-packs to begin selling wine and liquor.

The Senate measure would not immediately get the state out of the wholesale liquor business. Rather, the bill authored by Sen. Charles McIlhenney, R-Bucks, would set a two-year time frame for a legislative committee to determine the value of the wholesale business before it’s sold. In addition, McIlhenney’s bill leaves the decision of when to close state stores solely in the lap of the Liquor Control Board.

The handling of the wholesale liquor business could set up a tussle with House Republicans, who want to completely dismantle the state’s liquor monopoly. But first, the Senate must come up with a bill that will pass in the Senate, and Republicans leaders on Tuesday said they still don’t have the 26 votes needed.

Republicans hold a 27-23 edge in the Senate.

In a briefing with reporters before the Republican bill was unveiled, Sen. Jay Costa, D-Allegheny, said the 23 Senate Democrats are united in support of a measure that would “modernize” state store operations rather than dismantle the monopoly.

Sen. Gene Yaw, who sits on the Senate Law and Justice committee, which will vote on the bill before it reach the full Senate, said he supports McIlhenney’s bill. The only thing that would have been a deal-breaker for Yaw would have been concerns that the legislation does not treat existing beer distributors and other license-holders fairly. Yaw said McIlhenney’s bill arguably treats beer distributors better than either the House version or the liquor privatization plan.

Senate Republicans say that it makes no sense to sell the wholesale business until after its value is boosted by increased sales made possible by the expanded licenses.

Senate President Pro Tem Joe Scarnati, R-Jefferson, said that the wholesale business generates more than $100 million a year. But the changes proposed by McIlhenney’s bill could double the revenue for the liquor system’s wholesale business, Scarnati said.

“I have a real problem divesting at a bargain price,” Scarnati said.

Proponents of completely dismantling the system now argue there is little reason to believe that the Pennsylvania Liquor Control Board can cope with increased sales.

“Under the current system, the PLCB does not provide adequate service to bars, restaurants and taverns – and Sen. McIlhinney’s proposal will only further exacerbate the PLCB’s inefficiencies,” said Matthew J. Brouillette, president and CEO of the Commonwealth Foundation, which has been lobbying in favor of dismantling the liquor monopoly.

“ ‘Modernizing’ this government-run wholesale system to offer delivery to more than 13,000 retail outlets would cost taxpayers an estimated $700 million.”

Yaw said that he doesn’t think it would make sense to blow up a system that has been in place for 80 years in one fell swoop. He pointed to the way that the state rolled out gaming, first with slots and then with table games, as an example of how the state incrementally embraced something new.

“The way (gaming) happened was uneventful,” Yaw said. “I don’t think you just snap your fingers and get out of the wholesale (liquor) business and completely redo the licensing.”

The House plan would allow beer distributors to add wine for between $7,500 and $37,500, and add spirits for another $30,000 to $60,000.

If beer distributors do not claim all of the 1,200, then the licenses would be sold to the general public.

In addition, the measure would allow as many as 820 grocery stores to begin selling wine.  

The Senate measure would not add licenses, other than by allowing existing license owners to upgrade to sell wine and liquor to go in beer distributors, restaurants and hotels. The fee would be $8,000 a year.

The Senate measure also eliminates the 18 percent Johnstown Flood Tax added on liquor sales. But McIlhenney said that increased sales would offset the lost tax revenue and generate another $140 million a year.

McIlhenney said that his proposal would put that new money into funds to freeze property taxes for seniors. A portion of the cost of each license fee would also be funneled to the Department of Public Welfare to pay for rape crisis and domestic violence programs. Corbett had proposed using the proceeds from liquor privatization for special block grants for schools.

A proposal unveiled by Senate Republicans intends to drive the state-run wine and liquor stores out of business by allowing beer distributors and businesses with restaurant or hotel licenses to sell wine and liquor to go.

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