The Tribune Democrat, Johnstown, PA

February 26, 2013

Slowest state stores lost $274G combined

CNHI Harrisburg Bureau

HARRISBURG — While the state-run liquor system posted a $103 million profit last year, the 25 worst-performing of the 605 state stores posted a combined loss of $274,074, data provided by the Liquor Control Board shows.

Thirteen of the state stores that posted losses in 2011-12 have modest profits halfway through the year, but that includes the extremely lucrative holiday season, and some of the stores that are now in the black may fade back into the red by the end of the fiscal year, an LCB spokeswoman cautioned.

Skip Brion, chairman of the Liquor Control Board, said it is unlikely the state-run monopoly will ever be able to completely eliminate unprofitable stores. The LCB will “always have some unprofitable stores in rural areas,” Brion said.

Brion was appointed by Gov. Tom Corbett, who has proposed privatizing the liquor system as a means of improving consumer choice while generating $1 billion for a special grant program for schools.

The issue of profitability was raised by Sen. John Gordner, R-Columbia, in the Appropriations Committee hearing on Monday. Gordner said that the question of store performance is something to consider when one wonders about the impact of privatization on rural areas of the commonwealth.

Gordner noted that while the governor’s privatization plan would guarantee that all counties have at least one liquor outlet, residents in some geographically large counties would have to travel an inordinate distance to get to a liquor store.

“I know there would be liquor stores near the colleges in my districts,” but other areas might be under-served, he said.

But Brion said that he does not believe that privatizing would necessarily have less access to retail outlets serving beer, wine or hard liquor.

 “We are a monopoly,” he said. “If privatization were to occur, those licenses would go to bigger entities like Wal-Mart and grocery stories.”

The number of stores bleeding red ink has dropped from about 50 a few years ago, as the Liquor Control Board has tried a number of cost-cutting measures, Brion said.

In some locations, the LCB has cut store hours so that fewer employees are needed to staff the location. Some poor performing stores are open only three days a week, Brion said.

“I’m pleased with the progress we’ve made over the years in diminishing the number of unprofitable stores,” said LCB board member Bob Marcus.

Marcus said that when the revenue generated by the 18 percent Johnstown flood tax is included, all of the stores turned a profit. “Our staff has worked hard to make that happen.”

Tuesday, Gordner, R-Columbia County, said that his concerns about privatization extend beyond just the potential change in availability in rural areas.

“I believe that the stores are run and managed pretty well, especially with the modernization emphasis over the past five to 10 years. But there is also a ‘control’ element,” Gordner said. “I am not aware of any underage purchasers of alcohol at state stores for example because there are full-time state employees that would otherwise lose their job working the cash registers.”

Gordner added that the hours of operations at the state store that offer “sufficient convenience in my opinion but also do not allow for a midnight or 3 a.m. purchase of 100-proof alcohol.”

Gordner’s comments are typical of the concerns being raised from lawmakers on both sides of the aisle. While liquor privatization has broad public support, the issue has repeatedly failed to gain traction in Harrisburg due to opposition from unions, beer distributors and those concerned about the social consequences of easier access to alcohol.

A House version of the liquor privatization legislation is expected to be introduced in March. A draft of that legislation circulating among lawmakers indicates that the privatization plan would provide licenses for grocery stores, convenience stores and pharmacies, and big-box type stores, along with an opportunity for beer distributors to sell beer in smaller quantities.

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