Misplaced Priorities: Another Run at Privatizing Alcohol Distribution

Stephen Herzenberg |

Governor Tom Corbett announced on Wednesday his new plan for privatizing the distribution of wine and spirits in Pennsylvania.

We pointed out in a press release the likely impact of the plan if implemented: an increase in excessive alcohol consumption and its related negative impacts, including traffic fatalities — plus a loss of some of the nearly half a billion dollars in revenues that the state system currently delivers to the state budget through taxes and profits.

The Governor’s proposal would close the state’s 600+ wine and spirits stores, auction off 1,200 wine and liquor licenses to retailers, and phase-in access to small quantities of beer and wine at supermarkets and convenience stores generally.

The Governor claims the proposal would yield up to $1 billion from the sale of licenses — to private wholesalers, beer distributors, supermarkets and other stores — all while maintaining annual revenues to the state from the current system.

The Governor proposes to dedicate the funds to block grants for school safety, early learning, individualized learning, science, technology, engineering, and math courses — “shots for tots,” if you will. And if the funds don’t materialize, school safety and early learning aren’t all that important.

As the late Andy Williams might say, where do I begin? (OK, I thought it was a Karen Carpenter song too…)

For starters, the Governor’s liquor privatization plan is more about ideology than it is about convenience, savings or education.

Linking alcohol privatization to education funding is a transparent gimmick. Public education is a core function and responsibility of state government, and state support of educational opportunities for students should not be conditioned on selling off the state’s liquor stores or any other gimmick.

Dedicating a portion of wine and spirits revenues to education (or not doing so) should be a separate issue from privatization. We could dedicate some of the current system’s revenues to education if we wanted. The linkage of these two ideas conveys a surface lack of confidence in the merits — and political viability — of the alcohol privatization proposal on its own. To get it through, it’s necessary to try to bribe a key constituency and state lawmakers concerned about education.

The clearest implication of the core privatization proposal is that it would boost excessive consumption of alcohol. Why? Because of the radical increase in alcohol accessibility. That alcohol-related social problems would result from privatization is the definitive conclusion of the scientific community, including University of Pennsylvania Professor Karen Glanz. The Governor’s proposal essentially acknowledges that alcohol problems would worsen — by proposing a 75% increase in funding for alcohol treatment and prevention!

For its estimates of fees from licenses and annual revenue impacts, the administration relies on another study by Public Finance Management (PFM). Last February, University of Michigan research scientist Roland Zullo took apart PFM’s 2011 study of privatization options because it used internally incompatible assumptions. Those assumptions allowed PFM to reach too-good-to-be-true conclusions: the same revenue as the current system on an annual basis, a big upfront payday and comparable consumer prices.

Why should we expect this PFM study to be any more plausible than the last one? Also, why should we expect PFM to come to any conclusion other than the one desired by its client?

The Governor’s privatization proposal would take a radical step at a time when other conservatives across the country are re-evaluating positions seen as ideological and disconnected from people’s top priorities, such as jobs, education, and health care. Did parts of Harrisburg not get the memo?