Privatizing liquor sales – the envelope please

    Just as I thought!

    The long-awaited analysis of Pennsylvania state store privatization that Gov. Corbett ordered has finally been released, and I take some satisfaction in a two-word phrase that appears on page nine of the report’s executive summary: license scarcity.

    Let me explain.


    I’ve ranted a few times in this space about an aspect of the pending privatization plan that no one seemed to be talking about: that the plan under consideration in the legislature envisions auctioning off a limited number of retail liquor licenses to the highest bidders, reaping a windfall for the state but at the same time artificially limiting the number of outlets.


    So we’d end up with a modified version of the same, idiotic restricted sales structure we have now. But instead of state stores, we’d have private operators with a state-charted monopoly on liquor sales.

    When Public Financial Management, the nationally-respected firm hired for the study looked at the options, they noticed the same thing, and said there are two ways to go with privatization.

    If you want to maximize convenience, availability and competition, you adopt an open retail license approach—decide on reasonable criteria and fees and let those who want to get into the business try their hands.

    If the goal is make a bundle up front for the state, they found, you set up an auction and “sufficient license scarcity should be put in place to enhance the valuation of each individual license.”

    In other words, artificially limit the outlets so you gouge operators for a high up-front fee.

    Seems to me if you’re going to privatize, you might as well go all the way.

    One factor that will weigh against that approach is the opposition of some, like Philadelphia State Rep. John Taylor, to widely-expanded liquor sales in Philadelphia neighborhoods.

    It was also interesting to see that the study reached no conclusion about the social impact of expanded liquor and wine sales, saying there are many studies of the issue and “the outcome of this research is mixed.” Which is exactly what I found when I tried to look into competing claims about the evil or innocence of easier access to firewater.

    You can download the PFM study and executive summary here.

    I’m beginning to think with all the complications and the other fish to fry in the legislature, we’ll have the state store system until I’m in a nursing home (but maybe I can order online).

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