Real question of liquor store privatization: how to prop up revenue

Following a report in October that the state of Pennsylvania could make up to $1.6 billion from the sale of wholesale and retail licenses to sell wine and spirits, a reader asked for more information about current annual revenues from sales.

NewsWorks reported in October that the state of Pennsylvania could make up to $1.6 billion from the sale of wholesale and retail licenses to sell wine and spirits, according to a report commissioned by Gov. Corbett. The privatization plan proposed by House Majority Leader Mike Turzai estimates a return of nearly $2 billion.

Whatever the number, this one-time windfall does not address the revenue for the state that is currently generated under the current setup.

In response to Mary Wilson’s story from October 25 (New report estimates selling Pa. liquor licenses could net $1.6 billion), a reader said via Twitter, “it would be helpful to also state how much in annual revenues and profits they bring in off liqueur for proper analysis.”

Looking at the executive summary from Liquor Privatization Analysis prepared by The PFM Group may help here.

According to the report, the majority of Pennsylvania Liquor Control Board revenue comes the mark-up of the product to consumers and the state taxes applied to the sale. This pays for PLCB operating expenses, state police liquor law enforcement, and treatment and prevention programs for the Department of Health. These expenses would require a funding source if the state converts to a privatized liquor system.

The report estimates that in fiscal year 2012-13, revenues minus expenses under the current system will net the state $408 million. To maintain current state spending levels, any privatization solution must generate revenues equal to at least that amount.

It’s assumed that taxes and fees would continue to be applied to wine and distilled spirits, although the type of tax may change. The choices may have an impact on consumer prices.