Wolf's state store plan an ambitious cocktail

Gov. Wolf's budget proposal Tuesday called for a modernization of State Stores to generate $185 million in additional annual profit by fiscal 2018.

The dramatically increased profits would be used to make payments on a $3 billion bond issue designed to help close the $30 billion gap in the Pennsylvania Public School Employees' Retirement System, according to Wolf's plan.

Under it, the Pennsylvania Liquor Control Board, endangered by Republican talk of privatizing the system, instead would have a monumental task - assuming it gains General Assembly approval.

Based on the system's profitability in the year ended June 30, gross revenue from the state's 600-plus wine and spirits outlets would have to soar to $5.7 billion in fiscal 2018 from $2.3 billion in fiscal 2014 to generate an additional $185 million in profits.

How would the Wolf administration get there?

"The governor believes we can make the system more convenient for consumers and achieve revenue growth related to an increase in sales from a variety of initiatives, including expanded hours - like Sunday sales - and holiday sales, improved store locations, flexible pricing and customer engagement, consortium purchasing with other control states, and sales out of state that result from our competitive pricing," spokesman Jeff Sheridan said Friday.

Republicans were skeptical.

Rep. Chris Ross (R., Chester), chairman of the House Liquor Control Committee, said he had "serious doubts that the modernization proposals can generate anything close to the revenues projected for them."

The Republican-controlled House last month passed a bill that would privatize state wine and liquor stores and, by selling licenses, bring in an estimated $1 billion to help close a $2.3 billion budget deficit expected in the fiscal year starting July 1.

Modernization was a central topic at last year's LCB budget hearing before the House Appropriations Committee. Board officials discussed the reform ideas now being touted by Wolf with lawmakers who were eager to learn how much additional revenue the state could reap.

Liquor board officials estimated that expanding Sunday hours and opening more stores on Sunday, and allowing more pricing flexibility, would boost annual profits $46 million to $69 million.

That is far from the $185 million Wolf has called for.

Net profits in the year ended June 30 were $123.68 million on gross revenue of $2.27 billion. That amounts to net profit margin of 5.44 percent.

At that margin, gross revenue would have to be $5.7 billion to achieve an additional $185 million in annual profit.

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