Privatization last call? Nah

An editor friend likes to talk about the Drawer of Durable Headlines, which include such newsroom favorites as "Tensions Rise in Middle East," "Mumia Seeks New Trial," and "Pa. Republicans Push to Privatize Liquor Sales."

Earlier this week, it looked as though we could retire that last headline for the summer, as GOP legislators failed to count enough votes to bring their latest proposal to scuttle the State Stores to a vote on the House floor.

For three hours Monday, legislators debated the pros and cons of the issue — the first time in Pennsylvania it got that far. But conversation stopped, and the measure seemed to be bottled until at least after summer break. Then on Wednesday, House Majority Leader Mike Turzai told my colleague Angela Couloumbis he expected the body to resume discussions next week.

You'd think it would be easier to fix a system that calls to mind the former Soviet Union — without the variety of vodka. Gov. Corbett made privatization a campaign issue. His party controls both chambers of the legislature. And the last time Pennsylvanians were polled by Quinnipiac University, in August, they told surveyors they wanted the State Stores unloaded. By a 2-1 ratio.

Supporters of the legislation argue that privatization will lower prices and make buying liquor more convenient. Social conservatives warn that easier access to booze would boost underage drinking and drunken driving. Union officials argue that privatization is unlikely to produce the projected revenue but is certain to end the living wages of thousands of state workers.

The debate has left me looking to hear from someone who doesn't have a dog in the fight.

Katja Seim and Joel Waldfogel have written a paper on Pennsylvania's privatization effort that has been accepted for publication by the American Economic Review. The professors have known the peculiarities of the state's system since they were colleagues at the University of Pennsylvania's Wharton School.

Waldfogel, who has since returned home to teach at the University of Minnesota, remembers trying in vain to find the beer aisle in a State Store when he moved here, only to be told at the register, "Welcome to Pennsylvania." Seim is from Wuppertal, Germany, where you can buy a liter of lager at the movies.

I asked them why it was taking so long to blow up a Prohibition-era system so many people loathe.

"For many parties, the system wasn't that broken," Waldfogel said. "And there were some parties for whom the system was wonderful."

In the "wonderful" category, you'd have to list state workers. They account for 5/7 of the cost of operating a store and make more than twice what their counterparts do in the private sector, the economists found. Average pay, including benefits, of a State Store worker was $43,680, according to the 2007 Economic Census, which put the cost of private labor at $21,000.

Cut those jobs and consumers could see some of that money, but there would be other costs, Waldfogel said. "A lot of folks will find themselves outside the middle class."

Others benefiting from the current system are rural residents, because the free market doesn't have a stake in spreading around stores the way a government entity does.

But overall, he said, most people would see a privatized system positively. "They will get some combination of more convenience, better prices, and access to more selection without having to leave the state to shop."

Seim suggested we look to Washington state for a fresh example of privatization. The Seattle Times asked its readers to report what they were paying for liquor the first week of the change, which took effect there June 1. More prices were higher than lower by a slight margin in their informal survey.

Washington's system is a little different from Pennsylvania's. Beer and wine were already available at private stores. To recoup money lost down the road, the state has slapped fees of 17 percent on retailers and 10 percent on distributors. That isn't reflected in the prices posted on the shelves, which is causing customers sticker shock at the register.

"It's still very early on," cautioned Seim. She is convinced that if Pennsylvania didn't hike its already high taxes and fees, prices wouldn't change very much.

That is, if this deal ever gets done. Chances are we'll get to use our headline again. And again.

 

Contact Daniel Rubin at 215-854-5917, drubin@phillynews.com, or follow @danielrubin on Twitter.