Showdown vote promised on Pa. liquor system - with beer in the mix

HARRISBURG - For the first time in Pennsylvania legislative history, liquor privatization will be served up for a vote next week in the state House of Representatives.

So promised Majority Leader Mike Turzai (R., Allegheny) on Friday, saying he had a revamped plan for auctioning off the state's wine and liquor stores and would bring it up for debate as early as Monday.

Turzai's latest proposal, which has Gov. Corbett's backing, centers on the familiar premise of getting the state out of the business of selling wine and liquor. But the top House Republican is throwing a new word into the mix:

Beer.

"We believe we've developed a strong plan, one which includes beer distributors, to also give them the ability to grow their business," Turzai spokesman Steve Miskin said Friday.

Turzai's new plan calls for issuing 1,600 licenses, the first 1,050 of which would be offered to beer distributors, who under current law can sell only beer, and only by the case - or keg. The remaining licenses would be auctioned off, on a county-by-county basis, to the highest bidders.

In other words, the plan holds out to Pennsylvania drinkers the hope of one-stop shopping, such as their New Jersey counterparts already enjoy: beer, wine and liquor under the same roof.

The plan also would, for the first time, let beer distributors sell six-packs - or any other configuration, such as an 18-pack - with no limit on the number of packages sold in a single transaction. Now, as Pennsylvania beer drinkers know, one can only buy six-packs at bars, delis, or taverns (usually at a steep markup), and no more than two at a time.

It was not immediately clear from Turzai's office how much money he believes the state could reap from this plan. A report commissioned last year by Corbett, a staunch privatization supporter, said auctioning off the Liquor Control Board's 600-plus retail stores, as well as its wholesale liquor operations, could raise as much as $1.6 billion.

Privatization foes - chief among them the union representing liquor store clerks - on Friday were quick to pick apart Turzai's latest proposal, grousing that it lacked detail and asserting that no privatization model can bring state coffers the kind of money the current system does.

Also in the "against" column: some in the state's beer industry.

"This plan is not good for beer," said Jay D. Wiederhold, president of the Pennsylvania Beer Alliance, which represents wholesalers. "It's disguised as being good for beer, but the fundamental problem is, you are trying to privatize a state-controlled system by interfering with private business. Beer in this state is a private industry."

He and other industry people said it would be tough for mom-and-pop distributors to afford the licenses to sell wine and hard liquor. Turzai's bill would charge distributors a flat fee that would vary by county.

If they do purchase a license, those distributors would then need to scramble for cash to buy inventories of wine and liquor and perhaps knock down walls in their stores to make room to fit it all in.

This in the midst of rising competition from supermarkets and other chains that have recently received LCB licenses to sell beer. Under Turzai's bill, distributors would be the only ones allowed for the first decade to sell beer, wine, and hard liquor - but businesses such as Wegmans that already have beer licenses would be grandfathered in.

"This is not a pro-small-business bill, this is a very big-business bill," said Paul Egonopoulos, owner of Brewers Outlet in Philadelphia's Mount Airy section and a director of the 450-member Malt Beverage Distributors Association of Pennsylvania. "More accurately, it's a supermarket bill."

Beyond the beer industry, privatization still faces a tough battle inside the Capitol, from those in the legislature who say alcohol should be tightly controlled to union supporters who worry that LCB employees will lose good-paying jobs.

There is also spirited debate on whether it makes financial sense to scrap the current system, which provides reliable revenue for the state. "It's real simple," said Wendell W. Young IV, president of United Food and Commercial Workers Local 1776, which represents 3,000 employees in wine and spirits shops. "You cannot take the system private and make the state the same kind of money."

According to the LCB, liquor sales this fiscal year have totaled $1.5 billion, with the agency set to kick roughly $80 million in profit into state coffers.

That is on top of $113 million in sales tax - plus money raised from the 18 percent so-called Johnstown flood tax slapped onto wine and liquor sales. That tax has generated nearly $273 million this fiscal year, which ends June 30.

Turzai's plan would replace that 18 percent levy with a new gallonage tax, at a rate not immediately made public Friday.

Young said he would be "relentless" in his efforts to beat back the latest privatization push. He said he did not believe Turzai had the votes to get it passed in the House, where Young said more than 200 amendments had already been filed to change the legislation. "It is going to look like freaking Frankenstein," he said.

But like the monster of fiction and film, the idea is popular. Every recent poll has found a solid majority wants the state to get out of the liquor business.