Inquirer Editorial: Who better to sell liquor than ...

Those who have doubted the ingenuity of Pennsylvania government should consider one of its most remarkable accomplishments to date: liquor stores that don't make money.

According to a new analysis prepared for Gov. Corbett, the Liquor Control Board figures that nearly one in 10 of its stores failed to clear a profit in 2009-10. However, if each State Store were assigned its proper share of costs and revenues, the report adds, "nearly all PLCB stores would be unprofitable."

That's not the backward beverage ministry's only distinction, according to the extensive report by the Harrisburg-based PFM Group. When measured against other states both with and without liquor control, Pennsylvania also has among the highest prices, the most burdensome taxes, the costliest operations, and the lowest profit margins.

Wait, it gets worse. The LCB's costs have been growing faster than its revenues for a decade, PFM found - especially its administrative costs, which have been rising at the breakneck pace of 7.5 percent a year. No telling how much of that overhead went to disastrous experiments such as the agency's clunky wine-vending contraptions, which were mercifully consigned to the scrap heap in September.

The not-exactly-legion defenders of this antediluvian system - namely, those directly or indirectly employed by it - are fond of mentioning the hundreds of millions of dollars in revenue it turns over to the state each year. Next fiscal year, its net benefit to the state will be $408 million, according to the PFM report. What's fascinating about this figure is that it's actually less than projected wine and liquor tax collections for the same year, which are expected to be $425 million.

In other words, roughly all of the LCB's gains can now be attributed to the state's high alcohol taxes: the 18 percent "Johnstown Flood Tax" (speaking of antediluvian) and the 6 percent sales tax. So that vaunted revenue infusion has virtually nothing to do with government liquor control - and everything to do with liquor taxes that could be collected even if the LCB were rightly returned to the history books from whence it came.

Responding to the report last week, an LCB spokeswoman bristled that the agency's unprofitability amounts to nothing more than "a general observation about the agency that you can make about any agency." The state isn't making any money locking up criminals, building bridges, or performing other typical government functions, the argument goes. So who cares if it's losing money selling liquor, too?

It would be a good question - if you could buy a bridge at a corner store in New Jersey.