April 22, 2018
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Should states be in the liquor business?

By Melissa Maynard, Stateline.org

WASHINGTON — For about a year, Pennsylvania wine-lovers didn’t have to go to a state-run Fine Wine & Good Spirits store to pick up a bottle of their favorite cabernet or sauvignon blanc.

They could swing by the grocery store, like Americans in most states, with one major caveat: They had to purchase the wine from a state vending machine. To get their bottle out of the machine, they had to blow into a breathalyzer and wait for a state employee in a central office to verify their identity and sobriety.

The Pennsylvania Liquor Control Board’s initial attempt to modernize its retail operations with wine vending machines in grocery stores ended in September after a little more than a year of operation. An audit released last August found that the wine kiosks were inconvenient for customers and took in $1.12 million less than the cost of operating them. They frequently malfunctioned and were shuttered on Sundays, the top sales day for grocery stores.

Eighteen states have an agency charged with overseeing the wholesale or retail sale of liquor or wine, but only Pennsylvania and Utah exert complete control over all such sales. Now Pennsylvania is one of several states grappling with whether to modernize its system or get out of the alcohol business entirely.

Proponents of privatizing retail and wholesale purchases of wine and liquor in Pennsylvania believe the vending machine episode is proof the state doesn’t belong in the booze business. “They are free to run their business however they like without any concern for market demands; it’s a monopoly,” says state Rep. Justin Simmons, a Republican. “They spent millions of dollars on wine kiosks and it was a total bust. It was a boondoggle and a joke.”

Simmons likes to remind people what former Gov. Gifford Pinchot said when he created the Pennsylvania Liquor Control Board at the end of Prohibition. “He said that he was going to make the sale of alcohol as inconvenient and expensive as possible, and that’s essentially the same system we have today.”

An online campaign from a free-market think tank, the Commonwealth Foundation, at freemydrink.com lays out the case even more bluntly. “Somehow, the PLCB thought customers would like the convenience of blowing into a public breathalyzer and gazing into a state-run camera where an off-site, taxpayer-paid employee verified their sobriety and identity. Turns out, Pennsylvanians like freedom. The ‘Blow and Go’ fiasco shows just how inept government can be when they ignore customer needs and try to imitate the benefits of free markets.”

Last November, voters in Washington state approved a ballot measure that will make Washington the first state since the 1930s to abandon its role in retail and wholesale liquor sales. “You’ve had the same basic structure among the states since the end of Prohibition,” says Leonard Gilroy, director of government reform at the Reason Foundation, another free-market think tank that advises states and localities on privatization. “Not much has really changed on the map.”

Washington auctioned off its state-run liquor stores earlier this month, and it will complete the transition to a private system by June 1. “We’ve really taken a billion-dollar business with 300 locations and brought it to a screeching halt in less than six months,” says Pat McLaughlin, business enterprise director for the Washington State Liquor Control Board. One thousand state employees will lose their jobs after the transition.

However, opponents have challenged the validity of last November’s ballot initiative, arguing that it is unconstitutional because it included more than one measure. The state Supreme Court will review the case on May 17.

(c)2012 Stateline.org

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