Pennsylvania: Sweeping liquor reform bill advances toward full Senate and uncertain future
Source: Penn Live
By Wallace McKelvey and Charles Thompson
December 09, 2015
Sweeping liquor reforms that would keep the existing state stores but expand sales at grocery stores and restaurants advanced Wednesday toward a full state Senate vote.
The raft of measures was based on the budget framework negotiated between Gov. Tom Wolf and the Republican leadership, but it faces an uncertain future in the House, where key members have been vehement in their support of privatizing the state’s liquor distribution system.
“I really don’t know what’s going to happen in the House and if this is going to be enough for them,” said Sen. Charles McIlhinney, R-Bucks County. “But, at the end of the day, in order to get something done you have to have a compromise.”
McIlhinney, who chairs the Senate Law and Justice Committee, said the bill is the state’s best chance at comprehensive liquor reform in 70 years. In total, he said, he believes the convenience and expansion measures will net the state an additional $115 million in revenue per year.
“I was told by the Governor’s Office that he would support this package,” he said. “I think that’s important thing to make this, possibly, a reality.”
The bill’s reforms, which mirror many of the modernization efforts of recent years, were included in an amendment to a previous House bill that would have privatized the state system. Both the amendment and the final version of the bill received a 7-4 vote along party lines.
Key components of the Senate’s liquor proposal, which is expected to go to a full Senate vote Thursday, include:
No restrictions on hours, state-mandated holidays or Sunday operation of state liquor stores
Opening up loyalty programs and coupons at state stores
Lottery sales at the state stores
Flexible pricing to allow state stores to offer special discounts and sales
Restaurants and hotels with licenses can sell up to four bottles of wine for take-out. ($2,000 permit fee + annual renewal fee of 2 percent of wine purchases from the Liquor Control Board)
Grocery stores that currently sell beer, such as Wegman’s, may also sell up to four bottles of wine.
Casinos can sell beer, liquor and wine 24/7. Liquor can be consumed off the gaming floor. ($1 million application fee; $1 million annual renewal fee for first 4 years; $250,000 renewal thereafter)
Casinos can provide beer, liquor and wine free of charge at invitation-only events
LCB can reissue restaurant licenses that haven’t been renewed or revoked via an auction. Up to 50 licenses can be auctioned per county, per year pending approval by the municipality in which the license is transferred.
Codifies a recent court decision that allows license-holders that also sell gas to continue to operate as long as the two operations are separate.
Expands the roster of organizations allowed to obtain special occasion permits to include the Boy Scouts of America, the Red Cross and others.
Creates a Liquor Study Commission to produce a full report of the state’s alcohol distribution system. The General Assembly would have to act on its recommendations by June 2016.
Allows bed and breakfasts to provide no more than one bottle of wine to customers at check-in.
Allows breweries and some distilleries to participate in farmer’s markets and food expos.
Prohibits the sale of powdered alcohol.
Allows licensed hotels and restaurants to sell alcohol between 7 a.m. and 2 a.m. on Groundhog Day.
Allows wine producers to direct ship wine to state residents.
Reduces special liquor order markup to licensees from 30 percent to 10 percent and allows for direct shipment.
Allows for the sale of gift baskets containing one bottle of Pennsylvania wine.
Creates promotion boards for brewers and wine producers.
A few of the Democratic opponents cited worries about opening policy doors that will reduce long-term job security for the employees at the state-owned liquor stores.
“This is landmark legislation, and it’s nice to be a part of all that,” said Sen. Jim Brewster, D-Allegheny County. “But it’s very complicated and there are still have four or five thousand people out there who are depending on us to make the right decision.”
Sen. Anthony Williams, D-Philadelphia, said he was voting no in because he didn’t like being asked to consider such a sweeping change to Pennsylvania’s liquor horizon in the final stages of a budget cycle. Williams said the issues are important enough that they should be considered independently and separately from the vote-leveraging and deal-making that accompanies the rush to complete, in this case, a long-delayed budget.
McIlhinney countered that he was confident that most of the issues contained in the bill had been fully aired over the past three years, including a series of public hearings McIlhinney held during the 2013-14 legislative session.
“I did try to work to accommodate as many people,” he said, of recent deliberations, “but you can’t always make everyone happy.”
Moreover, McIlhinney said the Senate’s proposals could be implemented immediately compared to the alternatives. When asked about whether the reforms will erode sales, he said he doesn’t believe the expansion of wine, for example, will impact the state stores. Any possible loss would be mitigated by expanded hours and Sunday sales.
“You really wouldn’t go wine shopping at Giant Eagle,” he said. “If you’re in there getting other things, you’ll buy a buttle of wine, you’ll buy some beer. But if you’re going to actually look for special wines, you’ll go to the state stores.”
The Senate’s proposal has no impact on beer distributors, McIlhinney said.
United Food and Commercial Workers President Wendell Young said Wednesday he’s worried that the bill will cost the state tax revenues now and start a slow bleed of customers away from existing state stores and beer distributors that will jeopardize jobs in the future.
Young cited provisions including a reduction in the mandatory mark-up the Pennsylvania Liquor Control Board charges on so-called “special orders” by bars and restaurants of liquor products not regularly stocked by the agency that he said could cost the agency about $20 million annually. Another convenience reform permitting direct shipment of wine from wineries to consumers, Young said, would tax those sales based on fluid ounces sold, rather than a fixed percentage of the price, which Young said will generate less for the state on high-priced items.
“At a time where we need revenue it doesn’t make any sense to subsidize the supermarket, the bar and the restaurant business in Pennsylvania by giving them tax breaks and deeper discounts to buy the merchandise at the expense of the taxpayers in Pennsylvania,” said Young, whose union represents clerks at the state-owned liquor stores.
Young’s longer term worry is that both privately-operated beer distributors and the state stores would lose customers to supermarkets that opt in for wine sales, putting many existing jobs at risk.
“They’re (grocery store operators are) just going to rearrange the current space and reassign personnel to stock more of the wine and less of the donuts and other things. It’s not going to create new jobs. It’s going to eliminate a lot of existing jobs,” Young said. “I don’t like it. I’m concerned about it, and we’re going to fight to change it.”
The bill will likely be a hard sell to House Republicans, who sent the bill in its original privatization form to the Senate less than a month ago.
Republican leaders could not be reached for comment Wednesday night, but they’ve panned proposals similar to McIlhinney’s as recently as last week. They have insisted that any liquor reform bill include a date certain by which the state would end its role as the single wholesaler of wine and alcohol.
McIlhinney and other Senate leaders said they hoped that Wolf’s apparent sign-off on the bill would help the House leaders accept the bill as the first positive step toward liquor privatization in decades.
The Senate’s proposal requires a larger study of the state’s liquor system by a newly created commission whose recommendations the General Assembly must act upon. McIlhinney said the action wouldn’t necessarily lead to privatization.