Coronavirus shines new light on Pennsylvania’s state liquor monopoly

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Where and how Pennsylvanians buy their liquor has resurfaced as a budget, policy and public-health dynamic while the commonwealth wrestles with the effects from COVID-19.

Gov. Tom Wolf closed the state-run liquor stores on March 17 as the pandemic escalated, declaring them non-essential. After the commonwealth’s online system crashed from high demand, Wolf then allowed curbside pickups.

Pennsylvania's state-run liquor stores, including this outlet in Fox Chapel, are delivering their wares curbside during the pandemic.

Pennsylvania is one of 17 so-called control states nationwide in which governments monopolize liquor distribution.

Stay-at-home orders and disputes over business closures have prompted tugs-of-war as well as uncertainty in the Keystone State. Wolf last week announced a three-tiered, color-coded system for reopening businesses.

Gov. Gifford Pinchot formed the Pennsylvania Liquor Control Board in 1933, four months after Prohibition ended, to control alcohol sales and make its availability ”as inconvenient and expensive as possible.” The commonwealth has loosened some of the restrictions over the years.

According to the board’s annual report for fiscal 2018-2019, it generated more than $2.67 billion in sales and taxes from its Fine Wine & Good Spirits stores, direct deliveries to licensees, and from its e-commerce website.

Together, it returned more than $769.9 million to the general fund, state and local government and other beneficiaries that fiscal year. It returned $717.2 million to the general fund, including $381.9 million in liquor tax, $150.2 million in state sales tax and $185.1 million transferred to the general fund.

Like other states, Pennsylvania is reeling from revenue hits and added expenses. The commonwealth, which is debating its fiscal 2021 budget, could lose $4 billion in revenue absent further rescue aid from Washington.

Democrat Wolf in February proposed a $36.1 billion general-fund spending plan, which lawmakers are debating.

Alcohol sales are up nationwide during the stay-at-home orders driven by the pandemic, according to published reports, despite the shutdown of bars and other drinking venues.

Some Pennsylvania politicians have renewed their calls for privatizing the state system. The state controls hard liquor sales to the public down to the retail level, in state-owned stores. Beer and wine are available in licensed groceries and convenience stores. Previous attempts to relax the system, including those by Wolf’s predecessor, Republican Tom Corbett, have failed, in part from objections by public labor groups.

Pennsylvanians driving to neighboring states during a health crisis is a red flag to state Rep. Seth Grove, R-Dover.

“You’re forcing travel. You are forcing people to interact with other areas. I don't know if we want Pennsylvanians buying alcohol in New Jersey right now,” Grove said.

Alcohol border wars have been common over the years. For example, New Hampshire’s aggressively marketed state-run system is a source of longtime bickering with neighbor Massachusetts, whose residents have readily crossed state lines to buy amounts that are sometimes illegal. Investigators from many states have camped out at New Hampshire store lots over the years to eyeball license plates and bulk purchases.

“The reasoning for liquor stores as a state enterprise to me has always been a little shady,” said Nicole Gelinas, a senior fellow with the Manhattan Institute for Policy Research. “You go into these massive, massive stores in New Hampshire that are nothing like the corner stores in Massachusetts. It’s a very strange thing to put state pride in.”

Municipal bond analyst Joseph Krist suggested privatization efforts in Pennsylvania are part political theater.

“There’s been some discussion, but if I had to bet on it, I would say a year from now that the state would probably still run the liquor stores and they’ll move onto something else,” he said.

The recent furor over liquor availability shows that Pennsylvanians are largely OK with the system and comfortable with their traditions, according to Krist. It's a state that still airs a weekly polka show on television.

“Pennsylvania has always been slower in comparison to the rest of the northeast in just a lot of ways,” he said. “Some of it’s cultural. It’s kind of an insular place, even for a decent-sized state. Consequently, they’re kind of slow to respond.”

As the presidential election looms, Pennsylvania is also under the national spotlight as a battleground state that Republican Donald Trump won in 2016.

“It’s a perfectly average state that looks like the rest of the nation,” Gelinas said. “It has a diverse economy, large swaths of farmland and a high-tech cluster in Pittsburgh with its large healthcare and higher-education presence.”

Pittsburgh’s eastern counterweight, Philadelphia, has also experienced a tourist and cultural boom over the past 15 years that the pandemic is jeopardizing.

“Pennsylvania is pretty much a middle-of-the-road tax and spend state. Wolf has been a pretty pragmatic governor. It is not a high-spend, high-taxation state and does not have the same moral hazards as New York, New Jersey or Connecticut,” Gelinas said.

While the two biggest cities thrived pre-pandemic, others have suffered.

State capital Harrisburg sought bankruptcy in 2011, although a federal judge nullified the filing. Scranton, Wilkes-Barre and others have long operated under Pennsylvania’s workshop program for distressed communities, known commonly as Act 47.

Municipal corruption cases have scarred reputations in Harrisburg, Scranton, Allentown and Reading.

“There are more Wilkes-Barres and Scrantons than there are Pittsburghs and Philadelphias," Krist said.

"To me, cities of that size all share an awful lot of the problems in Pennsylvania," he said. "There’s no institutional infrastructure on which to build a modern economy the way Pittsburgh and Philadelphia are set up.”

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