Liquor Store Privatization Is Around the Corner in Pennsylvania and Tennessee

Legislators in Pennsylvania and Tennessee may do the unthinkable during their respective 2013-2014 sessions.


Legislators in Pennsylvania and Tennessee may do the unthinkable during their respective 2013-2014 sessions: loosen their stranglehold on alcohol sales. 

"Pennsylvania maintains one of the tightest, most restrictive liquor-control systems in America," according to the Pittsburgh Post-Gazette. The state's Liquor Control Board sets prices and store hours, polices distribution, and caps the number of stores.

camera_obscura [busy] / photo on flickr

But that could change this year. Pennsylvania Gov. Tom Corbett recommended privatizing liquor stores in his 2013-2014 budget proposal, and last month, the Pennsylvania House passed a bill for the first time ever that would transfer the ownership of state-run liquor stores to private entities over a period of time. According to Senate Majority Leader Dominic Pileggi, the measure faces stronger opposition in the upper chamber before it makes it to the Corbett's desk. The competing Senate bill, which seeks to "modernize" the existing model, does little more than tinker around the edges of the existing state-owned system.

Every Pennsylvania Democrat and five Republicans voted against the House measure. Many Democrats opposed the bill because the sale of state-owned liquor stores would eliminate positions within state government. Statistics available at the Pennsylvania Office of Administration reveal the number of state employees has dropped by more than 2,000 since Corbett took office in 2011.

"Voters want full privatization; they want convenience," says Nate Benefield, Director of Policy Analysis for the free-market Commonwealth Foundation. Benefield suggested that the only groups opposed to privatization are state employees and alcohol distributors. David Taylor, Executive Director of the Pennsylvania Manufacturers Association, said, "Getting Pennsylvania out of the booze business will send a message that positive change is possible in Harrisburg and that even the most entrenched self-serving interests cannot thwart the public will forever."

The argument against privatization goes something like this: "Eighty to 90 percent of our income comes from beer sales. How are we going to be making a living if everyone has it?" That's a quote from Mark Tanczos, president of the Malt Beverage Distributors Association of Pennsylvania. As Tanczos demonstrates, the resistance to liquor store privatization boils down to pure protectionism. 

That's a less than compelling argument in the eyes of Pennsylvania voters. A poll taken by nationally-recognized pollster Fairbank, Maslin, Maulin, Metz, and Associates in January revealed that Republicans and Independents support privatization by a more than two-to-one margin, while Democrats support it by 52%-43%. While Senate leaders don't seem to be in a rush to get something to Gov. Corbett, liquor privatization in Pennsylvania seems to be a matter of "when," not "if."

Booze reform in Tennessee

In Tennessee, consumers may buy wine and liquor at privately-owned retailers, but a push to allow the sale of wine in grocery stores has gained steam over the last few years. An organization made up of more than 28,000 Tennesseans called Red, White & Food is leading the charge in Nashville. This isn't the first time Tennessee has considered opening the market to competition. State lawmakers have attempted to legalize the sale of wine in grocery stores during previous legislative sessions, but have come up short. A renewed effort this session may make it to Tennessee Governor Bill Haslam's desk, but it still faces several hurdles.

"This year, the legislation would've created the ability for local governments to hold referendums to allow grocery stores to sell wine," says Jarron Springer, President of the Tennessee Grocers & Convenience Store Association, who is helping to push the legislation along in the General Assembly. (Currently, jurisdictions allow referendums for liquor-by-the-drink, package sales, and the establishment of distilleries. To get such a measure on the ballot, proponents must first garner enough signatures equal to 10% of the number of voters who participated in the last gubernatorial election.)

Asked about the greatest hurdle to passing wine in grocery stores by the end of the 2014 session, Springer said, "It's been a real challenge to get anyone from the [anti-wine in grocery stores] side to discuss this. Advocates want to bring opponents to the table to work through a compromise."

Springer also notes that the issue goes much deeper than wine in grocery stores. The complex nature of Tennessee's laws make it nearly impossible to alter one aspect of alcohol sales without disrupting another facet. The state governs how, when, and where wine and liquor may be sold, while localities decide how, when, and where beer may be sold. One proposed amendment to the Senate version would have expanded the hours of operation of liquor stores to include Sunday. Democrat Senator Doug Henry, who supports the sale of wine in grocery stores, does not support expanding the operating hours of liquor stores and would therefore not vote for an amended version of the original bill.

The proposed bill passed the Senate Finance, Ways & Means committee after an earlier attempt this session stalled the measure. Increased public pressure in recent years has brought wine in grocery stores closer to reality, and lawmakers may well find a solution by the end of this legislative session.

Other states are slowly moving toward liberalizing liquor laws. Washington recently privatized liquor sales by referendum, and Oregon may take the same path. Virginia Governor Bob McDonnell made the sale of state-owned ABC stores a priority in his 2009 campaign, but gridlock in the legislature halted that attempt for now. The trend, however, is in the direction of expanded consumer choice and reduced government interference. It's just going to take more time.