Devil in the Details of PLCB Finances

It was another banner year for the government liquor monopoly—or so the PLCB claims. The agency recently released its finances, touting all-time high sales and a record $720.6 million transfer to the state’s General Fund. But don’t be fooled. The devil is in the details and our analysis of the PLCB’s finances shows privatization is just as critical as ever.

Sales Net of Taxes & Gross Profit

Every year the PLCB boasts of record sales, which isn’t impressive considering its monopoly—now near monopoly after Act 39—on the sale of wine and liquor. Still, even with control of the market, the PLCB’s sales have slowed in each of the last three years. 

Gross profit, which is the sales net of taxes minus costs of goods sold, increased by just $16.3 million. This is far from impressive and reflects normal growth rather than a productive year. Keep in mind, some “modernization” proposals took effect during this period. Yet, even with these changes, the PLCB could only produce a 2.7 percent increase in gross profit.

Net Income & Operating Costs

The agency reported a net income increase of just 1 percent over the prior fiscal year. This increase is the product of the $16.3 million increase in gross profit mentioned above and $17.9 million in license fees, which doesn’t reflect the PLCB’s ability to serve consumers or entrepreneurs. However, an increase in total operating costs ($30 million) nearly wiped out the net income increase. CF has warned about the PLCB’s expenses in the past. And they’re likely to get worse as pension and health benefits continue to grow.

Reserves & Net Position 

The agency drew down on its short-term investments to make an unusually large transfer ($216.7 million) to the General Fund. This was necessary because net income wasn’t enough to make the transfer promised under modernization.  Overall, the PLCB’s fiscal health deteriorated. The board reported falling $114 million further in the red, ending the year with a negative net position of $352 million.

In addition to its poor finances, the PLCB continues to fail consumers—see its recent price hikes on 422 items—and entrepreneurs with a new rule that requires businesses to pick up and pay for special orders without being able to determine if the orders are correct. The new policy has produced so much backlash that Sen. Anthony Williams has introduced legislation to allow for direct shipping to address industry concerns.

The senator’s legislation is a small step forward, but it does not fix the underlying structural problems with the liquor control board. These problems can only be addressed with full privatization. Any other piecemeal reform is insufficient.