Privatizing Pennsylvania Alcohol Distribution Risks Lost Revenue and Higher Social Costs

Date of Press Release: 
January 30, 2013

HARRISBURG, PA (January 30, 2013) — The Keystone Research Center (KRC) today called on the General Assembly and public to encourage Governor Corbett to abandon a new proposal to dramatically increase the number of retail outlets for beer, wine and spirits in the state.

"The proposal could cost the commonwealth revenue that won’t be invested in education, health services and a stronger economy," said Stephen Herzenberg, Ph.D., an economist and executive director of KRC. "It will also radically increase alcohol accessibility and the resulting social costs."

KRC economist Mark Price, Ph. D., estimated last year that, controlling for other variables including the strength of state alcohol regulations, privatizing alcohol distribution in Pennsylvania would lead to 58 more traffic fatalities annually.

Professor Karen Glanz, who heads Penn’s Center for Health Behavior Research, also observed that "retail alcohol privatization increases the risk of excess consumption of alcohol and its associated consequences. A large body of research has also found negative social impacts from privatization of alcohol distribution."

Dr. Glanz is the George A. Weiss University Professor at the University of Pennsylvania and a member of the Community Preventive Services Task Force, a national task force of public health experts. The Task Force recommended in April 2011 against further privatization by states of retail alcohol distribution. A peer-reviewed article summarizing the research that led the Task Force to its conclusion was published in the American Journal of Preventive Medicine in April 2012.

"The governor’s proposal seems out of step with voters," Herzenberg said. "While elected officials elsewhere are recognizing that voters want real solutions on jobs and other priorities of middle-class families, the governor is trying to fix a system that isn’t broken."

Herzenberg said that the revenue implications of the governor’s proposal will deserve careful study. "The state wine and spirits system transfers about half a billion dollars to the General Fund annually, including taxes and profits. How much will be collected from the industry after privatization?"

The governor’s proposal was released in conjunction with an analysis of its financial implications that builds on a 2011 study of privatization options by the consulting firm Public Finance Management (PFM). University of Michigan research scientist Roland Zullo found that the 2011 PFM study used internally inconsistent assumptions to arrive at over-optimistic conclusions about the impact of privatization on revenue and consumer prices.

For links to the studies by Dr. Price, the Community Preventive Services Task Force, and Dr. Zullo, and for other information, go to Keystone's Alcohol Privatization Page.