It was an internal memo that got leaked, and on Wednesday made public, that suggests the Pennsylvania Liquor Control Board could increase its profits next year if it increased its mark-up on each bottle from the current 30 percent to 35 percent.
At its public hearing Wednesday in Harrisburg, LCB members dismissed the furor over the leaked memo.
“It’s much ado about nothing,” said Bob Marcus.
The memo was meant for board members to consider and not intended for public consumption. It crunches numbers and projects a decline in profit for next fiscal year because the LCB’s fixed costs (labor, pensions) are increasing.
Profit this year is roughly $120 million. It could drop below $100 million next year.
The memo gives board members options including a higher mark-up.
“It seems to me that would be a last resort,” said Joseph Brion, LCB Board Chairman.
He made clear it’s not likely to happen.
“We’re not increasing the mark-up,” he said. “I think that’s been a mistake (in the reporting) all along. The memo really was just a financial document that internally is given to us every year.”
On every bottle of liquor purchased in Pennsylvania there’s a 30-percent markup, an 18-percent Johnstown flood tax, a six-percent sales tax, and a handling fee of .50 to $2.50 depending on the size of the bottle.
“It’s a bad proposition for the state and it’s a bad proposition for the consumers. The only way to go is privatize this system,” said Steve Miskin, spokesman for the House Republican caucus.
The House passed a liquor privatization bill last year that has stalled in the Senate. Miskin insists the LCB painted a rosier picture about its financial future during budget hearings. He says the internal memo suggesting sliding profits next year is troubling.
“Either they were purposely misleading the legislature and the public or they’re inept and ignoring this,” Miskin said.
The LCB is not ignoring recent ethics violations by several of its employees who took gifts and trips from vendors.
A policy change approved Monday will require every employee to sign its code of conduct every year. The board also implemented a code of conduct for vendors. Basically, vendors can’t offer and employees can’t take anything of value.
“It was very disturbing to me on some of the issues that … vendors precipitated,” Brion said. “So the board decided that maybe we should have a code of conduct for vendors.”
Another proposal that could increase LCB revenues is expanded Sunday sales.
Currently, only 25 percent of liquor stores are open across the state. If every store could open on Sundays it would generate an estimated $13 million.
Expanded Sunday sales would require legislative approval.