Can the Budget Deadlock in Harrisburg Lead to Liquor Reform?

In an effort to resolve the ongoing budget battle in Pennsylvania, The Pennsylvania Senate has passed a $30.3 billion Republican-backed state budget that calls for increases in the cigarette tax, new revenue from internet gaming and major changes to the liquor code. The Pennsylvania House has not given its blessing to such a budget deal yet and has indicated that the Senate Plan does not go far enough to dismantle the current liquor system. The House has its own more radical proposal.

While not a certainty, it is likely that some type of liquor law reform will result from the lingering budget negotiations in Harrisburg. However, liquor reform has been linked to budgets before, only to be de-linked when a lack of consensus threatened to derail the main goal of securing a budget deal.

The Republican controlled House and Senate have long sought major changes to the alcohol distribution system in Pennsylvania and view this year’s budget process as an opportunity for significant changes to the Liquor Code. Governor Wolf, a Democrat, has already agreed to some changes in the liquor code as a method of extracting new sources of revenue. However, many unanswered questions remain about if, how and when the stalemate in Harrisburg might end Pennsylvania’s protracted budget battle.

The governor has stated that he is committed to a framework that includes historic changes to education funding, pension overhaul, and liquor reform. Wolf, who generally opposes privatization, has indicated he will approve the Senate plan if it is attached to the overall budget framework. The Governor has indicated that he would agree to the Senate plan despite the fact that revenue projected thereunder falls well short of the $350 million he is seeking in new schools funding. The Senate plan may not be enough to satisfy Pennsylvania House leadership however, which has stated that it wants nothing short of abolishing the Commonwealth’s 85 year monopoly on wine and liquor sales.

The Senate’s wine privatization plan would open all State Stores on Sundays and on many holidays. State stores would get more pricing freedom, and under the plan, restaurant and hotel liquor license holders could sell up to four bottles of wine for over the counter, off premises consumption by paying an initial fee of $2,000, and thereafter renewing at a cost of 2 percent of annual wine sales. Casinos could obtain licenses to sell wine, beer and liquor 24 hours a day for $1 million, with a $250,000 annual renewal fee. Not content with those changes, the Senate plan would create a liquor study commission that would report to lawmakers in six months with recommendations on the future of the State’s liquor system, and the General Assembly would be required to vote on those recommendations by June 2016. Under the Senate plan, the Commonwealth’s state stores, and wholesale operation would remain in place for the time being.

Conversely, House leadership is convinced that the Governor is willing to support total liquor privatization in exchange for Wolf’s budget, which includes higher taxes and spending on issues important to the Wolf Administration. A House plan proposes to close all the state-owned liquor stores; create 1,200 new permits to sell wine, beer and liquor with retail beer distributors given first opportunity to obtain those licenses; permit restaurants, hotels and grocery stores to obtain permits to sell wine and liquor for over the counter off premises consumption. The current House plan has been denounced by the Senate is not likely to reach the Governor’s desk.

The uncertainty about the Senate bill’s fate has many in Harrisburg wondering what will happen next. Most expect the budget wrangling to continue into the New Year. Follow us on Facebook and Twitter for regular updates on the budget process and liquor reform.
— J. Ken Butera

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