As a recent investigative video shows, liquor stores in New Jersey and Delaware are filled with Pennsylvania shoppers every day.  The video, produced by the state chapter of the National Federation of Independent Businesses, should shock no one.

We already know consumers shop with their feet—even the Pennsylvania Liquor Control Board acknowledges it.  Their survey of Philadelphia region residents found nearly half shop in other states, costing the commonwealth hundreds of millions annually in sales due to "border bleed."

Consumers want greater convenience, selection, and lower prices.  They want beer, wine, and liquor to be sold in local grocery stores.  They don’t want to drive as far, or make multiple stops.  And they want the ability to buy alcohol in whatever quantity they choose.  That’s why a Delaware shop had three times as many Pennsylvanians as Delaware shoppers.  But we can bring them back.

Lawmakers, customers, and activists celebrated the historic vote in the Pennsylvania House to end the government liquor store monopoly. Indeed, lawmakers accomplished what many pundits doubted was possible—and what several governors had tried and failed to do—by even holding a vote on a liquor store privatization bill.

But consumers and taxpayers have nothing to toast—not until the Senate and House agree to legislation that will earn Gov. Corbett’s signature. The challenge for lawmakers is balancing the free market consumers want with the demands of those already vested in the current system.

The state Senate has begun hearings on privatization and it is a near certainty they will do something, but what that something will be is far from certain.  Sen. Chuck McIlhinney, who chairs the committee taking up the House-passed bill, says he supports privatization, but what does privatization really mean?

Here are two key things that must happen in any bill to deliver for consumers and taxpayers:

First, lawmakers must increase retail competition.  This means licensing more stores to sell wine and spirits so consumers don’t need to cross state lines, allowing beer distributors and grocery stores to carry wine and liquor for greater convenience, and creating meaningful competition even if they don’t shut down the state-run stores immediately.

No Pennsylvanian wants to see a government monopoly replaced with a private one.  And providing a mechanism to close down state stores once private competition has ramped up, as the House-passed legislation did, will finally get government out of the booze business and allow the PLCB to focus on its regulatory mission.

Second, lawmakers must end the government monopoly over wholesale operations.  The wholesale monopoly allows government bureaucrats to determine what is sold in Pennsylvania and what isn’t, to set artificially high prices for every bottle sold, and to limit competition and selection.   

The PLCB’s wholesale monopoly is the source of endless frustration for restaurant, winery, and bar owners and has produced a series of boondoggles on the taxpayer's dime.  One of the biggest PLCB blunders is the branding and marketing of their own wine label, TableLeaf.  This government wine takes prominent shelf space away from Pennsylvania labels, yet the brand state taxpayers own is actually grown and bottled in California and directly competes with wineries right here in the Keystone State. 

Thanks also to the PLCB wholesale monopoly, consumers were treated to the infamous wine kiosk program—elaborate vending machines in grocery stores that required a public breathalyzer test, identity verification, and a video sobriety test prior to allowing a sale.  

It's decades past time to get government out of our Prohibition-era liquor system. Pennsylvanians have suffered from the PLCB's conflicts of interest and taxpayer-funded boondoggles for far too long.  Until lawmakers pass a plan that satisfies both consumers and stakeholders, we will continue to see shoppers stream across state lines for the convenience our government monopoly has failed to deliver.

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Nathan A. Benefield is Director of Policy Analysis with the Commonwealth Foundation (CommonwealthFoundation.org).

Myth #1: Defined benefit pension plans are better for taxpayers than defined contribution plans.

Fact: Defined benefit plans are inherently political. Defined benefit plans encourage lawmakers to increase benefits for current workers in good times, regardless of whether such benefits are affordable, and allow policymakers to push costs off onto future taxpayers in bad times. By contrast, defined contribution plans—which require a set contribution from employers and employees every month—make benefits predictable for taxpayers and workers.

Over time, defined benefit plans have proven to be unsustainable and unpredictable. This is why private companies are rapidly abandoning such retirement systems. A survey by Towers Watson shows that Fortune 100 companies have overwhelmingly shifted to defined contribution plans.

These companies are also choosing 401(k)-type plans over “hybrid” plans. Hybrid plans, such as “cash balance plans,” are defined benefit plans that incorporate aspects of defined contribution plans. While they offer less risk than traditional pensions, they suffer from the same funding and political shortcomings which plague Pennsylvania’s existing plans.

Since 2002, the number of Fortune 100 companies offering hybrid plans has rapidly decreased, while those offering 401(k) plans only increased more than 300%.  

Myth #2: Defined contribution plans, such as 401(k)s, don’t provide for an adequate retirement.

Fact: 401(k)s can be designed to provide a substantial replacement income at retirement when workers invest their entire careers.  Evidence showing lower 401(k) income is based largely on workers who participated for only part of their careers.

Because 401(k) plans offer portability when changing jobs, they enable workers to maintain greater long-term control over their retirements. They can even be passed down to children or heirs, and—unlike Pennsylvania’s present system—they cannot be raided or underfunded.

Myth #3: State pension plans cost less to administer than 401(k) plans managed by Wall Street firms.

Fact: A Deloitte study found that 401(k) plans cost the same or less than traditional plans to administer.     SERS and PSERS spent more than $760 million last year on administrative costs and investment fees. As a percentage of assets, these costs exceed the average total fees for large 401(k) plans as calculated by Deloitte.

The fact is, Pennsylvania’s troubled state pension funds already rely on expensive Wall Street investment firms to close looming deficits. For example, in 2006, the State Employees’ Retirement System (SERS) gave $6 billion to six private investment firms to buy risky hedge funds in hopes of earning lavish returns to cover its pension shortfall.

Myth #4: Converting to a 401(k) pension system would create significant “transition costs.”

Fact: Opponents claim government-mandated rules that require Pennsylvania to pay off unfunded liabilities sooner will cost the state, but the national Governmental Accounting Standards Board (GASB) regulates only the accounting methods—it doesn’t mandate when or how debts must be paid. Taxpayers are already on the hook for the $40 billion unfunded liability for state and public school workers.  Switching to a new plan does not add to this liability.

Pennsylvania state government and school districts currently put less money into the pension plans than the “Annual Required Contribution” mandated under accounting rules.  Regardless of reforms lawmakers may enact for new workers, the current funding system is unsound.

Myth #5: We must enroll new employees in the current system to reduce our pension liability.

Fact: State pension plans are not funded like a Ponzi scheme.  An employee’s contribution is only for his or her own retirement.  A teacher’s contribution, for example, does not even cover the full estimated “normal cost” of his or her pension. Taxpayers (the school district and state) pay an additional cost per employee based on assumptions of workers’ retirement age and investment returns.  The unfunded liability is entirely borne by taxpayers and must be paid off regardless of pension design changes.

Submitted Testimony of the Commonwealth Foundation for Public Policy Alternatives to the Senate Law & Justice Committee, April 30, 2013

The Commonwealth Foundation would like to thank Chairman McIlhinney, Chairman Ferlo, and the members of the Committee for the opportunity to submit testimony on the social impacts of liquor privatization. We look forward to working more with the Committee as well as the other members of the Senate on this very important issue.

If government control of wine and liquor sales means a safer state, Pennsylvania should be one of the safest in the country. This is not the case. Compared to bordering states and the national average, the commonwealth currently ranks in the middle-of-the-pack or worse in alcohol-related deaths and alcohol-related traffic fatalities.

Data on Social Impact of Alcohol Use

We examined the Center for Disease Control's alcohol-attributable deaths statistics, which can be found on the CDC’s Alcohol-Related Disease Impact portal rather than alcohol-induced deaths, which is a narrower and less comprehensive look at the statistics.

Here are the facts:

• Pennsylvania ranks higher than five of six bordering states and is near the national average in alcohol-attributable deaths per 100,000 residents.
• The commonwealth has more alcohol-related traffic fatalities per 100,000 residents than four of six bordering states and ranks slightly higher than the national average.
• Pennsylvania ranks higher than five of six bordering states in the percentage of traffic fatalities related to alcohol use, at 33 percent—slightly higher than the national average.
• Mothers Against Drunk Driving ranks Pennsylvania 35^th in DUI safety, worse than all bordering states but Delaware. A survey by the U.S. Department of Health and Human Services ranks Pennsylvania higher than the national average in underage drinking, binge drinking, and underage binge drinking.

According to the same survey data, most underage drinkers in other states aren't going into stores to buy liquor. Almost 90% of underage drinkers get their alcohol from someone else. Less than 5% of underage drinkers bought their own alcohol in a store.

Indeed, almost three-fourths of the alcohol consumed in Pennsylvania—which includes beer, wine, and spirits consumed at restaurants and bars—is not sold at PLCB stores. This clearly shows that underage drinking is not tied to government monopolies over liquor stores.

Using government data, a website from the Mackinac Center allows users to compare social outcomes for states that control their alcohol sales to states that don’t. These statistics show no difference between states with government-run alcohol monopolies and those licensing private retailers. 

CDC Report is Red Herring

The Center for Disease Control’s independent study performed by the Guide to Community Preventive Services Task Force is often used as a red herring against privatization. But here are the facts: First, the Task Force does not represent the CDC’s official position.  Second, the Task Force reviewed 21 studies, some of which included more than 30-year-old sales data. While some of these studies found increased consumption following privatization, others found decreases or no change.

The Community Guide’s own "Research Gaps" paper on the CDC’s Task Force report concludes:

The limited available evidence of effects of privatization on alcohol-related harms (i.e., motor vehicle crashes and cirrhosis) in North American settings is not consistent with findings on consumption (i.e., while the increased consumption associated with privatization would be expected to lead to increased motor vehicle crashes and alcohol-related diseases, a tendency toward the opposite has been observed).  Further research is needed to resolve these inconsistencies.

Thus, both because most studies do not directly address impacts on excessive consumption and because of inconsistent findings on related harms, there is insufficient evidence to determine the effects of privatization on excessive alcohol consumption and related harms.

Many of the arguments against privatization aren’t about social harms—for which the evidence shows no link with government control—but increased consumption following privatization. Consumption would increase dramatically if every adult drinker had one more glass of wine each month, but this does not create a policy problem. And as long as consumption is measured in terms of sales, we expect to see an increase. The Task Force’s synopsis ignores the fact that none of the studies show liquor store privatization has an effect on underage drinking or DUI fatalities.

The former chair of the American Medical Association, Dr. Raymond Scalettar, penned a letter, "There was little proof in privatization op-ed," in the Harrisburg Patriot-News criticizing the Task Force conclusion for this same reason.  He concludes, "Alcohol consumption habits tend to be culturally driven and macro-level control policies have little to do with drinking patterns."

We disagree with the Task Force’s premise that privatization would lead to more motor vehicle crashes and alcohol-related diseases. In addition, the very CDC report commonly used to argue against privatization has been deemed insufficient to make a reasonable determination about the veracity of its claims.

Conflict of Interest

The PLCB spent taxpayer dollars on tone-deaf "dangers of drinking" ads, including one that seemingly blamed rape victims for their own victimization. This very same government entity designs and spends our money on advertising campaigns to encourage alcohol consumption.  One PLCB Web site says binge drinking leads to impaired decisions and potential rape, the other has a recipe for a cocktail called "Wake-up Whipped," featuring PLCB-selected spirits.  

The PLCB spends tens of millions of taxpayer dollars every year to market and sell alcohol products. But they promote moderation and alcohol safety via advertising at the same time. There should be no doubt that this inherent conflict of interest prevents the PLCB from effectively protecting and serving the public.

We would like to thank the Committee for the opportunity to submit our testimony for the record. We are happy to follow up with any questions or additional information it may find useful.

The Affordable Care Act may not yet be fully implemented, but its negative effects and exorbitant price tag are already being felt in statehouses, hospitals, and homes across the country.

Yet in the face of the president's and the Senate's unwillingness to address the law's many issues, some states — including my home state of Pennsylvania — are taking proactive steps to help protect taxpayers and families from the ACA's burdensome costs by refusing to expand Medicaid programs that fail to serve the poor.

Fifteen states have so far announced their intention not to participate in the ACA's Medicaid expansion program.

The president may not like this development, but it's a decision that makes sense, both fiscally and morally.

Consider Medicaid's current bill of health. Medicaid has a poor record of serving the people who need it the most. The program's broken system of doctor reimbursements and its reams of red tape mean that many doctors have to choose between accepting Medicaid patients and staying in business.

As a result, Medicaid recipients have fewer options, spend more time in the waiting room, and ultimately don't get the care they need.

The 48-year old program is bleeding red ink. It is already the single largest item in most state budgets, accounting for roughly 23% of state spending on average. Pennsylvania alone expects to spend more than $9 billion in state funds on Medicaid over the next year.

The national numbers are even more enormous. Medicaid spending ballooned from $73.7 billion in 1990 to an estimated $450 billion last year.

And the GAO predicts Medicaid costs will continue to grow faster than taxpayers' ability to pay and consume a larger share of state and federal spending.

These numbers — already at mind-boggling levels — are expected to accelerate under the Affordable Care Act. Rather than rein in the runaway cost of Medicaid, the ACA urges states to expand the program using an unfortunate "carrot and stick" approach.

The "carrot" is that the federal government has promised to shoulder the additional costs at first, but its payments will trickle off after three years.

The "stick" is 20 new federal taxes that residents will still pay for Medicaid expansion in other states, even if their state refuses to participate. It's nothing more than financial extortion by another name.

Pennsylvania has seen through this ruse, as have 14 other states, with ten more still weighing the offer.

Past experience has taught these governors that Washington politicians will renege on their promises — President Obama has already suggested cutting the federal matching rate.

Even if the federal government keeps its end of the deal, states will be forced to raise taxes to pay for a program they have little control over.

That's why Pennsylvania Gov. Tom Corbett should also be praised for requesting an "innovation waiver" for the program. Unlike the fake flexibility pursued by Arkansas, these waivers offer states wider latitude and have a good track record in the states where they exist.

With flexibility to fix Medicaid, states have saved money, improved patient care, and produced more satisfied participants.

In the face of the ACA's crippling uniformity, such waivers are the best means for states to improve the health care of their neediest citizens while balancing their budgets.

The ACA's problems are obvious, whether you're sitting in Washington, Harrisburg, or anywhere in between.

That's why leaders in statehouses across the country should do the right thing and follow Pennsylvania's lead.

Instead of waiting for dollars and dictates from D.C. to expand a broken program, our states can save our ailing health care system by fixing Medicaid themselves.

# # #

Tom Smith was Pennsylvania's Republican nominee for U.S. Senate in 2012 and recently joined Commmonwealth Foundation's board of directors.

Editors Notes: This commentary first appeard in Investor's Business Daily.

• The PLCB created and heavily promoted the wine brand TableLeaf.  The agency spent $7-10 million of our tax dollars on copyrighting, branding, and marketing this single in-house brand. And they have at least seven other government brands featuring more than 30 different products.
• Adding insult to injury, TableLeaf is a product of California—the PLCB promotes out-of-state grapes rather than Pennsylvania’s growing wine industry.
• The PLCB unfairly competes against Pennsylvania wineries and other private businesses by using tax dollars and monopoly power to push its own in-house products. Imagine being a local winery owner, knowing your taxes are being used to fund your own competition!

Wholesale Managerial Incompetence Costs Taxpayers

• The PLCB poured $66 million in taxpayer money—nearly two-and-a-half times the estimated cost—into  a "state of the art" inventory system that failed to allocate adequate product levels, causing widespread shortages at retail outlets.
• This led to massive hoarding by store managers and, later, to over-ordering. Surplus inventory was stored in non-temperature-controlled trailers that cost an additional $500,000 and subjected heat sensitive merchandise to temperatures in excess of 100 degrees.

Promotion and Regulation Create Conflicts of Interest

• The PLCB is charged with encouraging responsible alcohol use through regulation and education, but promotes the same activity by advertising and encouraging liquor sales with taxpayer money! This is a blatant conflict of interest that has relegated Pennsylvania to the worst of both worlds.
• Pennsylvania State Police do not perform sting operations in PLCB stores as they do in privately owned bars and restaurants. The state allows the PLCB to monitor its own businesses—an inspection exemption that couldn’t happen in a free market.

Tasteless Ad Campaign Demonstrates Out of Touch PLCB

• The PLCB’s infamously graphic "She couldn’t say no" sobriety ad campaign—that  implied intoxicated rape victims were partly to blame for their own rape—brought national and international attention,  and met with shock and ridicule as far away as the UK Daily Mail.
• The PLCB spent $45,000 on a tone-deaf billboard ad campaign to promote the "Simply Naked" wine brand.

 Efforts to “Modernize” Become Costly Fiascos

• The infamous wine kiosk program, begun in 2009, offered the opportunity to buy wine out of vending machines placed in grocery stores. Purchasers were required to blow into a public breathalyzer and stare into a camera to verify their sobriety and identity. Not recognizing this as convenience, Pennsylvanians chose not to participate.
• After horrid sales, customer complaints and frequent breakdowns that sparked an Auditor General investigation, grocery giants Wegmans and Wal-Mart pulled the plug.
• The kiosk debacle should never have happened. The PLCB ignored advisors who warned that the kiosks were 'deficient," not "user-friendly" and the company that made them lacked a "coherent business plan." Of course, the Board approved the program anyway, granting the contract to a company with no proven track record.
• That company then defaulted on a $1 million payment to the state in 2011—an issue still being litigated in 2013.

Wholesale Monopoly Means Bureaucrats Jet-set on Taxpayers’ Dime

• From 2007-2011, 14 PLCB employees visited exotic destinations such as Paris, Dubai, New Zealand, Catalonia, Barcelona, Lisbon and Argentina, often at taxpayer cost. The rest was paid by foreign governments and corporations hoping to have their products sold to a captive audience.
• The PLCB outfitted a $35,000 wine tasting room, dubbed "the wine shrine," complete with leather chairs, sofas and big-screen TVs to "educate palates" of Pennsylvania consumers.

Cronyism Remains Rampant at PLCB

• From creating high-paid positions (CEO Joe Conti made  $156,000 annually, more than a senator’s salary), to awarding an "employee charm school" contract of more than $173,000 to the husband of a high-ranking PLCB official, the PLCB embodies government cronyism.
• Why was the failed kiosk contract granted anyway? Editorial boards across the state have wondered if the $400,000 donated to former Gov. Ed Rendell’s campaign by kiosk company investors may have tipped the scales.
• Accepting gifts and favors from vendors as a PLCB official is considered unethical (if not criminal) behavior. State inspectors say CEO Joe Conti and at least two others accepted free wine (no surprise) and sporting event tickets. Thankfully, Joe Conti retired earlier this year, right?
• Not quite! Joe Conti is back on an "emergency" basis at the bargain price of $80 an hour. And he is eligible to collect pension payments at the same time!

Getting government out of the booze business would eliminate conflicts of interest, stop government from freezing out Pennsylvania wineries, reduce opportunities for cronyism, eliminate taxpayer-funded boondoggles and allow the PLCB to focus on its mission as a regulatory agency.  Privatization means ending the government monopoly over both wholesale and retail operations and returning to a free market.

Myth #1: The 2008 stock market collapse is the sole culprit of Pennsylvania’s public sector pension crisis.

Fact: The stock market collapse and other investment losses account for only about half of today’s pension crisis. The rest of the problem stems from the following political factors unique to Pennsylvania’s pension plans:

• Legislators retroactively increased pension benefits in 2001, followed by a cost-of-living adjustment in 2002, which added nearly $10 billion in debt instantly;
• Legislation in 2003 and 2010 delayed pension contributions, which led to higher future taxpayer payments; and
• PSERS and SERS officials reduced their assumed stock market returns from 8% to 7.5%; these simple adjustments added $5.5 billion to the state’s pension shortfall.

PSERS analyzed the causes of its unfunded pension plan in 2010:

Myth #2: Act 120 of 2010 solved the growing debt problem for teacher and state worker pensions.

Fact: The Pennsylvania State Education Association, for example, claims Act 120 fixed our pension crisis by lowering upcoming pension costs.  This claim ignores a dramatically underfunded system. We’re already more than $47 billion in debt, which will require higher taxes to pay off.

Projections regarding Act 120 were based on an unrealistic 8% return on investment. These assumptions have already been lowered.   Without consistent, unrealistically high investment returns, the current pension system is beyond hope of becoming self-sustaining.

Myth #3: Pension obligation bonds are a risk-free investment to finance pension plans.

Fact: Issuing a pension obligation bond is like taking out a second mortgage on your house, investing the money in the stock market and hoping for a great investment return. It’s a risky bet that requires investment returns to consistently exceed interest payments on bonds.

Moody’s Investor Service has warned state and local governments on such borrowing to finance underfunded pension systems. Their report stated:

[P]ension bonds are often a red flag associated with greater rigidity of long term obligations, failure to find sustainable solutions to pension funding and a pattern of pushing costs off into the future.

Under Mayor Ed Rendell in 1999, Philadelphia issued $1.29 billion in pension bonds to balance the city's budget. But officials continued to underfund the city’s pensions, leaving Philadelphia in the same predicament as before the bonds were issued, only now with more than $1 billion in additional debt.

What does genuine pension reform look like?

Pension costs are ballooning so quickly, they threaten to consume funds for education, public safety and welfare.  Without changes, school districts will likely be forced to compensate for pension obligations by laying off more teachers and cutting programs.

Public retirement plans should be affordable for taxpayers, have costs that are predictable for state and local governments and be paid while workers are currently working¾not pushed off onto future generations.   Lawmakers should:

1. Establish a new defined contribution, 401(k)-type plan for new state and local government workers, school employees, judges and legislators.
2. Prohibit new borrowing schemes to finance pensions.
3. Fund pensions consistent with accounting rules.
4. Consider modifying unearned benefits and eliminating loopholes that allow people to game the pension system. 
5. Fund pensions without increasing taxes or borrowing.

 By adopting proven, comprehensive pension reforms now, Pennsylvania can save current and future generations from an unbearable and unfair fiscal burden.

The Budget Maintains Above-inflation Increases in Spending

• The 2013-14 budget proposal increases spending by $8.1 billion (42%) from 2002-03, not including spending moved to other funds. Inflation during this time was 27%
• K-12 Education, Public Welfare, Corrections and Treasury (debt payments) represent 90% of the General Fund budget; but these four areas represent 100% of the spending growth.
• K-12 Education, Public Welfare, Corrections and Treasury grew by $7.6 billion.
• All other programs and departments were reduced by $426 million.

Corbett's Proposal

• Spending on K-12 education and public welfare would represent record levels—exceeding previous highs when these areas included billions in federal stimulus funds.
• Public Welfare spending would increase by more than $300 million, primarily in Medical Assistance (Medicaid), even without expanding Medicaid under Obamacare.
• Education spending would increase by $338 million in Corbett's budget.
• Treasury, which includes interest payments on debt, is the fastest growing department, growing 186% from 2002-03 to 2013-14.

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For more information on the Pennsylvania State Budget, visit CommonwealthFoundation.org/Budget.

Pennsylvania's pension crisis is about to hit Pennsylvania homeowners and taxpayers, and the results won't be pretty.

The state's two pension systems - for state government workers (SERS) and public school employees (PSERS) - are, together, more than $40 billion in debt. It's a shortfall that taxpayers must cover, amounting to an average $1,000 increase in contributions per household by 2017. In the Philadelphia region alone, property taxes are expected to rise between $240 and $630 a year as a result.

Citizens have been aware of the looming crisis for years, with one concerned parent in Levittown aptly calling it an "impending pension tsunami" back in 2011 during teacher-contract negotiations. Two years later, many policymakers in Harrisburg continue to ignore the crisis, and now the tidal wave is both larger and closer.

Beyond higher taxes, the ballooning pension costs are also threatening to gobble up funds for education, public safety, transportation, and other programs. The pension tsunami will likely force more teacher layoffs - on the heels of 6,000 in the last two years already - and cuts to arts and athletic programs in our schools. That's why Gov. Corbett's proposal to reform the system is so necessary.

How did things get so bad? The problem started more than a decade ago, in 2001. Facing a flush stock market and a fully funded system, legislators raised benefits for state and school workers by 25 percent, hiked their own benefits by 50 percent, and created a cost-of-living increase for retired workers a year later.

Together, the increases created a $10 billion hole in our pension systems, which only deepened through stock market crashes and a lingering recession. To make matters worse, lawmakers passed legislation touted as reform that delayed paying off our pension obligations.

Sensible reform is preferable to tax hikes or service cuts, and the governor agrees. His solution includes moving the state's pensions to a 401(k) model, also called a "defined contribution" plan. Under this system, the state would annually put a set amount of money into employees' retirement plans, while workers would continue to contribute a portion of their salaries to their pensions.

The "defined contribution" system would get politics out of pensions. Our current system encourages lawmakers to grant lavish benefits in good years and avoid paying in bad years. The 401(k) model, on the other hand, requires that the government deliver on its payment promises every year - making it difficult for the government to promise things it can't afford. The costs would be current, affordable, and predictable - none of which is true under the status quo. And workers would also enjoy the control and transparency of individual retirement accounts. No politician could raid the accounts for pet projects.

Moreover, 401(k) plans offer more convenience for employees. Younger workers, especially, would benefit from the ability to take a 401(k) with them as they change jobs, instead of forfeiting retirement savings to advance their career. Older adults could pass any remaining 401(k) funds on to their children. Compare that with the current "defined benefit" system, in which pension payouts end when retirees die, even if they paid in more than they collected.

Our teachers and state workers deserve better than empty promises. And Pennsylvania taxpayers deserve to be protected from the looming crisis. By shifting the state's pension system to a 401(k) model, lawmakers will shield both workers and taxpayers from the pension tsunami.

# # #

Priya Abraham is a Senior Policy Analyst at the Commonwealth Foundation, Pennsylvania's free-market think tank.

Eighty years ago, baseball was still segregated, Social Security was non-existent and it was illegal to buy alcohol in the United States. Times have changed, and Prohibition has since ended -- except for a few holdout states that have failed to evolve their laws to coincide with changing national attitudes towards liquor.

It's still a commonplace occurrence for states to meddle in the booze business -- even when a majority of citizens support reversing this archaic public policy. In recent years, policymakers in Alabama, Idaho, Ohio, North Carolina, Pennsylvania, Texas and Virginia have all tried to end the government control of liquor sales without success.

The news isn't all dismal, however. Last year Washington voters chose to kick the government out of the alcohol business, and just last week Pennsylvania lawmakers approved a privatization bill in the House of Representatives. An epic fight is now brewing in the Pennsylvania Senate between the defenders of the status quo and the friends of liquor liberty.

Pennsylvania's battle highlights many of the issues facing the pro-privatization lobby in control states, though its system is more broken than most. It's one of only two remaining states with a complete government monopoly over the sale of any type of alcohol other than beer, both wholesale and retail.

When the state created the Pennsylvania Liquor Control Board in 1933 following the passage of the 21st Amendment, then-Gov. Gifford Pinchot said it would "discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible."

To that end, government has been successful and Pinchot's legacy lives on. While most of the country enjoys the freedom of walking to the corner grocery store to buy a bottle of wine or a six-pack of beer, Pennsylvanians face the annoying prospect of driving to the nearest government-run store -- "nearest" often being a loose term -- for wine or spirits, a distributor or tavern for beer, and making a third stop for groceries.

All of this could soon change, as the House vote shows. But standing in the way to block liquor freedom for Pennsylvania taxpayers and consumers are government unions that profit from the monopoly.

And what a fuss those unions are making. The United Food and Commercial Workers, which has roughly 3,000 members in the state-run stores, is doing everything it can to scare the General Assembly away from meaningful reform. One popular slogan, yelled loudest by a UFCW official at a pro-privatization press conference, is that privatization is a "picture of profit before people."

Not true. The proposal would nearly triple the number of stores -- mostly small, mom-and-pop businesses -- selling wine and liquor, and allow thousands of grocery stores to expand and carry wine. The result is thousands of additional jobs for Pennsylvania families.

Pennsylvania's economy would quickly feel the benefits. An economic analysis conducted for the state Office of the Budget estimated privatization would bring back $92 million from residents who now illegally cross state lines to buy their booze to get the prices and selection they want. Privatization would be an economic stimulus and create jobs.

It wouldn't hurt the government's coffers, either. The Office of the Budget estimates that alcohol would generate more tax revenue after privatization.

There's also the small fact that liquor privatization is immensely popular. My organization, the Commonwealth Foundation, recently commissioned a poll of our state's citizens. The poll showed that 61% of Pennsylvanians -- Republicans, Democrats, Independents, even union households -- want the government to get out of the booze business.

The numbers are even higher for regular patrons of the government-run stores. A full 77% of weekly customers voiced their support for cutting the red tape between them and the checkout counter.

Each of the 17 remaining government control states could benefit from privatization. While passage of liquor liberty legislation through the Republican-controlled Pennsylvania Senate remains far from certain, a victory here could generate the momentum in the remaining states to finally issue a last call for government-sold alcohol.

# # #

Matthew Brouillette is president and CEO of the Commonwealth Foundation, Pennsylvania's free-market think tank.

Under the Affordable Care Act (ACA), also known as "Obamacare," the federal government would pay the lion's share of costs for new Medicaid enrollees. But the federal government first takes that money through taxes on individuals, families and businesses across America—including those in Pennsylvania. The ACA included more than 20 new taxes with a $500 billion price tag. That's $6,363 more in taxes per family of four over the next nine years.

President Obama has already proposed reducing the federal government's matching rate for Medicaid, meaning states like Pennsylvania would have to pay even more. Even if the federal government manages to keep its promise, Pennsylvania would have to come up with billions in additional state tax dollars to afford the expansion, or cut funding from other departments, like education and transportation.

Myth #2: No expansion means Pennsylvanians will subsidize Medicaid expansion in other states.

Expansion states will not receive additional expansion dollars because other states opt out, rather the total cost of the ACA will decrease. According to a 2012 Congressional Budget Office projection, states refusing to expand Medicaid in 2014 will reduce the federal deficit by $84 billion. Rejecting the Medicaid expansion keeps money in the pockets of Pennsylvania taxpayers who also pay federal taxes.

Myth #3: Expanding Medicaid will increase access to quality health care for low-income Pennsylvanians.

Medicaid is a troubled program that often harms the poor. Due to low payment rates, one-third of doctors won't see Medicaid patients, meaning recipients have difficulty securing appointments. A study in the New England Journal of Medicine found that 44 percent of children with juvenile diabetes on Medicaid could not get an appointment with an endocrinologist, compared to only nine percent with private insurance.

When Medicaid patients do receive care, they often experience worse outcomes than the uninsured. For example, a University of Virginia study found that Medicaid patients are twice as likely to die following surgery as those with private insurance and 13 percent more likely to die than the uninsured.

Myth #4: Expanding Medicaid will save taxpayers money and lower insurance costs by reducing uncompensated care.

Government health insurance programs actually drive up private health insurance costs. A Milliman study puts the price of this cost shifting from Medicaid and Medicare to those with private insurance at $1,800 per family, or 10.7 percent of health care spending.

Past voluntary Medicaid expansions in other states promised reductions in uncompensated care, but in practice, cost shifting and uncompensated care costs increased. In Maine, the 2002 expansion of Medicaid was a disaster for hospitals; uncompensated care did not meaningfully decrease while Medicaid crowded out higher-paying private insurance. In 2000, similar problems surfaced in Arizona. Their expansion resulted in skyrocketing Medicaid enrollment, but little change in the number of uninsured residents, and the share of people with private insurance actually dropped.

Myth #5: Pennsylvania can participate now but opt out in three years if the expansion costs too much.

It's highly unlikely Pennsylvania politicians would remove individuals from Medicaid once they begin depending on government insurance. In addition, the federal Department of Health and Human Services could prohibit states from opting out once they choose to participate.

Myth #6: We can afford to expand Medicaid with federal aid.

Medicaid already consumes 30 cents of every dollar spent by our state government, crowding out other budget priorities like education and transportation. Medicaid spending grew 83 percent over the past decade-nearly twice as fast as residents' income. Pennsylvania cannot afford its current Medicaid obligations, let alone an expansion.

Even with federal money, Pennsylvania taxpayers would be on the hook for $2 billion in additional state taxes over the next 10 years just to cover the expansion.

Myth #7: Governor Corbett is taking an extreme position by opposing the Medicaid expansion.

Just half of U.S. governors are supporting an expansion of Medicaid, while 15 governors have said no and 10 more remain undecided. Though some Republican governors have garnered headlines by embracing Medicaid expansion, most (including Gov. Corbett) have not. Moreover, a governor's position is not the final word for states, as expanding Medicaid requires approval from the legislature. In Florida, state lawmakers went against their own governor's recommendation and voted down the Medicaid expansion proposal.

A better way to help struggling families would be to adopt real health care reforms that lower the cost of coverage and give Medicaid patients more control over their own care. For our fiscal health, and the health of families, we desperately need the flexibility to allow state officials to design a solution that fits the needs of Pennsylvanians-not an expansion of an already failing program.

# # #

For more on Medicaid, visit www.CommonwealthFoundation.org.

The legacy of patronage, nepotism and cronyism of the Pennsylvania Turnpike Commission continues to cost Pennsylvanians dearly in the form of higher tolls and massive debt.  As Attorney General Kathleen Kane's recent charges reveal, the Turnpike Commission remains a playground for powerful senators, their political appointees and wealthy campaign funders—and this is after they've claimed to have reformed.

When then-Governor Ed Rendell attempted to abolish the Turnpike Commission in 2007 by contracting out its operations, taxpayers would have realized nearly $13 billion in upfront revenue.

But this didn't happen. Defenders of the moribund status quo won the day, and the Turnpike Commission and its beneficiaries have put taxpayers nearly $8 billion in debt and forced drivers to pay the Turnpike's ever-increasing tolls.

The Turnpike issue bears a striking resemblance to the current debate over the Pennsylvania Liquor Control Board.  Following last week's House vote, the Pennsylvania Senate has the opportunity to end similar corruption and taxpayer costs by dismantling the PLCB—the Turnpike Commission's cousin in wasted money and broken models.

Consider Joe Conti, the former Bucks County Republican senator, who in 2006 was appointed by Gov. Rendell as the PLCB's new CEO—a newly created, $156,000 per year position.  The move so angered then-PLCB Chairman Jonathan Newman that he resigned. 

Under Conti's watch—who is under investigation by both the Inspector General's Office and the State Ethics Commission for accepting gifts and favors from vendors and other businesses with an interest in liquor regulation—the PLCB has been mired in boondoggles and mismanagement of the government-run liquor monopoly.

In 2011, former Auditor General Jack Wagner uncovered that the PLCB spent more than $66 million taxpayer dollars (and counting) on the Enterprise Resource Planning system, a computerized inventory management tool that caused widespread shortages and surpluses at PLCB distribution centers, crippling commerce, and costing two-and-a-half times the original plans (and counting, with estimates nearing $100 million).

As if that wasn't bad enough, the PLCB management demanded purchasers order excess inventory due to the shortages.  This led to a surplus in inventory, some of which was then sent to non-temperature-controlled trailers despite heat exceeding 100 degrees, at a cost to taxpayers of more than $500,000.

Then, under Conti's direction, the PLCB wasted millions on a failed wine kiosk program.  Remember that great consumer-friendly idea where adults had to blow into a breathalyzer in the supermarket so a state employee could confirm their sobriety before buying a bottle of wine from a vending machine?  Well, despite the PLCB's own internal recommendation against the program, the kiosk contract was awarded to a vendor that donated to Gov. Rendell's campaign. The vendor then stiffed taxpayers $1 million (and counting).

At the same time—unbeknownst even to board members, let alone the public—the PLCB used tax dollars to brand, buy and market numerous in-house brands of wine and spirits that now compete against private industry, including Pennsylvania mom-and-pop wineries and distilleries.

But at least the PLCB is a cash cow for Pennsylvania, right?  Not so. The agency ended the fiscal year with negative $9.8 million in net assets.

The good news is that the recently passed House bill would end the 80-year reign of this Prohibition-era vestige.  But it can only reach Governor Corbett's desk if it first gets past the Senate where the Law and Justice Committee Chairman Chuck McIlhinney has heretofore expressed opposition to ending the PLCB's booze monopoly.

But the facts are indisputable, whether you're sitting in the Senate or waiting in line at the PLCB. The broken government-run monopoly is rife with unethical behavior and wastes tens of millions of taxpayer dollars.  We're paying for these same failures on the Turnpike every day.  But we don't have to do the same for the PLCB.  Let's seize the opportunity to end these abuses, give consumers what they demand, and get government out of the booze business once and for all. 

# # #

Matthew J. Brouillette is President and CEO of the Commonwealth Foundation.

Pennsylvania Budget Facts:

• Pennsylvania State Budget 2013
• Budget Proposal: 5 Key Facts
• Pennsylvania State Budget 2012-13 for Smarties
• State Spending Limits for Pennsylvania

Charts and Poli-Graphs:

• Unsinkable: The True Story of Pennsylvania's Sinking Pension System
• State Operating Budget 1970-2013: Image
• General Fund Spending by Department: Image

PA State Budget Analysis:

• Commentary: No Free Lunch with Medicaid Expansion
• Policy Point: Medicaid Expansion Facts and Myths
• Commentary: Standing with Taxpayers
• PA State Budget Updates
  

PA Budget Info and Data:

• Pennsylvania Office of the Budget
• Pennsylvania Open Government Portal
• PennWatch
• Pennsylvania Department of Revenue - Monthly Revenue Reports
• Independent Fiscal Office
• PA Department of Education - State Funding for School Districts

Pennsylvania State Budget Legislative Resources:

• PA House Democrats Appropriations Committee
• PA House GOP Budget Page 
• Pennsylvania Senate Republicans Budget Page
• Pennsylvania Senate Democrats

Wholesale Privatization

• One year after the legislation is signed into law, wholesale divestiture would occur.  The state would negotiate wholesale licenses to distribute wine and liquor products to stores, bars and restaurants by brand.  After paying a license fee based on valuation, a wholesaler would have the exclusive right to distribute that brand throughout Pennsylvania.

New Privately-Run Wine and Spirits Stores

• The state would initially issue 1,200 wine and spirits licenses.
  • Beer distributors would have right of first refusal on licenses for one year. If a distributor gets a wine and spirits license, they would be the one-stop shop to get wine, beer and liquor.
• After one year, the unclaimed licenses become available to the public on a ‘first-come basis,' based on the number of licenses available in each county; no county will have fewer licenses available than the number of distributors.
• All license holders must be stand-alone alcohol retail stores, unless owned by distributors.
• A wine and spirits licensee can hold five licenses in the state, but no more than one per county.
• Licensees can't require memberships (that is, Costco, Sam's Club, etc. would be excluded).

Retail License Cost

• Licensees can purchase the right to sell wine, spirits or both.
• The cost of a new license for beer distributors varies based on county classes. Wine: $7,500 to $37,500; Spirits: $30,000 to $60,000. Distributors can elect to pay this cost over four years with an additional five percent fee.
• New wine and spirits stores: Wine: $97,500 to $187,500; Spirits: $142,500 to $262,500.
• Licenses are renewed every two years at a cost of $1,000.
• Sunday sale permits will be available at annual cost of $1,000.

Greater Convenience through Grocery Stores and Package Reform

• Grocery stores may purchase a license to sell up to 12 bottles of wine. Prices for these licenses would range, based on county, from $97,500 to $187,500. Sunday sales permits would also be available.
• Restaurants may purchase a license to sell up to six wine bottles to go, in addition to beer which they are currently allowed to sell.
• The gas prohibition is removed, meaning that a gas station that has a restaurant license and sells food will also be allowed to sell limited amounts of beer and wine.

Closure of State Stores

• Once the number of privately-operated stores (including grocery stores selling wine) doubles the number of government-run liquor stores in a county, the state stores must close within six months.
• As the 600 state stores close, the Department of General Services could offer up to 600 additional wine and spirits licenses.
• The PLCB will have to close all state store operations once it has 100 or less stores remaining.

Benefits for Current PLCB Employees

• These include: training and education grants, tax credits for businesses to hire displaced workers, and a civil service hiring preference.

Safety

• Transaction scan devices would be required and employees must be trained in alcohol safety.
• State Troopers would be allowed undercover investigations in licensed establishments, which does not currently occur in state stores.

# # #

For more on Liquor Store Privatization, visit www.BoozeFacts.com

The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.

Governor Corbett's proposed budget of $28.4 billion in general fund spending and $67.6 billion in spending from all funds represents our highest spending levels ever—exceeding years when federal stimulus dollars inflated total spending.  This budget, however, still reflects a reduction from 2010-11 spending levels when adjusting for inflation. 

Spending has Dramatically Outpaced Inflation in PA

• Pennsylvania's budgetary challenges stem from spending that has outpaced taxpayers' ability to pay.
  • From 1970 to 2014, state government spending increased from $4 billion to a proposed $67 billion, an inflation-adjusted increase of $12,655 per family of four (or $3,163 more per resident).
  • If state government total spending had grown at the rate of inflation plus population since 2000, taxpayers would be saving more than $11 billion dollars this year, or $3,673 per family of four ($918 per resident).

Pennsylvania State Budget Basics

• While the General Fund Budget is the primary focus of both legislative discussions and public attention, it represents only about 40% of the commonwealth's total operating budget.

• Total Operating Budget = $66.7 billion
  • General Fund Budget = $28.4 billion
  • Federal Funds = $21.7 billion
  • Special Funds = $4.9 billion
  • Other Funds = $11.6 billion

• General Fund spending increased by $8.1 billion (40%) from FY 2002-03 to the proposed 2013-14 budget, not including spending moved to other funds. Inflation was 27% over this time.
  • K-12 Education, Public Welfare, Corrections and Treasury (debt payments) represent 85% of the General Fund Budget; but these four areas represent 100% of the spending growth.
  • K-12 Education, Public Welfare, Corrections and Treasury grew by $7.6 billion.
  • All other programs and departments were reduced by $426 million.

Debt and Tax Burden Growing

• From 2002 to 2012, Pennsylvania state debt—including debt held by state agencies—more than doubled, from $23.7 billion to $47.9 billion.
  • Today, Pennsylvanians owe $125 billion in combined state and local government debt-almost $10,000 for every man, woman, and child.

• Pennsylvania has the 10th highest state and local tax burdenin the nation, up from 24th in 1991, according to the Tax Foundation.
  • Pennsylvania taxpayers pay $4,183 per capita in state and local taxes, or 10.2% of their income.

Gov. Corbett's Proposed Pension Reform

• All state and public school employees hired after January 1, 2015 would be placed into 401(a) defined-contribution plan, similar to 401(k)s common in the private sector.
  • State employees would contribute 7.5% of their pay and school employees 6.25% of their salary, with taxpayers—via the state or school districts—contributing 4% of salary toward workers' retirements. This money would be deposited into a personal account owned by employees.
  • Moving to a defined-contribution plan would get politics out of pensions. Defined-contribution plans provide retirement benefits that are affordable for taxpayers, predictable for workers and governments, and are not subject to the political manipulation that has plagued Pennsylvania's pension system.

• Gov. Corbett's budget would arbitrarily lower state and school district contributions into pension plans. These temporary delays in payments require larger taxpayer contributions over time.

• Future benefits for current employees would be curtailed, reducing taxpayer costs.
  • There would be no change to benefits for current retirees, nor any changes to benefits already earned by current employees.
  • An individual's pension benefit is determined by multiplying years worked by final pay by a "multiplier." For most current workers, the multiplier is 2.5% of pay. Under the proposal, employees with a multiplier greater than 2% would see it reduced by 0.5% (or could pay more to keep the current multiplier) for each year worked after 2015.
  • Final pay would be calculated by a five-year average instead of a three-year average, and "spiking" would be prohibited.

Liquor Store Privatization Proposal

Gov. Corbett proposed privatizing the state liquor stores as part of his budget. A version of this proposal passed the state House in March.

Wholesale Privatization

• One year after the legislation is signed into law, wholesale divestiture would occur. The state would negotiate wholesale licenses to distribute wine and liquor products to stores, bars and restaurants by brand.

New Privately-Run Wine and Spirits Stores

• The state would initially issue 1,200 wine and spirits licenses.
• Beer distributors would have right of first refusal on licenses for one year. If a distributor gets a wine and spirits license, they would be the one-stop shop to get wine, beer and liquor.
• After one year, the unclaimed licenses become available to the public on a 'first-come basis,' based on the number of licenses available in each county; no county will have fewer licenses available than the number of distributors.

Retail License Cost

• Licensees can purchase the right to sell wine, spirits or both.
• The cost for beer distributors would be significantly less than those for new stores.
• Licenses are renewed every two years at a cost of $1,000.

Greater Convenience through Grocery Stores and Package Reform

• Grocery stores may purchase a license to sell up to 12 bottles of wine.
• Restaurants may purchase a license to sell up to six wine bottles to go, in addition to beer which they are currently allowed to sell.
• The gas prohibition is removed, meaning that a gas station that has a restaurant license and sells food will also be allowed to sell limited amounts of beer and wine.

Closure of State Stores

• Once the number of privately-operated stores (including grocery stores selling wine) doubles the number of government-run liquor stores in a county, the state stores in that county must close within six months.
• As the 600 state stores close, the state can offer up to 600 additional wine and spirits licenses.
• The PLCB will have to close all state store operations once it has 100 or fewer stores remaining.

Benefits for Current PLCB Employees

• These include: training and education grants, tax credits for businesses to hire displaced workers, and a civil service hiring preference.

Safety

• Transaction scan devices would be required and employees be trained in alcohol safety.
• State Troopers would be allowed undercover investigations in licensed establishments, something that does not occur in PLCB stores.

Proposed Transportation Spending Increases

• Gov. Corbett's proposal would uncap the Oil Company Franchise Tax over a five-year period. Currently, the tax applies only to the first $1.25 of fuel prices. By uncapping this, the tax would be charged on the full price of motor fuel.
  • This is estimated to equal  28.5 cents per gallon of gas given current prices.
  • To help offset this, the proposal calls for reducing the Liquid Fuels Tax (flat gasoline tax) from 12 cents per gallon to 10 cents per gallon over two years.
  • Pennsylvania already has among the highest gas tax rates in the U.S., and estimates suggest this proposal would give Pennsylvania the highest state gas tax in the nation.

• The administration says the plan will generate $1.8 billion in additional revenue by "year 5," but this spending increase is not reflected in the Governor's Executive Budget, which shows only a $1.2 billion increase for transportation by 2017-18.
• In addition, the proposal includes several mechanisms to spend more efficiently and leverage private sector capital.
  • The proposal calls for ending the Turnpike Commission's transfers under Act 44 ($250 million per year for highways and mass transit) in 10 years.
  • Local transit agencies would have to increase their local match of costs, and conduct consolidation studies.
  • A new office would implement and oversee Public Private Partnerships under the new law, utilizing private sector capital to build and maintain infrastructure.

# # #

For more information on the Pennsylvania State Budget, visit www.CommonwealthFoundation.org/Budget

1. The PLCB has a conflict of interest-on the one hand controlling and monitoring alcohol, and on the other, advertising and marketing the sale of alcohol.
2. Government control has not made Pennsylvania safer in terms of alcohol-related accidents or deaths, underage or binge drinking, or other social impacts.
3. Academic studies and government data show no difference between states with government-run stores, and states that license private sellers of liquor.

Conflict of Interest

The PLCB continues to use tens of millions of taxpayer dollars every year to market and sell alcohol products as well as advertise alcohol safety in an egregious conflict of interest.  Should taxpayers really be forced to support government advertising and promotion of alcohol consumption?   

The PLCB spent taxpayer dollars for tone-deaf "dangers of drinking" ads, including one that seemingly blamed women who get raped for their own victimization, but this very same government entity designs and spends our money on advertising campaigns to encourage alcohol consumption.  One PLCB Web site says binge drinking leads to impaired decisions and potential rape, the other has a recipe for a cocktail called "Wake-up Whipped," featuring PLCB-selected spirits.  

There should be no doubt then that the PLCB enforcement of alcohol regulation and simultaneous promotion of its consumption is an inherent conflict of interest that prevents it from effectively protecting and serving the public.

The date rape scenario ad has been pulled from the PLCB Web site after a massive outcry from women and men across the commonwealth, but the damage has already been done.  Like the failed wine kiosk program, the inventory system fiasco, and the massive revenue lost to border bleed, the PLCB has failed to understand the market in which it operates, wasting millions of taxpayer dollars in the process.

Government-branded Wine

In a recent investigative report, the Pittsburgh Tribune-Review uncorked a secretive plot by Board officials that siphoned millions in taxpayer money to research, copyright, brand, advertise and market more than 30 "in-house" government wines and spirits to compete directly with private labels for shelf space and consumers.  

These brands unfairly compete against Pennsylvania wineries and other private businesses by using tax dollars and its monopoly powers to push its products. 

Kari Andren of the Pittsburgh Tribune-Review explains how the PLCB is using tax dollars to advance its monopoly:

The LCB spent nearly a half-million dollars last fiscal year, about 10 percent of its advertising budget, to promote five of its own private-label brands - TableLeaf, Dialed In, LA MERIKA, Hayes Valley and Las Parcelas, records show. No money was spent on two other wine brands, Zita and Vinestone, or Copper Sun vodka.

Even though [PLCB CEO] Conti said he was "99 percent sure" no LCB money was spent to promote or develop the brands, ads placed by his agency for its in-house products appeared in high-profile, hard-to-miss locations in newspapers and magazines, on billboards, public transit vehicles in Pittsburgh and Philadelphia, radio shows and the Internet radio service Pandora, as well as in online sponsorships, records show.

The advertising money that Andren details above is in addition to the more than $7-10 million spent copyrighting, branding, marketing and selling the government wine brand, TableLeaf.

The violation of public trust has launched external and internal ethics investigations for numerous violations and disastrous decisions by executive staff that has cost taxpayers millions. 

Data on Social Impacts of Alcohol Use

If government control of wine and liquor sales means a safer state, Pennsylvania should be one of the safest in the country.  This is not the case.  Compared to bordering states and the national average, the commonwealth currently ranks in the middle-of-the-pack or worse in alcohol-related deaths and alcohol-related traffic fatalities.

The Commonwealth Foundation uses the Center for Disease Control's alcohol-attributable deaths statistics, which can be found on the CDC's Alcohol-Related Disease Impact portal.  Proponents of Pennsylvania's government-run liquor stores use alcohol-induced deaths, which is a narrower and less comprehensive look at the statistics.

• Pennsylvania ranks higher than 5 of 6 border states, and near the U.S. average, in alcohol-attributable deaths per 100,000 residents.
• The commonwealth has more alcohol-related traffic fatalities per 100,000 residents than 4 of 6 border states (slightly higher than the U.S. average).
• Pennsylvania ranks higher than 5 of 6 border states in the percentage of traffic fatalities related to alcohol use, at 33 percent, slightly higher than the U.S. average.
• Mothers Against Drunk Driving ranks Pennsylvania 35^th in DUI safety, worse than all bordering states but Delaware.
•  A survey by the U.S. Department of Health and Human Services ranks Pennsylvania higher than the national average in underage drinking, binge drinking, and underage binge drinking.

•  Consider this related fact: In other states, most underage drinkers aren't going into stores to buy liquor, according to the same survey data.  Almost 90% of underage drinkers get their alcohol from someone else.  Less than 5% of underage drinkers bought their own alcohol in a store.

Indeed, looking at consumption patterns in Pennsylvania-almost 75% of the alcohol consumed in Pennsylvania (which includes beer, along with wine and spirits consumed at restaurants and bars) isn't sold at PLCB stores-shows why underage drinking isn't tied to government monopolies over liquor stores.

Red Herring of the "CDC" Report

Often the Center for Disease Control's independent "Task Force" study is used as a red herring against privatization.  But here are the facts: First, the Task Force does not represent the CDC's official position.  Second, the Task Force reviewed 21 studies with more than 30-year-old sales data, some of which found increased consumption following privatization; others found no change or decreases.

Many of the arguments against privatization aren't about social harms-for which the evidence shows no link with government control-but increased "consumption" following privatization.  Consumption could increase dramatically if every adult drinker had one more glass of wine each month, but this does not create a policy problem.  And as long as "consumption" is measured in terms of sales, we expect to see an increase.

The Task Force's synopsis ignores the fact that none of the studies show liquor store privatization has an effect on underage drinking or DUI fatalities.

In fact, the former chair of the American Medical Association, Dr. Raymond Scalettar, penned a letter, "There was little proof in privatization op-ed," in the Harrisburg Patriot-News criticizing the CDC task force conclusion for this same reason.  He concludes, "Alcohol consumption habits tend to be culturally driven and macro-level control policies have little to do with drinking patterns."

Government statistics show no difference between states with government-run alcohol monopolies and those licensing private retailers.  Using government data, a website from the Mackinac Center allows users to compare a myriad of social outcomes for states that control their alcohol sales to states that don't.

Studies on Privatization on Alcohol Safety

A review of the existing literature reveals there's no clear consensus on the social impact of privatization.  For example, a 2003 study of alcohol outlet density and DUI fatalities in California over an eight year period found that increased outlet density was associated either with no change in DUI fatalities or a decrease in DUI fatalities, depending on how one defines "density."[1]

A 2003 study of outlet density among students at eight public universities found a positive relationship between outlet density and self-reported drinking problems.[2]  A 2005 study of alcohol privatization in Alberta over the period 1950 through 2000 found no relationship between privatization and DUI fatalities.[3]  A 2006 study looking at privatization across all states for a single year found a positive relationship between privatization and DUI fatalities.[4]  These and other studies provide conflicting stories as to the relationship between privatization and social outcomes.

This holds true with the studies referenced by opponents of private liquor sales as well.  Many associate higher outlet density to increased social harms.  A literature review by Dr. Antony Davies of Duquesne University covers a number of these studies.  Often these studies begin from the general consensus that privatization equals more outlets which thereby results in more harm, but there is no causality to make that claim.  For example, the density of retail outlets could be caused by the propensity of the populace to consume alcohol, not the other way around.  Overall, the findings concerning density and consumption are mixed, at best.

A study by Dr. Antony Davies and John Pulito of Duquesne University, commissioned by the Commonwealth Foundation, showed that the level of state control over alcohol sales has no link to underage drinking, binge drinking, and DUI fatalities.  A follow-up study by Davies and Pulito examined 49 states over 21 years using sophisticated analytic techniques and finds that states with private alcohol markets have lower alcohol-related fatality rates.

Davies has published several papers on this topic in a variety of peer-reviewed venues, all of which show the same lack of effect of state controls. The most recent was published by the Mackinac Center.

# # #

Katrina Anderson is a senior policy analyst and director of government affairs and Nathan Benefield is director of policy analysis with the Commonwealth Foundation (www.CommonwealthFoundation.org), Pennsylvania's free-market think tank.

[1] McCarthy, P., 2003. Alcohol-related crashes and alcohol availability in grass-roots communities. Applied Economics, 35: 1331-1338.

[2] Weitzman, E.R., A.Folkman, K.L. Folkman, and H. Wechsler, 2003. The relationship of alcohol outlet density to heavy and frequent drinking and drinking-related problems among college students at eight universities. Health and Place, 9: 1-6.

[3] Trolldal, B., 2005. An investigation of the effect of privatization of retail sales of alcohol on consumption and traffic accidents in Alberta, Canada. Addiction, 100: 662-671.

[4] Miller, T., C. Snowden, J. Brickmayer, and D. Hendrie, 2006. Retail alcohol monopolies, underage drinking, and youth impaired driving deaths. Accident Analysis and Prevention, 38: 1162-1167.

Editor's Note: This commentary first appeared in the Philadelphia Inquirer.

When Governor Corbett announced his intention to privatize Pennsylvania's liquor stores, the beneficiaries of the status quo came out in force. Case in point: On Wednesday, liquor store union boss Wendell Young IV and members of the UFCW 1776 shouted over business leaders speaking in favor of privatization in the Capitol Rotunda. 

The friends of government-run liquor stores have to resort to such tactics as they have neither public opinion nor facts on their side.  Here are just a few of the myths they use, and the reality they choose to ignore.

Myth #1: There's no real support for privatization.

Consumers choose convenience. More than 60 percent of Pennsylvania residents support getting government out of the booze business. This is broad-based, bipartisan support-including the majority of union household. And the people who use the PLCB are even more fed up: a full 77 percent of weekly PLCB customers support privatization.

Myth #2: The PLCB is a reliable source of revenue for the state.

The PLCB wants you to believe that without them, the state's revenue would dry up. The truth, however, is that more than 80 percent of the PLCB's $500 million in "profits" is generated from taxes and the rest is taken out of the pockets of Pennsylvania consumers and taxpayers through "markup" charges. Privately-owned liquor stores would produce the same revenue-or more-as private companies pay additional taxes and licensing fees to the state.

Myth #3: Shoppers aren't crossing the state's borders to buy their booze.

Not even the PLCB can back this one up. A PLCB-conducted survey showed that 45 percent of residents in Philadelphia and its surrounding counties purchase some or all of their alcohol outside of Pennsylvania. This border bleed equals more than $180 million in lost sales, and more than $40 million in lost state tax revenue annually from just a handful of counties.

Myth #4: The PLCB pays for itself. It has no debt.

No matter how you skin it, the PLCB is in the red. The agency ended the 2012 fiscal year with negative $9.8 million in net assets. That's right: It finished the year owing more in liabilities than the agency had in assets. These losses are due in no small part to years of mismanagement, including wine kiosk failures, government-branded wine labels, and inventory systems that couldn't count correctly.

Myth #5: Privatization failed in other states.

Washington's experience says otherwise. Prices in that state increased because of significant jumps in state taxes that accompanied privatization. Yet despite this increase in taxes and prices, sales of liquor in Washington have increased following privatization (spirits sales were up 2.9 percent by volume in the four months after privatization), reducing border bleed and bringing more revenue into the state's coffers. 

Myth #6: Privatizing the state stores will eliminate thousands of family-sustaining jobs.

Actually, ending the state-run monopoly will create thousands of additional jobs across the state and unleash millions of dollars in new business investment.  Expanding existing grocery and convenience stores and creating new wine and spirits stores would result in tens of thousands of additional jobs across the state. The Governor's plan allows beer distributors to expand their already safe and reliable businesses, creates hundreds of new wine and liquor outlets, and enables grocery stores to expand to sell wine and beer to meet the needs of consumers.

The current proposal to get government out of the booze business also provides benefits for current PLCB employees such as training and education grants, tax credits for businesses to hire displaced workers, and a civil service hiring preference.

Privatizing the PLCB is the right move. The fears about the effects of such a policy may be well-intentioned (or self-serving, in some cases), but the benefits that the state stands to reap show that they're also unjustified. And once the Legislature moves ahead with a plan, we'll all be able to toast to it.

# # #

Katrina Anderson is Senior Policy Analyst & Director of Government Affairs for the Commonwealth Foundation. 

Everyone knows the adage about "free lunches" - or so I thought. I'm starting to have doubts, based on the negative reaction to Gov. Tom Corbett's recent decision not to expand Pennsylvania's Medicaid program.

When the governor released his budget last month, the loudest opposition hinged on Medicaid - government insurance for the poor and disabled. Advocates of expanding the program via the Affordable Care Act and its "free" federal money pointed out that the governor's decision was a heartless refusal to help Pennsylvania's poor. But this is not the case.

Medicaid expansion is far from just a financial issue: It's primarily about the quality of care that Pennsylvania's low-income citizens deserve. And when it comes to that, Medicaid fails to deliver.

As it stands, nearly one in three doctors in Pennsylvania refuses to take Medicaid patients. Medicaid is notorious for underpayment and bureaucratic snags. Profitable practices turn into money pits surrounded by red tape. Rather than go out of business, doctors decide to cut their losses by cutting Medicaid.

For the families that depend on the program, this means that the line in the waiting room gets longer, if they can get to a doctor at all.

The problem is widespread. A recent study in the New England Journal of Medicine found that 44 percent of children on Medicaid with juvenile diabetes could not get an appointment with a doctor. For those with private insurance, this number was 9 percent. The average wait time for children on Medicaid was a staggering 103 days - more than twice as long as those who were privately insured.

Medicaid doesn't just fail those it intends to serve - it also fails taxpayers. Beneath the ACA's "free" façade is a complicated system of taxes and a $500 billion price tag. The law includes more than 20 new taxes, ranging from taxes on tanning beds to investment income to the individual mandate itself.

These taxes don't just hit the 1 percent - they hit middle-class families. Pennsylvanians are staring at a $6,363 tax increase per family of four over the next decade.

Federal tax increases are only half the story. President Obama's 2013 budget proposal would have reduced the federal share of Medicaid expansion, meaning that states would have to pay more than originally anticipated.

According to The Heritage Foundation, the hit to Pennsylvania's state budget would be between $1.3 and $5.5 billion over the next eight years.

Medicaid already consumes 30 cents of every dollar our state government spends. Moreover, Medicaid spending grew 83 percent over the past decade. Expanding Medicaid will only exacerbate this crisis.

While an expansion of Medicaid would be a disaster for Pennsylvanians, continuing with the status quo is equally untenable. That's why Corbett didn't just say "no" to Medicaid - he asked the federal government for a waiver to let state lawmakers fix the ailing program for Pennsylvania families.

It's a request with a proven track record. Florida used its Medicaid waiver to give low-income families the option of buying private insurance. The result? $118 million in savings. Rhode Island saved $55 million. And citizens in these states reported that they were healthier and happier with their medical coverage.

So forget about the "free lunch" - with a federal Medicaid waiver, we could have our cake and eat it, too.

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Nathan Benefield is director of policy analysis with the Commonwealth Foundation (CommonwealthFoundation.org).

While the Governor's proposal will likely change throughout the legislative process, privatization efforts should not be diluted into "modernization," which preserves the inefficient and wasteful Prohibition-era liquor system.  Here are five principles that should help guide the discussion.

• Government should permanently and unequivocally get out of the business of selling alcohol and end the system in which state-run liquor stores, with all their advantages and taxpayer subsidies, compete against private mom & pop businesses.
  
  
• Only full privatization ends the conflict of interest inherent in having the Pennsylvania Liquor Control Board both regulate and promote wine and liquor sales with tax dollars.  Modernization would allow the PLCB to continue to produce government-brand wine and fiascos such as the failed wine kiosk program, undermining Pennsylvania wineries, consumers, and taxpayers alike.

• Modernization or other measures that maintain the current state store system fail to move Pennsylvania into the 21st century and deliver the choice and convenience Pennsylvanians want.  Modernization is like offering consumers a "touch-tone" phone—it's better than a rotary phone, but is a far cry from the smart phones consumers really want in 2013.

• To promote competition, lower prices, selection and convenience, lawmakers should allow the market to decide the number of outlets that can sell wine and spirits.  At the least, the number of licenses should be set to the national average of retail outlets based on population, to keep Pennsylvania competitive with the rest of the nation.

• While beer distributors cannot expect to retain their protected oligopoly, proposals should treat them fairly in consideration of how much time and money they have invested in their business, including minimizing the cost of upgraded licenses and guaranteeing loan financing for new licenses.

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For more on Liquor Store Privatization, visit www.BoozeFacts.com

The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.

Doesn't sound so great now, does it? The old adage is correct. There really is no such thing as a free lunch. But this is the kind of offer the federal government is giving states to expand their Medicaid programs as part of the Affordable Care Act. In Pennsylvania, Gov. Tom Corbett wisely turned down this offer with his newly proposed budget.

Critics say Corbett gave up "free money" and refused to help the poor. But the money wasn't really free, and throwing low-income Pennsylvanians into a failing health care system isn't a real solution.

Under the ACA, the federal government would pay the lion's share of costs for new enrollees in Medicaid (government health care coverage for the poor and disabled). But the federal government first takes that money through taxes on individuals, families and businesses across America—including those in Pennsylvania.

The Affordable Care Act included more than 20 new taxes with a $500 billion price tag. That's $6,363 more in taxes per family of four through 2022.

Even with these new federal taxes, taxpayers would be on the hook for billions of dollars in higher state costs. The Heritage Foundation estimates that expansion would have cost $1.3 to $5.5 billion in state taxes over the first eight years of the program. Moreover, President Obama's 2013 budget proposal included a reduction of the federal share of the Medicaid expansion, meaning states like Pennsylvania would have to pay even more.

Besides the huge taxpayer burden of expanding Medicaid, the low-income families who really need health care will get the short end of the stick. Families on Medicaid often receive poor quality care. Nearly one in three doctors in Pennsylvania currently refuses to take Medicaid patients, because the program pays far less for services while imposing more red tape. As a result, families on Medicaid have to wait longer to get care.

A study in the New England Journal of Medicine found that 44 percent of children on Medicaid with juvenile diabetes could not get an appointment with an endocrinologist, compared with 9 percent with private insurance. The average wait time for those children was 103 days on Medicaid, more than twice as long as those who were privately insured.

Medicaid already consumes 30 cents of every dollar that our state government spends, including federal funding. Medicaid spending grew 83 percent over the past decade—nearly twice as fast as residents' income. Unless lawmakers are able to control Medicaid spending and slow this rate of growth, tax relief for Pennsylvania families will be impossible, and the cost for Medicaid expansion will push out other government programs.

Here's a worse proposition: The only way state lawmakers can currently reduce Medicaid spending is to cut payments to medical practitioners even more. States like California are moving in this direction, but such a policy could prove disastrous.

Hospitals would lose money. Health care providers would be forced to shift more expenses to the privately insured, driving up the cost of health care coverage. And more doctors would refuse Medicaid, reducing the access and quality of care for families.

So if expanding Medicaid isn't the answer, what is? Gov. Corbett didn't just say "no" to Medicaid—he asked the federal government for flexibility to fix the program. For our fiscal health, and the health of families, we desperately need this flexibility to allow state officials to design a program that fits the needs of Pennsylvanians.

State reforms to improve Medicaid services and control costs have worked elsewhere. Florida received a waiver to give poor families a credit to buy private insurance, which saved the state $118 million, and recipients were healthier and more satisfied with their coverage. Rhode Island saved $55 million over three years and improved the quality of health care through reforms made possible by a federal waiver.

Gov. Corbett made the right call by rejecting an illusory "free lunch" and demanding the ability to control Medicaid spending. That's the kind of health care policy that will truly give low-income Pennsylvanians the health care they need.

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Nathan A. Benefield is director of policy analysis for Commonwealth Foundation, (www.CommonwealthFoundation.org) Pennsylvania's free-market think tank.

Guest Commentary

Education can and should be America's newest civil rights issue.   Today, too many schools are failing too many children. The system is broken, and access to a quality education is largely the province of the wealthy, of those who can afford to opt out of failing government schools in favor of better options.

The poor, immigrants, inner-city children are the ones hurt most by these harsh realities. They are the ones most in need of quality schools but are stuck in under-performing schools where test scores continue to decline and where outdated work rules and union practices make reform nearly impossible.

There are better ways.  Vouchers that allow children to attend private schools, the expansion of charter schools, distance learning, and specialty school programs are all ideas whose time has come. It is important to understand that it is not the schools that must change but the educational system itself.

It's a struggle on the order of what America experienced in the 1960s, when the fight over establishing equality under law for all Americans became the watchword of the era.  It's time for this fight again, only this time with the goal of equal access to quality education at the center of the debate.

The Chester Community Charter School is a good example of what can happen when people face the problem and take action to overcome it. It started in 1998 with only 97 students. Today, there are more than 3,200 spread across nine state-of-the-art buildings where the lives of thousands of students are being made better while restoring life to the city of Chester, one of the Commonwealth's poorest communities.

Despite the fact that it draws from the same student pool as the rest of the Chester-Upland School District, CCCS has produced consistently superior academic outcomes and placements for its students.  This contrasts dramatically with the Chester-Upland School District, which is perennially ranked among the worst school districts in the Commonwealth.

It works because CCCS is different. As a charter school it is free from the kinds of onerous, outdated work rules and regulations that have paralyzed the cause of reform in existing public schools. It brings a different approach to education, one that is paying benefits to all the students who attend. As others have observed, the one-size approach to education no longer fits all. Nor does it have to.

And charter schools are just one option. Directing per-student dollars to families rather than schools so that parents can use vouchers to help pay tuition at private or parochial schools is another. The educational establishment had shown far too often that it cannot reform itself, so the only alternative is for parents, communities, and those who care about the future of our children here in the Commonwealth and across the nation to demand that things be allowed to change.

This means pressuring policy makers to open the system to increased reforms. Pennsylvania and the nation need more charter schools like CCCS and other educational options that will create the educated workforce of young Americans that are needed to be competitive in the global economy, not of the future, but that is here now.  It's important to understand that a charter school is a public school, but the decision to form one comes from parents, teachers and the local community, and they have fewer stagnating rules to follow.

These reforms will not happen by themselves. It will take a concerted effort to move the debate from fixing the unfixable, at tremendous cost to the taxpayers, to offering new options for parents who want their children to enjoy greater success than they did. This used to be the American dream; now it's increasingly a pipe dream, as jobs move offshore in search of educated, quality workers and sensible work rules that allow for greater economic success.

The time to turn the tide is now. Where charter schools are in operation the competition to enroll students in them is so intense that school districts often have to resort to lotteries to determine who goes. There should be enough space for everyone who wants to attend, which means we need to expand the number of placements available which, in reality means expanding the opportunities available for our children.

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Dr. Jim Broussard writes for Citizens Against Higher Taxes, teaches American history and historiography at Lebanon Valley College.