News Column

LCB posts record sales of more than $2.2 billion

September 3, 2014

By Kari Andren, Tribune-Review, Greensburg, Pa.



Sept. 03--Revenue from state wine and spirits sales topped $2.2 billion last year, a record for the Liquor Control Board, agency officials said Wednesday.

But the announcement comes just weeks after a memo from the LCB's chief of financial operations warned board members that this year might not be so profitable.

Sales and taxes generated $2.24 billion for the fiscal year that ended June 30, about $67 million more than the previous year, or a 3.2 percent increase, according to the LCB. The agency controls all wholesale and retail sales of alcohol in the state and operates more than 600 wine and spirits stores.

Overall, the agency sent more than $526 million in revenue and taxes to the state's General Fund, $25 million to state police for liquor law enforcement and $2.5 million to the Department of Drug and Alcohol Programs.

Board Chairman Joseph "Skip" Brion said the numbers show the LCB is in a strong financial position.

"As we move forward, we continue to analyze our expenses and sales data to make sure that we're operating the agency in the most efficient, effective and responsible manner possible to benefit the commonwealth and its citizens," Brion said.

But the financial picture presented on Wednesday differs from one painted for next year in an internal LCB memo obtained by the Tribune-Review last month.

In that memo, August Hehemann, director of financial operations, warned the three-member Liquor Control Board that net income was projected to fall to $96.2 million this year, or $27.5 million less than the LCB reported on Wednesday.

Hehemann proposed raising the LCB's markup on products from 30 percent to 35 percent to generate an additional $42 million if implemented for a full year. He cited rising costs for employee benefits and necessary technology upgrades that had been put off in previous years.

An official from a Harrisburg-based political think tank was critical of Hehemann's comments.

"The memo is saying (that) in the future, 'If we're going to be financially stable, we're going to have to charge everyone more,'" said Nate Benefield, vice president for policy analysis for the conservative Commonwealth Foundation in Harrisburg. "That's the business model they have."

But Wendell W. Young IV, president of the United Food and Commercial Workers 1776, which represents state store employees countered, stating that Hehemann's memo was just one facet of the agency's ongoing review of business and sales practices.

"For someone in that (LCB) system to be analyzing what we could do and how we could do it shouldn't be a shocker to anybody," he said.

"Contrary to what some politicians ... want people to believe, the PLCB is a valuable asset that benefits all Pennsylvanians and continues to produce more and record revenue and profit," Young said.

State store sales last year were in part driven by Chairman's Selection wines, which saw a 5.6-percent growth, according to LCB figures. The Chairman's Selection program offers highly rated but limited-quantity wines sold at deep discounts.

Overall sales of wines and spirits each increased 3.7 percent, figures show.

Gov. Tom Corbett and House Majority Leader Mike Turzai, R-Bradford Woods, have pushed to privatize wine and spirits sales. The House approved a privatization bill last year, but the Senate has not acted on it.

Since then, other proposals have surfaced, but lawmakers in the Republican-controlled General Assembly have yet to coalesce around one and get it to Corbett's desk. It's unclear if lawmakers will take up the issue when they return to session later this month.

Young said his group and the LCB have pushed for changes that would modernize the agency's operations, such as increasing store hours, allowing direct shipment of products to consumers and allowing flexibility in pricing. Lawmakers would have to approve those changes.

Kari Andren is a staff writer for Trib Total Media. She can be reached at 724-850-2856 or kandren@tribweb.com.

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