Out of Control Policy Blog

Pennsylvania Scandals Highlight Need to Get State Out of the Toll Road and Liquor Business

I'm always harping on the need to get government out of the business of business, and two developing stories in Pennsylvania offer a perfect illustration of why. First, as reported by TollRoadsNews.com:

Vincent Fumo, the Pennsylvania Turnpike's leading legislative patron while a Democrat state senator and Ruth Arnao, wife of the chairman of the Pennsylvania Turnpike Commission have been found guilty on all 182 counts in the big corruption case against them tried in Philadelphia by the US Government. The result was announced today after a trial lasting five months and jury deliberations over six days. [...]

In the trial itself the Turnpike did not feature much. But the US Government indictment of Fumo said (p43 #83) that between April 2003 and December 2004 the Pennsylvania Turnpike Commission paid $220,000 in checks of $10,000 a month to a man described as Senate Contractor #4 (SC4) identified later as Michael Palermo under a phony contract as a consultant.

The contract was signed two months after Mitchell Rubin became chairman of the Turnpike. The indictment said that Palermo worked on Sen Vincent Fumo's Susquehanna River "farm" in return for the payments he was getting from the Turnpike.

Quoting the federal indictment: "...at the same time that he began to take an active role at the farm, (SC#4) also received beginning in April 2003, a $10,000 a month check from the Pennsylvania Turnpike Commission (PTC) as part of a lucrative consulting contract. This contract was awarded to (SC#4) by the PTC within two months after (SC#5), a member of Fumo's inner circle of friends and the boyfriend (later husband) of Ruth Arnao was elected chairman of the PTC. Despite total payments of $220,000 to (SC#4) between April 2003 and December 2004 the Pennsylvania Turnpike Commission has no records reflecting that any work was ever performed by (SC#4) on that contract either." (p43 #83)

As the same publication reports today, Gov. Ed Rendell is investigating whether he can legally remove Commission chairman Mitchell Rubin.

Second, the PA Liquor Control Board has inadvertently inspired more calls for its privatization through its recent PR fiasco. Per the Tribune-Democrat in Johnstown:

The LCB announced recently that it wanted to make store workers friendlier and more well-mannered, to make sure there are smiles on their clerks' faces when they're meeting the public. That's certainly commendable. It's something every business should demand of its clerks as they interact with customers.

To accomplish its agenda, however, the LCB has hired a company to conduct workshops beginning this month. The contract is worth $173,000. [...]

The board says it wants to make sure clerks are saying "hello," "thank you" and "come again" to customers shopping for wine and spirits.

Harrisburg good-government activist Eric Epstein calls the idea "a demented interpretation of happy hour." He says it's "a sad state of affairs when you have to train people to be kind and courteous."

It's also mind-boggling that the LCB would invest that kind of money at a time when the state is facing huge budget deficits and when so many people are losing their wages because of the massive layoffs taking place around the state.

If that isn't enough, the contract itself has come under fire. On Friday, Auditor General Jack Wagner said that he would review the board's awarding of the contract to a Pittsburgh company owned by the husband of the LCB's regional manager for western Pennsylvania. [...]

Meanwhile, the LCB says it wants wine and liquor consumers to be happy. And that's what we want also. That's why we continue to criticize our state for being one of the few still in the liquor business.

Privatize the stores and let a competitive market determine prices and what products are to be sold – as well as whether the workers are friendly enough.

Pittsburgh Tribune-Review columnist Mike Seate opines today:

But rest assured, things would be quite different if the business of selling booze in our commonwealth were in private hands. If customers didn't like the way they were being treated in one store, they could simply shop elsewhere.

I know that sounds crazy, but imagine the concept: If Pennsylvania got out of the vice business, liquor store hours wouldn't be dictated by a Legislature composed mainly of hypocritical men who think selling booze after 5 p.m. on Sundays or 9 p.m. any other day of the week is an affront to the Almighty.

We'd see more sale prices as independently owned stores competed for market share. Clerks who grumbled at customers would get pink slips, not free courses in behavioral science. And we taxpayers would get a much-deserved break.

A Morning Call reader adds:

All improvements to this system since then derived only from the threat of privatization. Now we find they spent $173,000 of our money learning how to be nice. This is a total waste. In a competitive, commercial environment this would never be asked of the consumer. In fact, the state of Pennsylvania is the largest single unit buyer in North America, yet consumers gain no benefit from the economies of scale. Privatize liquor sales! Consumers will gain better prices, more variety and even more attractive stores. Political hacks and union bosses will be the only ones upset.

There's a lot that can be said about these stories, but it seems most appropriate to focus on what I see as the biggest irony. It REALLY boggles me when privatization antis whine, "...but we can't possibly privatize X, Y, or Z or else we'll lose control over it." Sounds to me like they lost control in Pennsylvania a long time ago.

I'd counter, as I did here with regard to the Pennsylvania Turnpike, that if you do privatization right, you will actually gain control through privatization rather than lose it.

Leonard Gilroy is Director of Government Reform


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