1 1 HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA 2 3 * * * * 4 Budget Hearing 5 Liquor Control Board 6 7 House Appropriations Committee 8 9 * * * * 10 Main Capitol Building 11 Majority Caucus Room 140 Harrisburg, Pennsylvania 12 13 14 Monday, February 24, 2014 - 11:48 a.m. 15 16 --oOo-- 17 18 19 20 21 1300 Garrison Drive, York, PA 17404 22 717.764.7801 23 24 25 Key Reporters [email protected] 2 1 COMMITTEE MEMBERS PRESENT: 2 Honorable William F. Adolph, Majority Chairman Honorable Ryan Aument 3 Honorable Karen Boback Honorable Jim Christiana 4 Honorable Gary Day Honorable Gordon Denlinger 5 Honorable Brian Ellis Honorable Garth Everett 6 Honorable Glen Grell Honorable Seth M. Grove 7 Honorable Adam Harris Honorable Tom Killion 8 Honorable David Millard Honorable Mark Mustio 9 Honorable Donna Oberlander Honorable Bernie O'Neill 10 Honorable Mike Peifer Honorable Scott Petri 11 Honorable Jeffrey Pyle Honorable Curtis G. Sonney 12 Honorable Joseph F. Markosek, Minority Chairman Honorable Brendan Boyle 13 Honorable Matthew Bradford Honorable Michelle Brownlee 14 Honorable Mike Carroll Honorable Scott Conklin 15 Honorable Madeleine Dean Honorable Deberah Kula 16 Honorable Tim Mahoney Honorable Michael H. O'Brien 17 Honorable Cherelle Parker Honorable John Sabatina 18 Honorable Jake Wheatley 19 REPUBLICAN NON-COMMITTEE MEMBERS PRESENT: 20 Honorable Matt Baker 21 Honorable Sheryl Delozier Honorable Gene DiGirolamo 22 Honorable Jerry Stern Honorable Joe Hackett 23 Honorable John Taylor Honorable Rick Saccone 24 Honorable Mark Keller Honorable Mindy Fee 25 Honorable Mike Turzai, Republican Majority Leader Key Reporters [email protected] 3 1 DEMOCRATIC NON-COMMITTEE MEMBERS PRESENT: 2 Honorable Flo Fabrizio Honorable Pam DeLissio 3 Honorable Michael Schlossberg Honorable Paul Costa 4 Honorable Dom Costa Honorable Frank Burns 5 Honorable Tom Caltagirone 6 7 8 STAFF MEMBERS PRESENT: 9 David Donley 10 Majority Deputy Executive Director 11 Daniel Clark, Esquire 12 Majority Chief Counsel 13 Miriam Fox 14 Minority Executive Director 15 16 17 18 19 20 21 22 23 24 25 Key Reporters [email protected] 4 1 INDEX OF TESTIFIERS 2 TESTIFIERS 3 LIQUOR CONTROL BOARD 4 Joseph E. Brion, Chairman 5 John Metzger, Acting Executive Director 6 Bob Marcus, board member 7 Tim Holden, board member 8 9 10 11 12 REQUEST FOR INFORMATION 13 Page Line Page Line Page Line 14 36 11-13 71 11-16 104 14-18 15 16 17 18 19 20 21 22 23 24 25 Key Reporters [email protected] 5 1 MAJORITY CHAIRMAN ADOLPH: Thank you. 2 I'd like to reconvene the House Appropriations 3 Committee meeting, our budget hearings. 4 Our next testifiers are the Pennsylvania Liquor 5 Control Board. Good morning, gentlemen. 6 (Good morning response by all 7 testifiers). 8 MAJORITY CHAIRMAN ADOLPH: Nice to see 9 you. Chairman Brion, if you would like to 10 introduce the distinguished panel, and we'll get 11 right into questions. 12 MR. BRION: I would. To my immediate 13 left is Robert Marcus. Bob has been on the board, 14 I believe, since about 2006. Is that correct, 15 Robert? 16 MR. MARCUS: 2007. 17 MR. BRION: Seven. To his left is our 18 new member, Tim Holden. Tim, as you know, was a 19 Congressman. I want to thank the Governor and the 20 Senate for appointing Tim. As a former 21 Congressman, he was held in very high esteem, as 22 you know. He's been a valuable addition. He's 23 been at the building a lot, learning what I call 24 the ropes, Mr. Chairman, and he's jumping right 25 into it with regard to the operation. Key Reporters [email protected] 6 1 To my right is John Metzger. John was 2 appointed back in January by the board as our 3 acting executive director. John was a Supply Chain 4 Director prior to taking over the Executive 5 Director position. He's doing a great job for us, 6 and I want to introduce him. He'll be testifying 7 on some specific numbers if you have any questions. 8 MAJORITY CHAIRMAN ADOLPH: Would you 9 care to give a brief opening statement? 10 MR. BRION: I would. Thank you. 11 MAJORITY CHAIRMAN ADOLPH: Thank you. 12 MR. BRION: Chairman Adolph, Chairman 13 Markosek and the House Appropriations Committee, 14 all good morning. We were out in the hallway and 15 we wrote this up in 10 minutes, so thank you for 16 giving us some extra time to be ready for you. 17 Before we begin, I'll just go over where 18 we are with some of the background of the PLCB. We 19 have had a very good year. We come before you as 20 the representatives of a self-funding agency that 21 has transferred $80 million in profits and 432.3 22 million in state tax revenues to the General Fund 23 in the last fiscal year. We also provided $39 24 million to other state agencies, such as the state 25 police, and local entities for total financial Key Reporters [email protected] 7 1 contributions to the Commonwealth of approximately 2 $551 million during the last fiscal year. 3 The board and John and the rest of the 4 employees that are here today, they're here before 5 you on behalf of the agency, and we request no 6 appropriation from the General Fund in the fiscal 7 year 2014-2015. In fact, the fiscal year 2012- 8 2013 was a very strong financial year for the PLCB. 9 Not only what I said before, but through the 10 operation of 606 brick-and-mortar stores and an 11 Internet store, for a total of 607 stores, the 12 board generated nearly 2.2 billion in gross sales, 13 a 4.5 percent more than the previous fiscal year. 14 As a result of our strong sales growth 15 and operational expense control, we experienced a 16 24 percent increase in net income when compared to 17 the fiscal year 2011-2012. 18 In addition, we capitalized on the 19 operational change led by John, to my right, that 20 gave ownership of the warehouse inventory back to 21 the vendors, enabling the agency to repay a 22 110-million revolving operational loan to the state 23 treasury, in place since 1968. So that loan was 24 given to PLCB in 1968. The loan was paid off in 25 February of 2013, and we don't anticipate needing Key Reporters [email protected] 8 1 that loan in the future. 2 Obviously, the PLCB is unique because 3 it's not just a retailer but a regulator. The 4 agency oversees the regulation of more than 23,000 5 liquor licenses and permittees statewide, including 6 restaurants, clubs and beer distributors. Our 7 staff processes thousands of applications annually 8 with limited resources and works tirelessly 9 educating the public about the responsibility of 10 alcohol consumption, which we take very, very 11 seriously; responsible alcohol consumption. Our 12 employees remain committed to protecting the 13 health, welfare and safety of the community that we 14 serve. 15 In closing, PLCB's most valuable 16 resource has been and will continue to be the hard- 17 working, innovative employees, some of them in the 18 room today, who work for the agency. We, as the 19 board, understand our mission to serve the citizens 20 of the Commonwealth of Pennsylvania. 21 I'll address any questions you have. 22 MAJORITY CHAIRMAN ADOLPH: Thank you, 23 Chairman. As is the custom of the Appropriation 24 budget hearings, Chairman Markosek and I, we invite 25 the committee chairs of the standing committees. Key Reporters [email protected] 9 1 With us for this hearing is Chairman Taylor, the 2 Republican Chair of the Liquor Committee, as well 3 as the Democratic Chair, Representative Paul Costa. 4 Thank you, gentlemen, for being here. 5 Also, I'd like to acknowledge the 6 presence of Representative O'Neill and 7 Representative Gordon Denlinger, members of the 8 House Appropriations Committee that have also 9 joined us. 10 Chairman Brion, I was very interested in 11 hearing and, obviously, excited about the 12 possibility of receiving some additional money in 13 this year's budget. I heard that in the Senate 14 Appropriations hearings--not that I pay much 15 attention to what's going on on the other side of 16 the building, but this one got my attention--a 17 possible increase. The Governor has budgeted an 18 80-million-dollar transfer from the Liquor Control 19 Board, and you said possibly it could be as high as 20 a hundred million. 21 I guess my question is, is the press 22 reporting that correctly, and what should we budget 23 for? 24 MR. BRION: Mr. Chairman, the question 25 was, can we provide more than $80 million in this Key Reporters [email protected] 10 1 fiscal budget? I believe, when they were looking 2 at our books and whatnot, my answer was exactly 3 what you just suggested; that we think, obviously, 4 projecting out at this point in time, we could 5 project that we could provide another $20 million. 6 But that is based on some issues that we, 7 obviously, are trying to wrestle with right now. 8 Representative Taylor and I talk about it all the 9 time. And that is the restriction on Sunday sales 10 and, also, the issues with regard to pricing. 11 We are doing very well, as you can see 12 from my opening statement, from a fiscal stand- 13 point, and we are projecting out that additional 14 $20 million, that is correct.