Pennsylvania Gov. Tom Wolf (D) wants to “monetize” future earnings of the Pennsylvania Liquor Control Board, by borrowing $1.25 billion against future PLCB profits. Since he appoints its members, the board has hired Public Financial Management to provide financial advice and Eckert Seamens Cherin & Mellott to provide legal advice.
The borrowing could prevent privatization of the state liquor system for as long as the bonds are outstanding, unless taxpayers agreed to buy out the investors before the bonds were due.
It’s also a way to do an end run around the General Assembly, which seems unable to agree on a budget. “It’s easy money, but it’s a lousy idea because you probably haven’t done anything to alter the underlying imbalance, so next year you have to come back to the well and do something else,” said municipal finance expert William Glasgall.
David Ozgo, chief economist, Distilled Spirits Council, doesn’t like the plan either. “Normally, when a business takes on debt, they are doing it to recapitalize, they are doing it to buy new plants and equipment. They are investing in productive assets,” Ozgo said. “Well, the PLCB is not investing in productive assets here. They are using the money to pay ongoing state expenses.”