BILL ANALYSIS Ó AB 1149 Page 1 Date of Hearing: April 25, 2011 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Wesley Chesbro, Chair AB 1149 (Gordon) - As Introduced: February 18, 2011 SUBJECT : Beverage containers: recycling and litter reduction: funds SUMMARY : Extends for five years CalRecycle's plastic market development program, which provides Bottle Bill funds to support recyclers and manufacturers using empty plastic beverage containers. EXISTING LAW , the Beverage Container Recycling and Litter Reduction Act (Bottle Bill): 1)Establishes refund value and redemption payments for beverage containers. 2)Requires a distributor to pay a redemption payment for every beverage container sold or offered for sale in the state to CalRecycle, which is required to deposit those amounts in the California Beverage Container Recycling Fund (Fund). The money in the Fund is continuously appropriated for the payment of refund values and processing fees. 3)Requires DRRR to review the status of the Fund every three months to ensure that funds are adequate to make expenditures according the Bottle Bill and make specified determinations. 4)Authorizes funding for specified purposes to increase beverage container recycling, including up to $10 million annually for market development payments for empty plastic beverage containers until January 1, 2012. THIS BILL extends the plastic market development program and funding authority from January 1, 2012 to January 1, 2017 and requires CalRecycle to consider specified factors when setting payment amounts. FISCAL EFFECT : Unknown COMMENTS : AB 1149 Page 2 The Bottle Bill is designed to provide consumers with a financial incentive for recycling and to make recycling convenient to consumers so that the beverage container component of the solid waste stream will decrease. The centerpiece of the Bottle Bill is the California Redemption Value (CRV). Consumers pay a deposit, the CRV, on each beverage container they purchase. Retailers collect the CRV from consumers when they buy beverages. The dealer retains a small percentage of the deposit for administration and remits the remainder to the distributor, who also retains a small portion for administration before remitting the balance to the Department. When consumers return their empty beverage containers to a recycler (or donate them to a curbside or other program), the deposit is paid back as a refund. For many years, surpluses have accumulated in the Fund as a result of unredeemed deposits. Among other purposes, the surplus funds have been used, per statute, to fund various programs to reduce litter, increase recycling and promote used of recycled materials, including the plastic market developments program. Surplus funds have also been loaned to the General Fund in prior Budget Acts. In May 2009, CalRecycle notified the Legislature that the Fund was facing a $160 million shortfall by the end of the 09-10 Fiscal Year and initiated an 85% proportional reduction for all expenditures except CRV payments to consumers. In October 2009, the department increased this reduction to 100%. These deep cuts damaged the state's recycling infrastructure and directly contributed to the loss of at least 500 jobs statewide. In order to temporarily alleviate this funding shortfall, the Legislature passed AB 8X 7 (Budget Committee) in March 2010, which provided a one-time influx of $100 million dollars and temporary suspended multiple grant programs to provide funding through 2010. According to CalRecycle's most recent report on the Fund (April 8, 2011): In general terms, the Recycling Fund Condition Summary indicates that the Fund will be solvent as long as expected loan repayments to the Recycling Fund continue. The Recycling Fund Balance is not projected to reach a level that would require proportionate reduction in FY2010-11 or FY2011-2012. However, assessment is entirely dependent upon continued repayment of historic loans made from the Recycling Fund. The Governor's proposed FY2011-2012 Budget includes AB 1149 Page 3 General Fund loan repayments of $98M in FY2010-2011 (of which, $68M has already been transferred to the Recycling Fund) and $88M in FY2011-2012. It also includes repayments of approximately $21M in each of those fiscal years for loans made from the Recycling Fund to the Air Resources Board. If those loan repayments-beyond the $68M already repaid in the current year-are not made in FY2010-2011 and FY2011-2012, CalRecycle will need to revisit the question of proportionate reduction for the FY2011-2012 period. The plastic market development program uses surplus redemption funds from the Fund to make payments of up to $150 per ton to California-based processors and manufacturers that recycle and utilize post-consumer plastic beverage containers. In 2007-09, the total amount of funds authorized was $5 million. For 2010 and 2011, the legislature increased this payment authority to $10 million annually. This bill would continue the $10 million annual allocation until 2017. According to the author: While California's plastic market development program has succeeded in increasing California processing and use of recycled plastic in-state, California continues to export in excess of 90% of plastic collected for recycling. In 2010, Californians collected more than 250,000 tons of PET and HDPE plastic beverage containers for recycling, with all but 25,000 tons exported overseas (primarily to China) for processing and manufacturing. Existing California-based manufacturers of products and packaging could be utilizing this material, reducing pollution and waste, and increase jobs and economic opportunity in California. The program is needed to continue building California's recycling infrastructure. Currently, there are six California companies doing plastic processing, and about a dozen CA manufacturers that can use recycled plastic. Together, these companies are employing about 750 people, whose jobs are supported by the current program. Should the program sunset, a portion of these jobs could be at risk. REGISTERED SUPPORT / OPPOSITION : AB 1149 Page 4 Support California Nevada Soft Drink Association California State Association of Counties California Resource Recovery Association Californians Against Waste CarbonLITE Industries City and County of San Francisco Earthbound Farm Epic Plastics Peninsula Packaging Company Regional Council of Rural Counties Opposition None on file Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916) 319-2092