BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 254 (Hancock and Correa) - Solid waste: used mattresses: recycling and recovery. Amended: April 15, 2013 Policy Vote: EQ 6-3 Urgency: No Mandate: No Hearing Date: April 29, 2013 Consultant: Marie Liu This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 254 would require a mattress recycling organization to develop and implement a manufacturer and retailer stewardship program to recover and recycle used mattresses. Fiscal Impact: Ongoing costs of approximately $500,000 to the Integrated Waste Management Fund (Special Fund) in FY 2014-15 first to draft regulations and guidance documents and for review and certification of the mattress recycling organization and its plan then for ongoing oversight and enforcement. Ongoing revenues of approximately $500,000 to the Used Mattress Recycling Account beginning in FY 2015-16 for reimbursement of state costs. Background: The Product Stewardship for Carpets Program requires manufactures of carpet sold in California to submit a carpet product stewardship plan to the Department of Resources Recycling and Recovery (CalRecycle) that demonstrates how it will manage waste carpet. A similar program also exists for paint under the Architectural Paint Recovery Program. Proposed Law: This bill would establish the Used Mattress Recovery and Recycling Act (act). Specifically, the act would: By July 1, 2014, allow a qualified industry or association to request to be certified as a mattress recycling organization (organization) by CalRecycle. By January 1, 2015, require that all manufacturers and retailers of mattresses offered for sale in California register with the organization. Require the organization to develop and submit to SB 254 (Hancock and Correa) Page 1 CalRecycle, for approval, a plan for recycling used mattresses, and means to fund that plan, by April 1, 2015. Require the organization to annually submit a budget to CalRecycle beginning July 1, 2015. Require the organization to reimburse CalRecycle for all its cost in implementing the act on a quarterly basis. Require the organization to establish a mattress recycling charge that shall be added to the purchase price of a mattress at the point of sale. Any retailer that sells a mattress to a consumer shall collect the charge then remit it to the organization. Require CalRecycle to place specific information about the organization and the program on its website. Require a retailer, beginning July 1, 2014, to offer consumers the option to have a used mattress picked up for recovery, at no cost to the consumer, at the time of delivery of a new mattress. Allow CalRecycle to impose an administrative civil penalty for violations of this act. All penalties shall be deposited into the Mattress Recovery and Recycling Penalty Account within the Integrated Waste Management Fund and may be expended, upon appropriation by the Legislature, to administer and enforce the act. Related Legislation: SB 1118 (Hancock, 2012) would have established mattress recycling goals for the state. SB 1118 failed passage on the Senate Floor. Staff Comments: Based on CalRecycle's experience with other extended producer responsibility programs, the department believes that its costs will be approximately $500,000 for two Integrated Waste Management Specialists, one Staff Programmer Analyst, one Accounting Officer, and a half Staff Counsel position first to develop the program and associated regulations and guidance documents. Later, these positions would then be needed for oversight and enforcement activities including creating, maintaining, and publishing a database for compliant manufactures and reviewing annual reports. This bill intends to be cost neutral to the state by requiring the organization to reimburse CalRecycle for its costs on a quarterly basis. However, there are certain initial costs that will occur before there is an organization that CalRecycle can request reimbursement from (such as certifying the organization) SB 254 (Hancock and Correa) Page 2 or before the organization has generated funds to pay for any reimbursements (such as reviewing the initial recovery and recycling plan and associated budget). Staff believes clarification is needed on whether these initial costs are intended to be paid by the industry, and if so, how. Staff notes that initial costs can be covered with an upfront fee, such as an application fee. This bill would direct any assessed penalties to be used to help fund the administration and enforcement of the act. Staff notes that generally allowing program implementation to be paid for by fines and penalties can be a perverse incentive, or at least create the illusion of a perverse incentive, for overly aggressive enforcement. However, because this bill requires CalRecycle's ongoing costs to be fully reimbursable by the organization, there would be no incentive for overly aggressive enforcement.