BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 700 (Wolk) - Natural resources: parks: carryout bags.
Amended: April 23, 2013 Policy Vote: NR&W 6-3, EQ 6-2
Urgency: No Mandate: Yes
Hearing Date: May 13, 2013 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 700 would require that retailers charge five
cents for each reusable bag provided to customers at the point
of sale. Revenues will fund grants to cities and counties for
local parks and litter abatement and reduction programs.
Fiscal Impact:
Ongoing revenues, likely in the hundreds of millions of
dollars in revenues to the Local Environmental Enhancement
Fund (General Fund) from a tax on single-use bag.
Ongoing costs, likely in the tens to hundreds of millions
of dollars, in local grants from the Local Environmental
Enhancement Fund administered by the Natural Resources
Agency (agency).
Ongoing costs, likely in the millions of dollars, from the
Local Environmental Enhancement Fund for grant
administration by agency.
Ongoing costs, likely in the high hundred thousands to low
millions of dollars, to the Office of State Audits and
Evaluation to review grants funded by the Local
Environmental Enhancement Fund.
Ongoing costs, likely in the millions of dollars, to the
State Board of Equalization (BOE) for the collection of the
single-use bag tax.
One-time costs, likely in the low hundreds of thousands of
dollars, from the General Fund to the BOE to develop
regulations to collect the bag tax.
Possible cost pressures, likely in the tens of millions of
dollars, to the General Fund for increased Prop 98
guarantees.
Background: In response to littler and plastic marine debris,
approximately 70 local governments throughout California have
adopted ordinances banning plastic bags. Most of these local
SB 700 (Wolk)
Page 1
ordinances also require stores to charge a fee for paper
carryout bags.
The At-Store Recycling Program (PRC §42250 et seq.) requires
supermarkets and stores over 10,000 square feet that include a
pharmacy to provide a clearly labeled and easily accessible
recycling bills for plastic bags, have reusable bags available
to customers, and to only provide bags that are labeled to
encourage recycling. This program sunsets on January 1, 2020.
Proposed Law: This bill would require that retailers charge a
five cent charge for each single-use bag provided. The retailer
would be able to keep up to one cent per bag if the retailer
credits consumers five cents for every bag the consumer
provides, prominently displays signage regarding the credit for
provided bags, and reflects the bag charge on the consumer
receipt. Cities and counties would be able to adopt an ordinance
that exempts their jurisdiction from the bag surcharge.
The BOE would be required to collect the charges from the
retailers and develop regulations pursuant to that collection
pursuant to the Fee Collection Procedures Law. Revenues would be
deposited in the Local Environmental Enhancement Fund (LEEF) and
be collected in such a way that the city or county origin of the
revenues is retained. The BOE would explicitly be allowed to
retain 5% of the charges annually collected for purposes of
administrating the fee collection.
This bill would require the Natural Resources Agency (agency) to
develop a grant program to allocate funds in the LEEF for local
parks and local programs aimed at reducing and cleaning up
litter. Specifically, grants would be issued for: (1) the
operations and maintenance of local parks, (2) local park
acquisition, (3) expansion of access to local parks and
recreation, (4) local park improvement and rehabilitation, (5)
protecting and restoring local parks, (6) nonmotorized trails,
and (7) local litter abatement and cleanup programs. Grants
would only be issued to cities and counties that collect the bag
surcharge and the grant amount may not exceed the total amount
of revenues generated in that city or county. The agency would
be required to post the grant amounts received by cities and
counties and the locals would be required to post on their
websites a list of the projects funded.
SB 700 (Wolk)
Page 2
The Office of State Audits and Evaluation within the Department
of Finance would be required to review the agency's grants to
locals and the locals' use of the funds.
This bill would not become operative should the bag ban in SB
405 (Padilla) be enacted and become operative on or before
January 1, 2014.
Related Legislation:
SB 405 (Padilla) of this session would prohibit grocery
stores and large retailers from providing single-use bags to
customers beginning January 1, 2015. The ban on single-use
bags would expand to convenience food stores and foodmarts
on July 1, 2016. SB 405 is on the Senate Appropriations
suspense file.
AB 158 (Levine) of this session would generally prohibit
grocery stores from providing single-use plastic bags and
would require stores to make reusable grocery bags available
for purchase. AB 158 is in the Assembly Appropriations
Committee.
SB 1219 (Wolk) Chapter 384/2012 extended the sunset of the
At-store Recycling Program requirements until January 1,
2020 and repealed the provisions preempting related local
regulatory action.
AB 298 (Brownley, 2012) would have generally prohibited
stores from providing single-use plastic bags to customers.
AB 298 also required reusable bags to be certified by
CalRecycle as meeting specified specifications.
AB 1998 (Brownley, 2010) would have prohibited stores from
providing single-use plastic bags and required stores to
provide reusable plastic bag for purchase or recycled paper
bags for a fee. AB 1998 failed passage on the Senate Floor.
AB 1834 (Brownley, 2012) would define reusable bags for the
purposes of the At-Store Recycling Program Law. AB 1834 died
on the Senate Floor.
SB 915 (Calderon, 2012) would set plastic bag reduction and
recycled content goals. SB 915 was never heard in a policy
committee.
SB 1106 (Strickland, 2012) would prohibit the manufacture
of reusable plastic bags without specified warning labels
about disinfection between uses. SB 1106 failed passage in
the Senate Environmental Quality Committee.
Staff Comments: Californians use between 10 and 15 billion
SB 700 (Wolk)
Page 3
single-use bags annually. Similar bag surcharges in Washington,
D.C., Ireland, and Italy have seen use reductions ranging from
67-98%, although in Ireland and Italy, bag use mildly increased
after the initial shock of the tax seemed to diminish. Assuming
a reduction of bag use 75%, Californians are likely to purchase
approximately 3.3 billion bags annually should the bag surcharge
be enacted. Assuming no cities or counties opt out of the
program, this could result in $165 million in revenues, of which
up to $33 million will be retained by the retailers, up to $6.6
million to the BOE for administrative costs to collect the fee,
and up to $6.6 million to the agency for administration of the
grant program. This would leave $119 million for grants. These
are very rough estimates for illustrative purposes.
The BOE would be required to collect the bag surcharges in this
bill pursuant to the Fee Collection Procedures Law, which
generally provides for the BOE's administrative costs. This bill
would explicitly allow the BOE to retain up to 5% of the fund
for administrative costs. However, the bill has no mechanism to
pay for the BOE's initial costs of adopting regulations for the
administration and enforcement of the fee collection. Initial
costs are likely to be significant as the BOE would be required
to track the city or county where the fee was generated and the
large number of retailers that would be remitting the fee. In
other origin-dependent taxes, such as sale and use taxes, the
retailer is responsible for tracking the fee origin instead of
BOE. Additionally, because the fee collection would be required
to begin when the bill goes into effect, BOE would likely have
to contract out work to develop regulations on an expedited
timeframe, which would raise the cost. Given the potential tax
revenue, staff believes that initial costs are likely in the low
millions of dollars. Once the collection process is established,
annual costs are likely in the mid to high hundreds of thousands
of dollars and would be supported by tax revenues.
The agency would also have startup costs to develop a grant
program for cities and counties. These startup costs would occur
before revenues would be available. Typically grant programs
cost approximately 5% to administer so staff believes that
initial and ongoing administrative costs are likely in the high
tens of thousands of dollars. According to the author's office,
the intent is for the agency to have little to no discretion in
determining the size of the local grant. Rather the size of the
grant would be equal to the revenues generated in that city or
SB 700 (Wolk)
Page 4
county. Staff believes the author's intent is not accurately
reflected in the current bill language.
Staff notes that the bill would allow retailers to retain up to
one cent per bag provided to a customer; however the bill does
not put any restrictions on the use of that revenue. Presumably
the amount retained would help fund their administrative costs
to charge and remit the charge to the BOE and the actual cost of
the bag. Excess revenues would be profit for the retailer.
Staff notes that while the BOE and agency would be allowed to
keep a portion of the LEEF funds to cover administrative costs,
there are no such provisions to cover costs of the Office of
State Audits and Evaluations.
This bill would require a 2/3 vote as the surcharge on
single-use bags is a tax because of the lack of a nexus between
the charge and the uses of the revenues. As a tax, revenues
raised by this bill would increase the Proposition 98 guarantee
for state expenditures on education. Depositing revenues into a
special fund does not necessarily prevent a Proposition 98
impact as the uses of the special fund can be changed by the
Legislature and therefore are GF fungible. The Proposition 98
guarantee would be approximately 50% of the new revenues.
This bill creates a mandate as it creates a new crime or
infraction. However, these costs are not reimbursable.