Diminishing returns: California’s unclaimed bottle deposits hit $820M as recycling centers close

This is the government scam to collect taxes—and pretend it is saving the Planet.

You buy a can or bottle of soda and you are changed a “recycling” fee of five or ten cents.  There is no recycling fee—it is a tax.  So far the TAX has collected $820 million.  How?  You are 75 years old and drink beer, soda and flavored waters.  You are charged the TAX for each bottle or can.  Then, to get your money back in the cold of winter or heat of summer you stand in line outside near a recycling center—for minutes or an hour—smelly, tiredly and bad for your health.  Finally, if the machine works you get a slip with the amount of money you are to get back.  Then you need to drive to find a grocery store that will take the slip and give you the tax money back.  Or, you have kids and you need to do this while watching your kids so they do not get hurt.

Now you understand why folks, like me accept the tax and save my sanity and health.

Diminishing returns: California’s unclaimed bottle deposits hit $820M as recycling centers close

By Scott Rodd, KPBS,  6/20/24  https://www.kpbs.org/news/environment/2024/06/20/californias-unclaimed-bottle-deposits-820m-recycling-centers-close

Old transformers. Junky refrigerators. Outdated medical equipment.

Sergio Perez has seen it all come through SA Recycling in Barrio Logan.

“I like it because every single day is different,” Perez said, general manager at the recycling center. “Maybe you’re going to receive a lot of aluminum. Maybe you’re going to receive a lot of copper tomorrow.”

What he doesn’t see much of these days are bottles and cans. That’s because this SA Recycling location no longer participates in California’s bottle return program — the one that pays out a nickel or dime in exchange for returned beverage containers.

The program wasn’t very profitable to begin with for SA Recycling. And then neighbors began complaining about the growing number of homeless people milling outside the business and allegedly discarding trash around the neighborhood.

“We tried to work with the city” to find a solution, Perez said. “But it is not working.”

So SA Recycling dropped out of the bottle return program altogether.

Their decision reflects a broader trend across California. Over the last decade, the state lost half of its bottle return recycling centers — there are currently fewer than 1,300 statewide. During that time, San Diego County lost nearly two-thirds of its recycling centers.

Many of these locations simply closed down. And as recycling centers dwindled, the state’s recycling rate also dropped. The environmental consequences are alarming: Fewer recycling centers means more cans and bottles in landfills, along roadways and on beaches.

There’s also a financial impact. Many people on the bottom rung of the economic ladder need the money they get from bottle returns. Fewer recycling locations means fewer opportunities to get back those nickels and dimes.

All that spare change — from Humboldt County down to San Diego — adds up. The amount of unclaimed money sitting in the state’s beverage container fund has ballooned in recent years, from about $219 million in 2014 to a staggering $819 million last year.

CalRecycle, the department that oversees the state’s recycling system, spends millions of dollars from the fund every year to cover administrative costs and assist recyclers.

But the fund has also become a piggy bank for state leaders when budgets are tight. A KPBS review of state financial records found California has borrowed billions of dollars from the fund in the last two decades — in the form of short- and long-term loans — to buoy its general fund.

It can take years to repay the loans, and at times the borrowing has strained the recycling fund.

“Consumers have been putting more money into this fund and not being able to get it back out,” said Susan Collins, president of the California-based Container Recycling Institute. “Which turns their deposit effectively into a tax.”

CalRecycle declined multiple interview requests. In an email, department spokesperson Lance Klug said the state plans to use unclaimed deposit money to transform how people return their bottles and cans, as new regulations are set to take effect next year.

“Unredeemed beverage container deposits are intended to be returned to Californians and to support recycling,” Klug wrote. “These reforms are designed to increase access to recycling and increase opportunities for consumers to receive (their bottle deposits).”

Recycling centers shut down

California passed its Bottle Bill in 1986, establishing the state’s bottle return system.

The goal of the program is straightforward. Charge consumers a deposit of five or 10 cents — depending on the size of the container — every time they purchase a beverage. The state then returns the money when a bottle or can is brought to a recycler.

“That creates an incentive to recycle, and it’s a really powerful incentive that gets people to bring back containers,” Collins said.

Since the late 1980s, California has collected approximately 500 billion bottles and cans.

Under the program, CalRecycle set an ambitious 80% recycling rate goal. That means recapturing eight out of every 10 cans and bottles purchased in California, either through recycling centers or blue-bin curbside programs.

In the first decade of the 2000s, new recycling centers sprung up all over the state. Some were large facilities that processed more than half a million bottles and cans every month. Others were small vendors, often located near grocery stores.

As a result, California’s beverage container recycling rate increased from 55% in 2003 to 82% in 2009. The recycling rate remained at or above the state’s 80% target over the next seven years.

But a troubling trend soon took hold. Recycling centers — big and small — began shutting down.

In 2014, there were 2,604 recycling centers statewide; today, there are 1,286. The number of recycling centers in San Diego County dropped from 154 to 59 during that time.

A Flourish data visualization

Klug from CalRecycle pointed to market conditions as one explanation.

“Recycling centers face significant price fluctuations” for recycled materials, he wrote in his email. “State subsidy payments to recyclers are determined by formulas defined by law, and often do not make up for changing market conditions.”

Klug added that more beverages are being sold in plastic bottles, which have substantially lower scrap value than aluminum cans. He also said the pandemic took a toll on many recycling businesses.

With fewer places to return bottles and cans, California’s recycling rate dropped to 68% percent in 2020 and 2021. Last year, it rebounded slightly to 71%.

According to an analysis from the advocacy group Californians Against Waste, the recycling rate in San Diego County hit a dismal 57% in 2022.

Unclaimed deposits top $800 million

Unclaimed deposits from unreturned containers go into the state’s Beverage Recycling Container Fund.

The fund is supposed to help support recycling centers, reduce litter and provide grants for new recycling initiatives. Every year, tens of millions of dollars from the fund are also spent on administrative costs at CalRecycle, including salaries for some employees and executives.

The exact amount in the fund is hard to pin down, in part because CalRecycle has not released a semi-annual report on the fund — which is required by state law — in more than two years.

The department has also reported dramatically different fund balances in different state filings.

Last year, the state budget put the fund at $538 million. In recent weeks, however, the Department of Finance confirmed the fund actually stood at nearly $820 million.

Collins said this is a problem.

“The excess growth in the fund is the result of a program that isn’t serving consumers as well as it should be,” she said.

Recent budget documents estimate the fund is at around $328 million right now, but Collins said the number is unreliable and will likely be adjusted upward in the coming months.

A flush balance is a good thing for most state funds — but the beverage container fund is different.

Too much money in the fund means consumers aren’t getting back their deposits, recyclers aren’t getting paid by the state to process the recycling, and fewer bottles and cans are being turned into new containers.

Billions borrowed to plug budget holes

An overflowing recycling fund also invites borrowing by state leaders during lean budget years.

Between 2002 and 2010, CalRecycle documents show the state took out $459 million in loans to help plug holes in the general fund. (The Department of Finance recently told KPBS the borrowing was closer to $300 million, but couldn’t explain the discrepancy.)

It often took years — sometimes a decade or more — to repay these loans.

In 2009, a group of recyclers — including ones from San Diego — sued the state. They alleged the loans left the bottle deposit fund insolvent and led to reduced payments to recyclers, which had “disastrous consequences.”

While the recycling companies lost the case — and some later shut down or left the state — a 2010 report from the nonpartisan Legislative Analyst’s Office found the recycling fund had a $157 million deficit, and cited the loans as a primary cause.

Lawmakers around this time took heed. They passed a law that discouraged future borrowing from the recycling fund.

“The Legislature finds and declares that the maintenance of the fund is of the utmost importance to the state and that it is essential that any money in the fund be used solely for the purposes authorized in this division and should not be used, loaned, or transferred for any other purpose,” the legislation stated.

But it had no teeth, and the borrowing continued. Much of it was in the form of short-term loans to help the state cover cash management shortfalls. The loans — repaid after several days or several months — totaled more than $3 billion between 2013 and 2021.

While the state hasn’t taken out any short term loans since then, it did borrow another $100 million last year in a longer-term loan “to assist in closing the (state’s) projected shortfall.” California is currently staring down a budget deficit north of $25 billion.

Earlier this year, Gov. Gavin Newsom had proposed another $125 million loan from the fund.

The State Controller’s Office and Department of Finance said the borrowing from the fund is allowed under state law. But the practice is again being scrutinized by state lawmakers.

“If we’re going to do this, we have to be very clear about the integrity of this fund,” said Sen. Ben Allen at a budget subcommittee hearing in February. “This was money that was explicitly collected from consumers for the purpose of improving our recycling rates.”

The Department of Finance told lawmakers it has since repaid the $100 million loan from last year and recently nixed the planned $125 million loan.

A new way forward

Lawmakers in 2022 passed SB 1013, which re-envisions the state’s bottle recycling infrastructure. Some small changes — such as applying bottle deposits to wine and liquor containers — have already taken effect. But the most substantial changes will happen starting next year.

Currently, residents in areas without a recycling center are supposed to have the option of returning their bottles and cans to retailers, including grocery stores, convenience stores and gas stations. The stores are supposed to be the recyclers of last resort.

But this is often a surprise to consumers. Few retailers advertise this option. Many simply don’t participate, even though it’s required by law. One review of Los Angeles-area retailers found two-thirds of them refused to take bottle returns.

Starting next year, the requirements for retailers will get an overhaul.

Retailers in more areas of the state will have to participate in the program. If they don’t want to accept cans and bottles at their stores, they can pool resources and open a “dealer cooperative” — essentially, a quasi-recycling center that meets the needs of an underserved area.

However, stores under 5,000 square feet, or with less than $1.5 million in sales, will be exempt.

Additionally, eligible retailers will no longer have an option of paying an opt-out penalty in lieu of participating. They’ll have to accept bottle returns, or else face steep fines.

Sen. Toni Atkins of San Diego authored the bill. She declined multiple interview requests through a spokesperson.

“Bolstered by the strong support of the wine and spirits industries, along with environmental groups and local governments, this measure tackles some of the challenges our recycling programs face,” Atkins said in a written statement.

Recycling advocates agree the recycling system needs an overhaul, but some are lukewarm on the changes under SB 1013.

The Container Recycling Institute warned the new programs and investments could cost nearly $900 million in the coming years.

“If everything was fully implemented,” Collins said, “then we’d have a brand new problem on our hands — the (bottle deposit) fund would basically be oversubscribed. Which could lead to the collapse of the whole program.”

And things would only get worse if state leaders continue to draw substantial loans from the fund, Collins noted.

“It’s like, I’ve seen this movie before,” she said, referring to the fund’s deficit over a decade ago.

Mark Murray, executive director of Californians Against Waste, said he isn’t as concerned about the loans from the fund. But he is worried about what’s prioritized under SB 1013.

He and other advocates have voiced concerns that too much money is being put into new and novel recycling initiatives — such as mobile recycling pilot programs — and not enough is being dedicated to the traditional recycling centers that helped boost the recycling rate above 80% in years past.

He said a wiser investment would be more subsidies to those traditional recyclers. Assistance of $2,500 a month, for example, would help keep a small recycling center afloat.

“For that small investment over the next three-to-five years, we could have the 400-to-500 community-based recycling centers we need,” he said.

The solution to California’s recycling problem, he argued, is clear. You just have to look back 10 years.