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August 31, 2009

California's Capitol

Schwarzenegger Administration Floats 25-cent Fee on Single-Use Plastic and Paper Bags

Weeks after rejecting a Democrat-backed fee proposal to keep state parks open, the Schwarzenegger administration is proposing shoppers be assessed a 25 cent fee for each single-use paper or plastic bag – up to $2.00 per transaction – to pay for a variety of state recycling efforts.

“Requiring stores to charge and remit a fee for the distribution of single-use carryout bags will help the state and local governments to offset the environmental and social costs of single-use carryout bags,” says a summary of the idea which, sources say, has been discussed with members of both the Governor’s Office and the Department of Conservation, which oversees the state’ bottle and can recycling program.

(The bullet points are attached below.)

A copy of the bullet points was e-mailed to the Governor’s Press Office for comment.

“The Governor supports a ban on plastic bags but does not support a fee associated with this ban. We are working with legislators and stakeholder groups on the best way to accomplish this,” said Aaron McLear, the governor’s press secretary.

The genesis for the idea comes, in part, from the insolvency of the state’s Beverage Container Recycling Fund, which is more than $157 million in the red.

However, the 25-cent-per-bag levy would not take effect until July 1, 2010, doing little over the next year to restore the fund balance.

The Schwarzenegger administration’s bag fee proposal also appears motivated by a desire to consolidate the state’s scattered recycling programs into one department. The plan’s summary calls this proposed entity the “Department of Resources, Recycling and Recovery.”

The GOP governor’s proposal would exempt customers who are on Food Stamps or participate in the Women, Infants and Children program from paying the 25 cents per bag.

While three bills were introduced this year to enact programs similar to the Schwarzenegger administration’s – all by Democrats – none of the measures got out of committee in their houses of origin, usually a sign of unpopularity or unworkability.

In June, when Democrats unveiled a budget proposal that included a $15 fee on car registrations to prevent the governor’s proposed closure of dozens of state parks, Schwarzenegger rejected the idea.

“I’m very, very much against any tax increase whatsoever,” he said at the time.

There are an estimated 19 billion plastic and paper bags used each year in California, according to the San Diego Coastkeeper website.  If that figure is accurate, the Schwarzenegger administration’s proposal would generate nearly $5 billion. But that amount would presumably fall over time as consumers change habits in reaction to the fee.

Several environmental groups support the idea of the single-use bag fee. Among them is Heal the Bay whose legislative director is Leslie Tamminen, the wife of one of Schwarzenegger’s former top environmental advisers, Terry Tamminen.

While the proposal is being pitched to parties involved in the state bottle recycling program as a way boost the fund’s balance – and reduce the financial hit to them – it offers little short term relief.

California’s bottle and can recycling program, created in 1986, touches numerous entities –glass manufacturers, beer and soft drink makers, wholesalers and grocers, among them. A cottage industry of recycling centers has been created by it, as well.

At current recycling rates nearly $1.2 billion in recycling fees pass through the state fund each year.
When the fund balance falls various groups are assessed a higher “processing fee” to restore the fund’s fiscal health. Because of the fund’s zero balance, one beer maker must kick in an additional $11.2 million.

Other groups, like cities and counties, receive subsidies from the fund to defray the cost.

In June, when the Department of Conservation announced the fund’s insolvency, it said such payments would be reduced by 85 percent.  Cities and counties, for instance, will see a fraction of the $10 million annually they normally receive from the state to encourage curbside recycling.

Nowhere in the announcement did the department note that a major reason for the insolvency was money raked out of the fund to pay for other state purposes. A  higher level of recycling – a record 74 percent in 2008 — plus the state’s economic downturn caused a higher level of pay-outs, the announcement said.

“The dramatic increase in the recycling rate, coupled with a flattening of container sales due to the downturn in the economy, has resulted in increased pay-outs without a commensurate rise in previously expected revenues,” the department said. Since 2002, nearly $567 million in the nickels and dimes California assesses on cans and bottles has been “borrowed” to plug holes in the state’s cash-starved general fund.

Gov. Arnold Schwarzenegger has “borrowed” $167 million, $67 million to pay for the initial costs incurred by the Air Resources Board to begin implementation of AB 32, the landmark greenhouse gas emissions reduction measure. The board is supposed to reimburse the fund through revenue from imposing fees on polluters. No fees have been assessed.

Some environmentalists have proposed boosting the nickel for 12 oz containers to 10 cents. The administration has rejected that idea as too much of a burden on consumers. The bag fee proposal appears to be an attempt to improve the fund’s revenue condition without broadening the scope of the recycling program or increasing the CRV, the per-container California Refund Value. (The nickels and dimes.)

It’s unclear whether the Schwarzenegger administration proposal will see a vote in the final two weeks of the legislative session or whether the idea has sufficient support among Democrats to be approved.

Some of the groups impacted by the fund’s insolvency are suggesting a one-time change in how payments are made to the state, which would bring in an additional $100 million.

Payments to the state of the CRV are not due until 90 days after the month of sales. The idea would be to accelerate those payments by shortening the deadline to 60 days. That would, in effect, create a year in which 13 monthly payments instead of 12 are made.

Like the bag fee, its unclear how much support there is for that idea too.

The proposal:

Single Use Plastic and Paper Carryout Bag Pollution Prevention and Cleanup Program

Single-use carryout bags provided by stores impose hidden costs on consumers, local governments, the state, taxpayers, and the environment.  Requiring stores to charge and remit a fee for the distribution of single-use carryout bags will help the state and local governments to offset the environmental and social costs of single-use carryout bags.  This proposal would: 

  • Require stores to collect a $0.25 fee per single use bag up to $2.00 per transaction beginning July 1, 2010.
  • Provide that stores remit $0.20 per bag to the Board of Equalization and retain $0.05 per bag for administrative costs and consumer education materials.
  • Provide for an exemption of single use bag fees for customers participating in the Special Supplemental Food Program for Women, Infants, and Children or the Food Stamp Program.
  • Direct the Department of Resources, Recycling and Recovery to administer the program.
  • Create the Bag Pollution Fund (Fund)
  • Allow Beverage Container Recycling Centers that choose to collect bags and submit documentation that demonstrates delivery to a processor to receive a flat, per pound payment, beginning January 1, 2011
  • Allow annual appropriations of remaining monies as local assistance funding, beginning July 1, 2011 for the following:

o      60 percent of available Fund balance to Cities and Counties (takes place of support from Bottle Bill program):  30 percent per capita and

30  performance based grants

o      15 percent of available Fund balance allocated for grants for litter clean up

o      5 percent of available Fund balance for a Film Plastic Market Development program

o      10 percent of available Fund balance for California Conservation Corps and Local Community Conservation Corps support (Takes place of Bottle Bill program support)

o      5 percent of available Fund balance for educational material development and distribution

o       5 percent of available Fund balance to the Department of Toxic Substances Control for development of green chemistry initiatives

 Provide for a 50 percent prudent reserve for the first three years of the program, which may be eliminated or reduced after July 1, 2014 to ensure continuation of the program during revenue decline as single use bag usage decreases.


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