Analysis of the 2005-06 Budget Bill Legislative Analyst's Office February 2005

Reorganizing the State's Recycling Programs

In order to increase the effectiveness and efficiency of the state's recycling programs, we recommend that such programs be consolidated into a new department within the California Environmental Protection Agency. We also recommend that the nonrecycling-related functions in the current agencies be transferred to other departments.

Recycling is one of the solid waste prevention strategies that addresses the state's statutory goal of diverting solid waste from landfills and incineration facilities. (The other solid waste prevention strategies are waste reduction at the source and reuse—using an item, such as a plastic bag, over again in its current form.) More specifically, this strategy transforms an item that may once have been considered valueless (trash) and bound for a landfill into a valuable commodity that is not discarded. This strategy involves the complete cycle from the collection and separation of materials, to the processing of these materials so that businesses can then buy and manufacture using the recycled materials, and finally to consumers purchasing new products made from the recycled materials. For this reason, recycling serves a business development purpose and will become increas ingly important as landfill space becomes more limited and the demand for resources continues to rise as California's population increases.

As discussed below, our review finds that the state could be more effective in meeting this statutory goal if recycling programs in the Department of Conservation (DOC) and the California Integrated Waste Management Board (CIWMB) were consolidated.

Current Division of Responsibilities

The state's recycling responsibilities are divided between the Department of Conservation's Division of Recycling (DOR) and the California Integrated Waste Management Board (CIWMB). The DOR oversees the beverage container recycling program and CIWMB oversees all other solid waste and hazardous waste recycling programs.

Recycling Responsibility Divided Between Two Agencies. Responsibility for recycling is divided between DOR and CIWMB. In this section, we compare and contrast the recycling-related responsibilities and programs of the department and the board.

The DOR's Beverage Container Recycling Program. The DOR administers the Beverage Container Recycling Program, commonly referred to as the Bottle Bill program. This program was created 19 years ago by Chapter 1290, Statutes of 1986 (AB 2020, Margolin). The program encourages the voluntary recycling of most beverage containers by guaranteeing a minimum payment (California Redemption Value [CRV]) for each container returned to certified recycling centers. As shown in Figure 1, beverages are subject to CRV based on the contents of the container, not the container material. For example, even though wine coolers and wine are both usually bottled in glass and are recycled, only wine coolers are subject to CRV.

The Legislature's intent in enacting AB 2020 was to make redemption and recycling convenient to consumers in order to encourage litter abatement and beverage container recycling in the state. This program's statutory goal is to recycle 80 percent of beverage containers covered under this statute. In 2003, the state's recycling rate was 55 percent. (There has been a drop in the recycling rate in the last four years as new beverages, namely noncarbonated water, have become subject to CRV.)

The CIWMB's Other Solid Waste and Hazardous Waste Recycling Programs. The California Integrated Waste Management Act (Chapter 1095, Statutes of 1989 [AB 939, Sher]) created the CIWMB. This act charged this board with reducing, recycling, and reusing solid waste generated in the state to the maximum extent feasible in an efficient and cost-effective manner. With the implementation of this act, the board became responsible for the recycling of solid waste items not included in the Bottle Bill.Over time, statute has established programs in CIWMB to address particular waste streams. These include programs for the recycling of used oil, household hazardous waste, tires, and electronic waste. (The Department of Toxic Substances Control [DTSC] regulates the generation, treatment, and disposal of hazardous waste, such as used oil. The board oversees programs to encourage the collection of and development of economic markets for recycled hazardous waste.)

The board's statutory goal is to divert 50 percent of solid waste from landfills and incineration facilities by 2000. (Subsequent legislation authorized the board to grant time extensions to local jurisdictions for meeting this diversion requirement.) In 2003, the state's diversion rate was 47 percent. In that year, of a total of about 420 jurisdictions, about 150 were operating under approved time extensions to meet the diversion requirement and 11 were found to be noncompliant with the diversion requirement.

Missed Opportunities to More Effectively Meet Recycling Goals

We find there have been missed opportunities to more effectively meet the state's recycling goals. Specifically, the department's and board's efforts in regards to public outreach and education, recycled material market development, and sharing of recycling expertise are fragmented, thereby weakening the potential of delivering the state's recycling message and meeting recycling objectives.

There have been a number of reports regarding the division of recycling responsibilities between the two agencies, including Beyond Bottles and Cans: Reorganizing California's Recycling Efforts (March 1994) by the Little Hoover Commission and a report by the board and department, Duplication and Overlap in Recycling Programs of the Integrated Waste Management Board and the Department of Conservation, mandated by Chapter 815, Statutes of 1999 (SB 332, Sher). Additionally, legislation has been introduced (but not enacted) in past years to address the duplication and overlap of recycling responsibilities by consolidating recycling programs in a single agency. These bills include SB 2026 (Bergeson) and SB 1089 (Killea), both introduced in the 1993-94 session.

These reports have highlighted duplication and overlap between the department and the board in public information and education, local government review and assistance, and recycled materials market development. Our review finds that many of the cases of duplication and overlap identified in these reports have been addressed through memoranda of agreement and informal arrangements between the two agencies. However, we find that having bifurcated recycling programs leads to missed opportunities to foster and strengthen the state's recycling message and objectives with the result that recycling rates are lower than they would be otherwise. We do not think memoranda of agreement or informal arrangements can adequately address these issues.

In this section, we highlight some of these missed opportunities and explain why consolidating the recycling programs should lead to a more effective and comprehensive approach to recycling.

Public Outreach and Education. Both the department and the board have public outreach and education initiatives to promote recycling. In an attempt to avoid duplication and to coordinate their efforts, the department focuses on beverage container recycling (such as the "What is good for the can, is good for the bottle" campaign), while the board focuses on all other solid and hazardous waste recycling. Even though this operational practice has helped to reduce overlap and duplication, it misses an opportunity to reinforce and encourage recycling of all materials.

For instance, the department is developing a bar and restaurant recycling program. This program is designed to move bottles from the waste stream to the recycling stream. Since bars and restaurants sell almost half of their beverages in glass bottles, the department is reaching out to these establishments to offer assistance in setting up glass bottle recycling programs and is educating them on how this recycling can lower their waste-hauling bills. However, this example highlights a missed opportunity to outreach to bars and restaurants to develop a comprehensive recycling program that includes paper, food waste, and other materials. The current piecemeal approach to educating the public about recycling makes it difficult to encourage the reuse and recyclability of all products.

Recycled Material Market Development. The department and the board both have programs to develop and foster economic markets for similar recycled materials. For example, Chapter 753, Statutes of 2003 (AB 28, Jackson), created in the department a grant program to develop recycling markets. Under this program, the department awards grants to projects that develop new and expanded uses for aluminum, glass, and plastic beverage containers and improve the supplies and quality of recycled materials for use in manufacturing. The department is authorized to award up to $10 million annually for these projects until January 1, 2007.

The board has administered the Recycling Market Development Zone Revolving Loan Program since 1990. This program provides loans to businesses that use post-consumer waste (which includes aluminum, glass, and plastic beverage containers) or secondary waste materials to manufacture new products or reduce the waste resulting from the manufacture of a product. Up to $5 million annually is continuously appropriated for this program.

We think that there is an important role for grants and loans to encourage the demand for recycled materials through market development. However, it would be more effective if the state established a single set of priorities for which recycling markets to target, as opposed to the current prac tice whereby two agencies are each setting their own priorities. Additionally, this is an area where the board and department are duplicating administrative efforts. (The savings from the consolidation of these programs is discussed later in this report.)

Sharing of Technical Expertise. Lastly, since the implementation of recycling programs at the department and the board is different, each agency has developed its own particular technical expertise. For example, the department is familiar with the flow of incentive payments among manufacturers, processors, recyclers, and collectors to encourage participation in the beverage container recycling program. Whereas the board is familiar, for example, with processes for the safe recycling of hazardous waste.

Our research finds, however, that sharing of this expertise between the two agencies is limited. For example, as mentioned earlier, the board is responsible for electronic waste recycling. One of the electronic waste recycling program requirements is to use the electronic waste recycling fee to subsidize the costs of electronic waste recyclers and collectors. As previously mentioned, the department is very familiar with the flow of payments among the parties in the recycling chain that serves to encourage recycling. However, the board only met briefly with the department on this issue when it was developing the electronic waste recycling program, and failed to take full advantage of the department's expertise on this matter.

We think that this example highlights a missed opportunity for the state to maximize existing expertise in these organizations in order to implement effective programs. With recycling programs in different agencies, staff are often constrained from sharing information or expertise. As more and more recycling programs are being considered (such as the recent legislative proposals for mercury lamp and compact disc recycling), we think that it would be increasingly beneficial to centralize recycling experts in one organization in order to design effective and efficient programs.

The Case for Consolidation. As discussed above, having recycling programs in two different agencies creates a piecemeal approach to the state's recycling objectives. These examples of missed opportunities highlight instances where having all recycling programs under one organization would promote a more comprehensive and strengthened approach to recycling, particularly in terms of outreach to the public and the development of markets for recycled materials. We think this approach would be stronger than the current one because one state organization would be working towards this goal and one organization would be accountable for reaching it.

The memoranda of agreement and informal charters between the department and the board have mainly been effective in ensuring that both organizations do not work on the exact same tasks. However, they have not ensured that each organization's activities reinforce the work being done by the other. We conclude that a comprehensive approach to recycling can only be fostered and encouraged if executed under one organization.

Reorganizing Recycling and Waste Management

We recommend consolidating the state's recycling programs into a new department in the California Environmental Protection Agency. In addition, we recommend the elimination of the California Integrated Waste Management Board and the transfer of most of its remaining responsibilities (regulation of waste management) to an expanded Department of Toxic Substances Control. Finally, we recommend the Legislature consider options for transferring the remaining nonrecycling functions of the Department of Conservation to existing state agencies. Adopting these recommendations would create at least $2 million in special fund savings in the budget year.

The Distinct Goals of Recycling and Waste Management. In this section, we present our recommended reorganization of the state's recycling and waste management programs. We think it makes sense to separate recycling/waste prevention programs and CIWMB's remaining programs that focus on the regulation of solid waste management (such as the permitting of landfills and waste haulers). This is because the goals, as well as the implementation strategies of these two broad efforts—recycling/waste prevention and waste management regulation—are sufficiently distinct to be pursued separately, albeit in a coordinated manner.

As regards goals, the recycling/waste prevention programs attempt to reduce the amount of waste generated and to reuse materials that would otherwise be discarded. These activities focus on materials before they become part of the waste stream. In contrast, the focus of waste management activities is to ensure an effective and coordinated approach to the safe management of materials afterthey enter the state's solid waste stream.

As regards implementation strategies, the recycling/waste prevention programs are mostly nonregulatory in nature, as they largely involve the provision of incentives to encourage waste prevention and ensure that recycled materials are of good quality. On the other hand, waste management programs are mostly regulatory. These include such activities as working with local jurisdictions on integrated waste management plans, regulating the transport of solid waste, and the permitting and monitoring of solid waste management facilities, including landfills and facilities that transform solid waste.

That said, we recognize a connection between recycling activities and waste management regulation. For example, the success of recycling incentives could help local jurisdictions meet waste management plan requirements to divert a specified portion of waste from landfills. Therefore, as discussed later, we think that it will be important for a new department focused on recycling and waste prevention to coordinate its activities with that of a department focused on waste management regulation.

Consolidate State's Recycling Programs in a New Department. In order to improve the efficiency and effectiveness of the state's recycling programs, we recommend that all recycling programs at the department and the board be consolidated into a new department, which could be called, for example, the Department of Recycling and Waste Prevention, in the California Environmental Protection Agency (Cal-EPA). Additionally, we recommend transferring the board's waste prevention responsibilities to this new department. This is because a majority of the board's waste prevention programs concern recycling or encouraging reuse and reduction of waste at the source. These programs includethe California Materials Exchange (a directory of residential and industrial materials that can be reused), programs to facilitate composting, and the Waste Reduction Award Program.

Eliminate CIWMB and Transfer Board's Remaining Functions to An Expanded DTSC. We recommend that all remaining functions (solid waste management) of the board be moved to DTSC. Such a consolidation would have several advantages. First, it would enhance the state's protection of the environment and the public's health through centralized management of toxic substances and solid and hazardous waste. Secondly, by consolidating the existing permitting and enforcement activities of the board and DTSC, it would improve their effectiveness and efficiency in licensing businesses seeking landfill permits. Thirdly, this consolidation could facilitate further streamlining of the permitting process and adoption of best practices (such as DTSC's requirement that the financial assurances associated with permits are reevaluated when permits are renewed). Given the expanded responsibilities of DTSC under such a consolidation, it may be appropriate to rename DTSC as the Department of Waste Management.

Board Versus Departmental Structure. Our evaluation of organizational structures and our review of the board's current activities indicate that a departmental structure, rather than a board, could more effectively and efficiently administer the state's recycling and waste prevention programs. Stakeholders have indicated that as a department DOC has been very effective and timely in implementing changes to the Bottle Bill program. In contrast, the board's performance in nonregulatory program implementation (such as the award of grants and loans) has been critiqued as slow and bureaucratic.

We find that the board structure at CIWMB has provided the opportunity for valuable public input during (1) the review of local jurisdiction's progress in meeting the diversion requirement and (2) the permitting process. Therefore, it may be asked whether moving CIWMB functions to a departmental structure would impede public participation opportunities. In this regard, it should be noted that DTSC's current public participation program has been effective in seeking public input and participation. The DTSC's public participation specialists hold more than 350 meetings, hearings, briefings, and panel discussions each year, and produce at least 350 public notices and fact sheets to keep residents informed of their opportunities to get involved and ensure that their concerns and priorities are addressed in DTSC's decisions. Therefore, we think that DTSC's public participation program—continued in a new Department of Waste Management—would be effective in serving as the avenue for public input and participation in landfill siting and review of diversion requirements.

Governor's Reorganization Plan Also Proposes Elimination of CIWMB. We note that the Governor has recently proposed to eliminate CIWMB as part of his reorganization plan to eliminate or reform the state's boards and commissions (GRP No. 1). The reorganization plan also recommends that the functions of CIWMB be transferred "to Cal-EPA." No further details on this proposal have been made available. As discussed above, we are recommending the transfer of specific CIWMB's functions within Cal-EPA.

Need for Coordination. As noted previously, we recognize a need for a new Department of Recycling and Waste Prevention and a new Department of Waste Management to coordinate their efforts. In particular, we think that there should be coordination in (1) the development and implementation of local waste management plans and (2) pollution prevention activities.

Currently, the development and implementation of local waste management plans includes working with local jurisdictions to provide assistance (such as the identification of waste prevention strategies) to meet and maintain the diversion requirements and to assist in waste analysis in order to find cost-effective means of waste disposal. One option for coordinating the two departments' efforts in working with local jurisdictions would be for one department to serve as the lead agency for these activities. This would ensure coordination and accountability.

In regards to pollution prevention activities, the Office of Pollution Prevention and Technology (OPPT) at DTSC and a new Department of Recycling and Waste Prevention would each be involved in such activities. We recommend that OPPT continue its scientific and technical work regarding pollution prevention, while the Department of Recycling and Waste Prevention would oversee programs to educate the public regarding OPPT's findings and recommendations.

Recommend Consideration of Options for Transferring the Remaining Functions at DOC. Lastly, it should be noted that transferring DOC's recycling program to a new department under Cal-EPA raises substantial is sues regarding the placement of the remaining programs at the department. The remaining programs at DOC concern mine reclamation; farmland and open space conservation; oil, gas, and geothermal resources; and geological mapping. The Legislature should evaluate the remaining programs at the department and whether they should be transferred to other state agencies. In our Analysis of the 1993-94 Budget Bill we identified options available for transferring various components of the department to other state agencies, should its recycling functions be consolidated with those currently of CIWMB. We think that this could serve as a starting point for legislative consideration.

Savings Generated From Reorganization Proposal. Our reorganization proposal is summarized in Figure 2. In addition to increasing the state's effectiveness and efficiency in developing a comprehensive approach to recycling, our recommended reorganization will generate savings. First, the state could realize approximately $2 million in special fund savings from board salary, staff, and travel expenses by eliminating the CIWMB's board. Furthermore, by consolidating programs as we recommend, there should be some additional administrative savings from the resulting efficiencies.