State recycling program has been running large deficits

A state audit has found that the cost of the state’s recycling program for beverage containers has exceeded its revenue by over $100 million in three of the last four fiscal years.

The audit released Thursday reviewed the California Department of Resources Recycling and Recovery’s administration of the Beverage Container Recycle Program, which is meant to encourage and increase consumer recycling.

The audit found that in the last four fiscal years, the beverage program has been operating under an annual deficit. In the last fiscal year, costs exceeded revenue by nearly $29 million--an improvement over the three years before.

“Immediate action is needed to ensure the continued viability of the program,” State Auditor Elaine Howle said in the report.

Under the beverage program, created in 1986, beverage distributors have to make a redemption payment for every qualified beverage container sold or offered for sale in the state. Those payments are the primary source of revenue for the program.

The audit recommended that the state Legislature change laws to increase revenue and reduce costs in order to make sure that the beverage program is financially stable. The report also recommended that CalRecycle take steps to discourage fraud that could cost the program money, as well as to change the way revenue is collected.

While there is a fraud management plan in place, the audit found it doesn’t do a good enough job of identifying the kind of fraudulent activities that pose the greatest financial risk to the beverage program.

Because of that, Howle said, CalRecycle is “unable to demonstrate that it is focusing its resources in the areas of highest risk to ensure the greatest financial return to the beverage program.”

CalRecycle has 60 days to respond to the report to let the auditor know how its implementing recommendations.

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