BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 341 (Chesbro) Hearing Date: 08/25/2011 Amended: 07/07/2011 Consultant: Brendan McCarthy Policy Vote: EQ 6-1 _________________________________________________________________ ____ BILL SUMMARY: AB 341 requires the Department of Resources Recycling and Recovery to increase the diversion of solid waste from the currently required level of 50 percent to 75 percent by 2020. The bill requires certain businesses to arrange for recycling services and requires local governments to implement a commercial recycling program. The bill also makes a number of technical and procedural changes to the laws governing solid waste facility regulation. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Cost to implement Absorbable within existing resourcesSpecial * commercial recycling Cost to further increase Unknown costs, potentially in the millions Special * the diversion rate to 75% per year Reduced fee revenues Up to $20,000 per year by 2020 Special * * Integrated Waste Management Account. _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. Under current law, local governments are required divert 50 percent of solid waste through source reduction, recycling, and composting. The Department of Resources Recycling and Recovery is required to determine whether local governments are in compliance with this requirement. Local governments that are not in compliance or are not making a good faith effort to come into AB 341 (Chesbro) Page 1 compliance are subject to fines. Current law authorizes the Department to designate local enforcement agencies to permit solid waste facilities and enforce permit or other requirements. Current law requires local governments to adopt and submit non-disposal facility elements to the Department. These non-disposal facility elements must include a description of new facilities and expansions of existing facilities and all solid waste facility expansions that recover for reuse more than five percent of total disposed volume. AB 341 requires local governments to update existing non-disposal facility elements as conditions change and provide that information to the Department. The bill requires the Department to "ensure" that 75 percent of generated solid waste is diverted through source reduction, recycling, or composting. The bill prohibits the Department from imposing any enforceable requirements on cities or counties. The bill requires businesses that contract for solid waste disposal and generate more than four cubic yards of solid waste and recyclable materials per week or is a multifamily residential dwelling of five or more units to arrange for recycling services. Such businesses are required to either separate recyclable materials from solid waste and arrange for their collection, or to contract with a recycling service that provides mixed waste processing services. The bill requires local governments to implement a commercial recycling program, unless a jurisdiction already has established such a program. The Department is required to review such local commercial recycling programs. Staff notes that under authority granted pursuant to AB 32 (Nunez, Chapter 488, Statutes of 2006), the Air Resources Board is administratively considering commercial recycling requirements. The Air Resources Board is expected to vote on the proposed regulation in October of this year. The Department would then implement the regulation. The bill also makes a variety of technical changes to the code sections governing solid waste. AB 341 (Chesbro) Page 2 According to the Department, the cost to oversee commercial recycling requirements can be accommodated within existing resources. Because the bill requires the Department to "ensure" that the statewide diversion rate increases to 75 percent, while prohibiting the Department from imposing requirements on local governments, the bill will likely create substantial cost pressure on the Department. The current statewide diversion rate is 65 percent. (However, this diversion rate partially reflects reduced disposal in landfills due to reduced economic activity caused by the economic downturn. As the economy recovers, waste generation and disposal rates will likely increase and hence the diversion rate is expected to drop closer to 60 percent.) Requiring commercial recycling should increase the diversion rate, probably to between 65 and 70 percent. Further increasing the diversion rate to 75 percent will likely require the Department to create incentives for local governments, businesses, or individuals to encourage additional source reduction, recycling, or composting. Alternatively, the Department may adopt regulations directly on such entities to require additional source reduction or recycling. The bill does not include specific actions required by the Department to achieve the increased diversion rate. The costs for the Department to achieve the increased diversion rate are unknown, but could be substantial, particularly if the Department elects to use grant programs to incentivize additional diversion. The Department collects a "tipping fee" of $1.40 per ton of solid waste disposed of in the state. This fee is capped in statute. Staff estimates that increasing diversion rates from the about 60 percent (see above) to 75 percent, as required in the bill, will reduce tipping fee revenues by about $20 million per year by 2020. Staff also notes that the Integrated Waste Management Account has a structural deficit of about $8 million in the budget year and a projected year end fund balance of only $6.2 million. While the bill imposes state mandates on local governments, those mandates are not reimbursable because local governments are authorized to levy fees to pay for the costs required under the bill. AB 341 (Chesbro) Page 3 SB 1020 (Padilla, 2007) would have required the Integrated Waste Management Board to develop a plan to achieve a 75 percent diversion rate by 2020. That bill was held in the Assembly Appropriations Committee. SB 25 (Padilla, 2010) would have increased the required diversion rate to 60 percent by 2015 and also generally required businesses to contract for recycling services. That bill was held in the Assembly Natural Resources Committee. AB 479 (Chesbro, 2009) was substantially similar to this bill. AB 479 was held on this committee's suspense file. AB 737 (Chesbro, 2009) would have implemented a commercial recycling program and required the Department to report to the Legislature on potential strategies to achieve a 75 percent diversion rate. That bill was vetoed by Governor Schwarzenegger. AB 818 (Blumenfield) requires owners of multifamily residential buildings to provide recycling services. That bill is in the Assembly and pending concurrence in Senate amendments.