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CalRecycle Combats Fraud with $55 Million in Annual Deficits

May 12, 2015

SACRAMENTO, Calif. (KCRA) —For the second time in less than a week, CalRecycle announced a major bust involving people illegally bringing out-of-state containers to California to steal CRV refunds.

In February, the agency caught a truck driver hauling 9,280 pounds of empty cans and bottles from Nevada. After an investigation by the Department of Justice, it was determined to be fraud. Had the load made it past the Yermo agriculture checkpoint, it would have cost taxpayers nearly $14,000, according to a CalRecycle news release.

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“That money belongs to Californians,” spokesman Mark Oldfield said. “We’re the ones who paid those recycling fees when we bought the beverages.”

It’s unclear exactly how much the state is losing from such fraud, but a three-month study put the figure in the “low tens of millions a year,” Oldfield said.

KCRA 3’s investigative team has learned the fraud is a drain on a program that’s already in serious financial trouble. After years of operating in the black, the program is now running annual deficits in excess of $50 million. If current projections hold, it could go bust by 2018.

The state’s recycling program amassed a large surplus in 30 years, boosted primarily by low recycling rates.

The Legislative Analyst’s Office puts the peak surplus somewhere about $650 million. Then came the recession of 2008. Recycling rates began to soar as more consumers decided to collect those CRV nickels. In one respect, the program became a victim of its own success.

In fiscal year 2010-11, the CRV program lost $187 million. And in each of the next two fiscal years, the figure was just less than $110 million.

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Since 2013, CalRecycle has managed to slow the bleeding by stopping more fraud and closing “leakage,” which includes paying for containers that are not CRV eligible. However, the deficit is still about $55 million.

Current projections through 2018 don’t show it getting better unless something changes.

“All of these things that are coming out of the fund, maybe we could afford them back then,” Oldfield said. “We can’t afford them now. So, we have to look at that moving forward.”

The current break-even recycling rate is 79 percent, according to CalRecycle. Right now, consumers are returning 82 percent of the cans and bottles they purchase.

Last week, the LAO made more recommendations for state lawmakers to fix the recycling program.

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