OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sSB-996

AN ACT ESTABLISHING A BOTTLE RECYCLING FEE IN LIEU OF A REFUNDABLE DEPOSIT.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 18 $

FY 19 $

Revenue Serv., Dept.

GF - Cost

522,034

489,378

State Comptroller - Fringe Benefits1

GF - Cost

111,206

148,275

Department of Revenue Services

GF - Revenue Gain

Potential

None

Department of Revenue Services

GF - Revenue Loss

None

1.1 million

Department of Revenue Services

GF- Recycling Fee Account - Revenue Gain

None

32.4 million

Note: GF=General Fund

Municipal Impact:

Municipalities

Effect

FY 18 $

FY 19 $

Various Municipalities

STATE MANDATE - Cost

None

Potential

Various Municipalities

Revenue Gain

None

Potential

Explanation

The bill replaces the current bottle redemption system with an expanded recycling program that levies a non-refundable minimum four-cent fee on an expanded range of containers beginning in FY 18 and ending in FY 25.2

Elimination of Bottle Redemption System

The bill eliminates the existing bottle redemption system beginning on July 1, 2018. This results in a General Fund revenue loss of approximately $33.5 million annually from bottle escheats beginning in FY 19.

Section 2 of the bill specifies any balance in bottle redemption accounts as of March 31, 2018 and June 30, 2018 be used to refund deposits to dealers until August 31, 2018 with any balance remaining on September 1, 2018 to be deposited in the General Fund. To the extent this results in a one-time increase in escheat revenue to the General Fund, the revenue loss could be less than $33.5 million in FY 19.

Early Recycling Fee

Effective October 1, 2017 the bill establishes a minimum four-cent “early recycling fee” on juice, tea, sports drinks, and spirits or alcohol in containers of up to 50 milliliters (“nips”). This is estimated to generate approximately $11 million in FY 18.3

The bill specifies that this revenue be deposited in the General Fund and be made available to redemption centers in a manner that enables them to realize handling fees at higher rates than under current law. It is assumed that any revenue remaining after payments to redemption centers would remain in the General Fund; thus, this results in a potential one-time revenue gain to the General Fund in FY 18.

The bill establishes fines for violation of the early recycling fee provisions. To the extent any such violations occur, this results in a potential minimal revenue gain in FY 18.

Recycling Fee

Beginning July 1, 2018 and continuing until July 1, 2025 the bill establishes a minimum four-cent recycling fee on beverage containers subject to the current bottle redemption law and juice, tea, sports drinks, and nips. This is estimated to generate approximately $64.9 million annually.

The bill specifies that half the revenue be deposited in the General Fund and half the revenue be deposited in a new Recycling Fee Account within the General Fund. This results in a General Fund revenue gain of approximately $32.4 million annually from FY 19 through FY 25, and a Recycling Fee Account revenue gain of approximately $32.4 million annually from FY 19 through FY 25.

The bill further specifies that revenue deposited in the Recycling Fee Account be split evenly between the collector's subaccount, tipping fee subaccount, and beverage container use subaccount for various enumerated uses.

Administrative Costs

To administer the newly established fee, the Department of Revenue Services (DRS) would require two Revenue Examiners ($66,213 for salary and $25,214 for fringe costs each), two Tax Corrections Examiners ($58,640 for salary and $22,330 for fringe costs each), and two Revenue Agents ($69,836 for salary and $26,594 for fringe costs each), as well as approximately $100,000 in annual overtime and temporary employee costs. This estimate is based on the administrative requirements of other state trust taxes.

The DRS would also incur a one-time cost of approximately $155,000 in FY 18 for form development and printing, changes to the online Taxpayer Service Center (TSC) associated with electronic filing, programming changes to the agency's Integrated Tax Administration System (ITAS), and mailing expenses.

Municipal Impact

There is a cost to municipalities that experience increased tipping fees as a result of the expanded recycling program under the bill's provisions. The cost will vary based on the volume of new items municipalities must recycle. It is anticipated that the cost to municipalities will be at least partially offset by revenue deposited into the newly established tipping fee subaccount and used to reimburse municipalities for these costs.

The Out Years

The annualized ongoing fiscal impact identified above associated with the recycling fee would continue through FY 25, at which point the recycling fee terminates. The annualized ongoing revenue loss from the elimination of the bottle redemption system would continue into the future.

Sources:

Container Recycling Institute

 

Department of Revenue Services Bottle Escheat Data

 

Maine Bureau of Alcoholic Beverages and Lottery Operations Sales Figures

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 38.08% of payroll in FY 18 and FY 19.

2 The bill specifies that the new recycling fees cannot be less than four cents but does not specify a specific or maximum amount. For the purposes of this analysis, it is assumed that all such fees are levied at four cents.

3 The bill does not specify an end date for the “early recycling fee.” However, for the purposes of this analysis, it is assumed that it becomes subsumed in the “recycling fee” established in Section 4 of the bill.