Follow the (Recycling) Money

JUNE 25, 2010

“It is reprehensible that anyone would use taxpayer money for anything other than its intended purpose.”

That’s Aaron McLear, spokesman for Gov. Arnold Schwarzenegger, speaking to the Los Angeles Times about its revelation that state-issued welfare debit cards could be cashed in casinos and poker rooms.

He is not new to California government, or politics in general, and yet his quote – which is one of those absolute maxims no one dare argue against – betrays a certain naïveté about how public officials work. Of course, our esteemed assembly members and senators assure all of us taxpayers, all the money you send here every year is of course paying for honorable, just uses.

Of course.

But what happens when the money Sacramento gets isn’t from taxes, but, say, recycled beverage containers? Then, if a new California State Auditor’s report on the state Beverage Container Recycling Fund is to believed – and we certainly believe it – then your guess is as good as ours.

“This report concludes that because of forecasting deficiencies, the [Department of Resources Recycling and Recovery] was not always able to reliably project the revenues and expenditures in the beverage fund,” was how Auditor Elaine Howle introduced her office’s June 22 report to state officials. “Moreover, ineffective supervision and errors hindered the department’s forecasting reliability and more recently resulted in a $158.1 million overstatement of the projected beverage fund balance in the 2009-10 Governor’s Budget.”

Very long story short, since 1986 the state has been collecting money from all those plastic, glass and aluminum drink containers we’ve been so helpfully recycling. The beverage fund brings in a fair amount of money – so much so that it’s become one of those kinda hidden sources of cash that lawmakers can use to buttress other programs that have nothing whatsoever to do with recycled containers.

Like the California Air Resources Board, for instance. In fiscal year 2008-09, legislators loaned $32 million in beverage fund money to the ARB, and another $35 million in fiscal year 2009-10.

Anyway, Howle’s auditors found that in 2004-05 the recycling department overstated projected revenues by $44.4 million, $136.8 million in 2005-06, $48.4 million in 2007-08 and $175.8 million in 2008-9 (in 2006-07 they inexplicably understated forecast revenues by $43.7 million). But don’t worry: “To address the issues with its forecasting model, the deputy chief of the division… told us the department has initiated the process to hire an economist to update the forecasting model and expects to fill this position by June 2010,” says the auditor’s report.

The recycling department also apparently doesn’t do a good job monitoring beverage distributors, who largely self-report the redemption payments they owe the state. “The department is not following through with its three-year plan covering fiscal years 2006-07 through 2008-09 to audit the redemption payments that beverage distributors submit,” states the auditor’s report. “Moreover, the department did not always audit beverage distributors with identified underpayments from the prior three-year audit cycle.”

It gets worse. Auditors found the recycling department was so slow to collect underpayments that they missed out on $324,000 because the statute of limitations ran out. For some reason, the department also waited six months before attempting to collect $941,000 in underpayments from another distributor.

The department is also apparently deficient in investigating alleged fraud perpetrated on consumers who recycle beverage containers for cash. “[I]t does not track the fraud leads it receives to ensure that staff follow up or initiate investigations on leads,” the auditors found. “Also, the department does not have a systematic and defined method for analyzing data on recycling volume to detect fraud.” The department is also apparently not particularly careful about making sure the grants it gives out each year are used properly.

Lester Snow, the state’s secretary for Natural Resources all but shrugged his shoulders when presented with the auditor’s findings. “The department has already implemented a number of changes that address these recommendations,” he wrote to Howle on June 10.

Of course they have. It would be reprehensible to do otherwise.

Anthony Pignataro is now, finally, on Facebook. Click here to follow him.