There's a Massive Recycling Loophole in California...and It's Draining the State of Up to $200 Million a Year

When Gov. Jerry Brown took office in California in 2011, he said he faced a "wall of debt" totaling roughly $28 billion.  City after city has since declared bankruptcy*, and Brown has announced plans for massive tax increases on the rich to bridge the gap.

The Los Angeles Times, however, is reporting that just in the recycling budget, the government is paying out between $40 and $200 million a year to scam artists running a lucrative black market of plastics and cans.

"The law says California has to make it easy to recycle … so anyone with a devious mind, it's so easy, they can just go right in," Los Angeles County Sheriff's Deputy Dave Chapman explained.

The L.A. Times continues, explaining how recyclable materials are brought in from out of state and redeemed:

Under the state's 25-year-old recycling law, California charges consumers a deposit on most beverage containers sold within its borders. Anyone who brings empty containers back to one of about 2,300 privately run recycling centers can collect 5 cents for most cans and bottles and 10 cents for larger containers.

Only products sold in California are eligible.  But a can is a can — and many recycling centers in California aren't that interested in where they come from.

Hence the influx from out of state.  Last summer, the stateDepartment of Food and Agriculture counted all vehicles driving into the state with used beverage containers through 16 border stations. The three-month tally was 3,500, including 505 rental trucks filled to capacity with cans.  [Emphasis added]

In one example, officers from the Justice Department's recycling fraud unit (did you even know that existed?) suspected a pickup with an attached trailer might be carrying illicit cans, so it tracked their progress.  According to officials, by the time the group was arrested several weeks later, it had raked in about $189,000.

The scheme is particularly rampant in California since it is one of the only states in the region with the program, and while the collection centers are privately-run, they bill the state for all the money they distribute.  Moreover, with current technological capabilities, many note that it would be impossible to verify that every can was purchased in California before processing.

CalRecycle -- the state's Department of Resources Recycling and Recovery -- is also coming under fire for severe mismanagement, failing to investigate credible tips, and even having such a backlogged set of books that it was owed $10 million by beverage distributors and manufacturers.

Commenters appear torn on the subject.  Many say that in the grand scheme of things, criminals channeling their efforts towards efficient recycling isn't such a bad thing.  Others are upset that, rather than reform the program to keep the benefits in place but minimize fraud, the Justice Department is wasting millions on units dedicated to cracking down on criminal recyclers.  Still others want the program eliminated entirely.

*Of course, it should be noted that out-of-control public spending and unfunded liabilities for pensions and other post-employment benefits for its public sector employees are to blame for these bankruptcies.

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Becket Adams contributed to this report.

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