It’s a hot summer here in the islands, but those seeking relief from a cool beverage will soon be paying more.
The state Department of Health, the agency that manages the fund, plans to increase the controversial 6 cent beverage container tax by a half cent starting September 1.
The tax is charged to manufacturers, distributors and importers of beverages in Hawaii, and that tax is then passed on to consumers.
The Department of Health does not need additional approval from the legislature, because the increase was already written as an option into the law. The way the law was structured, the more the public cooperates and recycles, the more the chance of the tax being increased.
“State law requires the container fee to increase from one cent to 1 1/2 cents per container if the redemption rate exceeds 70 percent, unless the director of health, in consultation with the state auditor, determines that a fee increase is not needed. The statewide redemption rate from July 1, 2011, to June 30, 2012, remained strong at 77 percent; the rate for the previous year was 76 percent,” the health department said in a press release.
Health Director Loretta Fuddy said: “The half-cent fee increase was written into the bottle law from its inception to ensure the recycling program could sustain itself and continue to pay back deposits to consumers. We were able to hold off a fee increase for four years by using existing funds; however, the special fund is now too low to continue the program through 2014, and the current fee is not enough to build critical program reserves necessary to conduct essential operations.”
But the increase does not come without controversy – or questions from the law’s critics.
The fund has been raided multiple times by the Hawaii state Legislature for a total of $10 million between Fiscal Years 2009 and 2012 to balance the state operating budget.
“To date legislative impacts totals $10.4 million of which includes $3,292,018 Fiscal Year 2012,”said Janice Okubo, spokesperson for the Department of Health.
Okubo said a $9.6 million decrease in the program’s funds during FY 2009-11 was “primarily due to legislative impacts that removed the exemption from the Central Services Fees ($2.7M per year), two raids (Act 124 (11) and Act 192(10)) ($1.3M total) and the transfer of interest earned ($1.2M per year).”
The dollar amounts of the legislative impacts will increase as we continue to incur central service fees and loss of interest, Okubo said.
Even without the raids, Okubo said, “the container fee would eventually need to be increased a half cent to sustain the program because of the high redemption rates each year.”
The department has continued to expand its bureaucracy, leaving the department spending $3.4 million more than its annual revenue for this program.
Some of those expenditures include $13,976 in travel expenses for what Okubo said includes “material recovery validation, compliance checks, and support for all neighbor island recycling centers.”
Sen. Sam Slom, (R-Hawaii Kai to Diamond Head), was opposed to the law when it passed and is against the additional tax increase.
He said: “I have been opposed to and voted against every piece of this legislation that amounts to a power grab for the state Department of Health. I have warned that the tax will continue to increase without any legislative oversight. This is a perfect example of government out of control by punishing people for what it said had to be done for recycling. In other words, the more people recycle and are responsible, the more they will be penalized. The fact that the legislature also uses the beverage container special fund as a cash cow amply demonstrates that this scheme is more about money and taxation and less about the environment. Finally if re-elected I will again introduce legislation to abolish this program and make all recycling a county function as is done in the Mainland.”
The Health Department determined this year “the current fee structure and special fund balance would leave the HI-5 program underfunded in 2014 and unable to continue operations.”
The Health Department estimates the increase will bring in $4.5 million annually.
“As a result of the fee increase imposed on beverage distributors, consumers will likely see the additional half-cent fee added to their retail purchases of HI-5 labeled containers beginning September 1. This means that the deposit plus container fee will increase to 6 1/2 cents – a 5 cent deposit to be returned to the consumer when the container is recycled and a non-refundable 1 1/2 cent container fee to cover administrative costs,” the health department said.
Since its inception, the Department of Health said the more than 4.71 billion containers were recycled including 690 million containers in the last fiscal year.