Those Nickels Add Up!

by Tom Yamachika, President, Tax Foundation Hawaii

By now, most of us who go to the grocery store are used to seeing a bunch of little charges whenever we buy bottled or canned beverages. We get nicked for a nickel per container as a “deposit,” which theoretically is refundable if you bring the container back to the store or to a recycling center; and for a penny per container as a “fee,” which seems to disappear into a black hole.

The nickels and the pennies get collected by the Department of Health. The Department’s Solid Waste Branch runs the deposit beverage container program. The program collects a certain amount per container, like similar programs in other states, to promote container recycling. So, the pennies and the nickels go into a special fund, called the Deposit Beverage Container Deposit Special Fund (am I the only one who is bugged by the word “Deposit” appearing twice in that fund name?), established by HRS section 342G-104. The special fund is there to provide the money to run the program, making it self-sufficient, but there is a wrinkle. Section 342G-104(c) says, “Any funds that accumulate in the deposit beverage container deposit special fund shall be retained in the fund unless determined by the legislature to be in excess.” Meaning that the legislature expected that there would be extra money at some point, at which time the fund would be ripe for raiding.

But that assumes that the State doesn’t get raided first. We have written about this program and this fund before. The State Auditor’s Report No. 19-08 told the story of a staff worker for the accounting firm hired to do the fund’s financial audit. He dropped off a few bottles at the redemption center and received a whole 61 cents for his trouble. But the redemption center altered the log and claimed against the fund for reimbursement of 69 DOLLARS. And that wasn’t the only instance of fraud found.

The Department of Health also complained that fraud was a serious and real risk for the program, but we heard no stories of folks going to the hoosegow over this.

In the meantime, even with the fraud risk, the nickels in the fund started to pile up. Here is what the fund contained at the end of each fiscal year from 2013 to 2021:

Source: Office of the Auditor, Reports No. 15-02, 17-02, 19-08, 21-13, 23-07.

As of the end of 2021, there was more than fifty million bucks in the fund apparently sitting around doing nothing.

Now that our legislative session has started, therefore, we have an important message to lawmakers: “Hey! Those of you numbskulls who want to raise taxes! Shut up, take this $50 million, and leave us taxpayers alone! And, by the way, try not to spend it all in one place!”