January/February 1995
The November elections brought major political changes at all levels of government. Here’s a look at the recycling-related issues that could be addressed in 1995 by states and municipalities and how they could fare in the new political order. Next issue, in Part 2 of this forecast, potential federal legislation takes center stage.
By Clare Hessler
Clare Hessler is director of state and local programs for the Institute of Scrap Recycling Industries (Washington, D.C.).
What’s in store for the scrap recycling industry on the state and local levels in the coming year?
While that may have been a relatively easy question to speculate about in years past, trying to predict the legislative issues that states and municipalities will examine is dramatically different—and more difficult—this year due to the political power shift brought about by last November’s elections.
As in the federal elections, Republican candidates made significant gains in the state legislature elections as well as gubernatorial races. Before the elections, Democrats controlled 64 state legislative chambers while Republicans held 31, with ties existing in the Michigan house and the Alaska and Florida senates, according to the National Conference of State Legislatures (Washington, D.C.).
In November, however, Republicans won 17 new state chambers, giving them control of 48 legislatures in all and diminishing the Democratic tally to 47. Republicans also picked up enough seats in the Nevada assembly and the Maine senate to tie those chambers, and they gained seven seats in the California assembly, potentially creating a tie there as well (depending on the outcome of a controversy over one assemblyman's change in party affiliation).
In the gubernatorial races, the two parties virtually swapped positions in the recent elections, with Republicans gaining 12 new governorships, boosting their total from 18 to 30, while Democrats lost 11 seats, dropping their total from 30 to 19. (The one remaining governorship—in Maine —was won by an independent candidate.)
These election results have created a whole new political ballgame in state and local governments, and the potential for different legislative tacts on issues of interest to scrap recyclers—namely tax and regulatory breaks, mandatory risk assessment and cost-benefit analysis for environmental regulations, and compensation for personal property rendered unusable by environmental regulations.
And the Republican gains in the U.S. House and Senate make that potential even greater if the 104th Congress agrees to shift some priority-setting decision-making to the now Republican-dominated states, many of which have asked for more flexibility in solving their own problems on such issues as welfare and health care reform as well as relief from unfunded federal mandates.
Balancing Property Rights and Environmental Regulations
One controversial issue that could receive Republican support in 1995 is compensation to businesses for private property lost from commerce by environmental regulations. There's precedent for this topic: Last year, 32 states reviewed legislation calling for more protection for private property owners affected by environmental regulation, according to the National Conference of State Legislatures.
Supporters of such legislation assert that environmental regulations that restrict the use of property have the same effect as physical "takings" under eminent domain statutes and, as a result, should provide for monetary compensation to property owners for their loss of use. These supporters 'cite the Fifth Amendment to the Constitution, which prohibits the taking of private property for public use without just compensation. Meanwhile, opponents of property rights bills—generally environmental activists—argue that government shouldn't have to compensate property owners for environmental protection that's required by law and benefits the general public.
Scrap recyclers can experience such "takings" in several ways, but particularly in municipal ordinances that require processors to build fences around their operations. For instance, such ordinances might require fencing to be installed several feet from a facility's property line and prohibit the recycler from placing scrap closer than several feet from the fence within the facility. The result is that recyclers are basically denied the use of a portion of their property. Some property rights legislation could make this tantamount to a physical "taking" worthy of monetary compensation. In years past, many zoning requirements were based on public safety and aesthetics, but they are increasingly being based on "environmental" considerations as localities take on more and more environmental responsibility.
States have generally advocated moderate approaches when trying to balance the issue of property rights and environmental regulation. Since 1991, four states—Delaware, Indiana, Utah, and Washington—have passed laws to prevent the unfair taking of property, and last year Idaho, Mississippi, Missouri, Tennessee, Utah, and West Virginia enacted laws that also dealt with the issue, focusing on the following:
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requirements for state attorneys general to review proposed state regulations to protect property owners from "takings;"
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requirements that state agencies assess the potential impact of proposed regulations on private property. If needed, the attorney general would draft criteria or guidelines for state agencies to follow; and
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establishing a threshold for reduction in property value that must be met to qualify for compensation, such as a reduction in value of 50 percent or more
That leaves 40 other states to possibly follow these leads with bills of their own. And the federal government might also be expected to examine the issue. In fact, Environmental Protection Agency Administrator Carol Browner has advised the new Congress to address property rights and unfunded mandates before it sits down and works on any other upcoming environmental legislation.
Money Matters
An issue even-more sure to be proposed by legislators at both the state and federal levels is the ambitious task of cutting taxes and spending in 1995. But no matter who attempts it, it may prove a difficult goal. Even though the economy expanded in 1994, states are still faced with increased spending on Medicaid and new prisons due to lengthening prison sentences, according to the National Governors Association (Washington, D.C.).
The critical issue, then, is how the states could propose to cut spending and taxes, and whether they will look to the federal government for cues in this regard. For instance, what if states adopted an outlook like that of Secretary of Labor Robert Reich, who has said that Congress could save millions by cutting “corporate welfare?” The result could be an end to special small-business funding and tax breaks, such as those designed to boost local recycling capabilities.
Indeed, in these belt tightening times, some states have already looked at cutting the tax credits and incentives available to recycling companies. Indiana, as an example, has tried for the past two years to pass legislation that would eliminate or restrict the existing property tax deductions available to resource recovery facilities.
In 1995, Iowa is expected to revisit a legislative proposal from last year that would have eliminated manufacturing and equipment tax credits. At the same time, however, the state may provide a tax break for environmental equipment. Connecticut and Arkansas are also likely to consider cutting their similar tax credits. Of course, private recyclers aren't the only ones potentially facing an end to special business incentives. Some incentives that have traditionally been available only to municipal recycling programs could also be on the block, as is the case in Pennsylvania .
In general, however, many states will continue to push for additional financial incentives for the recycling industry to promote not only the environmental benefits recycling provides, but also economic development and job creation.
Return to the Greens
Another potential factor that could influence state policies in 1995 is the likelihood of a resurgence of environmental activism at the state and local levels. Congress failed to pass significant environmental legislation last year, and many lobbyists expect environmental advocacy groups to boost their efforts this year.
In addition, because many national environmental organizations, which have seen significant drops in membership—and, hence, income—are seen as having lost touch with their grass roots base, they are apt to step up their activities to counter these trends.
Furthermore, the new Republican-controlled Congress isn't expected to be as responsive to the more-strident environmentalists, so these individuals and groups will likely focus their attention on state and local matters in an effort to rebuild their grass roots support. The National Wildlife Federation, in fact, is already expending resources to improve water quality in the Great Lakes region, and other national environmental groups have gotten together in the Midwest and the South to create the Mississippi River Basin Alliance.
Seeking Flow Control Alternatives
State and local government will undoubtedly also search for alternatives to flow control authority for municipal solid waste in 1995. When the U.S. Supreme Court declared flow control unconstitutional last May, state and local governments turned to Congress, hoping it would pass legislation granting them flow control authority at least in limited situations and for certain materials.
Congress came close, but a compromise flow control bill dies in the Senate in the final hours of the fall session. While the 104th Congress could pass flow control legislation early this year, there are many hurdles, the issue is complex, and there is already a packed legislative agenda, with many issues in the GOP's "Contract With America" likely to be addressed first. This means state and local governments may not get the flow control authority they would like from Congress right away, so they could pursue other options to protect investments related to their solid waste facilities and contracts.
The alternatives they could consider include adopting “user fees” or taxes for entities that don't use the solid waste transfer/disposal facility or system designated by the state or local government. For example, a Florida town passed an ordinance requiring recyclers to pay the county landfill tipping fee before transporting recyclable materials out of the county. After reporting later on the quantity of material recycled, the recyclers receive a refund on a portion of the tipping fee. In one instance last fall, the tipping fee was more than $80 a ton and the refund was less than $20 a ton.
Other options for local governments include raising property taxes and reducing tipping fees in order to compete in the marketplace, or selling their waste management and recycling facilities to pass the management responsibility and debt to private industry.
An Intensive Year
The manifold political changes in states and localities will likely make 1995 an intensive legislative year, which presents both challenges and opportunities for scrap recyclers. On the one hand, much effort will be needed to educate the new legislators on the benefits of the scrap recycling industry and the issues important to it.
On the other hand, the new political order could present an opportune chance for the industry to make both legislative and regulatory gains. Most recyclers are very familiar with the industry's perennial legislative challenges related to metal theft, flow control, reporting requirements, white goods, and so on, and in the past, many processors have had their hands full simply fighting bad legislation or overly burdensome regulations. Perhaps it's time to revisit and revamp that approach.
Recyclers must make a commitment to be ahead of the issues, address important topics such as distinguishing scrap recycling from solid waste disposal, and develop new goals and strategies in concert with their state and trade association consultants.
To be significant players in 1995's new political ballgame and perhaps make unprecedented progress on recycling-related issues at the state and local levels, scrap recyclers must take an ever-more-active approach on both the legislative and regulatory fronts.
The November elections brought major political changes at all levels of government. Here’s a look at the recycling-related issues that could be addressed in 1995 by states and municipalities and how they could fare in the new political order. Next issue, in Part 2 of this forecast, potential federal legislation takes center stage.