Funding Questions and Legal Challenges, Oh My!

Only a few days after California’s SB 54 regulations were finalized on May 1, 2026, legal challenges started emerging, and it is expected that more lawsuits are on their way. For public agencies already navigating the complexities of producer responsibility, litigation in the process does not add confidence.

There are still more questions than answers, and the regulatory landscape continues to shift in real time. At R3, we will take the lead for you. Consider this your ongoing field guide; we’ll keep cutting through the weeds, so you don’t have to go it alone.

How Will Funds Be Distributed?

One of the more concrete elements of SB 54 is the Plastic Pollution Mitigation Fund (PPMF). Beginning in July 2027, plastic producers are required to pay $500 million annually into the fund for ten years. Four state agencies are designated by statute to receive and implement these funds: CalRecycle, the California Department of Food and Agriculture (CDFA), the State Water Resources Control Board (SWRCB), and the California Department of Public Health (CDPH). Each is currently conducting community engagement to inform how their share of the PPMF will be designed and allocated. You can participate in the conversation and express your priorities

The PPMF is intended to help those most affected by pollution, with 60% of funding slated to be directed towards monitoring and reducing the historical and current environmental justice and public health impacts of plastic, and 40% of funding slated to be used for monitoring and reducing the environmental impacts of plastic on terrestrial, aquatic, and marine life and human health. Funding is aimed at projects and programs that directly and primary benefit individuals in disadvantaged or low-income or rural areas who have often dealt with the brunt of the negative consequences of plastic manufacturing and pollution including facing a greater risk of exposure to plastic waste and increased health risks from microplastics and toxic chemicals. You can stay up to date on information regarding the PPMF by joining CalEPA’s listserv.

Circular Action Alliance (CAA), the selected Producer Responsibility Organization (PRO), must finalize their PRO plan on or before the deadline of January 1, 2027. A draft of the plan is expected to be released by mid-2026 and will be accessible for public comment for 60 days after CalRecycle publishes the plan. This plan will outline several key questions including the process for determining and paying costs that will be incurred, or otherwise incurred, by local jurisdictions, recycling service providers, alternative collection programs, and others due to the requirements of the Act.

A key concern for jurisdictions: will producer payments flow directly to haulers, MRFs, composters, or other service providers without any concrete requirement to pass savings along to ratepayers? The intent of SB 54, as stated in California’s Public Resource Code, and reinforced by staff at CAA and CalRecycle, is to ensure that local jurisdictions will be made financially whole for any new costs incurred associated with the implementation of this legislation.  Without a clear pathway, it can be difficult and confusing to forge ahead, however, R3 is actively tracking updates and will work with the needs of the individual jurisdiction to create a plan.

What Do the Legal Challenges Mean?

The final SB 54 regulations have drawn public opposition from two prominent environmental groups — the Natural Resources Defense Council (NRDC) and Californians Against Waste (CAW). Their concern centers on what they see as significant loopholes baked into the regulations, particularly around exemptions for certain plastic packaging and the allowance of chemical recycling as a compliance pathway.

The good news for public agencies is that anticipated lawsuits are expected to target specific implementing regulations, not SB 54 itself. What may shift, however, is how it gets carried out on the ground, and that’s where agencies need to stay flexible.

Is There Anything I Should Be Doing Right Now?

The details of SB 54 are still coming into focus, but enough is in place to justify starting your preparation now. The first step is understanding the basics: review the most recent Covered Material Categories List to see which materials are likely to be covered and how your current collection and diversion programs stack up against those requirements.

From there, if resources allow, put your energy toward benchmarking-focused actions:

1. Gather baseline documentation on existing collection, processing, education, and reporting costs tied to draft Covered Materials.
2. Begin mapping your program and infrastructure costs more broadly to understand how current expenses relate to the diversion of covered materials.
3. Conduct a gap analysis to identify which draft Covered Materials are underserved by your current programs and infrastructure, and whether targeted investments and/or new programs could cost-effectively close those gaps.
4. Collect contamination data across your recycling and compost streams to understand how contamination affects both recoverability and costs.
5. Identify gaps in equity for low-income communities to see if there are community areas that pose concerns for plastic-related pollution.

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Have questions about where to start? Reach out to our team – we’d love to hear what’s on your mind. R3 will continue tracking SB 54 planning and implementation as it unfolds. Check back for updates, analysis, and practical guidance, and subscribe to our quarterly newsletter to get insights delivered directly to your inbox!

Resources:

• Link to CalEPA’s survey: https://forms.office.com/pages/responsepage.aspx?id=UlYdt4NLV0KvzX_Rd4hFZLsrMaWFz7RJtZIxXlPCqw1UMDFVTUpVUEIxMFBVUUM0QlFaTFZPVlBJSy4u&route=shorturl
• CalEPA SB 54 information: https://calepa.ca.gov/programs/sb54ppmf/
• SB 54 bill regulation text: Article 8 section 18980.8 producer responsibility plan
• CalEPA Listserv: https://calepa.ca.gov/plastic-pollution-mitigation-fund-listserv/