Amongst the recycling policies that carry the property of extended producer responsibilities, deposit-refund (D-R) is recognized as an ideal policy as it can achieve a socially optimal outcome. In reality however, D-R often runs into a budget deficit. To correct for this void, we take the budget balance constraint into account in this paper, and re-examine the features of an earmarked D-R in recycling and output markets. Specifically, we investigate the circumstances under which a D-R runs into a budget deficit and examine the highest social welfare that an earmarked D-R can achieve. It is found that when recycling cost is relatively high, marginal environmental damage is mild, and the output market is competitive, the social welfare of an earmarked D-R is close to the social optimum. Under alternative conditions however, i.e., when recycling cost is low, marginal environmental damage is large, and output market is imperfect, it is more likely for a D-R to run into a financial deficit; this implies that the welfare of an earmarked D-R is less than the social optimum.