E911 Malfeasance

by Colin Berkshire

Colin here.  One of the most heavily taxed businesses is telecommunications. A typical tax on your telcom bill is about 20%. Because people have little option on this “discretionary” expense it is the perfect place to drop in little taxes.

The 911 regulatory surcharge/tax is one of the more insidious. This tax varies by state, but usually runs between $1 and $1.50 per line (and $5 per line in one area). Thus, it ranges from about 1.5% up to 15% of the typical phone bill.

What is this tax for? Hold on, before you spout out how it pays for emergency responders to swiftly take your phone calls during a time of crisis. Yes, some of it goes to that.

But what most people don’t realize is that the 911 tax is only partially used to fund the Public Services Answering Point, or PSAP.

Many states loosely define what appropriate 911 expenses are. It is typical that any military use, for any purpose whatsoever qualifies. So, if new furniture in a reception area of a local air force base is needed, then that qualifies even if the lounge has no connection to 911. Yes, the local law enforcement dispatch centers literally must beg for the nearby military base to not raid the 911 money for their discretionary use.

In 2011, $77 Million of 911 funds were simply moved to the state general budget, according to the Government Accounting Office GAO-13-376 report. The worst offenders of this were Arizona, Georgia, Illinois, Maine, New York, and Rhode Island. But since reporting this transfer of funds to the FCC is voluntary, many states simply did not answer the auditor’s inquiries.’

New York acknowledged to the FCC that $22.8 million of E911 funds were transferred to their General budget in 2011, although the GAO audit showed that it was closer to $45 million. Arizona siphons off 13% of the E911 funds to the general budget. Georgia charged prepaid cellular $13.7 million, and remitted none of this for 911 use. Rhode Island collected $17.3 million in E911 taxes in 2011 and then siphoned off $13 million for the general fund. Louisiana simply declined to provide any data on their 911 spending.

Is it therefore no surprise that 47% of the counties in Arizona and 15% of the counties in Illinois have not yet implemented “E911 Phase I”, which is the most rudimentary of the E911 services, required to be implemented more than a decade ago with a 2001 deadline.

The GAO made this polite statement: “The manner in which the FCC collects and reports information on state 911 funds limits the usefulness of the annual report.” The GAO then goes on with this scathing remark: “Contrary to best practices for collecting and analyzing data…FCC lacks written guidelines for interpreting states’ responses…does not describe the methodology used.” The GAO finally states: “The lack of a description of the methodology for FCC’s analysis is particularly problematic”

This is not a new problem. The GAO identified similar funding “irregularities” in its previous reports, including the 2006 report.

The telecommunications industry has been sick for decades, and it remains sick because of regulatory malfeasance. Excessive regulation where it is not important, excessive taxation, and misappropriation of funds all have created an industry that is most problematic.

GAO-13-376 (April 2013)

GAO-06-338 (March 2006)

GAO Survey on the use of 911