The Tale of an Abused Tax

By jlammers

January 15, 2009, 1:21PM       

(First published Sept. 21, 2008) 

The cell phone bill says "9-1-1 Service Fee": $1.20. You pay it every month to New York state.

But only six cents end up at a 911 center.

Instead, the state spends the money on itself: overtime, fringe benefits, travel, vehicles, new boots, clip-on ties, sun block, spray paint, groceries, dry cleaning and other daily expenses for agencies ranging from the state police to the departments of corrections and parks, state records show.

The National Guard, for example, spent almost $1 million at Oswego's Best Western Captain's Quarters hotel and steak and seafood restaurant and the Econo Lodge Riverfront Inn. That housed and fed up to 21 soldiers who patrolled the nuclear power plants for three years after Sept. 11, 2001.

The state imposed the fee to raise enough money to upgrade 911 technology so dispatchers can find you when you call from your cell phone and can't talk.

State Assemblyman David Koon, D-Fairport, knows first-hand how important that is.

Dispatchers listened helplessly to the last 20 minutes of his daughter's life when she dialed 911 on her cell phone and they couldn't find her. Jennifer Koon was abducted from a suburban shopping mall, raped and shot in 1993. Koon still has the 911 tape.

He fought to keep money flowing to 911 centers to buy equipment to find the next cell-phone caller.

Every county in New York now has that technology, but the state continues to tax cell customers $1.20 per month.

The fee may have started as a well-meaning temporary tax. But in typical New York state government style, the fee continues to pump into a 911 fund that is raided, borrowed against, increased and perpetuated after its job is done.

The state's latest move shows the attitude toward this steady income.

First, state officials promised to spend up to $2 billion from the fee to build the world's biggest wireless emergency radio system for the state's first responders. But that system keeps failing tests.

So Gov. David Paterson last month redirected $40 million from that project to the general fund to be used for anything.

"People are so used to paying that $1.20 to the state every month that nobody really pays too much attention to it," Koon said. "So, it's just another revenue stream the state is using now."

Where it goes

Here are some ways the state has spent your $1.20-a-month since 2002, according to state comptroller's office records.

Millions of dollars covered salaries at various state agencies. About $24 million went for overtime at agencies including the departments of corrections and parks.

About $225,000 bought clothing and footwear. Nearly $20,000 paid for laundry and dry cleaning services.

This year, expenses included two $153 hard hats and four pairs of $78 snowshoes for the Office for Technology. The State Police spent $18,600 on pants, shirts, jackets and tie bars.

Two agencies - technology and agriculture - spent almost $60,000 from cell phone customers last year to pay their own cell phone bills.

Over the years, the fee has also covered $15,500 on interest and late payments to businesses ranging from pizza places to the major law firm working on the statewide wireless network, records show.

How it happened

New York state passed a law in 1991 that allowed it to collect 70 cents from your cell phone bill every month. It could be spent on nothing other than upgrading 911 services so dispatchers can find you in an emergency.

Ten years later, the annual revenue had reached $43 million.

By 2002, state police were spending the money on vehicles, conferences, dry cleaning and clothes. An audit by then-Comptroller H. Carl McCall criticized state police for the practice.

So the state made the law more vague. The state Legislature and the governor changed the law to say the money could be spent on anything having to do with homeland security. While they were at it, they added another 50 cents per month to the fee and directed it to the state's general fund, for any expense.

Meanwhile, the 911 centers still could not find all cell phone callers.

Koon and others argued that more money needed to go to the 911 centers. The New York State Association of Counties lobbied for at least one-third of the annual revenue.

The state said no.

Instead, the Legislature passed another law that allowed counties to add another 30 cents to cell phone bills. That brought the total bill to $1.50 a month in Onondaga County.

But the 911 centers still could not find all cell phone callers.

In January 2003, four young men died in a boating accident off the coast of Long Island Sound. One of the teens called 911 from a cell phone, but dispatchers could not pinpoint the call. The boys' parents rallied with Koon for more money for the counties.

With no support from the governor's office, the Legislature relied on an old standby: They borrowed the money.

The Legislature passed a bill, and overrode a veto by then-Gov. George Pataki, to borrow $100 million for the counties. The state will pay 3 percent to 5 percent interest to borrowers by tapping future cell-phone taxes.

Across the state, 911 centers split up that money. But local taxpayers and not the state paid most of the bill for the improvements.

Monroe County, for example, spent about $11 million on new phones, data lines, aerial photographs and other equipment to locate cell phone callers.

The state contributed $1.6 million. The rest came from local property taxes and income from a 35-cent fee on land telephone lines.

The county gets about $400,000 a year from the cell phone tax. It doesn't buy much, said John Merklinger, 911 director for Monroe County and president of New York State 911 Coordinators Association.

"My personal opinion is, it's pretty sad the state keeps raiding the money," Merklinger said. "The problem is, I think the public thinks the money is being used for 911 and I don't think it is."

Still waiting for wireless network

The state's latest move shows how little reverence is paid to the original purpose of the fee.

The state, during Gov. George Pataki's term, promised to use the 911 cell phone money to pay for an emergency radio system called the Statewide Wireless Network, or SWN (pronounced "swin").

The $2 billion system is intended to connect state police with all emergency officials - such as environmental police, Buffalo police and Thruway snow plow drivers.

Michael Balboni, the state's homeland security chief and a former state senator, said the Legislature thought the 911 surcharge was an appropriate funding stream for the SWN because it would enhance the ability of crews to respond to emergencies.

State officials say they have spent $51.5 million on engineering fees, equipment and day-to-day expenses.

In the most recent year, those expenses have included about $73,000 on travel, lodging and food. The office paid for books, membership dues for trade associations and fees to send staff to New Orleans for an international police chiefs conference.

In the last year, the state SWN office spent about $1.1 million on "fringe benefits," which includes health and dental insurance and retirement contributions, according to state records.

But the company the state hired to build the network has, so far, not been able to pull off the project.

An electronics company called M/A-Com won the bid to build a system that would be tested in Western New York. The company has failed a series of tests there.

The most serious problem was that first responders lost stable contact when they left their vehicles. The portable radios they wear on their hips and shoulders are supposed to be able to repeat a signal to the car radio, but that connection does not consistently work, officials said.

Erie County intended to be a full partner in the SWN, but lost faith in it at the end of last year and decided to build a separate radio system. An audit last month by State Comptroller Thomas DiNapoli confirmed that decision, saying the county could save $30 million by scaling back its investment in SWN and building its own system. DiNapoli suggested other counties "seriously look at alternatives to SWN."

At the end of August, the state Office for Technology told M/A-Com that it had defaulted on its contract and gave the company 45 days to fix the problems.

If they cancel the contract, state officials say, M/A-Com will have to repay up to $100 million, including the travel and other day-to-day expenses, to the Office for Technology and the Office for Homeland Security.

A spokesman for the governor said the contract is silent on whether counties and other state agencies will be paid back.

Local governments and other state agencies spent about $7 million on equipment associated with the SWN last year. SWN officials say counties and other agencies would have bought some of that equipment anyway.

Again, local governments are on their own.

The state intends to use the cell phone tax to pay for only its part of the system. If counties want to tap in, they have to find the money elsewhere.

Onondaga County officials needed new radios and had to make a decision. They were not sure the statewide system would work dependably here and would be ready quickly enough.

So the county decided to buy different equipment and hope that it someday patches into a statewide system. Then, county officials had to come up with $34.7 million to pay for it.

John Balloni, Onondaga County's 911 coordinator, said the ideal funding source is the $1.20 Onondaga County's cell customers already pay to the state every month.

"That amount of money would literally void our need for a local surcharge to pay for this because there is enough money being collected on the state surcharge to pay for this project," Balloni said.

Onondaga County cell phone customers pay about $4 million a year through the $1.20-a-month tax. But the state only gives the county back about $260,000. That leaves the county hoping to add 65 cents a month to the bills for land telephone lines to pay for the radios.

Federal government not pleased

The state's spending has also annoyed the federal government.

Congress has warned states that it will punish those who raid their enhanced 911 revenue for other things.

Congress passed a law in 2004 limiting federal 911 grants to states that do not divert their own 911 revenue. A spokesman for the federal agency in charge said it is too early to say how much New York could lose. Balboni also said it was too soon to know the impact on New York.

U.S. Sen. Hillary Clinton was a co-sponsor of that bill. A Clinton spokesman said the senator feels that surcharges should be used for improving 911 systems.

With the original purpose of the fee accomplished, one option is for the cell phone tax to go away.

But cell phone users will have to pay off that $100 million in bonds at least through 2016. And if the SWN is built, the state will have committed the money for decades.

The state continues to find new uses for the money.

Paterson announced last month that he would dip into the unused SWN money as part of his plan to balance the current budget.

Now, cell phone customers will send another $40 million over the next two years into the general fund, to be used for anything.

Michelle Breidenbach can be reached at mbreidenbach@syracuse.com or 470-3186.