Taxpayers should get what they paid for and not something else.

We pay taxes—do we ever! —in advanced welfare democracies for certain programs, then the money goes elsewhere. Here in the United States, an example of this is our Social Security system, now running in the red because more people are collecting than paying into the system. The reverse was true for many years in the 1970s and 1980s.

That’s when Social Security ran big surpluses, mainly because the taxes were high and the work force paying into the system was growing at a fast pace. By the way, the taxes were, and are, regressive; they hurt people with low incomes the most. I remember, as someone making a relatively low salary in the 1970s and 1980s, paying a lot in Social Security taxes. They seemed a lot higher than the other taxes I was paying. They were.

Social Security in the Red

Today, with people living longer and fewer new workers, the Social Security system takes in less than it pays out. It is clear what happened: Governments, both left and right, arrogated those Social Security surpluses. They diverted the money that should have been put aside, and spent it on other things (Mostly making deficits, caused by their reckless overspending, seem smaller than they were).

I emphasize that this is not a partisan criticism—both government of the left and the right have played these money games. The result of this diversion of taxpayer dollars: Social Security is now facing potential cutbacks or even possibly higher taxes or maybe both.

Diversion in the Empire State

A similar situation exists here in New York State.

New York emergency communications/911 services are shortchanged dollars, a new federal report says.

This hurts their effectiveness, according to the study. Under a federal statute, states are allowed to collect taxes on cellphones but must use all the money for emergency communications services. However, New York “diverts” a lot of emergency communications systems money to other things, a federal regulator says in a new report.

A Federal Regulator Objects

Michael O’Rielly, a member of the Federal Communications Commission (FCC), complains that New York is now one of only three states that continue the practice.

New York uses these 911 funds “for either non-public safety or unspecified uses,” according to the annual FCC report, “On State Collection and Distribution of 911 and Enhanced 911 Fees and Charges.”

“This harmful behavior short-changes call centers and prevents necessary upgrades, thereby threatening the public’s safety at their most vulnerable time, or it deceives consumers by stealing their money for other spending purposes,” O’Rielly wrote in the report.

The FCC “has found New York to be a diverter of 911 fees every year since 2009,” according to the latest report.

Three States on the Dishonor Roll

Although most states have stopped diverting, three still do, the SEC said.
A spokesman for New York State Comptroller Thomas DiNapoli referred questions to the State Assembly, which initiates all money bills, and the governor.

A spokesman for the state Assembly Speaker didn’t respond to repeated questions on 911 fees. But a spokesman for the governor said the money is properly used.

Still, O’Rielly insists New York doesn’t comply.

For example, the report found some 90 percent of these emergency communications funds were not spent on 911 purposes in 2017.

These fees generated about $189 million for New York in 911 fees, the FCC report said. Some “forty-one and seven-tenths of these revenues went “into the general fund.”

That, “by itself provides sufficient basis to identify New York as having diverted 911 fees for non-911 purposes,” the report said.

Diversion—New York Style

A spokesman for the governor, in the New York State Division of the Budget, challenges the FCC report.

“New York’s cellular surcharge is used to upgrade public safety communication systems and support emergency services operations, statewide, including through the provision of interoperable communications grants,” the governor’s spokesman said. “These programs,” he added, “are providing critical funding to help first responders at all levels of government communicate faster and respond sooner.”

The state spokesman added New York officials are obligated to put large amounts of these charges into the general fund.

The “New York State Tax Law Section 186-f, which was passed into law by the Legislature, requires that the General Fund, being the primary funding source for the State’s public safety activities, receive 41.7 % of the revenue from this fee,” the state spokesman said.

“Ensuring the public’s safety is one of the most essential functions of government operations and is of the highest priority to the governor,” he added.

Still, a spokeswoman for FCC Commissioner O’Rielly said New York makes “excuses” for not complying and that most states now spend 911 money as prescribed by federal rules.

A New York Routine

“New York,” says Tax Foundation attorney Scott Mackey, “is one of only a few states that diverts funds routinely.”

Mackey, who has studied the use of 911 money across the United States, warns that emergency communications services are affected.

“I am not a NY resident,” Mackey adds, “but I think New Yorkers might be concerned that 911 system improvements could be delayed because funds are used for other purposes.”

A spokeswoman for FCC Commissioner Michael O’Rielly offered this example: “The practice has forced New York emergency call centers, often operated by New York counties, to make up the difference between the amount necessary to operate the center and the pittance provided by New York State in the form of grants. In the case of Niagara County call centers, which the Commissioner visited in 2018, it means higher local property taxes and other taxes to make up the shortfall.”

O’Rielly, a Republican from Lockport, New York, who was appointed by President Obama, says he will keep pushing for states to use 911 funds only for designated purposes.

“Having had some success this year eliminating diversion by some states and territories,” he writes, “this year’s list highlights how much more work remains and how it is clear that some repeat offenders cannot be shamed (e.g., New York, New Jersey, Rhode Island).”

He says the FCC could ask Congress to consider diversion in any new legislation.

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Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post. The eBook version of his latest book "MoneySense" is available now for Free Download by clicking HERE

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