$1B Diverted from Funds for Upgrades to NJ’s 911 System: How to Stop the Raids

County officials join forces with new state senator to end the diversions, which both Democrats and Republicans have OK’d over many years
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“New Jersey is the worst offender in the entire nation” for diversions, said John Donnadio, executive director of the New Jersey Association of Counties, center.

Few politicians, if any, would come out publicly in favor of taking money away from projects that are meant to make it easier for New Jersey first responders to serve their communities during an emergency.

Yet for over a decade, governors and lawmakers from both parties in New Jersey have quietly been skimming money from a special tax on phone bills that was established ostensibly to  fund upgrades to 911 emergency dispatching systems across the state.

The latest diversions, according to a report on 911 funding that has been issued by the Federal Communications Commission, totaled more than $90 million in 2018. And since the raids have been occurring regularly in New Jersey for over a decade, the combined phone-tax revenue that has been used for other purposes easily surpasses $1 billion.

“New Jersey is the worst offender in the entire nation, diverting anywhere between 85 percent to 95 percent of the fees that are collected,” said John Donnadio, executive director of the New Jersey Association of Counties, a group that has been pressing for years for an end to  the raids.

The diversions largely go unnoticed when the annual state budget comes together every June because other pressing issues, including fights over tax policy and public-worker benefits, have generally taken up most of the oxygen in recent years. In addition, when the diversions have been questioned by reporters, state officials have noted the revenue is still being used for related purposes authorized by statute, such as for funding State Police operations and policing in rural communities that are also in desperate need of support.

The raids have also come in the wake of the Great Recession, which officially lasted from 2007 to 2009. But the downtown took an enormous toll on the state budget and forced cuts across the board.

Systems need to be maintained

However, with a new state budget due out in a few weeks, and the state economy back in reasonable shape, officials from county governments that often operate regional 911 dispatching systems are hoping this is the year the diversions will end. In some places, dispatching is handled by municipal governments. But the county officials, who have been shut off entirely, note 911 systems need to be maintained, whether full funding comes from the state or not, and that the stakes are very high.

“First responders must rely on a precise, accurate and reliable communications network to save lives,” said Cape May County Freeholder Marie Hayes during a news conference in Trenton on Friday. “I repeat, to save lives.”

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Voters would be asked to approve a ballot question that explicitly calls for all revenue raised by the current levy on phone bills to go to 911 systems.

The event, organized by the New Jersey Association of Counties, a lobbying group for the state’s 21 county governments, was just the latest to call attention to the need for more funding for 911 upgrades. But this time Hayes and other county officials also announced they have joined forces with a newcomer to the state Legislature — Sen. Michael Testa (R-Cumberland) — to propose an insurance policy against future diversions. Their plan calls for new language to be written into the state constitution to ensure all the money gleaned from New Jersey phone bills is used for the advertised purpose of funding 911 system upgrades.

“It’s high time that we say, ‘Enough is enough,’” Testa said.

Over the years, many new taxes or dedicated funds have been established at the state level to support a wide range of specific purposes, including for promoting tourism and clean energy programs, lead paint abatement and affordable housing. But each one of those pots of money has been raided for other purposes at various times in past years thanks to fine print quietly written into the annual budget.

In the case of the funding for 911 systems, a tax of nearly a dollar was applied to every monthly phone bill in New Jersey beginning in the mid-2000s. At the time, it was proposed as a way to help the state fund a switch to the latest emergency dispatching technologies known as “NextGen” instead of relying on older 1980s-era systems.

Money was used for other purposes

According to data compiled annually by the Federal Communications Commission, the state tax generated $122.9 million in 2018, the most recent year for which there is complete data. Of that, more than $90 million was used for purposes other than upgrading 911 systems, according to the report. And among the states that have raided 911 system revenues the most, New Jersey topped the list in the report.

Shaun Golden, the elected sheriff in Monmouth County, offered some examples during the news conference organized by NJAC of how the fund diversions have affected local law-enforcement efforts, saying many towns are now facing costly bills for system upgrades without having the resources to cover them.

“It is impacting particularly local municipalities that can’t afford those upgrades without that money,” Golden said.

The diversions not only shift the burden of upgrading 911 systems onto local homeowners via property tax bills — which runs counter to the ongoing push to encourage more sharing of services among governments in New Jersey — it also means local governments cannot qualify for matching federal grants that could be used to stretch the state’s dollars, Donnadio of the counties association said.

“As a direct result, the state of New Jersey, and its counties and its municipalities, are no longer eligible for millions of dollars in federal grant funding to upgrade with ‘NextGen’ 911 technology,” he said. “Something has to change.”

Testa’s proposed fix calls for new language to be written into the state constitution to strictly prohibit using the phone-tax revenue for anything other than funding 911 system upgrades. Because language written into the state constitution supersedes any fine print inserted into the annual budget, passing a constitutional amendment is the only way to prevent a fund diversion like the raiding of the 911 revenue from occurring. Therefore, to create the lockbox Testa is seeking, voters will have to approve a ballot question that explicitly calls for all revenue raised by the levy on phone bills to go to 911 systems.

A good example of how effective such constitutional protections can be played out over the last decade after the state fund that pays for unemployment benefits ran dry during the Great Recession — and after years of being raided by governors and lawmakers for other purposes. In fact, instead of having the resources available to fund the bigger need for jobless benefits amid the economic downturn, the state had to borrow the money from the federal government to cover its unemployment checks.

Trying to get a question on the ballot

After that embarrassment, a ballot question was passed by New Jersey voters in 2010 that added new language to the state constitution strictly prohibiting any future raids from the unemployment fund. With that protection in place, the fund’s balance has been built back above $2.5 billion, and all the revenue borrowed from the federal government has been repaid.

To get a dedication of phone-tax revenues on the ballot later this year, Testa’s proposal would need to receive the support of 3/5ths of both the 80-member Assembly and the 40-member Senate. That’s a tall order for a senator who was just sworn into office at the end of last year, but Testa said he is going ahead undaunted.

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“First responders must rely on a precise, accurate and reliable communications network to save lives,” said Cape May County Freeholder Marie Hayes.

“The fact of the matter is there are people who are going to be placed at great risk if they don’t have a basic infrastructure for 911,” Testa said. “We’re talking about basic government services that should be provided.”

For its part, the administration of Gov. Phil Murphy has been trying to reverse a number of poor fiscal practices that caused the state’s credit rating to tumble during the tenure of Republican predecessor Chris Christie. Murphy, a Democrat, has also called for a series of tax increases to address the state’s broader fiscal challenges, which were exacerbated by a series of tax cuts enacted in 2016. The cuts took hundreds of millions of dollars out of the General Fund even as costs related to things like public-worker pensions and debt payments were rising.

In fact, according to data compiled by The Pew Charitable Trusts, New Jersey revenue collections, after adjusting for inflation, only fully rebounded from the hit delivered by the Great Recession sometime last year.

Murphy is due to present a state budget proposal by the end of next month for fiscal year 2021, which begins July 1. Treasury spokeswoman Jennifer Sciortino said the issue of 911 funding is “one of many being discussed during ongoing preparations.”

But she also pointed to the prior administration’s tax cuts as remaining headwinds the Murphy administration still must deal with. Among those cuts were a reduction of the sales tax and the outright elimination of the estate tax. When they were enacted, the loss of annual revenue that was forecast at the time added up to roughly $1 billion.

“At the end of the day, this underscores the continued need for new, reliable, recurring revenue sources,” Sciortino said.