10.2 9-1-1 Surcharges, Fee Diversion & Federal Grant Programs

10.2 9-1-1 Surcharges, Fee Diversion & Federal Grant Programs

Quick Answer: The financing of 9-1-1 communications centers relies primarily on dedicated monthly user surcharges levied on consumer telecommunications services across wireline, postpaid wireless, interconnected VoIP, and prepaid wireless retail point-of-sale (POS) transactions. While postpaid cellular fees are sourced to the subscriber's Primary Place of Use (PPU) under the federal Mobile Telecommunications Sourcing Act (MTSA), prepaid fees are collected by retail merchants and remitted through state departments of revenue. Diverting these dedicated emergency revenues to state general funds, law enforcement patrol vehicle fleets, or non-dispatch projects is termed 9-1-1 Fee Diversion. Section 902 of the Consolidated Appropriations Act, 2021 (the Don't Break Up the T-Band Act of 2020, Public Law 116-260) led the FCC to adopt fee diversion rules in PS Docket 20-291 (FCC 21-80) that define acceptable 9-1-1 fee uses; states the FCC identifies as diverters are barred from FCC and FirstNet public safety advisory committees, and 9-1-1 grant applicants must certify they have not diverted fees. Allowable expenditures encompass ESInets, NGCS, CAD, GIS layers, logging recorders, and dispatch personnel, while general government expenses are strictly unallowable.

---

1. Economics of Public Safety Communications & The Dual-Funding Crunch

Operating a carrier-grade, 24/7/365 Emergency Communications Center (ECC) requires sustained capital and operational funding. Unlike administrative municipal agencies that operate during standard business hours, public safety answering points maintain mission-critical infrastructure with zero tolerance for system downtime.

                  PUBLIC SAFETY FINANCIAL EXPENDITURE DUALITY
                                       │
         ┌─────────────────────────────┴─────────────────────────────┐
         ▼                                                           ▼
  CAPITAL EXPENDITURES (CapEx)                                OPERATIONAL EXPENDITURES (OpEx)
  • ESInet ingress border control (BCF)                       • Recurring fiber transport circuit leases
  • Next Generation Core Services (NGCS)                      • Software maintenance SLAs & licensing
  • CAD server clusters & dispatch consoles                   • 24/7 SIEM & MDR cybersecurity monitoring
  • Geodetic GIS address points & centerlines                 • Over-the-Phone Interpretation (OPI)
  • Voice/video logging recorders & master clocks             • Telecommunicator salaries, OT & wellness

The NG911 Dual-Funding Crunch

As public safety navigates the multi-year migration from legacy Time Division Multiplexing (TDM) architectures to Next Generation 9-1-1 (NG911), communications authorities confront the dual-funding crunch. PSAPs cannot simply decommission legacy systems overnight; they must continue paying recurring carrier tariff charges for legacy Centralized Automatic Message Accounting (CAMA) analog circuits, legacy copper selective routers, and legacy ALI databases while simultaneously funding the multi-million-dollar capital buildout and monthly cloud software subscription fees of high-capacity fiber Emergency Services IP Networks (ESInets) and Next Generation Core Services (NGCS). Dedicated 9-1-1 surcharges are essential to bridge this transition.

---

2. Dedicated 9-1-1 Surcharge Collection Architecture

Because telecommunications modalities differ fundamentally in billing architecture, state statutes establish distinct collection and remittance mechanisms across four primary service tiers:

┌─────────────────────────────────────────────────────────────────────────────┐
│                     9-1-1 SURCHARGE REMITTANCE ARCHITECTURE                 │
├─────────────────────┬───────────────────────┬───────────────────────────────┤
│ TELECOM MODALITY    │ COLLECTION MECHANISM  │ SOURCING DETERMINATION        │
├─────────────────────┼───────────────────────┼───────────────────────────────┤
│ Wireline            │ Monthly billing bill  │ Physical service address      │
│ Postpaid Wireless   │ Monthly billing bill  │ Primary Place of Use (MTSA)   │
│ Interconnected VoIP │ Monthly billing bill  │ Registered physical location  │
│ Prepaid Wireless    │ Point-of-Sale (POS)   │ Retail store physical address │
└─────────────────────┴───────────────────────┴───────────────────────────────┘

1. Wireline Access Line Surcharges

The traditional wireline model assesses a statutory flat monthly surcharge (typically $0.50 to $2.00 per access line) on the end-user's local exchange carrier telephone bill. The ILEC collects the fee, retains a nominal administrative handling allowance (usually 1% to 3%), and remits the balance to the state 9-1-1 enterprise fund or local emergency communications district based on the physical service address of the customer.

Revenue Erosion: Over the past two decades, residential wireline subscriptions have plummeted by more than 80% due to cellular cord-cutting, precipitating a catastrophic loss of historical 9-1-1 funding.

2. Postpaid Wireless Surcharges & The Mobile Telecommunications Sourcing Act (MTSA)

Wireless cellular service generates the largest share of modern emergency communications surcharge revenue. Postpaid cellular subscribers are billed a dedicated monthly 9-1-1 surcharge per active mobile directory number (MDN) on their carrier invoice.

Because mobile handsets move continuously across municipal, county, and state borders, allocating tax revenues based on where a call is placed is legally and technically impossible. Congress enacted the Mobile Telecommunications Sourcing Act of 2000 (MTSA) (4 U.S.C. § 116 et seq.) to establish a uniform sourcing standard:

• Surcharges and taxes are assigned exclusively to the taxing jurisdiction covering the customer's Primary Place of Use (PPU).
• PPU is statutorily defined as the residential street address or the primary business street address of the subscriber within the licensed service area of the carrier.
• Surcharges are remitted by the carrier to the state or local jurisdiction covering that PPU, regardless of where the device physically travels.

3. Interconnected Voice over Internet Protocol (VoIP) Surcharges

Interconnected VoIP service providers assess monthly 9-1-1 surcharges on each active subscriber line or concurrent voice channel capable of completing calls to the Public Switched Telephone Network (PSTN). Fees are sourced to the subscriber's primary registered physical service address. For multi-line enterprise SIP trunks, state statutes apply statutory equivalence formulas (such as one fee per outbound concurrent trunk path) to ensure appropriate fee parity.

4. Prepaid Wireless: The Retail Point-of-Sale (POS) Model

Prepaid wireless subscribers do not receive monthly carrier invoices, have no recurring billing cycle, and often maintain no verified residential address on file with the mobile operator. Early attempts to collect 9-1-1 fees by deducting airtime units directly from prepaid phone balances resulted in widespread non-compliance, carrier litigation, and massive revenue loss.

To resolve this disparity, public safety stakeholders developed the Model Prepaid Wireless 9-1-1 Act, which has been enacted by the vast majority of states:

• Point-of-Sale (POS) Collection: Surcharges are collected at the retail cash register or online checkout when the consumer purchases a prepaid mobile handset, prepaid SIM card, or airtime refill card.
• Tax Structure: Levied as a flat statutory dollar amount per retail transaction or as a percentage of the retail transaction amount.
• Remittance via Departments of Revenue: The retail merchant collects the fee, retains a small administrative allowance, and remits the surcharge directly to the State Department of Revenue on the state sales tax schedule. The revenue department then transfers collected proceeds into the dedicated state 9-1-1 enterprise fund for disbursement to PSAPs.

---

3. The 9-1-1 Fee Diversion Crisis

9-1-1 Fee Diversion is defined as the legislative transfer, sweep, or reallocation of dedicated 9-1-1 surcharge revenues collected from consumer communications bills for purposes other than the support and operation of 9-1-1 systems.

                      THE FEE DIVERSION WORKFLOW
Dedicated Surcharges Paid by Consumers (for 9-1-1 Emergency Services)
                           │
                           ▼
             [State Treasury / Revenue Pool]
                           │
        ┌──────────────────┴──────────────────┐
        ▼                                     ▼
  ALLOWABLE EXPENDITURES                PROHIBITED FEE DIVERSION
  • ESInet & NGCS core routing          • General Fund budget balancing
  • CAD software licensing & servers    • Highway patrol vehicle fleets
  • Telecommunicator salaries/training  • Police uniforms & body cameras
  • Logging recorders & GIS layers      • Prison management software (JMS)
  • PSAP facility backup generators     • Municipal debt service & pensions

Manifestations of Fee Diversion

Fee diversion typically manifests in three administrative practices:

1. General Fund Budget Sweeps: Legislative bodies transfer accumulated cash reserves from dedicated 9-1-1 trust funds into the state general fund at the close of a fiscal year to offset structural deficit shortfalls.
2. Unrelated Public Safety Offsets: Lawmakers allocate 9-1-1 surcharge revenues to purchase state police patrol cars, officer body-worn cameras, non-dispatch mobile radios, or correctional facility inmate management systems under the rationale that they are "public safety expenditures."
3. Executive Agency Overhead Subsidies: Siphoning 9-1-1 funds to subsidize broad state administrative overhead, governor's cabinet initiatives, or legislative information technology networks.

Operational Harms to Emergency Dispatch

When 9-1-1 fees are diverted, emergency communications centers suffer direct operational injury:

• Deferred NG911 Transition: PSAPs cannot afford to deploy fiber ESInets, implement Next Generation Core Services, or upgrade to geospatial call routing, leaving citizens on vulnerable legacy copper trunks.
• Equipment Failures: Centers are forced to maintain end-of-life CAD and call-handling hardware long past manufacturer end-of-support dates.
• Staffing and Retention Crises: Underfunded centers cannot offer competitive wages, resulting in serious telecommunicator vacancies, increased call-answer times, and telecommunicator burnout.

---

4. Statutory Anti-Diversion Framework & the FCC Fee Diversion Rules

In response to chronic fee diversion, Congress and the FCC instituted an aggressive statutory and regulatory anti-diversion regime.

Annual FCC Report to Congress

Mandated by the NET 911 Act of 2008, the FCC issues an annual sworn questionnaire to the governor of every U.S. state and territory, requiring comprehensive accounting of all 9-1-1 surcharge fees collected and every expenditure made. The FCC compiles these findings into its public Annual Report to Congress on State 911 Fee Diversion, identifying offending jurisdictions.

Next Generation 9-1-1 Advancement Act of 2012

Enacted as Title VI, Subtitle D of the Middle Class Tax Relief and Job Creation Act of 2012 (Public Law 112-96), the Act tied the federal 9-1-1 grant program to non-diversion: grant applicants must certify that designated 9-1-1 fees have not been diverted (for the 180 days before applying) and must return grant funds if diversion occurs during the grant period.

Don't Break Up the T-Band Act of 2020 & the FCC's 2021 Fee Diversion Rules

Congress reinforced anti-diversion penalties in Section 902 of Title IX, Division FF of the Consolidated Appropriations Act of 2021 (known as the Don't Break Up the T-Band Act of 2020, Public Law 116-260). The statute directed the FCC to issue formal rules defining the precise boundaries of allowable 9-1-1 fee expenditures.

In June 2021, the FCC adopted its Report and Order (FCC 21-80, PS Dockets 20-291 and 09-14, effective October 18, 2021, codified at 47 CFR §§ 9.21–9.26), defining acceptable and diverted uses of 9-1-1 fees:

┌─────────────────────────────────────────────────────────────────────────────┐
│            FCC 21-80 (PS DOCKET 20-291): FEE EXPENDITURES                   │
├──────────────────────────────────────┬──────────────────────────────────────┤
│  ALLOWABLE 9-1-1 EXPENDITURES        │   UNALLOWABLE (ILLEGAL DIVERSION)    │
├──────────────────────────────────────┼──────────────────────────────────────┤
│ • ESInet ingress, BCFs & NGCS        │ • State General Fund cash sweeps     │
│ • CAD servers, software & consoles   │ • Police patrol cars & fire engines  │
│ • GIS address points & centerlines   │ • Officer body cameras & tasers      │
│ • Voice/video logging recorders      │ • Jail / records management (JMS/RMS)│
│ • Telecommunicator salaries & OT     │ • Non-dispatch municipal IT systems  │
│ • Dispatcher training & certification│ • State highway maintenance          │
│ • CISM & mental wellness programs    │ • Municipal bond debt service        │
│ • PSAP backup generators & UPS plants│ • Police uniform allowances          │
└──────────────────────────────────────┴──────────────────────────────────────┘

The Strike Force on 911 Fee Diversion

Section 902 also directed the FCC to form the Ending 9-1-1 Fee Diversion Now Strike Force, which studied how federal, state, and local governments could end fee diversion and reported its recommendations to Congress.

---

5. Federal Public Safety Grant Programs & Compliance

Federal grants provide vital capital funding to assist local governments in modernizing emergency infrastructure. However, receiving federal assistance binds the grantee to rigorous compliance standards.

                         FEDERAL 9-1-1 GRANT LANDSCAPE
                                       │
         ┌─────────────────────────────┼─────────────────────────────┐
         ▼                             ▼                             ▼
  NTIA / NHTSA 911 PROGRAM       IIJA (BIL) BROADBAND & CYBER       DHS / FEMA HSGP
  • Dedicated NG911 migration    • State/Local Cyber Grants (SLCGP) • SHSP & UASI funding
  • State matching funds         • Rural broadband connectivity     • Interoperable communications
  • Mandatory anti-diversion     • Infrastructure resilience        • Regional CAD-to-CAD links
  • Strict non-supplanting       • Disqualifies fee diverters       • 2 CFR Part 200 audit rules

1. Joint NTIA / NHTSA 911 Grant Program

Administered jointly by the National Telecommunications and Information Administration (NTIA) of the Department of Commerce and the National Highway Traffic Safety Administration (NHTSA) of the Department of Transportation, this program provides dedicated capital matching grants directly targeted at state and tribal NG911 deployment:

• Statutory Purpose: Capital acquisition of ESInets, Next Generation Core Services, cybersecurity software, and GIS geospatial data infrastructure.
• Non-Supplanting Requirement: Grant funds must supplement, rather than replace (supplant), existing state or local operational funding allocations.
• Anti-Diversion Disqualification: Applicants must certify that no designated 9-1-1 fees were diverted during the 180 days before applying and agree not to divert fees during the grant period; recipients that divert fees must return grant funds.

2. Infrastructure Investment and Jobs Act (IIJA)

Enacted in 2021 as Public Law 117-58 (the Bipartisan Infrastructure Law), the IIJA allocated tens of billions of dollars toward national infrastructure resilience:

• State and Local Cybersecurity Grant Program (SLCGP): Administered by CISA and FEMA, providing $1 billion over four years to protect public safety and municipal operational networks from ransomware and advanced persistent threats (APTs).
• Broadband Equity, Access, and Deployment (BEAD) Program: Expands high-speed fiber-optic connectivity to underserved and rural areas, providing critical transport paths for rural ESInets.

3. DHS / FEMA Homeland Security Grant Programs (HSGP)

FEMA administers the State Homeland Security Program (SHSP) and the Urban Areas Security Initiative (UASI). While not exclusively dedicated to 9-1-1, these programs provide substantial funding for public safety communications:

• Procurement of interoperable P25 Land Mobile Radio (LMR) consoles and base stations.
• Development of redundant backup PSAP facilities and mobile command centers.
• Integration of multi-agency CAD-to-CAD message bridges to coordinate regional disaster response.
• Compliance with Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards codified at 2 CFR Part 200.

---

6. Surcharge Remittance & Grant Compliance Comparison Matrix

---

7. Enabling Legislation: Factors to Consider

State and provincial 9-1-1 funding laws do more than set a fee. The ENP Body of Knowledge lists six factors to weigh when drafting or evaluating enabling legislation:

Examples of governing bodies include the Texas Commission on State Emergency Communications (CSEC) and the Tennessee Emergency Communications Board, which oversees the state's emergency communications districts. Tying funds to standards gives a state program leverage to raise service quality consistently, but requirements without matching funding can strain small PSAPs.

---

8. Operational Traps & ENP Exam Watch

• Postpaid vs. Prepaid Sourcing Distinctions: Postpaid wireless 9-1-1 surcharges are sourced based on the customer's Primary Place of Use (PPU) under the federal MTSA, regardless of where mobile calls occur. Prepaid surcharges are collected at the retail point of sale (POS) by merchants and remitted via state departments of revenue.
• Know the Actual Diversion Penalties: Federal law does not impose a blanket ban on every federal grant. The concrete consequences are public identification in the FCC's annual fee report to Congress, exclusion of diverting states from FCC and FirstNet public safety advisory committees (Section 902), and ineligibility for 9-1-1 grants that require a non-diversion certification.
• Law Enforcement Patrol Cars Are NOT Allowable 9-1-1 Expenditures: A pervasive ENP exam distractor involves using 9-1-1 surcharges to purchase marked police patrol cruisers or tactical gear under the excuse that they respond to 9-1-1 calls. The FCC's fee diversion rules (47 CFR Part 9, Subpart I) treat uses unrelated to 9-1-1 operations as diversion, even when the equipment responds to 9-1-1 calls.
• Non-Supplanting Requirements: Federal public safety grant funds must be used to supplement existing local operational investments. An agency cannot accept a federal grant and simultaneously reduce its local municipal budget by an equivalent amount.
• Enabling Legislation Sets Conditions: State funding laws often tie fee distributions to governing board oversight and to standards for telecommunicator training, equipment, and addressing and mapping data.