Program Review and Investigations Committee




<MeetMDY1> September 11, 2014


Call to Order and Roll Call

The<MeetNo2> Program Review and Investigations Committee meeting was held on<Day> Thursday,<MeetMDY2> September 11, 2014, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Representative Martha Jane King, Chair, called the meeting to order. In remembrance of the events that occurred on September 11, 2001, Representative King asked that those present observe a moment of silence. She welcomed Representative Koenig as a guest and congratulated Senator McDaniel on his candidacy for lieutenant governor. The secretary then called the roll.


Present were:


Members:<Members> Senator Christian McDaniel, Co-Chair; Representative Martha Jane King, Co-Chair; Senators Tom Buford, Ernie Harris, Jimmy Higdon, Dan "Malano" Seum, and Whitney Westerfield; Representatives Leslie Combs, Jim DeCesare, David Meade, Terry Mills, Ruth Ann Palumbo, Rick Rand, and Arnold Simpson.


Legislative Guest: Representative Adam Koenig.


Guests: Dale W. Edmondson, Chairman of Commercial Mobile Radio Service Emergency Telecommunications Board (CMRS Board) and Executive Director of Campbell County Consolidated Dispatch Center; Joe Barrows, Executive Director, CMRS Board; Major John Bradley, Chief Information Officer, Kentucky State Police and member of Commercial Mobile Radio Service Emergency Telecommunications Board; Judge/Executive Rob Rothenburger, Shelby County; Mayor Steve Austin, Henderson; Ed Butler, Executive Director, Emergency Communications, Kenton County.


LRC Staff: Greg Hager, Committee Staff Administrator; Chris Hall; Colleen Kennedy; Van Knowles; Jean Ann Myatt; William Spears; Shane Stevens; Joel Thomas; Carolyn Purcell, Graduate Fellow; Kate Talley, Committee Assistant.


Minutes for July 10, 2014

Upon motion by Senator Harris and second by Representative Simpson, the minutes of the July 10, 2014, meeting were approved by voice vote, without objection.


Follow-up on Report: 911 Services and Funding: Accountability and Financial Information Should Be Improved (adopted in 2011)

Mr. Knowles stated that the responsibility for 911 is split between state and local governments. Local governments, which have primary responsibility, operate public safety answering points (PSAPs) or arrange for 911 coverage, and generally raise most funds for 911 service.


State government, through CMRS Board, ensures that wireless calls are handled properly and distributes wireless 911 funds. With its authority under Senate Bill 119, the board is gathering information on local 911 costs and revenues.


In many places, local governments work together on 911 services. A common arrangement is a city that operates a PSAP for the entire county. The relationships and responsibilities of local governments are not always clearly defined. In some places, the parties may not have a written agreement or may not be able to locate one.


Some local governments formed interlocal boards that receive revenues and make budget decisions. Most of these boards were created in order to receive 911 services from the Kentucky State Police (KSP). Local control may be limited in city-county arrangements and with interlocal boards and other arrangements.


The report’s first recommendation is that all such arrangements should have a written agreement and should clearly establish the authority to control funds and provide 911 services.


If there is a 911 board, it should have a fiscal agent to handle its funds and should issue an annual audited financial statement. Local 911 fees should be remitted directly to the specified authority.


The report’s second recommendation is that KSP or any other state agency that provides local 911 services should do so on a contract basis in order to preserve local control.


The state agency should not be a party to interlocal agreements unless required to be and should not have voting representatives or officers on a 911 board that was formed by interlocal agreement.


Both recommendations suggest legislative consideration.


HB 1, enacted in the 2013 Regular Session, does not directly address 911 agreements. It applies in some respects, particularly by imposing financial reporting and audit requirements. It appears to have no effect on the recommended membership of regional 911 boards and might not apply to contractual arrangements between local entities. Program Review staff found no other enacted legislation that was relevant to these or the other recommendations in the report.


The ability to locate a wireless 911 caller is crucial to emergency response. The report notes that geospatial audits to assess the location process were not a prerequisite for certification and were not repeated. Wireless providers are responsible for the accuracy of the location information, but auditors were not required to report on provider accuracy.


The report’s third recommendation is that the board pursue its plan for ongoing geospatial audits and that auditors should report on the accuracy of the location service of wireless providers. The CMRS Board has not updated its regulations regarding geospatial audits.


Funding for 911 includes local 911 fees, local general funds, and the state 911 wireless fee. KSP also uses some state general funds to operate its PSAPs. Permitted uses of local 911 fees are unclear and differ from the permitted uses of the state 911 fee. Controls on 911 funds are inconsistent. Local 911 funds are only occasionally subject to audit. Local accounting procedures can make it difficult to perform audits of local and wireless 911 funds.


The wireless fund audits might not reach all the entities that handle wireless funds because the CMRS Board’s authority is limited to auditing PSAPs. The board has audited only a selection of PSAPs during each 2-year audit cycle. The board also audits wireless providers to verify fee collection, selecting some providers for each 2-year cycle.


The report’s fourth recommendation is that the General Assembly might wish to clarify whether the CMRS Board should audit all providers every 24 months and whether the board should audit all PSAP authorities every 24 months. In the absence of such clarification, the board should audit all providers and PSAP authorities every 24 months.


The report’s fifth recommendation is that the General Assembly might wish to consider additional audit controls so that local and wireless 911 revenues are maintained in separate restricted funds; each entity operating a PSAP creates a 911 cost center or has some other means to identify 911 expenses separately from other expenses; and all entities that handle dedicated 911 funds are subject to audit by the CMRS Board or another auditing authority.


CMRS Board annual reports indicated that an effort was made to bring audits up to date, but no statistics were given.


The CMRS Board is responsible for reviewing the rate of the wireless 911 fee every 24 months. However, the statute is unclear as to whether reports are required.


The report’s sixth recommendation is that the General Assembly might wish to consider clarifying whether the board should report on the wireless 911 fee cost studies and whether the board should report the methodology and findings of each review to designated officials.


The wireless statute does not refer to local governments but rather names “PSAPs” to receive funds and be subject to audits. However, PSAPs have no standing as fiscal agents. A local or state authority operates each PSAP and handles its funds. The wording has limited the CMRS Board’s ability to distribute and audit state 911 funds.


The report’s seventh recommendation is that the General Assembly might wish to consider whether to amend the statute to refer to state or local government authorities responsible for 911 services.


The recommendation also suggests clarifying how wireless funds should be distributed and controlled when local governments obtain 911 services from a state agency and whether wireless funds may be used to assist a noncertified secondary PSAP to handle wireless enhanced 911 calls.


Local and wireless 911 funds are insufficient to cover the costs of most PSAPs, so they receive supplemental general revenues from local governments. However, some local governments and interlocal boards that contract with KSP have accumulated 911 fund surpluses. The statute limits surpluses to the original purpose but provides no other guidance.


The report’s eighth recommendation is that the General Assembly might wish to limit the amount of 911 funds that a local government may hold in reserve and to require local governments to reduce 911 levies or return state wireless funds when revenues exceed costs.


Traditional 911 fees apply to phone lines and devices. New technologies and ways of delivering services might not fit existing fee structures. For example, differing postpaid and prepaid wireless fee methods are a result of accommodating new technologies and business models.


The statutory fee for postpaid service—the traditional wireless contract service—is 70¢ per month per phone. The report calculated that the fee for prepaid wireless service generated significantly less per phone. Their prepaid business model has led some providers to pay some of the 911 fee themselves rather than collecting it directly from their customers.


In order to accommodate the prepaid business model, the wireless industry proposed, and the National Conference of State Legislatures adopted, a model bill for a point-of-sale 911 fee on prepaid service. The report shows that the model bill would create an uneven fee burden and had opportunities for potentially large losses. If the target is to collect an average of 70¢ per phone, then the model bill would probably generate only half of that. Other losses could occur because of interstate sales over the Internet and other sellers who might not collect the fee.


The report presents features that probably would reduce the uneven fee burden somewhat and would more likely meet the revenue target. The report makes no recommendation on funding but does recommend obtaining more information pursuant to SB 119 of the 2011 Regular Session.


Senate Bill 119 effectively asks for a statewide 911 financial statement showing the costs for delivering 911 services and the revenues used to pay for them, for both landline and wireless calls. The bill gives the CMRS Board the responsibility to collect the information and provide it to the LRC. The board was unable to complete the data collection in time for inclusion in the Program Review 911 report. Because of the complexities of 911 oversight and funding, the board probably would need to send staff out to the field to collect the information.


PSAP authorities have to pay for delivery of 911 calls, and the CMRS Board reimburses some wireless providers for 911 calling costs. That makes it important to have information about the pricing of landline 911 phone service and the 911 costs of wireless providers.


The report’s ninth recommendation is that CMRS Board staff should visit all PSAPs and related local governments and boards to establish which ones have the needed information and to validate the information. The board should take steps in subsequent years to verify the data collected. The General Assembly might wish to consider permitting the board to allocate funds to these tasks beyond the current administrative fund limit.


CMRS Board annual reports did not mention a program of visits to local governments and PSAPs to establish and validate financial information.


The report’s tenth recommendation is that the CMRS Board report all revenues contributing to 911 services and all costs of providing those services in a manner that would permit decision makers to understand the sources and uses of 911 funds.


CMRS Board annual reports included information resembling a statewide 911 financial statement. The reports acknowledged that the information remains incomplete and unverified.


The report’s eleventh recommendation is that the board should examine the 911 fee collection process, the prices charged for delivering 911 calls, the actual cost of delivering 911 calls, and the need for continued wireless provider cost recovery.


This recommendation applies to landline and wireless providers. CMRS Board annual reports did not mention the fees collected by providers or the amounts paid to providers for 911 service. The annual reports did recommend that the General Assembly repeal wireless provider cost recovery.


The 911 service provided by KSP appeared to have inconsistent quality. Some local authorities were pleased with the service and others reported dissatisfaction. The report’s twelfth recommendation is that KSP should review the quality of the 911 services it provides to counties and review the satisfaction of local responder agencies.


In response to a question from Representative DeCesare concerning whether audits should be conducted for contracts that have been created by state agencies with both local governments and the 911 board to provide 911 services, Mr. Knowles said that prior to the passage of the HB 1 in 2013, there were no such requirements. HB 1 does not specifically address 911 issues but still might have some bearing on the auditing of 911 services. He said that he did not know whether third-party fiscal agents with contracts for 911 services should also be subjected to audits, but that he would check on this.


In response to a question from Senator Higdon, Mr. Knowles clarified that the Federal Communications Commission (FCC) originally set up provisions for wireless providers to receive cost recovery from states for the costs of developing wireless 911 service, but that over the years, the purposes for the overhead costs have been completed and there is no longer a need.


In response to a question from Senator Higdon, Mr. Knowles summarized SB 119. It empowers the CMRS Board to collect information such as financial statements. An annual or biannual report is required. At the time of the study, some of the interlocal 911 boards that contracted with KSP had considerable surpluses.


Senator Buford commented that he has not always been able to obtain needed information to address constituents’ questions about 911 services. The General Assembly has left local governments to do self audits. A statewide 911 financial statement that covers as many 911 areas as possible is needed. The General Assembly may not have the authority to require an audit of local services, so legislative action may be needed. He often sees the 911 service providers with sophisticated equipment such as expensive cars, but responses to 911 calls are not always as fast as possible. The General Assembly needs to fully understand how the 911 service provider’s funds are being used to respond to 911 calls to determine whether it is authorizing more funding than necessary. Funding or legislative action should be contingent on more information being provided through audits of 911 centers. He asked how many cell phones and land lines are being used in Kentucky.


Referring to Recommendation 2.3, Senator Westerfield inquired about the definition of “geospatial audit.” He mentioned a recent story that appeared in the Nashville, Tennessee press that described a woman who called 911 from a cell phone, but whose husband died before responders reached him because the call pinged the wrong cell tower and lengthened the response time. He said that this story raises a question about how 911 calls are routed.


Mr. Knowles confirmed that geospatial audits were done in Kentucky for wireless phones. However, the results of the audits were not required to be reported and they did not address the accuracy with which the wireless providers were able to determine the call location.


In response to questions from Representative Simpson, Mr. Knowles stated that KSP contracts with local governments and interlocal boards to provide 911 services.


Representative Simpson commented that KSP might not be charging enough for 911 services. The General Assembly might be better served by focusing on surplus funds held by local governments.


Senator Higdon said that there are over 4 million cell phones in Kentucky. He mentioned that Senator Buford sponsored SB 119.


In response to a question from Representative King as to status of recommendations directed to the General Assembly in the Program Review study, Mr. Knowles said that the only relevant legislation was HB 1. It required audits, although not specifically of 911 service centers.


Dale W. Edmondson and Joe Barrows next appeared before the committee.


In response to a question from Senator McDaniel as to why CMRS runs an annual fund surplus, Mr. Edmondson said that CMRS receives 70¢ per cell phone. A small, fixed amount is retained for CMRS administrative functions. Ten percent of the remaining funding goes into a CMRS grant fund. To be able to quickly respond to changing technological conditions, the board has been retaining grant funding. The CMRS Board did not receive a federal grant that was included in the reported surplus, so the actual surplus is less than reported. The surplus funding has been returned to the counties, leaving $50,000 in the grant fund.


Senator McDaniel commented that the CMRS report submitted to LRC said that $7.3 million was committed and unexpended. The General Assembly’s frustration is that it wrote a budget based on the numbers in that report.


Mr. Barrows explained that the money in the fund stays obligated to specific counties for 911 services until the counties ask for reimbursement for 911 service costs that they have incurred.  In 2013, CMRS conducted a series of 911 projects that have not yet been completed.


Senator McDaniel commented that the CMRS’s total balance seems to be increasing. He asked for an accounting as to the entities to which CMRS funds are allocated and when reimbursement is expected. The General Assembly has an expectation of receiving such an accounting from the CMRS Board because it appears as if CMRS has a $9 million stockpile.


Mr. Edmondson said that the $9 million is accounted for. As soon as funds are expended, in the next quarter, funds come back into the account. The funding for counties is separated on a volume usage basis.


Senator McDaniel commented that it looks as if funds are not accounted for and an accounting from CMRS is needed. He said that CMRS has three open balances from 2012.


Mr. Edmondson said that such balances are usually due to equipment issues.


In response to a question from Senator McDaniel as to whether this is a good time to consider consolidation of 911 services given Kentucky’s movement to VIPER [Voice Over Internet Protocol for Emergency Response], Mr. Edmondson said that CMRS’s practice is to consider consolidation.


Senator McDaniel commented that the provision of 911 services is a public expectation, and that he looks forward to seeing the CMRS accounting statement.


Representative King commented that the Logan and Todd county fiscal courts had to expend funds to continue to deliver 911 services. She asked if CMRS has enough grant funding allocated to these counties to fully provide 911 services and how much more it would need to allocate so that fiscal courts would not need to subsidize 911 services.


Mr. Edmondson said that he doubts that there will ever be enough grant funding to keep up with the demand for 911 services. Cell phone 911 service is now expected by the public. In counties that do not have the population base to support the cost of providing 911 services, it is likely that grant money must be supplemented. 


In response to a question from Representative King, Mr. Edmondson said that counties are reimbursed immediately by CMRS for designated allocations for 911 services.


Senator Higdon commented that Marion County never implemented E-911 and inquired whether CMRS advises small counties to contract with KSP to provide 911 services.


Mr. Barrows replied that in the past, as funding became tighter, a number of counties began to look into such contracts. Some counties have asked KSP to take over provision of 911 services. CMRS has set aside grant money for six counties, which will be obligated until those counties ask for reimbursement.


In response to a question from Senator Higdon as to whether the provision of 911 services for texting and other technologies may soon be required and whether a statewide plan is needed for such services, Mr. Barrows said that the FCC is driving those requirements. If a PSAP requests such services, the FCC requires that the wireless company provide them. An issue is whether a local PSAP can handle such 911 services.


Senator Higdon asked whether the CMRS Board charges point-of-sale fees or collects the fees from the prepaid wireless companies and whether CMRS can choose which one it uses without legislation.  Mr. Barrows said that the FCC uses one of three methods. The first method would be to decrement 70¢ worth of minutes each month per phone. The second method uses a formula that divides the prepaid revenues by $50, which ideally gives the number of subscribers, which is multiplied by 70¢. The third method allows the CMRS Board, by regulation, to adopt a method for collecting fees. The board has not adopted a regulation because the General Assembly would unlikely to approve it.


In response to further questions from Senator Higdon, Mr. Barrows said that wireless providers pay for free cell phones and collect fees from Internet sales of cell phones.


Mr. Barrows answered a question from Senator Higdon by explaining that approximately 2.5 percent of the $25 million collected annually is used to pay administrative costs. CMRS has four staff currently.


In response to a question from Senator Westerfield, Mr. Edmonson said that since CMRS’s grant funds are being disbursed, no further legislation is needed at this time.


Senator Westerfield asked Mr. Edmondson to provide him with a scoring rubric, along with the scores for the counties he represents.


Senator Buford asked whether CMRS could provide the General Assembly with the names of the regions that are too small to provide 911 services on their own and should therefore contract with KSP to provide such services.


In response to questions from Representative DeCesare, Mr. Edmondson said that Kentucky counties whose 911 centers are PSAP-certified are eligible for CMRS grants. Mr. Barrows listed Marion, Magoffin, Owsley, Robertson, Nicholas, and Martin as counties that did not implement E-911.


Major John Bradley appeared before the committee.


In response to a question from Representative Simpson, Major Bradley said that in its contracts to provide 911 services through interlocal agreements, KSP establishes costs inconsistently.


In response to additional questions from Representative Simpson, Major Bradley said that KSP is working to formalize its interlocal agreements in order to create a fair funding model. Although KSP can apply for grants, it has not received many and grants are a very small part of its budget.


In response to a question from Representative King, Major Bradley said that a review of KSP’s 911 services is ongoing via an emergency medical dispatcher who specializes in working with centers that contract with the state police. He noted that the state police need to give latitude to localities.


In response to an additional question from Representative King, Major Bradley said that KSP is not ready to take over all 911 dispatches in Kentucky. It would first have to assess all PSAPs in Kentucky, which would be a radically different approach from the way 911 services are currently handled.


Senator Higdon commented that he is glad to hear that KSP is working on a real cost basis in providing 911 services.


In response to questions from Senator Higdon, Major Bradley said that KSP includes retirement costs in its accounting statements, although it has no way to recoup retirement costs.


KSP’s involvement in providing 911 wireless services has evolved over time. He noted that providing 911 services is not a money-making business, although at first, a number of local entities had envisioned it that way. 911 services are very expensive. Citizens expect a high standard of care but are not necessarily willing to pay for it. KSP tries as much as possible to provide 911 services through local dispatch centers.


In response to a question from Senator Higdon, Major Bradley said that there are 114 certified PSAPs in Kentucky.


Judge/Executive Rob Rothenburger next appeared before the committee.


Judge Rothenburger noted that although there are 4 million cell phones in Kentucky, the real question is the number of devices that are capable of Next Gen technology. Most PSAPs in Kentucky would welcome an audit and inquired of Mr. Knowles whether he can provide an update on the number of PSAPs that have surpluses. There are six counties in Kentucky’s VIPER project. VIPER will eventually connect all PSAPs, thus regionalizing and saving money.


In response to a question from Representative DeCesare, Mr. Barrows said that it is undecided whether CMRS can collect 70¢ from iPads and other tablet devices that have phone capability. The statutes may not cover 911 services for these devices. This should be examined.


Judge Rothenburger commented that he is seeing calls from such devices escalating in his region.


In response to a question from Representative King, Judge Rothenburger said that Kentucky counties are freely participating in consolidating 911 services because they see it as a way to save money and offer services more efficiently. Such consolidation will result in fewer delays in response time to 911 calls. Counties are sharing only some aspects of 911 service provision, such as equipment. The CMRS Board just received a grant of $180,000. Without that grant, the six counties could not have consolidated.


In response to a question from Senator Buford, Judge Rothenburger confirmed that some phones billed to other states are utilizing 911 services in Kentucky.


Mayor Steve Austin appeared before the committee.


Mr. Austin said that 911 services are split into operational costs and revenue costs. His area is collecting $500,000 less revenue than the cost needed to provide 911 service. Henderson is losing land lines very quickly and that it increased its land line fees by 25¢ per year to make up for those losses. There have been attempts to put 911 service costs on water bills but courts have ruled against this practice. He noted two ways in which the General Assembly can be of help: (1) allow cities and counties to create special taxing districts to offset the costs of 911 services, and (2) allow cities and counties to put 911 costs on tax bills to forestall concerns about lawsuits.


In response to a question from Senator Higdon, Mr. Austin said that the counties around Henderson are unwilling to participate in regionalization of 911 services.


Representative Adam Koenig said that he sponsored a bill last year that would have allowed cities to put 911 fees on wireless bills. He asked whether such legislation would help Henderson. Mr. Austin replied that the cost of cell phone service is the same, but that Henderson receives less money for providing cell phone 911 services.


Mr. Butler appeared before the committee.


Mr. Butler said that Kenton County funds its 911 services through a parcel fee. In response to questions from Representative Simpson, Mr. Butler said that Kenton County does not have a surplus. There are no court challenges to the county’s fee structure.


In response to questions from Representative King, Mr. Butler said that Kenton County has eliminated land line fees. Eighty percent of 911 calls come from wireless devices. Landowners are financing all cell phone use.


The meeting adjourned at 11:55.