eRate officials on Nov. 3 announced they have enough cash on hand to start mailing funding-commitment decision letters this week to schools and libraries that have been waiting longest for answers.

Meanwhile, Washington lobbyists are pushing members of Congress to write a bill that would exempt the Universal Service Fund from complying with the federal law that caused the funds to be stopped in the first place.

The law, known as the Anti-Deficiency Act, requires government entities to have the money in hand before “obligating” or promising it. On Aug. 3, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. (USAC), which administers the $2.25 billion-a-year internet and telephone service discount program, stopped mailing funding letters to applicants in order to comply with the law.

2005 application
window opens Dec. 14

Though the status of eRate applications from 2003 should be resolved shortly, most 2004 applicants will still be wondering how much eRate funding they are to receive before it’s time for them to apply again for 2005 funding. The SLD announced on Nov. 5 that applicants will have 66 days in which to file applications the 2005 funding year….

  • As a result, schools and libraries nationwide have been left wondering what became of their eRate applications.

    “It’s just had a huge impact,” said Mary Kusler, legislative specialist for the American Association of School Administrators (AASA). “There’s still a whole mess of school districts that don’t know what they are getting, if at all, and it makes it hard to plan for the next year, which is starting soon.” (For information about the 2005 application window, see accompanying story.)

    Many schools and libraries reportedly have had to delay technology projects–and a few even have been forced to cut off their internet service. “It’s happening in more places then I would have expected. It’s happening in Kansas and Alaska,” Kusler said.

    The SLD could not specify when more decision letters would be mailed, but from now on, the agency expects to send out at least one wave of letters per month. The November wave of letters will go to all applicants for funding years prior to 2004 that have completed the review process.

    “Every time we get some money in from collections, we’ll have to see how much money we have [to send out],” said SLD spokesman Mel Blackwell. “This will be a monthly routine. We just started, so all I can tell you is it will be at least once a month.”

    As more funds become available, the agency will mail decision letters according to a set of priorities announced Oct. 28. “We’ll start with the oldest [applications] first and work forward,” Blackwell said.

    The priorities explain that all pending 2004 applications will be processed and mailed after all applications from prior years are resolved. The SLD is resolving applications from the oldest funding years first, because money for those years already has been collected–but collections for 2004 are still ongoing.

    This slow trickle of eRate funds has prompted a broad coalition of education groups, known as the Education and Libraries Networks Coalition (EdLiNC), to lobby members of Congress to draft a bill that would exempt the eRate and Rural Health Care programs from the Anti-Deficiency Act.

    EdLiNC represents more than 20 organizations, including the AASA, American Library Association, Consortium for School Networking, Council of Chief State School Officers, and International Society for Technology in Education.

    “We’re trying to find possible vehicles to which we could attach a bill,” Kusler said. “We just need to make sure we are doing everything we can do to get the program up and running. The program is not operating currently as it should.”

    With this simple waiver, the eRate could go back to issuing funding commitment letters the way it always had, regardless of how much money is in the bank.

    Federal Communications Commission (FCC) Chairman Michael Powell said he supports creating an exemption. In an Oct. 5 letter to Sens. Olympia Snowe, R-Maine, and John D. Rockefeller, D-W.Va., Powell wrote, “Let me assure you that I appreciate and share your concern that the Anti-Deficiency Act may affect the operation of the universal service program.”

    He said “remedial legislation” that would exempt the fund from the law would be one option. “I would welcome an opportunity to work with your staff to craft such a legislation,” Powell said.

    But questions remain unanswered about how the decision to bring the eRate program in compliance with the Anti-Deficiency Act came about.

    Rep. John Dingell, D-Mich., the ranking Democrat on the House Commerce Committee, sent a letter to Powell Oct. 27 asking several questions, including: What was the legal basis for the decision? And, how was the White House Office of Management and Budget (OMB) involved?

    Dingell also asked why the FCC, an independent agency, would legally take orders from OMB. In another question, he asked whether FCC Commissioners Jonathan S. Adelstein and Michael J. Copps–the two Democratic commissioners–had been consulted, because they have publicly said they were left in the dark. (See “FCC fur flies over eRate delays,”

    An FCC spokesman said the agency is still reviewing Dingell’s letter and would not immediately comment.

    Another concern is why the Anti-Deficiency Act is not being applied to the High Cost, Low Income portions of the Universal Service Fund. “Why are the eRate and Rural Health Care the only programs singled out? It’s a clear lack of consistency,” Kusler said.

    The Wall Street Journal reported that the FCC has not applied the law to the High Cost, Low Income program because doing so could have a devastating effect on the entire Universal Service program.

    It would mean phone companies would have to contribute 25 percent of their long-distance revenue in addition to their current payments, the Journal reported. “That’s the nightmare scenario,” Frank Gumper, chairman of USAC’s board of directors, told the Journal. “By then, these programs would be on the verge of collapsing.”

    USAC has already asked federal regulators to increase the amount of long-distance revenue phone companies are required to contribute to the Universal Service Fund from 8.9 percent to 12.5 percent. For the last three quarters, the FCC has held the contribution factor at 8.9 percent, even though the need has been greater, Blackwell said.

    Collecting a higher percentage will help USAC catch up by about $275 million, but it won’t mean all applicants will get their funding-commitment letters any sooner, Blackwell said. The additional money will become “cash on hand” for funding commitments promised before the agency began complying with the Anti-Deficiency Act.

    The increase likely will force the entire telephone industry–including wireless, long distance, and local providers–to raise the Universal Service fee on consumer’s bills.

    “If [USAC] starts collecting more, inevitability [telecommunications companies] will have to start charging consumers more and phone bills across America will go up,” Kusler said.

    Related story:

    2005 application window to open Dec. 14


    Federal Communications Commission

    Schools and Libraries Division

    Letter from Rep John Dingell to FCC Chairman Powell