News of the Week

E-rate Outlook Under Bush Administration

Recent indications from the Bush Administration are that the E-rate program will remain under the control of the FCC and that it will not be consolidated with other technology funding programs under the DOE. This position contrasts markedly with an earlier proposal contained in the Bush white paper “No Child Left Behind” that suggested combining technology funds and distributing those funds via state block grants

U.S. Secretary of Education Roderick Paige, testifying before the House Education and Workforce Committee earlier this week, said that the Administration would not seek to move the E-rate program to the Department of Education. By way of confirmation, Senator Barbara Mikulski indicated that the White House staff provided the same message to her and other Senators this week that the Administration would not seek to merge E-rate into the ESEA reauthorization.

Although not stated explicitly by the Administration, the change in position apparently reflects several factors, namely:

1. The current E-rate program is working well and has become an important source of ongoing funding to schools and libraries nationwide.
2. The program is funded through Universal Service contributions of the telecom carriers, not from general tax revenues. Combining E-rate funds with other federal funds, or finding an alternative source of federal funds, would be politically and legislatively difficult.
3. Private schools and, to some degree, libraries have argued strongly that they would be severely disadvantaged if E-rate funds were replaced by federal block grants.

The new FCC Chairman, Michael Powell, has so far taken a neutral position on the E-rate program suggesting that he will support the Administration’s position. For PY4, it would take proactive action by the full Commission to change the annual $2.25 billion funding limit. As a result, we expect E-rate funding to continue at its current level for PY4.

• More on PY3 Item 22 Rejections – Request for NYS Information

Our last Weekly News article reported on a FCC appeal decision reversing an automatic rejection of a PY3 Form 471 application that had left out Block 5, Item 22 references to a discount rate worksheet. Shortly thereafter, the FCC issued a second decision remanding six applications with similar problems back to the SLD. On the basis of these decisions, we expect the SLD to look favorably on a number of similar PY3 appeals that had been made directly to the SLD (and on which the SLD had been deferring action pending the FCC decisions).

This is clearly good news for PY3 applicants who appealed the rejection of their Form 471s for missing Item 22 data. Unfortunately, applicants, whose Form 471s were rejected for a similar reason, but who did not file appeals, are not helped by these decisions. The SLD has no plans or procedures for retroactively reviewing rejected applications that were not appealed.

E-Rate Central believes that a strong case can be made for asking the SLD to review all Item 22 rejections, whether or not a timely appeal was filed. We are asking any NYS applicant, whose PY3 Form 471 was rejected for missing Item 22 data, to please notify us as soon as possible.

• Timing on Technology Plan Approvals for PY4

Since technology plan approvals for E-rate purposes are valid for up to three years, many applicants will needed renewed approvals for PY4. There is some confusion, however, as to the deadline for completing these approvals. Within the next few weeks, we expect the SLD to post some clarification on its Web site. Until then, it is best to assume that the deadline is July 1, 2001.

Several points should be noted:

1. Neither Form 470 nor Form 471 requires a certification that an applicant has an approved technology plan. Both forms include a check off option that a technology plan “will be approved.” Form instructions, however, indicate that this option should be checked if the applicant is “currently seeking approval,” which strongly suggests that an actual plan exists.
2. The first time an applicant must formally certify that their plan has been approved is after funding has been awarded and the applicant files a Form 486 to confirm receipt of service. As a practical matter, many applicants do not file their Form 486s until later in the program year, well past July 1. (As an aside, it should be noted that the new filtering law may require PY4 Form 486s to be filed by October 28, 2001.)
3. The SLD is likely to take the position that, although it is not necessary to certify plan approval until a Form 486 is finally filed, any services being discounted must be received under an approved plan. Thus, for example, an Internet service bill for July cannot be discounted, even retroactively, unless a technology plan had been approved as of July 1. As a result, we strongly recommend that all applicants needing new approvals for PY4 move quickly to have their plans approved by July 1, 2001.