News of the Week

Wave 41 for FY 2014 will be released on Thursday, February 19th. Funding for FY 2014 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2014 is $2.13 billion.

Wave 82 for FY 2013 will be released next week on Monday, February 23rd. Funding for FY 2013 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2013 is $2.13 billion.

One of the “Frequently Unanswered Questions” discussed last week in our newsletter of February 9, 2015, was the treatment of charter schools in the applications of the school districts in which they are located (or of district schools in the charters’ own applications). USAC and FCC guidance on this issue has been mixed — and informal.

The purpose of this article is to explain the underlying issue and to provide some practical advice. Please note that the views expressed in this article are those of E-Rate Central. This does not reflect formal USAC or FCC guidance.

The root of the charter school issue lies in Para. 220 of last July’s E-rate modernization Order (FCC 14-99) that states:

220. While we do not specifically define the term “school district,” an applicant should determine its discount using all E-rate eligible students in schools that fall under the control of a central educational agency. Commenters note that private and charter schools generally operate independently of the main public school district and are individually responsible for their finances and administration. We therefore agree with commenters that these educational entities and local public school districts should calculate their discounts separately if not affiliated financially or operationally with a school district. Independent charter schools, private schools, and other eligible educational facilities that are seeking support for more than one school building should factor all students in facilities under the control of their central administrative agency into the discount calculation.

On the surface, this paragraph would seem to recognize that public school districts and charter schools are operated and financed independently and, as such, that their E-rate discounts should be determined separately. Indeed, one purpose of this paragraph, as we first read it, was to assure that groups of centrally-managed private or charter schools would file combined district-like applications.

The charter school controversy revolves around the definition of the phrase “central administrative agency.”  Depending upon the jurisdiction, a local school district may have some degree of administrative responsibility and/or control over its local charter schools. The district may be the chartering agency; may be responsible for monitoring certain student activities (e.g., with regard to special education); or may provide varying degrees of direct financial support. Yet, the charter school may be independently governed and have its own budget responsibility with no direct relationship to the public school district.

If the charter school(s) and its local district are considered to be affiliated (or centrally administered), Para. 220 suggests:

1. The charter school(s) should be included in the discount rate calculation of the district application (i.e., included in its Block 4 list of schools); and conversely,
2. All district schools should be included in the discount rate calculation of any separately-filed charter school application(s).

So far, most of the informal guidance we’ve heard from USAC and the FCC on this issue has focused on the district application side — and has not always been consistent. Within the last few weeks we have heard:

1. Districts must include their local charter schools in their Form 471 applications;
2. Districts must include their local charter schools in their applications only if the districts and those charter schools are linked under the same state LEA code; or
3. Districts can decide for themselves whether they provide sufficient administrative control over their local charter schools to include them in their applications.

It should be noted that clarifying an FCC order is not a trivial matter. Often, it requires bureau action on a petition for clarification. As a practical matter, we may not see formal clarification on the charter school filing issue before the March 26th application deadline.

Given the lack of formal guidance, what is a district and/or charter school to do?  Our advice is as follows:

1. Make a good faith effort to determine whether the district and charter school(s) are centrally administered. In particular:
   1. Recognize that the apparent goal of Para. 220 is to assign a single “district” discount rate to all related schools;
   2. If the district and charter school(s) filed separately in the past, as is likely the case, the default position could be to file separately again in FY 2015. We believe that this default position is consistent with the degree of independence normally afforded most charter schools; and
   3. In the spirit of the E-rate rules, the decision should not be governed simply by a desire to maximize the resulting “district” discount rate.
2. This is a two-way decision that should be coordinated between the district and the charter school(s). If the district includes the charter school(s) in its own application, the district schools should also be included in any separate charter school application.
3. Coordination may also be required at the state department of education level, particularly if the district and the charter school(s) share related LEA codes. Contact information for state E-rate coordinators can be found on the State Information pages of our website.
4. A final decision on the district’s Block 4 discount rate calculation should be shared with the local library applicant(s) whose discount rate is based on the district data.
5. Note that this discussion assumes that district and charter school services are provided separately. If services are being shared, then the application — be it a consortium application or an expanded “district” application (including the charters) — should include all entities.

FY 2015 Form 471 Application Window:

The FCC Form 471 application filing window for FY 2015 opened on Wednesday, January 14, 2015. It will close at 11:59 pm EDT on Thursday, March 26, 2015.

Since a Form 470 must be posted on the USAC website for at least 28 days, the last possible date to file a FY 2015 Form 470 is February 26th. Please remember that filing a Form 470 this late is a last resort. It would mean that vendors would have to be selected, contracts signed, and a Form 471 filed all on March 26th. With the complexity of this year’s online Form 471, this is not an attractive option.

CEP Percentages Less Than 40%:

USAC posted a Form 471 Filing Tip last week briefly stating: “If you choose “CEP” as an alternative discount mechanism for an individual school, you cannot enter a percentage of direct certification students less than 40 percent for that school.”  Additional clarification may be useful.

Under the Community Eligibility Provision (“CEP”) meal reimbursement program, at least 40% of a single school’s students must be “directly certified” as NSLP-eligible. A school district, however, may group multiple schools (some or all) for CEP purposes as long as the identified percentage of the group, in aggregate, meets the 40% threshold. Consider, for example, the following two school group:

• School A has 30 identified students out of a total of 100 — a standalone percentage of 30% that would not qualify individually for CEP.
• School B has 150 identified students out of a total of 200 — a standalone percentage of 75% that easily qualifies for CEP.
• As a group, schools A & B have 180 identified students out of a total of 300 — a group percentage of 60% that makes both schools eligible for CEP.

Although some states report both individual and group CEP percentages, it is the aggregate percentage of a group that determines meal reimbursements. Similarly, for E-rate purposes, the aggregate CEP percentage should be used for all schools within a group. Note that this approach is conceptually equivalent to the use of aggregate student eligibility numbers now used to calculate a districtwide discount rate.

Note also that it explains and expands upon last week’s USAC tip. Since an individual school is not eligible for CEP on its own with a percentage under 40%, the Form 471 system will not accept a CEP percentage under 40%. When dealing with an eligible CEP group, however, applicants should use — and the Form 471 system will accept — the aggregate CEP percentage for each school within the group.

USAC released two S&L News Briefs last week. As outlined below, both briefs dealt with the Form 471 application process.

The Special Edition News Brief of February 9, 2015, provides answers to a series of frequently asked questions (“FAQs”) on the phase-out of E-rate support for voice services and the elimination of support for certain other “legacy” services. This is an important topic for almost every applicant because it means the loss of E-rate discounts on a number of services that have traditionally been supported. Although over-all funding for E-rate has been increased, the increases will accrue only to applicants expanding their broadband connectivity to and within their schools and libraries.

The topic is also important to most applicants because it means that they must cost-allocate out expenses for lower discount voice services and newly ineligible services in their FY 2015 Form 471 applications. In many cases, this will involve identifying different line-item expenses within large telephone and/or cellular bills.

Note that cellular data eligibility is addressed in the next to last FAQ. More generally, however, E-rate discounts on cellular service are being negatively affected by several factors, all of which involve cost allocations. In particular:

1. In almost all cases, cellular data is ineligible (typically representing about 50% of a bundled voice/data service plan).
2. Text messaging is ineligible.
3. Costs attributed to free or heavily-discounted mobile devices are ineligible.
4. Voice service eligibility is being phased out.

Taken together, many applicants will see their E-rate discounts on cellular service drop by at least 60-70% in FY 2015 — and even more in FY 2016.

This is an important Special Edition News Brief and should be reviewed by all applicants.

The regular S&L News Brief of February 13, 2015, reviews important aspects of the competitive bidding process, including:

• Receiving only one bid — or no bids.
• Rejecting all bids and canceling (then restarting) a procurement.
• Making significant changes in the scope of a project and/or services requested.
• Considering all bids received.
• Retaining documentation (including both winning and losing bids).