FY 2016 Category 2 Funding Adjustment Options:
A number of applicants who received Category 2 funding commitments at or near to their 5-year budget caps in FY 2016 have been receiving PIA inquiries proffering incremental retroactive increases. These inquiries represent a proactive outreach by USAC to correct 2016 application review problems, but may be confusing to applicants surprised to be receiving PIA inquiries on older and funded applications.
Here’s the background, not fully explained in these PIA inquiries. FY 2016, the second year of Category 2 budgets, was the first year in the E-rate Modernization era in which the new funding caps were adjusted for inflation. The inflation adjustment applied, not only to the total E-rate funding cap, but also to individual school and library Category 2 budgets. Unfortunately, when the FCC first announced the FY 2016 inflation percentage in May 2016, it referenced only the increase in the total funding cap. USAC did not update Category 2 budgets in its systems until March 2017. As a result, most FY 2016 Category 2 funding requests were reviewed using the FY 2015 budget caps. School funding, for example, was capped at $150.00 per student rather than the inflation-adjusted $151.50 per student — a 1.0% increase for FY 2016. Applicants requesting funding above their Category 2 budget caps were required to reduce their requests to a level at or below the equivalent FY 2015 maximum. Some applicants subsequently appealed; most did not.
Last week, USAC effectively “appealed” on behalf of applicants improperly capped in FY 2016. It gave each applicant an option to restore funding to the full, 1% higher, budget level. As shown in the PIA example below, USAC has calculated the “old” entity budget(s) at the FY 2015 level, the “new” entity budget(s) at the properly inflated FY 2016 level, and the incremental budget amount(s) now available retroactively.
As noted, use of this increase is an option. Question #1 asks if the applicant wants to “reallocate” the incremental Category 2 budget back into the associated application commitment. If the answer is “Yes,” the applicant is asked to allocate the increase into the appropriate FRN line item(s).
If the increase option is exercised — and the FRN allocation(s) approved by USAC — the applicant will receive a Revised Funding Commitment Decision Letter (“RFCDL”). If the work has already been done, an invoice can then be filed for the additional discount. Note that many completed Category 2 projects may have already been invoiced at a discount, using the SPI mode. As a result, the additional discounts will have to be coordinated and processed through the associated service providers.
Remember that the additional amount, as shown in the example above, is a pre-discount figure. The additional discount available is unlikely to be significant for most applicants. We suspect that many, once they have recovered from the shock of another FY 2016 PIA inquiry, will politely respond “No” to Question #1 and turn back to their FY 2018 application work. We do, however, applaud USAC’s initiative to correct an old wrong. Bravo!