Funding Status
The FCC moved quickly last week to approve USAC's recommendations setting the final Priority 2 funding thresholds for both FY 2011 and FY 2012. This week's funding decisions will reflect the new FY 2011 threshold; next week's will reflect the new FY 2012 threshold. In particular:
- For FY 2012, Priority 2 services will be funded at 90%, and denied at 89% and below.
- For FY 2011, Priority 2 services will be funded at 88% and above, and denied at 87% and below.
Based on estimates provided at last week's meeting of the Schools & Libraries Committee of the USAC Board, approximately $150 million in additional FY 2011 and FY 2012 funds would remain after funding Priority 2 at these thresholds — not enough to fund down 1% more in either year, but serving as a start for the pool of potentially available funds for the roll-over into FY 2013.
Wave 55 for FY 2011, with Priority 2 funding at 88%, will be released on Wednesday, August 8, 2012, for $29.8 million. Cumulative funding for FY 2011 is $2.33 billion.
No funding waves for either FY 2012 or FY 2010 are scheduled this week. We suspect that the delay in the sixth FY 2012 wave is a result of the finalized decision to begin Priority 2 funding and which will generate a large number of application denials at 89% and below.
FCC Provides Guidance on the Community Eligibility Option
The FCC sent a letter to USAC last week providing guidance on discount rate calculations for schools using the Community Eligibility Option ("CEO"). Although this does not yet affect E‑rate applicants in all states, it will within the next two years.
CEO is an alternative methodology, initiated by the U.S. Department of Agriculture ("USDA"), designed to encourage schools in mid- to high-poverty level communities to provide breakfast and lunch for all students. It also changes the process for reimbursing schools for free and reduced-price meals. The program started last year for three states (KY, MI, and IL) and has been expanded this year to three more (NY, OH and WV) and the District of Columbia. By 2014-2015, it will cover all states. From the USDA's perspective, CEO is designed to simplify the administration of free meal programs in schools with mid- to high-poverty levels. Unfortunately, CEO may complicate the administration of E-rate and other educational programs.
The CEO alternative works as follows:
- It is an extension of the direct certification process by which students from high-poverty families, identified by their participation in state support programs (e.g., SNAP or TANF), are automatically deemed eligible for free or reduced-price lunches (without completing the standard NSLP applications).
- A school is eligible to use CEO if 40% or more of their students are direct certification eligible, and if the school is willing to provide free breakfasts and lunches for all students. The election to use CEO can be made on a school-by-school basis, hence a given district may have both CEO and non-CEO schools.
- For expense purposes, free meal reimbursements are calculated using the formula 1.6 times the direct certification eligibility percentage. For example, a school with 50% direct certification would receive reimbursements at the 80% level. The 1.6x multiplier is apparently an estimated correction factor recognizing that the direct certification process does not identify all eligible students. Over time, this multiplier may be reduced.
There is one other criterion for electing to use CEO — and this is critically important from an E-rate perspective. Schools electing CEO are prohibited from collecting and processing NSLP applications. From a free meal administration viewpoint, eliminating the need to collect and tabulate applications is a major advantage. For E-rate and other programs (e.g., Title I) relying on NSLP eligibility data, however, this is a problem.
The key question for an E-rate applicant, with one or more CEO schools, becomes: How is the discount rate of a CEO school to be calculated? Note the following:
- Current NSLP data cannot be used because the school is prohibited from collecting it.
- The 1.6x direct certification factor might provide an estimate, but there is nothing in the E-rate rules to permit it.
- The school could presumably undertake an independent survey, but such an action would negate the entire principle of the CEO option.
Neither the FCC nor USAC has yet come up with a long-term answer to this problem. For purposes of FY 2012 applications, CEO schools in the three initial states were advised to use previous year NSLP data. In other words, since there was no 2011-2012 NSLP data available for applications due March 2012, the schools were to use 2010-2011 NSLP data. In this economic climate, the year-old data might understate eligibility, but at least it is hard data (and is consistent with the historic process used for Provision 2 and 3 schools).
Last week's FCC guidance letter addresses the same problem as it applies to the FY 2013 application cycle, and now to six states (plus DC). The advice is also similar. New CEO schools, whether they are from the new states or simply new adopters from the original states, are to use 2011-2012 NSLP data. Continuing CEO schools from the original states, which are now in the second year of the program, are to use the two-year old 2010-2011 NSLP data.
Obviously, this is not a long-term solution (otherwise, for FY 2016, as an example, the original CEO schools would be using five-year old data). Even in the short-term, it is likely to cause problems. It will be interesting to see, for example, how participating states handle the posting of NSLP data. Will they just ignore CEO schools, or will they attempt to insert data from the previous year(s) for those schools?
Additional FCC guidance or USAC instructions will likely be required by the time the FY 2013 application window opens. Stay tuned.
E-Rate Updates and Reminders
FCC Appeal Decisions Watch:
The FCC issued only two, applicant-specific, appeal decisions last week, both involving competitive bidding issues. DA 12-1213 overturned a USAC denial based on an applicant's failure to comply with state and local procurement rules. DA 12-1221 upheld a USAC denial based on an applicant's failure to demonstrate that price was the primary factor in its vendor selection process.
FCC Comment Deadlines:
Comments on the draft FY 2013 Eligible Services List ("ESL") are due this Monday, August 6th. The proposed ESL makes no significant changes in product and service eligibility, but does include a restructuring of the Priority 1 services under new section headings (see our newsletter of July 9, 2012). Reply comments are due August 21st.
August 6th is also the due date for reply comments on a petition for clarification filed by the State Educational Technology Directors Association ("SETDA"). SETDA's petition asks for clarification on the "educational purpose" criterion as it applies to remote VPN access to school computer systems by students and teachers (see our newsletter of June 25, 2012).
FTC Seeks Comments on COPPA Rule Revisions:
Although not directly related to E-rate, schools and libraries should be aware of last week's move by the Federal Trade Commission ("FTC") to seek public comment on a few revisions of the rules related to the Children's Online Privacy Protection Act ("COPPA"). The primary thrust of the proposed revisions is to close loopholes that permit certain types of Web companies to gather information on children despite the 1998 COPPA law that was designed to protect the online "footprints" of children less than 13 years of age.
SLD System Issues:
The SLD systems continue to exhibit somewhat unstable characteristics. As reported last week, the Entity Search tool on the SLD Web site is currently not showing all entities. In addition, service providers are reporting issues with the i486 E-notification system, and the SLD is reportedly now running Form 486 notifications manually. In some cases, this problem may delay discounted billing by service providers for funded applicants.
Schools and Libraries News Brief Dated August 3 – Consultant Registration Numbers
The SLD News Brief for August 3, 2012, defines a consultant and addresses the following questions:
- What is a Consultant Registration Number ("CRN")?
- How does a consultant obtain a CRN?
- How does an applicant find the CRN for its consultant?
- Where is consultant information located on a Form 470 and Form 471?