Update to E-rate Funding Freeze
~ Some new funding to be released - priorities listed ~
~ How this will affect Year 8 ~
~ Congressional help? ~
Message Posted November 16, 2004
Background
As you know, the SLD suspended issuing any funding commitments on August 4 in order for them to become compliant with new federal accounting requirements. Under the new rules, the SLD may only commit funds that it has on hand and for which are not obligated through previous funding commitments, provisions for pending appeals, or
invoices in process. The past practice was to issue commitment letters (without actually having money in the fund) knowing that the fund would receive $2.25 billion during over the course of the year through carrier contributions. This has always worked because most applicants don't submit BEARs until the end of the funding year, after the
USAC fund balance has been replenished.
Priority of Funding When Commitments Resume
The SLD has announced that although the problems associated with the funding freeze have not been resolved, they have been able to collect a small amount of funds that they can now commit to applicants. Unfortunately for Year 7 applicants, virtually all of the funds available first will go towards applications and appeals that have been successfully reviewed from previous funding years (Year 6 and before). This does not mean that they have to fund ALL applications from prior years before moving to Year 7; it simply means that they will commit funding for applications that have been reviewed and that are sitting in the funding queue.
After those commitments have been made, and more funds have been collected, they will begin trickle funding Year 7 remaining applications, with priority 1 applications being funded first, then priority 2 applications. The order in which priority 1 applications will be funded is related to the order in which your application was reviewed and approved by PIA. They expect waves to occur about once/month. This likely means that internal connections commitments likely won't begin again for many months.
How to Apply for Year 8
I realize that many of you haven't heard about your Year 7 applications and are unsure how to apply for Year 8. As noted below, there is a major move underway by all interested parties to have Congress pass legislation before the end of this session that would exempt E-rate from these new accounting rules. If this is passed, you likely will receive your Year 7 FCDL shortly thereafter. If legislation does not pass in the next few weeks, we have been working with the FCC and SLD to develop some type of notification letter that would list whether your applications have been successfully reviewed. This won't be a funding commitment (legally), but it will give you peace of mind that your application was done correctly so you can safely apply for Year 8. I'll keep you posted on this development.
How Will Accounting Problems Affect Year 8, Year 9 and Beyond
While the funding freeze appears on the surface to be a temporary problem, it is not. The underlying issue of whether the SLD can make commitments without actually having the cash up front is not going away unless Congress takes action (more on that below). Generally speaking, instead of most applicants receiving their funding commitment letters around or before the funding year actually begins, they can expect to receive their priority one FCDLs well after the funding year has begun. And priority 2 funding would not be issued until after all priority 1 FCDLs were issued. Therefore as you can see, this problem is here to stay and if you weren't caught in the funding freeze this year, you will be caught in this problem next year.
Congressional Action
We believe strongly that the impact of these new accounting rules has put E-rate on life support. A coalition of Washington DC interest groups, including school and library organizations, mayors, governors, and telecommunications providers have been actively lobbying for Congress to pass legislation in the next 2 weeks that would essentially exempt E-rate funds from the Anti-Deficiency Act. There is a small window for Congress to pass this legislation before the session ends and if it doesn't happen in the next few weeks, it's not likely to happen at all. Simply put, there is no other way to fix this problem.
Moving Forward
I'll be sending the wave notice for the first new money as soon as I receive it (sometime in the next two weeks) as well as updates on the efforts to pass the ADA legislation. In the meantime, don't forget that invoicing is NOT affected by the funding freeze and you should continue to submit your BEARs (and SPIFs if you're a service provider). Also, PIA is continuing to call applicants regarding their Year 7 applications. Please keep responding to their inquiries.
If you have any questions, please don't hesitate to contact me, as always.
-- Julie
Julie Tritt Schell
jtschell@comcast.net
(717) 730.7133 (voice)
(717) 730.9060 (fax)
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