Schools await help over E-rate program

By Edward Felker

WASHINGTON -- A top official with the suspended federal E-rate program, which wires schools and libraries to the Internet, said Tuesday that money could be flowing again by the end of November.

That was the word from George McDonald, vice president of the Universal Service Administrative Co. and manager of its schools and libraries division. The company is a non-for-profit corporation formed by the Federal Communications Commission to manage the E-rate program, known formally as the Universal Service Program.

Still, McDonald cautioned that the program likely won't be able to approve all of the grants it planned this fall because of new government accounting rules that prompted a moratorium in August on all new commitment letters, the equivalent of grant awards.


Those rules, which bring the program under government-wide standards intended to limit waste, fraud and abuse, require that the fund not award more in grants than it has collected in telephone taxes, even if actual payouts come months later.

"The rules mean we have to have the cash," he said.

The result will be that the program could award less than half the money that was intended to go to schools and libraries by year's end.

According to figures provided by the corporation to U.S. Sen. John D. Rockefeller IV, a West Virginia Democrat and member of the Senate Commerce Committee, the program projected grants totaling $1.4 billion from Oct. 1 until the end of the year and a total of $2.6 billion in 2005.

But now the program estimates that it will award just $650 million in the fourth quarter of 2004, with the possibility of another $200 million. It awarded $764 million this year previous to the moratorium.

That amount still to be awarded includes $300 million to some 4,189 grantees that were provisionally approved but put on hold pending a new infusion of tax money from the nation's telecommunications providers.

It all adds up to uncertainty for schools and libraries hoping to tap the program for the current school year. Minnesota recipients won $26.7 million in grants last year, but received only $10.1 million this year until the moratorium was imposed.

Mary Mehsikomer, a senior project planner and state E-rate coordinator for the Minnesota Department of Education, said she has begun hearing from school districts and libraries with concerns about the delays in funding. At the least, it could mean cash flow problems until money starts flowing.


"To not get the piece they were counting on from E-rate can be quite a significant problem for some of the districts," she said.

The state has cut back its telecommunication support to schools, making the E-rate support more important, she said.

The program covers up to 90 percent of the costs of telecommunication services, Internet access, and internal connections, depending on the income level of the community. Services and access costs are given higher priority in grant decisions, she said, which may mean less of an impact to schools and libraries that are not seeking money for new internal wiring projects.

During a hearing before the Senate Commerce Committee on Tuesday, Chairman John McCain, an Arizona Republican, noted what he called "ubiquitous" instances of waste, fraud and abuse in the program. Still, he said the program, created by the National Telecommunications Act of 1996, is not in trouble.

"We created the program, and despite its endemic problems, its popularity makes clear that it is not going away," he said.

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