Law & Courts

Antitrust Suits Yield Windfall in Tech Funds

By Rhea R. Borja — August 29, 2006 4 min read
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Public schools in 12 states and the District of Columbia are starting to reap a windfall of up to $865.6 million for educational technology from the settlements of state lawsuits alleging that the Microsoft Corp. violated state antitrust laws. And in the next few years, schools in additional states will see millions of dollars more from similar settlements.

For example, Minnesota gave out $55.2 million in educational technology vouchers in January to eligible public schools, while Vermont began sending $4.7 million in vouchers to schools this summer.

Technology Transfer

Public schools in 12 states and the District of Columbia have received or will soon receive funds for educational technology from the settlement of state antitrust lawsuits against Microsoft Corp., including:

*Click image to see the full chart.

Click to enlarge: Technology Transfer

SOURCE: Microsoft Corp.; State Education Departments

California, which is expecting to get $400 million to $600 million in settlement funds for schools, and Florida, with at least $80 million, plan to start their voucher processes for schools this fall. Arizona, the District of Columbia, Kansas, Massachusetts, Montana, Nebraska, North Dakota, South Dakota, and West Virginia also have distributed vouchers, Microsoft officials say.

School technology experts say the Microsoft money provides a needed infusion for districts, as state funding for such technology has been cut or zeroed out. Federal funding for educational technology has been slashed by 60 percent since 2004, and may be eliminated, noted Mary Ann Wolf, the executive director of the State Education Technology Association, based in Glen Burnie, Md.

“With the dramatic cut in federal funds for technology, this will help fill that gap,” she said.

In California, state aid for education technology has been eliminated. So the settlement money is critical and timely, said Barbara E. Thalacker, the state’s administrator for school technology. “These funds are the only technology funds going to schools if [federal funding] goes away,” she said.

The windfall for schools is the result of state class actions alleging that Redmond, Wash.-based Microsoft illegally monopolized the market for personal-computer operating systems and other software, and consequently overcharged consumers for its products.

Rich Wallis, an associate general counsel for litigation for Microsoft, said that because the claims rate for such lawsuits varies widely, the company wanted to ensure the money would be used. “If we were going to resolve these [lawsuits], we wanted to make sure that some benefit came out of it,” he said. “It was Microsoft’s idea to have the benefit go to poor schools. And the plaintiffs agreed to that.”

New Mexico, North Carolina, Tennessee, and New York have settled their suits, but not yet disclosed when schools will benefit, according to Microsoft.

The amount available to the 17 states and the District of Columbia that have settled their suits totals more than $2.14 billion, Mr. Wallis said. Four states still have class actions pending against the software giant: Arkansas, Iowa, Mississippi, and Wisconsin.

Long Legal Road

The jackpot for schools comes at the end of a long legal road. In all of the settlements, which are for lawsuits filed by states between 1998 and 2002, consumers and businesses must first be paid. After they are reimbursed, schools get their share. The amount going to schools in Florida, Minnesota, and Vermont is 50 percent of the remaining settlement money. In California, it’s two-thirds of the remaining funds.

In the case of Minnesota, consumers could have received up to $174.5 million. But they claimed only $64 million. As a result, half the remaining $110.5 million benefited schools. And the other $55.2 million? That went back to Microsoft.

The definition of eligible schools varies by state. In California and Vermont, eligible schools are public schools, including charter schools, in which 40 percent of the student populations qualified for subsidized lunches in the 2004-05 school year. The schools must also have state-approved technology plans.

In Florida, at least half of a school’s students must come from low-income families. And in Minnesota, virtually all public schools qualify, as they must have a minimum of one low-income student.

Schools can use the one-time money for both hardware, such as computers, printers, and evaluation tools, and for software and professional development, according to state documents. Schools can buy products from various companies, not just Microsoft. For instance, Minnesota schools can choose from more than 1,500 products from many companies.

Minnesota sent vouchers to 467 school districts, for amounts ranging from about $300 to $6.3 million. The $6.1 million that Minneapolis received has already made a difference, said Coleen Kosloski, the executive director of technology for the 39,000-student district.

More than half the classroom computers in Minneapolis schools were at least 4 years old, and other technology was also quickly aging. So the district spent $3 million on new equipment and the rest on instructional software.

“This settlement is extremely important to our school district,” Ms. Kosloski wrote in an e-mail. “With so many online applications and processes that our teachers and staff need, … it’s more imperative than ever to have up-to-date computers.”

In Florida, 1,790 schools with more than 1.1 million students will be able to cash in on the settlement. The state department of education is creating a Web site about the funds, and schools will be able to sign up for the vouchers this fall. Districts will likely get the money in April, said Cathy Schroeder, a department spokeswoman. “The school districts are very excited to hear about this new money for technology,” she said.

A version of this article appeared in the August 30, 2006 edition of Education Week as Antitrust Suits Yield Windfall In Tech Funds

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