Cash Freeze for E-Rate Hits Schools

By Rhea R. Borja — October 08, 2004 5 min read
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A freeze on $3.28 billion in requests for aid under the federal E-rate program has left hundreds of school districts scrambling to pay for their technology needs—and, in some cases, crippled classroom instruction.

The Universal Service Administrative Co., which oversees the “education rate” program for the Federal Communications Commission, halted funding in August, pending adoption of new accounting procedures. The FCC told USAC to change its procedures by Oct. 1 in response to E-rate audits and congressional charges of waste, fraud, and abuse.

USAC officials may decide as soon as this week to resume funding, but they have not set an exact date. Some of the accounting changes still need to be figured out, Mel Blackwell, the vice president for external communications for USAC, said last week.

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Atlanta Responds to E-Rate Scrutiny

“It’s not as simple as a flip of a switch,” he said.

The E-rate program, which has disbursed more than $8 billion since its inception in 1997, helps link public and private schools as well as public libraries to the Internet by paying up to 90 percent of technology costs such as wiring and connection fees. Consumers pay for the program through a “universal service” fee on their monthly telephone bills.

To complicate matters, the funding suspension came on top of another delay. Earlier this year, USAC’s schools and libraries division, which directly operates the $2.25 billion-a-year E-rate program, reviewed funding applications from the largest school districts before reviewing those from the many smaller and mid-sized districts. For some smaller districts, that step has resulted in a slowdown or reduction in student access to the Internet, continued aging of technology networks, and, in some rural districts, no Internet access at all.

‘Tired and Frustrated’

Consequently, many state E-rate coordinators are steaming, and district officials are sounding alarms. For instance, 75 percent of New Jersey’s schools that were approved for fiscal 2004 E-rate funding haven’t received their money. In Virginia, 70 percent of schools were still waiting as of last week; in Pennsylvania, the figure was 40 percent.

On Sept. 23, the State E-Rate Coordinators Alliance sent a strongly worded letter to USAC’s schools and libraries division to urge a lifting of the funding freeze.

The letter said the situation “has reached a boiling point in the applicant community as schools and libraries are suffering cash flow issues, losing valuable services, and having needed projects delayed as a result of these massive delays and suspension of funding.”

One case in point is the remote 416-student Kuspuk school district in the Alaskan bush, which is waiting to hear about the fate of at least $700,000 in approved E-rate funds. It is one of more than half of Alaska’s districts that were approved for fiscal 2004 funding, but haven’t received it, said Della Mathis, the E-rate coordinator for the state education department.

Kuspuk is “a typical bush school district that’s totally dependent on communications to stay anywhere close to the world,” she said.

Kuspuk’s nine schools are spread out over 1,200 miles, accessible only by plane or, in the summer months, by boat on the Kuskokwim River. Because of a tight budget, the district has only a meager number of old textbooks. There is no library in the district, nor in the villages served by the schools.

Thus, Kuspuk teachers have relied on the Internet to conduct research and gather classroom materials. About 300 computers were connected to the Internet via broadband until Aug. 15. That’s when the Internet connection was turned off, because E-rate money the district plann ed to use to pay the broadband fees was unavailable. Now, some teachers are calling the district office, which has slow Internet access, to look up and download materials for them.

“As much as half of our classroom instruction is tied to the Internet,” said Marge Randlett, a teacher and the technology director for the Kuspuk schools. “Now, with that being cut off and not having enough textbooks, we’re in a pretty bad way.”

District Superintendent Kim Langton added that if the Kuspuk schools don’t get the E-rate money soon, bad weather will force his district to further delay mounting equipment for Internet connections until next spring.

“I am so tired and frustrated,” he said over a staticky phone line. “We were looking to enhance our broadband and distance learning. We’re extremely grateful for E-rate, but everybody’s being punished for the waste and fraud going on.”

Safeguarding the Program

Examples of alleged or proven abuses in the E-rate program abound.

Nec Business Network Solutions Inc., an Irving, Texas-based subsidiary of nec America Inc., for instance, pleaded guilty in May to abusing the federal program, and agreed to pay the federal government $20.6 million in criminal and civil penalties. (“Company Pleads Guilty To E-Rate Abuses,” June 9, 2004.)

Last year, two executives of New York City-based Connect2 Internet Networks Inc. were convicted of fraud and have been prohibited from participating in the program for three years.

In addition, the 51,000-student Atlanta public school system is being audited for allegedly violating the program’s rules and procedures. The district has issued a detailed report defending its use of E-rate money.

In response to charges about E-rate problems, the FCC passed measures in August designed to safeguard the program. It made schools, libraries, and service providers more accountable and set a framework for how USAC can recover E-rate money that has been used improperly.

The “Fifth Order and Report” requires schools and libraries to keep E-rate documents for five years; states that USAC and the FCC will conduct audits or investigations of beneficiaries within five years of receipt of funding; bars schools, libraries, and service providers from receiving funds from the program if they owe any debts to it; and directs applicants to devise technology plans that follow U.S. Department of Education and USAC guidelines.

“The FCC has had requirements since the start of this program that, for whatever reason, people did not take seriously,” said Sara Fitzgerald, the vice president of communications for Funds for Learning, an educational technology consulting firm based in Arlington, Va., that specializes in E-rate issues. “So the FCC is getting frustrated. If you’re receiving money from ratepayers, and if you want to get this benefit, there’s responsibility that goes along with it.”

Coverage of technology is supported in part by the William and Flora Hewlett Foundation.


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