Ed-Tech Policy

E-Rate, Other Universal-Service Funds to Be Transferred to U.S. Treasury

By Benjamin Herold — August 08, 2017 2 min read
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The nonprofit organization responsible for administering the E-rate program and other federal universal-service funds announced Tuesday that it would transfer more than $9 billion it oversees out of the private banking market and into the U.S. Treasury.

The announcement was made in a post on the website of the Universal Service Administrative Company:

In coordination with the FCC, USAC is formulating the plan to transfer the funds of the Universal Service Fund (USF) to the U.S. Department of Treasury. The USF funds are currently held at a third party banking institution. This transfer of funds to the U.S. Treasury will reduce risk and ensure continued strong financial management of the USF. USAC remains the independent, not-for-profit administrator of the USF programs under the guidance of the FCC. While no action is required by any USF program participants at this time, USAC is committed to proactively communicating with all stakeholders through the course of this transition and will provide detailed transition information beginning in November of 2017. We anticipate the transfer to be complete during 2018.

The Federal Communications Commission oversees USAC and the four universal-service programs, which aim to provide connectivity to the entire country. Among the programs are the $3.9 billion E-rate, which helps subsidize the cost of telecommunications service for schools and libraries, and Lifeline, which helps low-income families pay for voice and broadband service at home.

Moving the funds into the Treasury was one of the recommendations in a report on problems with the Lifeline program recently issued by the Government Accountability Office. That report stated:

To address our findings regarding the USF, we recommend that the Chairman of FCC take action to ensure that the preliminary plans to transfer the USF funds from the private bank to the U.S. Treasury are finalized and implemented as expeditiously as possible.

Among the reasons GAO cited for recommending such a move: lower fees, better management practices and regulatory safeguards, and the opportunity for the federal government to use the funds as an offset for its debts.

Tuesday’s announcement prompted some concerns in a K-12 sector already jittery about the direction of the FCC—and especially its plans for the E-rate—under President Donald Trump and the chairman he appointed, Ajit Pai.

“While there might be some efficiencies associated with switching the E-rate program to a Treasury-managed account, we have concerns that program beneficiaries would lose the benefit of the significant interest that universal-service funds accrue in the private market,” said Reg Leichty, a lawyer and lobbyist for the Consortium for School Networking, a professional association representing school technology officers.

Leichty also expressed concern that the transfer of funds into the Treasury could be a step towards Congress assuming responsibility for universal-service funds, including an annual determination of how much should be allocated for initiatives such as the E-rate.

“We would not want this successful program to be subject to the whims of the annual appropriations process, which has not functioned well for a significant period of time,” he said.

Photo: Federal Communication Commission Commissioner Ajit Pai speaks during an open hearing and vote on “Net Neutrality” in Washington in 2015.—Pablo Martinez Monsivais/AP-File

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A version of this news article first appeared in the Digital Education blog.