A recent filing by the Universal Service Administrative Company indicates that the gap between E-rate funding commitments and actual disbursements has actually worsened since the program began.

As of March 31, 2002, USAC reported in a May 2 filing to the Federal Communications Commission, schools and libraries had failed to spend $543.7 million of the $2.085 billion in funding commitments that were approved for them in the 2000 Funding Year (Funding Year 3). That figure represented 73.9 percent of the total funding commitments, down from the 75.1 percent that was disbursed in the 1999 Funding Year and the 81.9 percent that was disbursed in the 1998 Funding Year.

Further, through the first nine months of the 2001 Funding Year (Year 4) only $362.7 million, or 16.1 percent of the $2.252 billion that has been committed has actually been disbursed.

At the request of the USAC board of directors, USAC for the first time provided a breakdown on how efficiently the funds were used. For the first three years, for which commitments are largely completed, a larger percentage of funding commitments for internal connections were spent, compared with the other two service categories. For instance, in the 1998 Funding Year, 88.6 percent of internal connections commitments were used, compared with 75.1 percent of those for telecommunications services, 71 percent of those for Internet access and 81.9 percent overall. In the 1999 Funding Year, 78.8 percent of internal connections commitments were used, compared with 70 percent of those for telecommunications services, 63.6 percent of those for Internet access, and 75.1 percent overall. In the 2000 Funding Year, 82.4 percent of internal connections commitments were used, compared with 64.4 percent of those for telecommunications services, 59.7 percent of those for Internet access and 73.9 percent overall.

For the 2001 Funding Year, internal connections disbursements are running behind Internet access (17.1 percent versus 23.8 percent), but it could be expected that internal connections spending will pick up as schools move into their traditional summer installation periods. This time, telephone disbursements lagged behind, at 12.3 percent of commitments. The reporting period covered the first nine months of the funding year. USAC is supposed to complete its processing of payment paperwork for that time period by March 2003.

In the first quarter of 2002, USAC earned $13.843 million worth of interest on the unclaimed dollars in the schools and libraries program.

Strategies for closing the gap between funding commitments and disbursements was one of the issues the FCC explored in its recent Notice of Proposed Rule-Making on the program.