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Legislation Introduced to Ease E-rate Funding Concerns

A bipartisan group of Senate Commerce Committee members has introduced a bill that would exempt the Universal Service Fund from the provisions of the Anti-Deficiency Act as a way of helping the Universal Service Administrative Company continue to process E-rate funding commitments in an orderly way.

In a statement, Sen. Olympia Snowe, R-Maine, one of the creators of the E-rate program, said that she and four other senators had determined that "the only way to address this problem is to pass a law exempting the USF from the law through December 31, 2005." That, she said, would enable USAC "to operate its programs in an orderly manner, phone bills can remain stable and both Congress and the Executive Branch can work on a permanent solution to this problem." Snowe noted that many government programs are already permanently exempted from the Anti-Deficiency Act, including the National Park Service and the Conservation Trust.

The Federal Communications Commission instructed USAC to convert its books to the federal government's accounting rules as of October 1, 2004. USAC has continued to disburse previously approved funding commitments, but has been unable to make new commitments because of changes in the way the accounting rules treat obligations. Under the Anti-Deficiency Act, government agencies are prohibited from incurring financial obligations beyond the amount that has been appropriated by Congress. In the past, USAC had been able to issue funding commitments before it had actually collected the funds from the telecommunications carriers. USAC expects to resume making funding commitments shortly, but will be unable to approve them at the pace it has in the past.

Snowe said that because of "a seemingly innocuous accounting rule change," USAC might also be forced to raise the contribution factor for the universal service programs from fees currently equal to 8.9 percent of the cost of phone customers' interstate calls to 25 percent or more by January 1, 2005. In addition, she said, the strains that are currently being experienced by schools and libraries might extend to the universal service programs that support the phone service of rural and low-income Americans.

Snowe said that her solution has "the support of the telecom industry, educators and state and local governments." A permanent solution, she said, "might require legislation, or it might not, but either way we will require sufficient time to craft that fix." The amendment, she said, would ensure that in the meantime, "the status quo is preserved, schools and libraries receive their Internet funding, the USF continues to operate soundly and consumers' telephone bills do not rise."

The measure, S. 2994, has been referred to the Senate Commerce Committee, for consideration.

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