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Congress Adjourns Before Addressing E-rate Accounting Rules

A move to make it easier for the E-rate program to approve new funding commitments is apparently dead—at least until early 2005. The House adjourned for the 108th Congress this week before passing a measure that would have exempted the Universal Service Administrative Company from coverage under the Anti-Deficiency Act for a short period of time so that a solution could be worked out.

As of October 1, 2004, USAC was required by the Office of Management and Budget and the Federal Communications Commission to comply with the federal government's accounting standards, which require that agencies have funding available before they can make new funding obligations. In the past, the Schools and Libraries Division had been able to approve funding commitments, knowing that by the time the money would actually be disbursed, it would have collected the necessary funds from the telecommunications carriers. Now USAC is required to collect the funds before it can approve new commitments.

In August 2004, the SLD halted issuing new funding commitments, with only $764 million worth of funding commitments approved for the 2004 funding year, and applicants still awaiting word on about $424 million worth of funding commitments for 2003. In late November, the SLD issued a wave providing $24.2 million worth of commitments for the 2003 funding year, and on December 3, it issued a wave that approved $317 million worth of commitments for 2004. However, all of those were for Priority One services.

The SLD has provided no information on when it will issue its next wave. Further, there is a concern that in order to have sufficient funding in hand to cover the funding needs of all of the Universal Service Fund programs, the FCC will be required to raise the contribution factor used to determine the contributions that telecommunications carriers must make into USF. That could translate into higher USF assessments on phone bills and possible opposition from consumers.

When the 109th Congress convenes in January, it is unclear how quickly Congress would be able to consider new legislation to address the USF's accounting issues. Sen. Ted Stevens, R-Alaska, will take over the chairmanship of the Senate Commerce, Science and Transportation Committee from Sen. John McCain, R-Arizona. Some members have suggested they would like to hold hearings to review a number of issues regarding the USF programs before moving forward with legislation.

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