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October, 2005 Contents

• EETT and Appropriations Update: Senate Approves $425 Million for EETT; Offsets for Hurricane Relief; Proposed Offsets in Reconciliation Bills
• E-Rate Update: Appropriators Consider ADA Exemption; ISTE Files Comments With FCC; House Subcommittee E-Rate Report and Recommendations; FCC Orders Relief Funds for Hurricane Katrina
• CALEA Update: Companies, Higher Ed and Library Organizations Appeal New CALEA Rule

EETT and Appropriations Update

Senate Approves $425 Million for EETT

On October 27th, the U.S. Senate made substantial progress in completing work on the Fiscal Year 2006 education appropriations by approving its version of the FY06 Labor, Health and Human Services, and Education spending bill. This Senate bill contains an appropriation of $425 million for the Enhancing Education Through Technology (EETT) program--significantly higher than the $300 million approved earlier by the House. The House-Senate conference committee will now reconcile differences between the two versions.

ISTE CEO Don Knezek notes that "We've generated several hundred emails to Congress and that's a good start. However, as key Senate and House members meet to finalize funding levels, NOW is the time to ratchet up our activity and generate thousands of emails on behalf of EETT. Our voices must be heard if we are to maintain funding for this vital program. A simple and effective way to send those e-mails is through the Ed Tech Action Network, www.edtechactionnetwork.org."

Overall, the Senate-approved version contains more funding for education than its House counterpart. But it's worth noting that several efforts to add funds did fail on the Senate floor. For example, the full Senate rejected Senator Edward Kennedy's (D-MA) amendment to increase the maximum Pell Grant award from $4,050 to $4,250. Senator Robert Byrd's (D-WV) bid to increase Title I funding by $5 billion also failed, as did Senator Hilary Clinton's (D-NY) amendment to increase IDEA funding by $4 billion.

House Leaders Want Offsets for Hurricane Relief

The coming House-Senate budget negotiations may last until mid-November or longer. And they'll most likely be complicated by House leaders who want to institute across-the-board cuts in domestic funding programs, including education programs, to offset hurricane relief efforts. If approved, these cuts could remove between 2% and 5% from final appropriations for all education programs, including EETT.

Additionally, some Members of Congress are pushing for further offsets through across-the-board cuts. Speaker of the House Dennis Hastert (R-IL) has proposed saving up to $16.9 billion from FY06 appropriations through a 2% cut on all discretionary spending. House Budget Committee Chairman Jim Nussle (R-IA) has gone even further, pushing for universal cuts ranging from 2-5%. Most significantly, Nussle's proposal includes cuts in homeland security and defense programs, areas of the budget previously held exempt from such actions. Any universal or across-the-board cuts would also reduce funding for education technology programs, including EETT.

Appropriators on both sides are optimistic that the funding process will soon come to a close. However, it remains unclear whether final deals will be reached before Thanksgiving. If Congress fails to approve all FY06 spending measures by November 18th, when the current temporary funding measure expires, it will have to pass another Continuing Resolution (CR) to allow government agencies with unapproved final budgets to keep operating.

Additional Offsets Proposed in Reconciliation Bills 

House and Senate committees have passed five-year deficit reduction measures through their budget reconciliation processes that aim to offset funds expended on hurricane relief. Distinct from the annual appropriations process, a reconciliation bill changes revenue (tax) or mandatory spending policies (Medicare, student loans, social security, etc.). For its part, the Senate Committee on Health, Education, Labor and Pensions approved a proposal that generates net savings of $15.1 billion over the next five years, $7 billion of which would come from cutting student loan lender subsidies. This proposal and others are headed to the Senate floor the week of October 31st.

Meanwhile, as its share, the House Education & the Workforce Committee also passed a net savings program of $18.1 billion over five years. However, Chairman John Boehner's (R-OH) most controversial proposal-to allow students displaced by the hurricanes to use money in federally funded accounts to cover the cost of private schools-failed to win the backing of his own Committee. Instead, the Committee accepted a proposal that would allow both public, private, and charter schools to apply for aid from the Secretary of Education, while preschool programs would apply to the Department of Health and Human Services for reimbursement. Under this proposal, the government would provide funds quarterly based on the number of weeks a child is enrolled. It would also allow a per-pupil allocation of up to $6,700, with additional resources available on behalf of students with disabilities. These funding levels may change as the plan advances to the Budget Committee.

These proposals are for large spending cuts. Even so, some members of the House have suggested that the cuts don't go far enough, proposing to deepen total spending cuts from $35 billion to $50 billion. The House Republican Study Committee, which published its spending reductions in a report entitled "Operation Offsets", is seeking major reductions in health care and transportation spending, areas that Senators and Congressional leaders have been loathe to cut.

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E-Rate Update

Appropriators Consider ADA Exemption

Senate and House conferees are continuing to resolve the differences between the two chambers' FY06 Commerce, Justice, Science appropriations bills (H.R. 2862) and including language in the Senate bill that exempts for one year the E-Rate and all of universal service from the Anti-Deficiency Act (ADA). This language would exempt E-Rate from provisions in the ADA that bar the E-Rate's administrator from sending out E-Rate funding commitment letters without having sufficient cash in its accounts to cover those commitments.

The House version of the bill did not include this exemption. Last year, the E-Rate's administrator was forced to shut down the program between August and November because the program was about to run afoul of the ADA. As a result, thousands of applicants did not receive notice of E-Rate support for months, delaying projects and chilling interest in continuing to participate in the program. This situation was only resolved with the enactment of a one-year exemption to the ADA for E-Rate and all other universal service programs in December 2004. Without further action by Congress, that exemption will expire on December 31, 2005.

ISTE Files Comments with FCC

In mid-October, ISTE and the Consortium for School Networking (CoSN) filed joint comments in response to the FCC's Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking (NPRM). The FCC sought input on the administration, management and oversight of the Universal Service Fund and the E-Rate. In their comments, ISTE and CoSN recommended:

1. The Commission should develop and implement new E-Rate performance measures that chart the program's success based on the availability of adequate connection speed and bandwidth to student and teacher desktop computing devices or the wireless hubs that serve them. The Commission should also disaggregate and publish data about achieving E-Rate goals so that policy makers can measure progress for rural and urban districts as well as for low income and minority populations.
2. The Commission should not transform the E-Rate into a formula-based program, nor should it expand E-Rate support to non-telecommunications related services.
3. The Commission should undertake reasonable efforts to deter waste, fraud and abuse, including imposing stiffer sanctions on applicants and vendors who repeatedly and knowingly violate important program rules.
4. The Commission should undertake efforts to streamline the application process, including allowing multi-year Priority I applications, but also should establish deadlines for the Universal Service Administrative Company's (USAC) processing of applicant funding commitments and appeals.
5. The Commission should retain school and library representation on the USAC Board and formally establish a practitioner panel to guide USAC decision-making.
6. The Commission should require auditors to specifically define audit findings as not including ministerial errors and/or should divide audit findings between ministerial errors and intentional fraud.

The comments in their entirety, and comments filed by all other entities, may be viewed via the FCC Web site, http://gullfoss2.fcc.gov/prod/ecfs/comsrch_v2.cgi. ISTE and CoSN will file additional comments in mid-December.

House Subcommittee Highly Critical of E-Rate; Issues Report and Recommendations

On October 18 after a unanimous vote the House Oversight and Investigation Subcommittee released a bipartisan staff report, Waste, Fraud, and Abuse Concerns with the E-Rate Program. Highly critical of the program, the report outlines key findings from the Subcommittee's two-year examination of E-Rate. It maintains that while E-Rate has "benefited the nation's children, the program falls far short as an example of efficiency, effectiveness, or integrity." Based on this report, House Oversight and Investigations Subcommittee Chairman Ed Whitfield (R-KY) and Telecommunications and the Internet Subcommittee Chairman Fred Upton (R-MI) pledged to draft E-Rate reform legislation that would overhaul the program.

The report spreads culpability for the program's shortcomings to the FCC, the USAC, schools and venders. It presents case studies of districts that it investigated and/or on which it held hearings (including Puerto Rico, Chicago, Atlanta, and a number of cases related to IBM). Most importantly, it offers eleven recommendations for reforming the program, which will likely form the basis of any legislation to overhaul it. Key recommendations include:

1. Funding more FCC and USAC personnel to conduct more audits.
2. Establishing "concrete and achievable goals and measures of effectiveness, so that Congress can assess the specific impact and value of program spending." The report specifically asks Congress to consider moving the program to another agency, evaluating the annual $2.25 billion cap, and expanding covered services to computers, software, and teacher training.
3. Minimizing "gold-plating" by revising the current technology planning process and requirements, including establishing stricter guidelines for what is contained in technology plans.
4. Implementing Government Accountability Office recommendations on the program, including determining which federal accountability requirements apply to E-Rate and reducing the appeals backlog.
5. Encouraging greater accountability of all program participants - including vendors, consultants, schools, USAC, and the FCC Wireline Competition Bureau.
6. Developing tangible measures of the extent and scope of program waste, fraud, and abuse by performing more audits.
7. Requiring that school districts hold a greater "stake" in the E-Rate by mandating higher co-payments by the school districts, new certifications for vendors and school officials that include tougher criminal penalties, allowing direct reimbursement to schools and libraries, and conducting verification and inspection of E-Rate program related work before discounts are paid out.
8. Establishing mandatory audits, civil penalties for rule violations, and more flexible provisions for program debarment.
9. Requiring a much more robust competitive bidding structure.
10. Requiring that, for all Priority II (internal connections) applications exceeding a reasonable threshold, a portion of the district's approved funding be set aside for an independent audit of the total funds committed.
11. Authorizing the GAO to examine the potential for waste, fraud, and abuse in the E-rate program's funding of "Priority I" services (telecommunications and Internet access fees).

A Web cast of the Subcommittee on Oversight and Investigations can be heard at: http://energycommerce.house.gov/108/Hearings/10062005hearing1674/hearing.htm

FCC Orders Relief Funds for Hurricane Katrina

On October 14, the FCC released an Order outlining the steps it is taking with regard to the Universal Service Fund and Hurricane Katrina victims. The Commission estimates a total disbursement of $211 million from the Universal Service Fund for "reconstruction and remediation" of telecommunications services, $132 million coming from the E-Rate program. The order does not specify where the E-Rate funds will come from, but the source is likely to be the nearly $365 million in unused program dollars. It's important to note that the Order applies only to areas impacted by Hurricane Katrina, not Hurricane Rita; there is no guarantee that Rita relief is forthcoming.

The FCC Order authorizes a new 2005 application window for both schools and libraries in affected areas and for those areas that have absorbed evacuees. This new window will close on December 13, 2005. The Order also authorizes a 90 percent discount level for program years 2005 and 2006 for districts directly impacted by Katrina; districts serving evacuees are not eligible for a discount level increase. The Order also allows affected schools and libraries to use funds received from the Federal Emergency Management Agency (FEMA) and to "restart the clock" on the twice-every-five-years rule. Thus, the first year of compliance for applicants in affected areas would be program year 2006, rather than this program year, when the rule came into operation. The Order additionally allows affected applicants to substitute services in one broad category for another for program year 2005. Lastly, it anticipates additional E-Rate support will follow.

In response to questions from Capitol Hill about fiscal controls on E-Rate dollars, the Order states that all beneficiaries under the new rules are subject to audit and investigation by federal or state authorities acting under the supervision of the fund's Administrator.

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CALEA Update

Companies, Higher Ed and Library Organizations Appeal New CALEA Rule

In late summer, the FCC issued a sweeping order extending the Communications Assistance Law Enforcement Act (CALEA) to broadband and VoIP providers. That order requires broadband providers including many educational institutions and libraries to make costly and technical changes to their networks and undertake certain burdensome and costly "assistance" requirements to facilitate law enforcement wiretaps.

A number of companies and organizations have filed legal challenges in federal court, charging that the FCC exceeded its statutory authority in extending the reach of the law and that application of CALEA to broadband and information services such as VoIP will stifle innovation and violate privacy. Also seeking to overturn the order are several higher education and library groups, including EDUCAUSE and the American Library Association.

Congress adopted CALEA over a decade ago as a limited mandate that applied to traditional telecommunications providers. The new FCC order not only extends the law to the Internet and new information services without any new statuary authorization, it also extends the requirements to non-commercial, "facilities based" broadband providers, which will include any number of education and library networks. We'll provide more information as the situation unfolds.

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Glossary

Conference Committee—A committee composed of temporary panelists from the House and Senate that meet to reconcile differences between the House and Senate versions of a bill.

Fair use—A somewhat nebulous concept that is often misused by consumer groups, private organizations, and lawmakers alike. The definition, as set forth in Section 107 of the 1976 Copyright Act, states that fair use is the doctrine that allows an individual who has violated copyright to justify that use under "recognized public purposes." Such public purposes may include, "criticism, comment, news reporting, teacher (including multiple copies for classroom uses), scholarship, or research."

Individuals with Disabilities Education Act (IDEA)—The 1997 reauthorzation of IDEA guarantees equal access to public education for people with disabilities. IDEA also includes a grant program to states and LEAs aimed at facilitating the education of children with disabilities by providing increased access to high quality programs and services.

Pay-as-you-go (PAYGO)—A Budget procedure that ensures that all legislation affecting direct spending or receipts is budget neutral in each fiscal year. Thus, any spending increases must be offset by funding cuts in other areas or tax increases.

Universal Design—"The term 'universal design' means a concept or philosophy for designing and delivering products and services that are usable by people with the widest possible range of functional capabilities, which include products and services that are directly usable (without requiring assistive technologies) and products and services that are made usable with assistive technologies." (Source: H.R. 4278, Improving Access to Assistive Technology for Individuals with Disabilities Act of 2004, Section 3)

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 Compiled and edited by Leslie Harris & Associates for ISTE.