[Congressional Record Volume 150, Number 132 (Wednesday, November 17, 2004)]
[Senate]
[Pages S11434-S11435]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Mr. Rockefeller, Mr. Stevens, Mr. 
        Burns, and Mr. Dorgan):
  S. 2994. A bill to provide that funds received as universal service 
contributions under section 254 of the Communications Act of 1934 and 
the universal service support programs established pursuant thereto are 
not subject to certain provisions of title 31, United States Code, 
commonly known as the Antideficiency Act, for a period of time; to the 
Committee on Commerce, Science, and Transportation.
  Ms. SNOWE. Mr. President, I rise today with the support of many of my 
colleagues on the Committee on Commerce, Science, and Transportation to 
introduce legislation to help keep Americans' telephone bills from 
rising and to prevent future disruption to the Universal Service Fund. 
The Universal Service Fund helps keep telephone rates at a reasonable 
level for millions of American consumers and businesses located in 
rural parts of our country, areas where phone service would otherwise 
be prohibitively expensive. The USF also provides discounts to schools 
and libraries on their Internet service through the E-Rate program, 
which I and Senator Rockefeller worked to establish in 1996. Finally 
the USF makes basic ``life line'' phone service available to low-income 
Americans, and gives assistance to rural health care providers.
  The bill I introduce today is a corrective measure that addresses 
problems recently encountered by the Universal Service Administration 
Company, or ``USAC,'' the private, nonprofit corporation that Congress 
created to administer the USF. Specifically, this bill deals with a 
decision by the FCC that ordered USAC to adhere to a special set of 
accounting rules that applies to government agencies. As a private 
company, USAC had utilized the same accounting rules as used by the 
private sector, but was told last year that it was subject to the Anti-
Deficiency Act, a law that prevents government agencies from incurring 
financial obligations beyond the amount that has been appropriated to 
them by Congress. Adherence to government accounting rules is one of 
the Anti-Deficiency Act's requirements.
  However, the switch to government accounting rules has caused an 
unforseen disruption in the operation of the USF. In July 2004, USAC 
was notified that its method for accounting for funding commitments 
made to schools and libraries under the E-Rate program was illegal 
under the new government accounting rules, even though the method was 
perfectly proper under Generally Accepted Accounting Principles. As a 
result, USAC was forced to place an enormous amount of cash on its 
books by the close of the fiscal year, September 30; to freeze the 
program on August 3, preventing any action on applications for E-Rate 
discounts right before the start of the school year; and to liquidate 
all of its assets, resulting in $4.6 million in penalties and an 
estimated loss of $30 million in expected interest income.
  While USAC believes it can resume acting upon applications for E-Rate 
discount later this month, it notified the FCC on November 1 that, in 
order to continue compliance with the new government accounting rules, 
the USF contribution factor must be raised. The contribution factor is 
the portion of each customer's phone bill that is paid into the USF. 
Currently the charge is 8.9 percent of a customer's interstate calls 
made, but it will likely rise to 13 percent or more. Of course, this 
increase would be passed right on to consumers and businesses. Worse 
yet, this accounting change is likely to affect the other components of 
the USF as well, since they by and large operate in the same manner. If 
the USF as a whole is forced to make the same accounting changes that 
were imposed on E-Rate, the USF contribution factor may rise to 25 
percent or more by January 1, 2005.
  As a result of a seemingly innocuous accounting rule change, schools 
and libraries across the country have been unable to obtain much-needed 
discounts on their Internet connections, leading many to shut off their 
Internet service altogether. A similar strain may be encountered by the 
USF as a whole, jeopardizing price supports for rural- and low-income 
Americans on their phone service. And if no immediate action is taken, 
the telephone bills of American consumers and businesses are slated to 
rise significantly come the beginning of the new year.
  My colleagues and I have examined this issue and worked closely with 
the FCC and our counterparts on the House Energy and Commerce 
Committee. We have determined that, given the pending phone bill 
increases on January 1, the only way to address this problem is to pass 
a law exempting the Universal Service Fund from the Anti-Deficiency Act 
through December 31, 2005. During this exemption period, USAC can 
continue 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. There is ample precedent for an 
exemption; indeed, many government programs are permanently exempted 
from the Anti-Deficiency Act, such as the National Park Service and the 
Conservation Trust.
  This is a bipartisan effort among those Members who deal with 
telecommunications issues regularly. We have worked closely with the 
FCC and the House, and we have the support of the telecom industry, 
educators, and state and local governments. A permanent solution might 
require legislation, or it might not, but either way we will require 
sufficient time to craft that fix. This bill ensures that, in the

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meantime, the status quo is preserve, schools and libraries receive 
their Internet funding, the USF continues to operate soundly, and 
consumers' telephone bills do not rise.

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