In 2020, there will be an important and unexpected change to the E-Rate Program from the FCC. We wanted to make sure you have all the correct information:
The new Five-Year Category Two funding approach has been made permanent, but rates will not reset until 2021. This is contrary to what was previously predicted, that a new 5-year budget would be reset in 2020. Until then, for the year 2020, recipients will be awarded a one-year, prorated amount based on their student count, at a 20% increased per-student rate.
What does that mean? Please continue reading for more detail on the program to see how the changes will affect your school or library:
What Is the E-Rate Program?
Established as part of the Telecommunications Act of 1996, the E-Rate program provides schools and libraries with funding for two categories of internet and communications services. Category One services provide internet and other communications services to the buildings. A full list of eligible services can be found on page 4 of the official 2020 List, but a few examples include:
- Cable Modems
- Broadband over Power Lines
- And more
Category Two services provide equipment and services related to connectivity within the buildings. Again, a full list of eligible services can be found on page 4 of the official 2020 List, but a few examples include:
- Firewall Services
- Wireless Controller Systems
- And more
In recent years, much of the Category Two funding has gone toward upgrading wired connections and expanding WiFi as schools transition to one-to-one, in-classroom computing.
The 5 Year Funding Approach
In 2015, the FCC began testing a new 5-year, Category Two funding approach. This new approach allowed schools to utilize 5 years of funding, up front, to make more substantial capital investments. If schools spent their whole budget in 2015, they would have to wait until 2020 to apply for additional funds. If schools didn’t spend everything in 2015, they could re-apply for the funds in following years, using an inflation-adjusted maximum.
How Does E-Rate Funding Work?
E-Rate funds are used to offset a portion of qualified expenses like internet connections, basic maintenance of internal connections, and managed internal broadband services. Under the current approach, schools start with a “pre-discount” budget of $150 per student. That was roughly $30 per student, per year. Then, based on the level of need, schools are eligible to receive E-Rate funding to cover 20%-90% (their discount rate) of the proposed costs, based on the free and reduced lunch student population. Let’s look at an example:
School A has 1,000 students in an urban area with a high rate of SNAP participation. This indicates a great need for financial assistance, which gives them a discount rate of 90%. They use the pre-discount rate of $150 per student to apply for $150,000 in E-Rate funding. If awarded, they can receive $135,000 (90% of $150,000) in E-Rate funding, having to provide the remaining $15,000 (10% of $150,000) for the project themselves. If a school has less than 62 students, they will receive a minimum of $9,200. This funding floor is also adjusted for inflation each year.
School districts could also share funds from across the district to pay for shared services although each school’s portion of those budgets had to be calculated, applied for, and paid for by each school separately.
If They Didn’t Spend It All In One Year
As mentioned before, schools and districts could spend their whole budget in one year. If they didn’t spend it all, they could re-apply for the un-spent funding, but using a slightly higher, inflation-adjusted, pre-discount rate. Let’s go back to our example:
If School A only spent a total of $50,000, $50 per student, on Category Two services in 2015, they could re-apply for E-Rate funding in 2016 at an inflation-adjusted pre-discount rate of around $153 per student. That gives them a total of $153,000, minus the amount already spent, for a new pre-discount budget of $103,000.
An Unexpected Announcement
This trial program’s fifth year ended in 2019, so most recipients have been expecting, and budgeting for, a new five-year program to begin in 2020. But in early December, the FCC made a surprise announcement that the re-set would not occur until 2021. The commission felt they needed an extra year to finalize the rules so that this new five-year approach could succeed long-term. To bridge the gap, schools can apply for one extra year of funding in 2020, with a pre-discount rate of $195.63 per student. The funding floor for the 2015-2020 budget window has also been increased to $11,998.43.
So How Much Is Actually Available In 2020?
To see what kind of funding may be available in 2020 for your school or district, let’s return to our example school once more:
School A spent all its E-Rate funding in 2015, a pre-discount budget of $150,000, which means they were ineligible to apply for more funding until 2020. With the new program extension, they are now able to apply at a pre-discount rate of $195.63 per student, which is $195,630 in pre-discount funding, minus the $150,000 they already spent. That leaves them with a pre-discount budget of $43,630. If they are still at a 90% discount rate, they can receive a maximum of $39,267 from the E-Rate program, providing the remaining $4,363 themselves. If schools don’t spend the budget this year, it does not carry over into the next five-year budget window.
Two More Important Changes for 2021:
Shared Budgets & Increased Funding Floor
Until recently, each school had to calculate its own budget and apply for its own funding. If there were shared costs to cover, each school would have to come up with an accurate way to split and shift the funds between schools and still pay for their portions separately. Good luck if students split time between different schools or moved mid-year. It was like splitting a coupon for a check with as many as 40 or 50 different people, before dinner is over, where your waiter was the government, and if you got it wrong you lost your whole coupon. Yikes!
Excitingly, budgets will now be calculated at the district level! School districts will now be able to apply for funding on behalf of all their schools and students. This will give them one district-wide budget to administer as they see fit, greatly simplifying both the planning and application processes. It will also make it simpler to pay for shared expenses. The new rule will go into effect with the 2021 E-Rate Budget re-set.
Finally, the minimum funding level, beginning in 2021, will increase further to $25,000 to make it more worthwhile for small schools to go through the application process.
What Does This Mean For You?
This update from the FCC is both good news and bad news depending on your school and district’s situation and plan.
On the bad news side, if your school had been planning a big project for 2020, assuming another 5 years’ worth of funding would become available, you’ll have to delay those plans. Instead, try to focus on smaller items that will have a positive impact on students and allow you to dedicate more focused attention to the big project next year.
On the good news side, the new district-wide budgeting and application process will open a whole new world of possibilities and save your administration a great deal of time going forward. Every school in your district has different needs. Under the old system, smaller schools in your district may have been placed at a disadvantage, unable to afford projects with large fixed costs because their individual budgets couldn’t afford non-shared service on their own. But now, districts will have the ability to spend as they see fit, to ensure every school in their district has the resources available to move education into the modern era.
There are two phases to applying for E-Rate funding. The first is the Bidding phase, where you request bids from service providers. You will use these bids in your actual application for funding. This first phase uses FCC Form 470 which can be found on the USAC website. The second phase is the Funding Application phase. In this second phase, you will select a bid and fill out FCC Form 471 to request actual funding. This form can also be found on the USAC website.
Phase 1 Form 470 must be certified by the E-Rate program at least 28 days before the end of the Phase 2 Form 471 certification deadline. Since Form 471 must be certified by March 25, 2020 at midnight, then Form 470 must be certified by February 26, 2020 at midnight.
Get Started Today!
The application window opened on January 15th so you can get started today! And with two big changes to deal with, the planning process should start as soon as possible. You’ll need to change your 2020 plans to account for the smaller, one-year budget extension. You may need to re-adjust your 2021 plans to maximize the possibilities offered by the new rules.
Macro Connect is here to help you with all of that. Our experienced technology leaders, installers, and support staff have years of experience managing the ever-changing technology needs of schools in Detroit and across Southeast Michigan. Since 2008, Macro Connect has been an authorized E-Rate service provider and has been awarded internal connections, basic maintenance, and telecommunications services by over 40 schools, districts, and ISDs. The depth of knowledge that Macro Connect brings to projects in this area is the result of over 380 Category 2 awards totaling over $9.5 million in hardware and services.
Call us today to make E-Rate work for you!