Rural Broadband Funding in Jeopardy

[imgbelt img=USDA_rural_development.png]Stimulating Broadband reports that $1.445 billion in funding for rural broadband loans and grants is in limbo, as Congress considers cutting these programs from the federal budget.


Stimulating Broadband and is reprinted with permission.

A full $1.445 billion in federal funds slated this year for rural telecommunications project capital subsidies is now in jeopardy. The risk of steep cuts to 4 programs within the U.S. Department of Agriculture, each of which is now open to funding applications, is part of the partisan battle over the larger federal budget.

Neither the total dollar amount involved, nor the magnitude of possible project impacts has been reported previously.  This is despite a series of cautionary statements issued by USDA over the past several weeks as funding application windows were announced for 3 of the 4 programs.

Sources at USDA tell us they are unsure what levels of appropriations will be finalized for the nearly $1.5 billion target figure. The possibility exists for deep cuts to all four funding lines.  

A senior government affairs manager at a trade association representing rural telecom interests has confirmed for us this potentially bleak picture, although the possibility is not widely seen today at rural carriers or at the equipment manufacturers that supply them.

As of this writing, inquiries made to the Republican Majority and Democratic Minority staff of the House Appropriations Committee have gone unanswered.

All Post-Stimulus Funding Programs in Limbo

The federal telecom funds cannot be legally issued by USDA to America’s rural communications service providers as budget negotiations between the Obama Administration and Republican leaders on Capitol Hill remain stalemated. The programs in question are managed by USDA’s Rural Utilities Service (RUS), headed by Administrator Jonathan S. Adelstein.

The funds involved are independent of the broadband stimulus efforts of RUS, based on separate appropriations and authorizations of Congress.

RUS saw current year funding for parts of its broadband loan programs cut to zero in thefirst continuing resolution (CR) budget of last fall. The Administration announced recently that it is attempting to leverage $400 million in previous funds from the 2008 Farm Bill for the Rural Broadband Access Loan Program into $700 million “program level” funding. Program level funds are those monies, inclusive of loan leverage, that actually move to projects in the field. The $400 million appropriations target and the $700 million program level both remain caught in the budgetary crossfire.  

Observers thought the annual funding for the USDA’s Rural Telephone Loan Program, distinct from the Broadband Program, was safe from the budget battle. The Rural Telephone program is now budgeted for a program level of $690 million.

Administrator Adelstein told us in a recent interview: “We have had, and last committed, $690 million in loans under our annual loan program. The program is now going ahead, as it does each year. We don’t need issue a specific notice, as the funding continues from year to year. The program is open, carriers are applying, and we are doing loans.”

As proof of the changing situation, USDA communications staff subsequently clarified the program’s status in response to our questions. The “$690 million will be available under the CR if Congress makes no changes, but the budget is not yet finalized”, staff wrote to us.  

An unprecedented sixth continuing resoltuion that temporarily funds operations of the federal government expires on April 8, as the national media reports an increasingly contentious negotiating cycle between the Obama White House and Republican leaders.

Four Grant and Loan Programs

The four grant and loan programs of RUS, with their program level funding are listed below.

Based on our review of the budget process, and off the record discussions with officials, believes all of the programs are at risk of potentially substantial cuts:

Total RUS Rural Telecom Grants & Loans: $1.445 billion      

Subtotal, Grants:                                                $    55 million,     4%

Subtotal, Loans:                                                 $ 1.39 billion,    96%


Community Connect Grants:                           $   25 million

Distance Learning and Telemed. Grants:     $   30 million

Broadband Access Loans:                               $ 700 million

Telecommunications Loans:                            $ 690 million, total

  Direct Loans, Hardship Loans                        $145 million, subtotal                      

  Direct Loans, Cost of Money Loans               $250 million, subtotal

  Guaranteed/Insured Loans                              $295 million, subtotal 

For RUS, No Good Deed Goes Unpunished

In the current risk to the rural telecom funding of RUS there is a tragic irony, a strong sense of no good deed going unpunished.

The vast majority of funds now being held — 96% of the $1.445 billion — are authorized as loans, to be secured by the credit facilities and low loan default rate of RUS. The actual appropriation needed to secure the full program level figure is significantly less, given the loan leverage rate.

Adelstein’s RUS is now disbursing $3.529 billion in grants ($2.357 billion) and loans ($1.191 billion) for 320 projects funded by the $2.5 billion portion of the broadband stimulus program issued to his agency by Congress. The $1 billion difference in program disbursements over appropriations comes from that same leverage ability.

Agriculture Secretary Tom Vilsack and Adelstein suspended the troubled Broadband Loan program, which they inherited from the Administration of President George W. Bush, in order to spend the stimulus monies as mandated by Congress.

They adopted a lessons learned from their reform of the Broadband Program. Also,  recommendations from past audits by the Government Accountability Office (GAO) and the Inspector General of USDA, are seen in the Program’s newly proposed Interim Rule.

On top of these reforms, Administrator Adelstein described for us more changes now rolling out in the RUS broadband/telecom programs. Branded as the Build-Out, Build-On initiative, the effort is marked by better coordination with all USDA economic development programs in the field. (See Stimulating Broadband Friday for an interview with Adelstein.)

Now, as the lessons have been learned, reforms put in place to correct the Bush era dysfunctions, and further improvements for the coordination of USDA’s field force are made, even the Farm Bill funds of 3 years ago are in effectively suspended.