For the second year in a row, a broad coalition of parties worked hard to convince Congress to exempt the federal Universal Service Fund (USF) from the requirements of the Anti-Deficiency Act (ADA). In both years, the coalition succeeded in the waning days of the Congressional session to attach language to appropriations legislation granting one-year exemptions for the USF. Without the exemption, schools and other beneficiaries of the program would have been faced with not being able to pay their technology bills.

Service providers would also have faced a dilemma: continue services and not be paid, or turn off services critical to schools, libraries, hospitals and health care clinics. Additionally, telephone companies may have had to pay substantially more into the fund, which would eventually have been passed on to customers in the form of higher USF charges on monthly bills. All in all, nightmare scenarios which ever way you look at it.

Fortunately, an unusual coalition of education associations, rural health care representatives, consumer organizations, local and state government, and telephone, wireless, Internet and cable companies succeeded in averting those nightmares.

The problem arose a little over a year ago. The FCC, which oversees four universal service programs that keep basic telephone service affordable and allow schools, libraries, and rural health care providers to buy communications services and equipment at a discounted rate, ordered the USF administrator to convert from general accounting rules to federal government accounting rules. While seemingly innocuous, the conversion invoked a number of unintended consequences in the form of new regulations, including those required by the ADA.

The ADA requires that federal agencies obligate funds only when they have enough cash-on-hand to cover those obligations. This was not the case under the old accounting system, so USF funding commitments were issued without enough cash-on-hand at all times to cover all commitments. This was possible because there is a continuous flow of monies into the fund through quarterly contributions from interstate telecommunications companies, and there is a several-month lag between the time commitments are issued and actual disbursements related to those commitments are made.

Realizing that the ADA was applicable, the fund administrator determined there was a substantial shortfall in cash-on-hand and stopped issuing funding commitments to schools, libraries, and rural health care providers between August and December 2004. That’s when the coalition began lobbying for the exemption, and received the first one-year exemption last December.

Facing the expiration of the exemption this year, the coalition sought a permanent exemption, yet succeeded in gaining only another one-year exemption. It was finalized with President Bush’s signing of HR2862 (the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006) last week.

However, the goal remains a permanent exemption, which will protect schools and the other beneficiaries from the prospect of losing critical funding and technology. But the task is not simple, as there are those in Washington who are opposed to any exemption at all. Here’s hoping to success next year!