Monday, April 11, 2011

GOP Kills Full $700 Million in Rural Broadband Loans Slated by USDA

Rescission of $68 Million Cancels $700 Million in Loans for Rural America 04/11/2011 San Francisco - The full amount of $700 million in rural broadband loan authority slated to be used this year by the U.S. Department of Agriculture has been cancelled as part of the budget compromise reached Friday evening.

House Appropriations Chair Harold Rogers
The loan authority cancellation was sponsored by the Republican majority members of the House Appropriations Committee, chaired by Rep. Harold "Hal" Rogers (R-KY-05).

In the run up to this weekend’s threatened shutdown of federal operations, an increasingly shrill chorus of right wing pundits had targeted the Broadband Access Loan Program of USDA’s Rural Utilities Service (RUS) for cuts. The effort, based in disinformation and outright incorrect facts about the program, achieved success among GOP appropriators.

No source in government or industry we interviewed expressed hope that any portion of the broadband fund will be restored in the current 2011 federal fiscal year.  Statements by President Obama and congressional leaders about the overall budget deal passed early Saturday morning clearly signal there will be no room for back filling of cut accounts this year.   

The $700 million was never a hard dollar appropriation sitting in the RUS accounts. The $700 million was instead the upper limit of the “program level” loan authority which USDA was attempting to issue to service providers in rural areas.

The intended $700 million program level – the dollar value of federally backed loans targeted to actually flow to rural telecom carriers applying for the funds -- was to be secured by $68 million in appropriations previously authorized by the 2008 Farm Bill. Of that latter amount, $39 million was cut by the continuing resolution (CR) passed two days ago, on top of $29 million taken out in the previous CR introduced February 25 by House Appropriations.

No amounts anywhere approaching $700 million will thus ever “be "pulled...out of USDA's coffers" as a result of this action, as one right wing apparatchik wrote erroneously last week.  

Said accurately, the denial of the $68 million in federal funds means that a figure over ten times that amount will not flow to credit worthy wired and wireless service providers for eventual repayment to the government.  The RUS broadband loan portfolio has a default rate of less than one percent.

The $700 million will also not flow to U.S. telecommunications equipment and materials manufacturers certified by RUS for inclusion on the agency’s List of Materials. Federal certification and inclusion on the List, which is required for all components used in USDA-funded rural networks, signifies the majority of each product’s manufactured value is of domestic origin.

In the broadband stimulus program, the Obama Administration had issued waivers from the Buy American provisions of the Recovery Act for telecom network equipment. The Administration did so despite the strong objections of organized labor and a handful of U.S. manufactures, with the vocal Zhone Technologies leading the small pack.

Demand for the full $700 million in a new tranche of rural broadband loans is clearly seen in the tremendous over subscription for RUS loan/grant packages in Round 1 and Round 2 of the stimulus effort. 

Rural Telecom Funding provides a link to our Mailing List for updates on the dynamic realm of changing budgets, program rules, and funding flows for telecom in rural America. 

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