Opening Statement of Sen. John McCain.   (As delivered.)
Re: Hearing on Schools and Libraries Corporation.
Date: July 16, 1998.
Source.  This document from creating by transcribing from an audio tape of the hearing.

"At the outset, let me make clear what the purpose of this hearing is, and is not about.  The hearing today is not about killing the schools and libraries program.   I repeat.  This hearing is not about killing the schools and libraries program.  It is not about preventing schools and libraries from obtaining access to advanced telecommunications.  It is, however, about finding a way to get the benefits of access advanced telecommunications to services schools and libraries in a way that is sustainable and supportable in the future.  It is about making sure that the people who ultimately pay this tax, that is, every user of telecommunications services in the country, gets value for their money they are forced to contribute to higher rates on all telecommunications services.  I do support the goal of making advanced telecommunications services to our nation's schools and libraries.  I do not, however, support the program concocted by the FCC and implemented by the School's and Libraries Corporation.

In 1996, when the Congress approved expansion of the universal service program to include a subsidy for discounted access to telecommunications services, the program was sold as a modest effort to bring the benefits of advanced telecommunications services to the schools and libraries.  The Administration and the FCC, however, managed to turn this modest proposal into a behemoth that is as large as the entire original universal service program, that included high cost and low income support.  [Inaudible word] of those in Congress who voted in favor of this program contemplated this result.  In addition, the FCC sizing of this fund at 2.25 billion dollars per year, later reduced to 1.275 billion, led to rate increases for many customers, and the appearance of new line items to customers' bills, commonly known as the "Gore Tax."

We are not here today to dwell on the broad policy mistakes of the Administration and the FCC.  We are here, however, to discuss the implementation of the schools and libraries program and whether the American people are being efficiently and effectively served.  The subsidy made available to schools and libraries under this program is derived from contributions made by telecommunications carriers.  In practical terms this means that consumers ultimately pay a tax to support this subsidy in the form of higher bills for telephone, cellular, and paging services.  Moreover, because the subsidy is subject to a yearly maximum, any payments made for ineligible services will either unnecessarily increase consumer bills, or else unnecessarily decrease the funding which would have been available for eligible services.

It is therefore absolutely essential to vindicate the interests of both consumers and subsidy fund applicants by assuring that the Schools and Libraries Corporation has developed an authoritative comprehensive system of auditing the more than 30,000 funding applications that have been received to determine whether they contain bundled costs for both eligible and ineligible services.

Because the administrative costs of maintaining the Schools and Libraries Corporation are deducted from the amount of funding that would otherwise be available for eligible services, the same concerns that warrant an independent audit to assure that funds are not dissipated on ineligible services also warrant an independent audit to assure that limited funds are not wasted on a costly and unnecessary bureaucracy.

With these concerns in mind, I requested on May 22, 1998 that the General Accounting Office initiate a formal investigation and audit of the operations of the Schools and Libraries Program and particularly its program integrity assurance program.  I further requested in the context of auditing the corporation's program integrity processes, that GAO also examine and identify any changes to the administrative structure that could in its judgement allow universal service subsidy funds to be distributed more efficiently, while allowing Congress to effectively oversee the program's compliance with federal law.   I asked the GAO to specifically give consideration to whether administration of the schools and libraries program might be better assigned to other federal agencies.

The integrity and efficiency of this program are issues that concern all Americans, not only those who will receive the funds and directly benefit from them, but also those who will be paying for them.  I look forward today to hearing from both the GAO and the Schools and Libraries Corporation the program integrity issues and whether we can have confidence that opportunities for fraud, waste, and abuse have been eliminated to the extent possible.