Tauzin and Burns Introduce E-Rate Reform Bill

(July 24, 1998)  Sen. Conrad Burns and Rep. Billy Tauzin introduced a bill on Thursday that would reform the controversy plagued schools and libraries program.   The proposal would fund the program out of the existing excise tax on phones, terminate the FCC's Schools and Libraries Corp., transfer authority to the NTIA, and hand out funds to the states in the form of block grants.

Presently, the "e-rate" is run by the Federal Communications Commission and its Schools and Libraries Corporation (SLC).  The FCC has administered the program pursuant its own very expansive and creative interpretation of Section 254 of the 1996 Telecom Act.

The e-rate is set to subsidize telecommunications services, computer networking, and Internet access for schools, libraries, and rural hospitals.   Funding comes from universal service contributions which the FCC sets and collects from phone companies.   The phone companies, in turn, pass these charges on to their consumers.   Hence, many critics of the FCC call this "tax" on phone users the "Gore Tax," because of the Vice President's involvement in the program.

Many legislators have criticized the way which the FCC has handled the program, and the GAO has ruled that the FCC illegally formed the SLC.  The bill filed yesterday would terminate the FCC's role, but continue the subsidies.

Rep. Tauzin described his bill at a press conference held to announce its introduction.  "One, we save the schools and libraries program from all claims of illegality.  We abolish the Gore Tax and the corporations which we think were illegally created to conduct the program at the FCC.  We make it clear that the FCC has no authority to do a legislative thing, and that is, pass taxes on the American public.  And we make it clear that the schools and libraries program will continue, that it will be properly funded, but that that funding will be conducted through the state eductaion authorities administered through the NTIA."

Rep. Billy Tauzin (R-LA) (website | biography) is Chariman of the House Telecommunications Subcommittee.  Sen. Conrad Burns (R-MT) is Chairman of the Senate Communications Subcommittee.  The two subcommittees have oversight authority over the Federal Communications Commission.  The bills introduced in the House and Senate are identical, and are titled the "Schools and Libraries Internet Access Act."  The House bill also has as principal co-sponsors Rep. Jerry Weller (R-IL) and Rep. Kenney Hulshof (R-MO).   Both are members of the Ways and Means Committee, which has concurrent jurisdiction over the bill.

"What began with a general and laudable goal in the Telecommunications Act of 1996 inevitably morphed into a political and bureaucratic tool of the vice president, who has spoken continually of reinventing government.  In the face of calls to discontinue this program entirely, I hope the administration would support what is indeed a rational compromise," Burns said in a press release.

The proposal contains the folowing provisions.

• The proposed legislation would slash the current 3 percent federal communications excise tax by two-thirds.
• The remaining revenue from the existing excise tax ($1.7 Billion) would fund the provision of telecommunications services to schools and libraries envisioned in Section 254 (h) (B) of the Telecommunications Act of 1996.
• Money for the E-rate program would be sent to the states in the form of block grants.
• The School and Libraries Corporation and Rural Health Care Corporation would be ended.
• The Federal Communications Commission would no longer administer the program.
• The Commerce Department's NTIA would oversee the program.
• Consumers would not get charged any additional new taxes, fees or charges for telecommunications services.
• Since the current excise tax goes into the general fund, the tax cuts would be offset by using part of the expected budget surplus.

Rep. Tauzin stated that the prospects for passage this session are good.   "We have had extensive discussions with the leadership here in the House over this bill, with Chairman Bliley, with Speaker Gingrich, with Chairman Archer, and with other Chairmen, such as Education Chairman Bill Goodling and Hal Rogers and others from the Appropriations Committee.  And there is a growing, at least, consensus that something like this needs to be done.  Chairman Bliley indicates that he would like to see action on the Gore Tax sometime in September, when we get back from the August break.  And so, there is a strong likelyhood that before we leave session in October, we will see some action."

Tauzin also stated that currently, the FCC is improperly assuming taxing and spending authority.  "As worth while as it is, they wanted to take over the legislative roll of taxing, and spending this money.  In fact, doing it in a corporation that had no legislative oversight, that was not responsible to any committee of Congress, that was not subject to the appropriations process here in Washington.  They were going to become a taxing agency, levying a tax on telephone users. ... They literally were assuming to themselves in this in this interpretation the right to tax and spend without any Congressional authority."

The House bill's initial eleven sponsors are all Republicans: Billy Tauzin, Jerry Weller, Kenny Hulshof, Chris Cox, Goss, Ron Lewis, James Rogan, Nick Smith, John Shimkus, John Sununu, and Ed Whitfield.