| Minnesota Telecommunications
Guide
Feb. 24,1998
The state Legislature is currently considering bills that would result in as much as a six-fold expansion of Minnesota's Telephone Assistance Program, better known as TAP. State law must be altered to conform with changes the Federal Communications Commission (FCC) made concerning eligibility and funding for national "Lifeline" programs (TAP is Minnesota's "Lifeline"). If state law is not changed, TAP participants would lose an additional $3.50 per month in aid the federal government will provide. A valuable program without serious opposition, TAP is administered by the Public Utilities Commission, the Department of Human Services and the state's local telephone companies. There is also little opposition to TAP's growth because the program has increased the number of low-income Minnesota households with telephones when such access is critical to economic success. General Funds or Surcharges? But the program's expansion also provides an opportunity to reexamine a basic policy question. Should TAP continue to be funded by surcharges on telephone access lines -- surcharges that might grow by more than 500 percent in the near future to meet program expenses -- or should TAP be supported by the state's general fund? Before considering that question, some background is necessary. Currently, 11-year-old TAP provides about 48,000 Minnesotans with a $7.00 credit on their monthly telephone bill. Half the aid is federal, half state. Those eligible must be senior citizens or have disabilities and their incomes must be 150 percent of federal poverty guidelines or less. Beginning this year, the federal government will double its contribution to $7.00 ($5.25 in direct aid; up to $1.75 in matching funds) if the state does two things: (1) maintains its $3.50 monthly support for all program participants, and (2) broadens program eligibility to include households eligible for public assistance or whose income matches the guidelines listed above. The state demographer's office estimates that about 283,000 state residents would be eligible for TAP under the new rules and that as many as 260,000 people are likely to participate in the program. Using its electronic data bases for public assistance programs, the state would automatically enroll about 210,000 people, one-third per year for the next three years. TAP's costs will rise significantly. By 2001, the program's current $1.9 million cost will increase to $12 million or more. The current surcharge of 6 cents per access line would need to rise to about 32 cents to cover costs. (This number would be about 25 cents if wireless lines paid surcharges for the first time.) Jerry Knickerbocker of the Minnesota Telephone Association thinks it's time that surcharges disappeared. "Now that TAP will use federal income guidelines, it should be funded from the state's general revenues as other social service programs are," he says. "We don't tax food to pay for food stamps. And we don't tax heating fuel to pay for energy assistance. So why tax telephone service to pay for TAP? It's fairer to fund TAP from general revenues because all taxpayers pay instead of just telephone subscribers." He says an example of the current unfairness is the fact that people with more than one phone line pay more than their share. Sen. Steve Kelley, chief author of the Senate bill (S.F. 2718), justifies the surcharge this way. "We have a gas tax that provides for our transportation infrastructure," he says. "Those that use the roads more pay more. It's similar for the telecommunications industry. The surcharge is like a user fee for access to the system." Kelley also says that with the present demands on the state's general revenues, funding TAP that way wouldn't pass either house.
The House Committee on Regulated Industries
disagrees with Sen. Kelley. Its bill (H.F. 3064) authorizes TAP funding from
general revenues after Dec. 31, 1999. Till then, a 10-cent surcharge, which
would apply to wireless lines for the first time, would be in force. The
Senate bill, which raise surcharges to 20 cents per line by 2000, does not
include wireless lines. After a stop in the House Rules Committee, a conference
committee will resolve the two bills' differences.
Because the federal government won't decide how to fund its own universal service fund until 2001, Knickerbocker questions the Senate bill's proposal that TAP payments be handled through an as-yet nonexistent state universal service fund starting in 2000. "The federal universal service fund was created to underwrite the cost of service for hard-to-serve areas," he explains. "Now that it's added more programs but no more money, our state universal service fund, when it's established, may be asked to pay up to 75 percent of what the federal fund pays now. Since we can't even begin to sort out what Minnesota will fund, who pays, or what things will cost, setting up a state fund to pay for TAP seems very premature." Kelley's response is that the state is "staying consistent with the way the federal government handles the situation." He also notes that the Legislature mandated a universal service fund a year before the federal law was passed. The House bill, however, removed all universal service fund language. Bruce Bentson, TAP administrative supervisor for DHS, says there are no strong opinions at his department about the program's funding mechanism -- as long as there is enough money. He says, however, that general revenues would probably fund TAP better than the surcharges in the Senate bill. If they proved inadequate, the bill requires a reduction in state aid, which would result in a proportional loss of the new federal matching money. Kelley says the surcharge amounts are there "to move the concept forward. We can adjust them higher if the program successfully enrolls many of the people who don't automatically qualify." Accountability
Knickerbocker thinks it all comes down to better
accountability. "The surcharge is on auto-pilot," he says. "The program is
only looked at when more money is needed. If TAP funds came from general
revenues, the program would have to justify how good a job it's doing, how
its funds are spent and why it needs any additional money."
PROFILE -- Paul Bunyan Rural Telephone Cooperative School mornings are less stressful for some students in the Bemidji School District, and some children don't have to wait in the cold, rain and dark for their bus. That's because Bemidji-based Paul Bunyan Rural Telephone Cooperative offers "BusCall," the nation's first school bus notification system. Using Global Positioning Satellites (GPS), cellular Cellemetry(r) data service and computers based at the Cooperative's headquarters, the system tracks buses and automatically calls families to tell them when their school bus will be arriving at their stop. The service, currently being trialed on ten Bemidji School District buses, should debut district-wide next fall for between $4 and $6 per month. BusCall is just the latest advanced technology offered by Paul Bunyan Telephone. Founded in 1954, the co-op serves over 8,000 mostly rural customers in a large area in Beltrami, Itasca, Hubbard and Koochiching counties. But the co-op still "has all the bells and whistles metro customers have, including ISDN and frame relay," says public relations coordinator Dennis Renowski. "We're very concerned about keeping up with technology." The co-op, which has had an average annual capital credit payout of about 25% to its members, is also concerned about its community. In addition to significant financial support for an area hospital and the many donations of time and money of its 40 employees, the co-op annually provides 20 area students with partial post-scholarships and funds one full-tuition scholarship to Bemidji State University. The co-op's future looks bright. "We've been working hard to provide our members with the most advanced services possible for some time," says Renowski. "We've been successful for almost 50 years, and we expect to do even better in the future."
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