The federal appeals court’s decision puts more than $2 billion a year spent on connecting schools and libraries to the Internet in legal jeopardy.
The funding mechanism for the Universal Service Fund (USF), which funds the E-Rate, a federal program essential to K-12 broadband connectivity, amounts to an “unjustified tax” and is therefore unconstitutional, the U.S. Court of Appeals for the Fifth Circuit ruled 9-7 on July 24.
Doug Levin, co-founder and national director of the K12 Security Information Exchange, said it’s hard to overstate how important E-rate, the federal government’s largest investment in education technology, is to teaching, learning and basic school operations.
“We live in a world without textbooks, and the vast majority of students in the country use devices in the classroom,” he said. Plus, “we need internet access to route buses, to operate physical security systems, to get lunches to kids.”
The Education Network and Library Coalition, which represents more than 10 education groups including the School Network Consortium and the Association of School Administrators (AASA), called the decision “unreasonable.”
The coalition said in a statement that the decision “could result in cutting off broadband access to tens of millions of students, educators and library users.”
The court majority said the program was “commendable” but not legal.
The suit was filed against the Federal Communications Commission, which oversees USF, by Consumers Research, a nonprofit watchdog group that asks readers on its website to report “companies that try to distract from bad business practices or engage in political activities that are inconsistent with their mission.”
USF is funded by fees for certain communications services, which fund four different programs aimed at providing communications services, including broadband, to schools, libraries, rural hospitals, the poor and people living in remote rural areas. In 2022, the programs disbursed more than $7.4 billion, including nearly $2 billion for E-rate.
“Each program has a laudable purpose,” Judge Andrew Oldham, who was appointed to the 5th Circuit Court of Appeals by former President Donald Trump, wrote in the majority opinion.
But he added that the telecommunications fees that fund USF unconstitutionally delegate Congress’ taxing power to the Federal Communications Commission (FCC) and a private entity appointed by the FCC, the Universal Service Commission (USF), which decides how much to charge telecommunications companies.
By that logic, Oldham argued, Congress could fund major health programs like Medicare and Medicaid “without taxing anyone. It could simply let hospital executives set the Medicare and Medicaid budgets, [the Department of Health and Human Services] “It would authorize a hospital health care tax that could be passed on to consumers’ hospital bills,” he wrote.
The Supreme Court is dominated by justices appointed by Republican presidents. Three Republican-appointed justices dissented, along with four Democratic-appointed justices.
Court decision raises questions about short-term impact
Big questions continue to swirl about the short-term impact of this decision and future legal action.
For example, it was not immediately clear whether the ban on collecting universal service fund fees applied only to states under the jurisdiction of the 5th Circuit, which includes Louisiana, Mississippi and Texas, or to the entire country. Two other federal appeals courts have issued conflicting rulings on the same issue.
A spokesman for the Federal Communications Commission said there will be no changes to USF’s programming until the court order takes effect on Sept. 16.
Meanwhile, the Biden administration could seek a “pause” on implementation of the ruling so that toll collection can continue while the ruling is potentially appealed to the U.S. Supreme Court.
FCC Chairman Jessica Rosenworcel, who has pushed to expand the program to include Wi-Fi on school buses and cybersecurity assistance, vowed to fight the ruling.
“This decision is misguided and wrong,” she said in a statement. “It reverses decades of bipartisan support for an FCC program that helps reach some of our nation’s most rural and underserved households, as well as hospitals, schools and libraries across the country. … We will continue to pursue all avenues of review.”
Supporters tout the “huge impact” of the E-rate program
If the ruling results in the elimination of the E-rate program, it could have “devastating consequences” for schools, Keith Krueger, executive director of the School Network Consortium, said in a statement. “The potential impact of this ruling on K-12 education comes with significant funding uncertainty, with potentially significant implications for funding for high-speed internet, Wi-Fi and cybersecurity.”
The program “has been essential to ensuring our nation’s schools and students have access to broadband connectivity, which is at the heart of modern education,” David R. Schuler, executive director of the Association of School Principals, said in a statement. “We are saddened to see 25 years of hard work and progress reversed with a single ruling. We know this will have especially devastating effects for our most vulnerable students and communities, but we remain prepared to defend and protect E-rate.”
But even if the U.S. Supreme Court were to hear the case, the body, which is dominated by Republican-appointed judges, could uphold the Fifth Circuit Court of Appeals’ decision and halt the E-rate funding mechanism nationwide.
Advocates would then have to turn to Congress to supplement more than $2 billion in connectivity funding for schools and libraries, as well as other priorities covered by the Universal Service Fund.
That’s exactly what Consumers’ Research wants.
“Our position is that unelected bureaucrats should not be imposing a universal service tax on communications consumers,” Will Hild, the organization’s executive director, said in an email. “Congress should [E-rate and other programs]they should do so directly.”
To keep the money flowing, Congress would need to enact legislation creating a roughly $9 billion program to cover all services paid for under USF, then allocate those funds through a separate process for passing spending bills.
Whether the program can be replicated through congressional legislation is by no means certain.
“We have to be realistic about the politics and whether Congress is willing and able to fund a program it has approved since 1996 but has not spent a penny on since,” said AASA Deputy Executive Director Noelle Ellerson-Ng.
