14. Program Administration Issues

In 1999, the Legislature created the CHCF-B Administrative Committee Fund within the State Treasury.¹⁷⁷ This legislation provided that the funding would be in rates, while the funds collection would be submitted first to the Commission, and then deposited with the Controller for deposit in the California High Cost Fund-B Administrative Committee Fund.¹⁷⁸ The COLR's claims are paid after being reviewed by Commission staff.

In 2001, the Legislature allowed funds to be transferred between various telephone funds in the annual budget act.¹⁷⁹ The Legislature also expressed its concern with stale data underlying the B-Fund. Section 270(b) restricted the transfer of funds until the service costs from the Commission's 1996 decision were recalculated.¹⁸⁰ Subsequently, the Budget Act of 2002 transferred nearly $251 million of High Cost Fund-B money to the state general fund.¹⁸¹

In 2004, Pub. Util. Code § 739.3 was further amended to: (a) provide that money in Commission-regulated telecommunications related funds are the proceeds of rates, and therefore, are held in trust for the benefit of ratepayers and to compensate telephone corporations for their costs of providing universal service; (b) extend funding for the various universal service programs including the B-Fund program until January 1, 2009;¹⁸² and (c) further require the Commission to conduct by January 1, 2006, a review of the B-Fund.¹⁸³ The purpose of the review was "to accomplish an adjustment of subsidy payments to reflect updated operating costs and an evaluation of whether subsidy levels can be reduced while maintaining the goals of the program."¹⁸⁴

We solicited comments on program implementation issues, including issues associated with an automated claims process.¹⁸⁵ Two parties presented proposals regarding program processing issues. Cox suggested an automated claims review that would include electronic submission of monthly claims via secured connection, standardization of a monthly claims format for all carriers, electronic notification with a date that the monthly claim was submitted, and the opportunity for all carriers to elect to receive payments via an automatic clearinghouse.¹⁸⁶ AT&T recommended that the Commission employ a Third-Party Administrator that would be responsible for processing new participant applications, processing claims for compensation from the fund, distributing subsidies from the fund, and provide staff support to the CHCF-B Administrative Committee, including preparation of financial statements and management reports. If such a Third-Party Administrator were employed, the Commission's role would be reduced to drafting the annual budget, overseeing audits of program, and periodically setting the level of the CHCF-B surcharge.¹⁸⁷

DRA expressed concerned that these proposals lack specificity, and provide no supporting data as to the likely cost of such programs. AT&T provided no basis - such as an undue burden on the Commission - for the management of the fund to be outsourced to a Third-Party Administrator. DRA argues that Third-Party Administrators can add an unnecessary layer of expense and administrative complexity for programs such as the CHCF-B. DRA recommends that, if the Commission elects not to eliminate the B fund, workshops should be held to determine the need for and cost of program implementation changes, with evidence (including evidence of anticipated costs) provided by those claiming needed changes.

We shall direct that a workshop be convened in the next phase of this proceeding for parties to seek consensus on how B-Fund program administration can best be improved, automated, and streamlined. We shall consider the need for further development of the record on this issue after parties report back on the results of the workshop in seeking consensus solutions regarding program administration.

¹⁷⁷ Government Code Section 270(a)(2), pursuant to SB 669.

¹⁷⁸ Government Code Section 276(b).

¹⁷⁹ Pub. Util. Code § 276, pursuant to Section 20 of SB 742 (2001), as amended by Stats. 2001, Ch. 903 § 5.

¹⁸⁰ Pub. Util. Code § 270(b)(2), pursuant to AB 140 (Statutes of 2001). The Legislature restricted fund transfers from the B-Fund to the other high cost fund until statewide data was recalculated.

¹⁸¹ AB 425 Provision 8660-011-047.0 (Stats. 2002, Ch. 379).

¹⁸² Pub. Util. Code § 739.3, pursuant to SB 1276 (Stats. 2004, Ch. 847, enrolled September 28, 2004).