PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Telecommunications Division RESOLUTION T-16437 Public Programs BranchSeptember 21, 2000
R E S O L U T I O N
RESOLUTION T-16437 . ALL TELECOMMUNICATIONS CARRIERS. ADMINISTRATIVE COMMITTEE REQUEST FOR APPROVAL OF ITS FISCAL YEAR JULY 1, 2001, THROUGH JUNE 30, 2002, BUDGET AND SURCHARGE RATE FOR THE CALIFORNIA TELECONNECT FUND PROGRAM.
BY LETTER REQUEST TO THE EXECUTIVE DIRECTOR DATED MAY 11, 2000.
_________________________________________________________
SUMMARY
On May 11, 2000, the California Teleconnect Fund (CTF) Administrative Committee (AC) filed with the Executive Director of the Public Utilities Commission its fiscal year 2001-2002 budget and surcharge rate level for the fiscal year 2001-2002. This proposed budget would increase the All End User surcharge rate for the fiscal year 2001-2002 to 0.20% from the 0.185% surcharge approved for the Six-Month budget January 1, 2001, through June 30, 2001. This resolution approves the fiscal year 2001-2002 budget of $ 35.442 million for the CTF program and the fiscal year 2001-2002 surcharge of 0.185 %.
BACKGROUND
The AC's May 11 request seeks approval of a fiscal year 2001-2002 budget of $37.384 million and increases the Six-Month budget from January 1, 2001, through June 30, 2001, surcharge rate of 0.185%. to 0.20% effective July 1, 2001. This budget request was filed pursuant to Finding No. 9 in Resolution T- 16374 dated December 16, 1999.
1. Decision 96-10-066
Decision (D.) 96-10-066 established the CTF program to provide discounted services to qualifying schools, libraries, hospitals, and community based organizations. The CTF program is funded by an All End User surcharge on intrastate billings. D.96-10-066 established a 0.41% surcharge rate which was intended to raise $50 million per year to fund the CTF discounts.
2. Resolution T-16165
The Commission in Resolution T-16165, dated July 2, 1998, lowered the CTF surcharge rate from 0.41% to 0.05% based upon a letter request by the AC to the Executive Director dated April 27, 1998. The reason cited for the lower surcharge rate of 0.05% was that the amount committed to be reimbursed to carriers on an annual basis was below the amount collected with a 0.41% surcharge rate which corresponds to the $50 million cap established in D.96-10-066. The new surcharge rate level of 0.05% did not reflect the revenue effect of the new federal universal rules for discounted services to schools and libraries.
3. Resolution T-16374
The Commission in Resolution T-16374 adopted a CTF year 2000 budget of $33.472 million and continued the then current surcharge rate of 0.05%. The Commission in Resolution T-16374 also adopted a CTF January 1, 2001, through June 30, 2001, budget of $16.932 million and increased the year 2000 approved surcharge rate of 0.05% to 0.185% effective January 1, 2001.
4. Senate Bill 669
Senate Bill (SB) 669 has changed the filing requirements for future budgets and surcharge levels. In order to conform to the State Budget process, we believe that future budgets must be consistent with the State of California fiscal year budget process, rather than the current calendar year budget process. Fiscal year budgets need to be presented for Commission approval at least one year in advance of the beginning of the budget year. The Commission must present a Budget Change Proposal for each program budget to the California Department of Finance (DOF) by September 1. SB 669 allows the Commission only 90 days to approve a program budget after filing of such a budget by the AC and before submission of the adopted budget to the DOF. In order for the Commission to fulfill this obligation on a timely manner in year 2001, the AC must have filed a proposed budget and a proposed surcharge level for fiscal year 2002-2003 for Commission approval on or before June 1, 2001.
In future years under the provisions of SB 669, if the State Budget including spending authority for CTF funds is not adopted by the Legislature and signed by the Governor by the beginning of the fiscal year, then CTF funds will not be paid out even if the associated claims are approved by the AC. Program payments to carriers may be jeopardized if the State Budget approval process is delayed beyond the start of the new budget year.
Besides filing of the transition plan for the transfer of funds to the State Treasury, SB 669 requires the Commission to conduct financial and compliance audits of these public program-related costs and activities at least once every three years, beginning January 1, 2000.
5. CTF Program Current Status
The CTF program was established in D.96-10-066 to provide discounted services to schools, libraries, hospitals, and community based organizations. The utilities have been providing discounted services to those qualified organizations requesting such services since February 1997. Further, utilities have been collecting CTF surcharge revenues from their end-users since the start of the program in February 1997.
The last phase of establishing the trust account with Union Bank for the CTF program and requiring carriers to deposit CTF funds was completed in September 1999. The Commission, in Resolution T-16331, dated September 2, 1999, adopted the agreement between the AC and Union Bank for the trust account with Union Bank for CTF. 1 ALJ Kenney, in consultation with the assigned Commissioner, issued a ruling, dated September 22, 1999, instructing when, where, and how to deposit CTF surcharge revenues and associated interest income into the trust account with Union Bank no later than November 12, 1999.2 The surcharge revenues represent the amounts collected by carriers since February 1997 and held from February 1997 to September 1999. Further, carriers are required to deposit ongoing remittance of CTF surcharge revenues beginning with the surcharge revenues billed by the carriers during October 1999.
6. Year 2000 Six-Month January 1, 2001 through June 30, 2001 CTF Budgets and Surcharge Rate Levels
Attachment A of this resolution shows the adopted year 2000 and the Six-Month January 1, 2001, through June 30, 2001, budgets for the CTF program. The year 2000 adopted budget provides for revenues of $11.367 million, including associated investment income, administrative expenses of $0.960 million , and program payments of $29.442 million for discounted services to schools, libraries, community based organizations, and rural and government-owned hospitals. The adopted year 2000 budget also includes an estimated $3.070 million for interest payment to carriers for year 2000. Such interest payments will be required for CTF services that are provided by carriers every month since February 1997 and such services are projected to be provided in year 2000. The carriers will be filing claims for CTF services provided for 1997 in year 2000. 4 Further, it is anticipated that claims for 1998 and claims up to September 1999 will be filed by carriers in year 2000.5 6
The estimated fund balance at the end of year 2000 is $8.549 million.
Attachment A of this resolution shows the adopted Six-Month budget from January 1, 2001, through June 30, 2001, with total revenues at $17.5 million, total program payments at $16.5 million and a balance of $9.1 million on June 30, 2001. The adopted surcharge rate level has been increased from 0.05% to 0.185% effective January 1, 2001.
7. Administrative Committee's Fiscal Year 2001-02 Budget and Surcharge Level
Column H in Attachment A of this resolution sets forth the AC's proposed fiscal year 2001-02 budget of $37.384 million for the CTF program. The AC's proposed budget includes revenues of $37.516 million, program payments of $34.1 million, other expenses of $2.259 million, a reserve at the end of the fiscal year of $9.625 million and an increase to the surcharge rate from the 0.185% adopted effective January 1, 2001, to 0.20% to be effective July 1, 2001.
8. Funding Caps
D. 96-10-066 provided funding caps for the CTF program. The CTF program was initially funded with $5 million for certain services provided to qualified Community Based Organizations (CBOs), $5 million for certain services provided to qualified municipal and county government owned and operated hospitals and health clinics, and $40 million for certain services provided to qualified schools and libraries. The Commission also stated on page 86 of
D. 96-10-066 :
"If the monies for the CBO and hospital and health clinic discount programs are not exhausted during the year, that money shall be available to fund the discounts for schools and libraries in the subsequent year."
The Telecommunications Division (TD) has estimated that the applications filed for fiscal year 2001-02 for the CTF program request approximately $32.1 million. TD is informing the Commission that the $32.1 million is over 50% of the monies allocated for the CTF program and approaching 75% of the monies allocated for the CTF program. TD has estimated that there are adequate funds for the CTF program with the current funds in the trust account and the adopted surcharge rate levels through fiscal year 2001-02 without exceeding the $50 million CTF program funding cap.
NOTICE/PROTESTS
Notice of the AC budget Letter Request was published in the Commission Daily Calendar of May 15, 2000. No protest to this Letter Request has been received.
DISCUSSION
TD recommends that the Commission adopt a budget for the CTF for fiscal year 2001-02 consisting of $35.442 million in expenses, incoming revenues of $36.396 million, a fiscal year 2001-02 ending fund balance of $10.087 million, and a surcharge rate of 0.18520% effective July 1, 2001.
The adopted budget includes projected investment income of $.48 million.
1. Fiscal Year 2001- 2002 Budget Expenses
Column I in Attachment A of this resolution sets forth the adopted fiscal year 2001-02 budget of $35.442 million in expenses for the CTF program. The adopted expense amounts consist of $34.1 million in program payments; $0.950 million for program/financial, claims, and remittance audits; $0.075 million in banking and trust fees; and $0.317 million for implementing SB669.
The adopted fiscal year 2001-02 program payments of $34.1 million are about $1.59 million higher than adopted in the year 2000 as more schools and libraries are utilizing the CTF program and the increased usage of discounted services by these organizations. The program payments also include an estimated $2.2 million for interest payments to carriers for fiscal year 2001-02. Such interest payments will be required for CTF services that are provided by carriers every year since February 1997.
The adopted fiscal year 2001-02 program payments of $34.1 million do not consider the carryover claims from prior years beginning February 1997. If claims for the years 1997 through June 2000 are not paid by the AC, then these amounts will be paid during the fiscal year 2001-02 using the prior adopted budgeted amounts which have been accumulating in the CTF trust fund.
The adopted budget revenues are $1.12 million less than the AC proposed budget revenues due to no increase in the surcharge rate but offset by a higher projected billing base and a projected investment income of $0.501 million. The adopted CTF expenses are less than the AC proposed expenses by $1.942 million due to SB 669 implementation expenses. The projected investment income was calculated using an interest rate of five percent applied to the average of the beginning and ending fiscal year balances.
The adopted fiscal year 2001-02 audit amount of $0.950 million represents $100,000 for a program/financial audit, $250,000 for claims audits, and $600,000 for carrier remittance audits. These audits of the program-related costs and activities are needed in order to ensure the financial integrity of the CTF program.
The adopted trust fee of $75,000 represents the estimated costs for commercial banking activities during the transition prior to turning over collected funds to the state treasury.
The fiscal year 2001-02 budget includes $0.317 million for implementation of SB 669. This includes expenses for Lock Box, Commission staffing and other expenses.
2. Fiscal Year 2001-02 Surcharge Rate Level and Fiscal Year End Fund Reserve Balance
The adopted year 2001-02 estimated surcharge rate level is 0.185% which is estimated to result in a fund balance of $10.087 million at the end of fiscal year 2001-02. This fund balance of $10.087 million results in about three months of reserve for CTF. We believe the 0.185% surcharge rate and an estimated reserve fund balance of $10.087, or about three months reserve, are appropriate for fiscal year 2001-02.
3. Notice of Availability of Conformed Resolution
In the past, the Commission has served a hard copy of this resolution on all telecommunications carriers and parties on the service list of I.95-01-021. To be consistent with the Commission's commitment to utilize the Internet for distributing Commission orders and information, the TD has informed the telecommunications carriers of the availability of the draft resolution as well as the conformed resolution, when adopted by the Commission, on the Commission web site, www.cpuc.ca.gov. In addition, a hard copy of the conformed resolution will be provided to all parties of record in I.95-01-021.
COMMENTS
The draft resolution of TD in this matter was mailed on July 3, 2000, in accordance with PU Code Section 311(g) to the parties of record in R.95-10-020 and I. 95-01-021. A letter was mailed to all telecommunications carriers advising them of the availability of this draft resolution in the Commission's web site, www.cpuc.ca.gov. The TD received no comments.
FINDINGS
The California Teleconnect Fund budget for the fiscal year 2001-02 of $35.442 million, as set forth in Column I of Attachment A of this resolution, is reasonable and should be adopted.
1.
2. An estimated reserve of $10.087 million for the fiscal year 2001-02 budget is reasonable for the California Teleconnect Fund and should be adopted.
3.The Telecommunications Division's recommendation of a surcharge rate level of 0.185% for the California Teleconnect Fund program in fiscal year 2001-02 is reasonable and should be adopted.
3.
4. Senate Bill 669 will require the California Teleconnect Fund and other program funds to be deposited into the State Treasury.
5. The implementation of SB 669 will be detailed in a report that will be submitted to the Governor and the State Legislature.
SB 669 will change the future filing requirements for proposed program budgets and surcharge levels equivalent to State of California fiscal year budget basis from a calendar year basis. 6.
The Commission is committed to utilize the CPUC Internet for distributing Commission orders and information.7.
THEREFORE, IT IS ORDERED that:
1. A fiscal year 2001-02 budget of $35.442 million, as set forth in Column I of Attachment A of this resolution, is adopted for the California Teleconnect Fund program.
2. A 0.185% surcharge rate to fund the California Teleconnect Fund program shall be effective July 1, 2001 and shall be applied to all surchargeable intrastate billings rendered on or after July 1, 2001.
3. All telecommunications carriers who are required to collect the California Teleconnect Fund surcharge shall collect a 0.185 % surcharge effective July 1, 2001, on service rates and charges of all intrastate end user services, except for those that have been specifically excluded, to fund the California Teleconnect Fund program. The combined California PUC Telephone Surcharge Transmittal form currently in use shall reflect this surcharge. The Telecommunications Division shall post this resolution on the Commission web site (
www.cpuc.ca.gov) within 5 business days from the effective date of this resolution.
3.
4. The Executive Director shall serve hard copies of the conformed resolution to all parties on the service list of R.95-10-020 and I.95-01-021.
This Resolution is effective today.
I hereby certify that this Resolution was adopted by the Public Utilities Commission at its regular meeting on September 21, 2000. The following Commissioners approved it:
__________________________________
WESLEY M. FRANKLIN
Executive Director
LORETTA M. LYNCH
President
HENRY M. DUQUE
JOSIAH L. NEEPER
RICHARD A. BILAS
CARL W. WOOD
Commissioners
1 The Commission in Resolution T-16331, dated September 2, 1999, adopted agreements for the trust accounts and other banking services for the California High Cost Fund-B (CHCF-B) and CTF with Bank of America and Union Bank, respectively.
2 ALJ Kenney's ruling also instructed carriers to deposit CHCF-B funds into a trust account with Bank of America.
4 The Commission in Resolution T-16330, dated October 7, 1999, adopted claim-reporting requirements for carriers seeking reimbursement from the CTF program for 1997 claims.
5 The Commission in Resolution T-16319, dated September 2, 1999, adopted claim-reporting requirements for carriers seeking reimbursement from the CTF program for monthly claims beginning October 1999 and thereafter.
6 The Commission in Resolution T-16381, dated May 18, 2000, adopted claim reporting requirements for carriers seeking reimbursement from the CTF program for monthly claims from January 1998 through September 1999.
