Idaho $14.5 million short on bill for broadband for schools

BOISE – There’s an unexpected $14.5 million hole in Idaho’s budget, as lawmakers are being asked to dip into state funds to make up $14.5 million in missing federal payments to a group of vendors providing broadband service to Idaho high schools.

“They’re business people, and they’re not going to do it for free,” state Department of Administration Director Teresa Luna told the Legislature’s joint budget committee on Thursday. If lawmakers don’t ante up $14.5 million in state funds, she said, the network serving all of Idaho’s high schools “will be shut down.”

Lawmakers were thunderstruck. The state has spent millions to set up the Idaho Education Network, run by Education Networks of America and CenturyLink; that included $3 million in federal stimulus funds in fiscal year 2010, two $3 million grants from the Albertson Foundation in 2011 and 2012, and roughly $3 million in state funds last year and a like amount this year.

“At the end of the day, we have to do the right thing, and I don’t think the right thing is to shut off the Idaho Education Network,” said state Sen. Dean Cameron, R-Rupert, co-chairman of the Joint Finance-Appropriations Committee. “We’ve got kids taking classes through it. We’ve got school districts that need to be protected.”

But he and other lawmakers said they were frustrated that they’ve just learned of the problem now – nine months after it arose and in the middle of the school year. The $14.5 million budget hole could jeopardize other budget priorities, Cameron said, including a $3.5 million planned expansion of the broadband network to Idaho elementary and middle schools next year.

The costs Idaho has been covering thus far reflected only about 25 percent of the cost of the service, Luna said, because the remaining 75 percent was coming from federal “e-rate” funds administered by a division of the Federal Communications Commission to provide Internet access to schools and libraries. That money was paid directly to Education Networks, which then distributed it to subcontractors including CenturyLink.

Since March, none of that federal money has shown up, Luna told lawmakers, and she’s not sure why not.

It may have to do with an ongoing lawsuit over the original contract award for the network, she said. Syringa Networks sued the state in 2009, contending that then-Administration Director Mike Gwartney improperly cut the company out of $60 million in business when he awarded the contract to CenturyLink. Syringa had partnered with Education Networks to try to win the big contract, but Gwartney awarded it to CenturyLink and Education Networks.

“It’s our belief, based on the questions that they’re asking us, that they’re reviewing the contracting and purchasing process to make sure that it meets their standards,” Luna said. “Even without full payment, the vendors have been providing services to the IEN since March. We are obligated for the services they have provided since that time.”

An FCC spokesman told The Spokesman-Review on Thursday that the funds are being held up in light of last spring’s Idaho Supreme Court decision in the Syringa case, while the agency investigates whether the contract followed federal procurement rules. There’s no telling how long that review might take.

Luna said she expects the feds to eventually pay up and reimburse the state, but there’s no guarantee.

Luna, who is the sister of state schools Superintendent Tom Luna, said she first learned of the nonpayment from Education Networks on July 31, “that they had not been paid e-rate funds in about three months. At the time, it did not raise a lot of concerns,” she said. “We had heard nothing to tell us the funds had been withheld.”

She said she arranged to pay the state portion of the vendors’ fees in advance for several months, “essentially to put a little bit more money into the vendors’ pockets for the 75 percent that they weren’t getting paid.”

A couple of months later, Luna said the state received an email from the FCC asking if Idaho’s contract with Education Networks was valid, in light of the lawsuit from Syringa Networks challenging the contract award. Luna said she answered yes but never heard back.