California broadband subsidy fund dwindles to less than a third needed for pending projects

by Steve Blum • , , , ,

Sick piggy bank

CASF funding status Part 2:

With only $145 million in collectable tax revenue left to spend on broadband infrastructure subsidies, the California Advanced Services Fund (CASF) will run dry this year. Last month, 54 broadband projects totalling $533 million in grant requests were proposed for CASF funding. Many, if not all, will be trimmed and some will almost certainly be rejected completely.

My blog post yesterday details the $130 million shortfall in tax revenue collected for CASF – actual and projected – over the final five years of the program, assuming that the legislature doesn’t extend it or the California Public Utilities Commission can’t raise the tax rate applied to in-state phone bills that funds it. Most of the shortfall – almost $120 million – will hit the account that pays for extending and upgrading broadband infrastructure, mostly in rural Californian communities.

That means that the $575 million authorised by the legislature for broadband infrastructure subsidies over the past 12 years drops to about $457 million in real money. Since 2008, the CPUC has awarded $282 million to Internet service providers, nearly all as grants. There was a loan program early on, but that didn’t prove to be popular and it was wound down, with the remaining money in the loan fund reallocated to grants.

The overhead for running CASF is also paid for by the phone tax revenue. As of a year ago – the most recent figures available – administrative costs totalled $17 million since the beginning of the infrastructure subsidy program, and have risen over the years. If you assume that the $2.2 million spent on administrative costs just for the infrastructure program in fiscal year 2018–19 stays steady and all projects are wrapped up by 2025, total overhead climbs to $30 million.

There’s some uncertainty in the numbers. CPUC overhead might continue to rise and project oversight could drag on, but in some years investment income has more than covered administrative costs. Maybe all the 77 projects already approved for CASF funding will be completed, but that’s not the way to bet. Money allocated to cancelled projects and a small but steady stream of loan repayments could add to the total available for new infrastructure grants. On the other hand, it might not be a bad idea to leave a reserve for projects that overrun budgets through no fault of their own – for example, because of tougher utility pole attachment standards imposed by the CPUC itself.

With that caveat in mind, add up all the expenses, subtract them from the actual dollars the CPUC will collect for the CASF infrastructure program, and you end up with $145 million left to spend on broadband projects. Tune in tomorrow for a look at how those $533 million worth of grant proposals might be carved down to fit.

CASF funding status Part 1: California’s broadband upgrade fund could lose $120 million, after senate committee caps subsidy bill

CASF funding status Part 3: Nearly all broadband subsidy proposals could survive California’s chopping block. Nearly

CASF Infrastructure Account as of 23 June 2020
Authorised – total$575,000,000
Infrastructure shortfall (est.)($117,654,165)
Infrastructure Account net of shortfall$457,345,835
Infrastructure awards as of 31 Dec 2019$271,333,358
Infrastructure grants awarded in 2020$10,825,350
Cumulative admin overhead as of 30 Jun 2019$16,732,595
Estimated admin overhead FY 2019–25$13,142,082
Total Infrastructure Account spent/encumbered$312,033,385
Funds remaining for new CASF infrastructure grants$145,312,450

The Central Coast Broadband Consortium (CCBC) supported Charter’s San Benito County proposal and assisted Etheric Networks with its application. The Connected Capital Area Broadband Consortium (CCABC) assisted DigitalPath. I assisted the CCBC and the CCABC, and also kibitzed on other projects. I also have opinions about what the CASF program should be (in case you haven’t noticed). I’m not a disinterested commentator. Take it for what it’s worth.