As Democrats and Republicans look for spending cuts in their latest discussions to fund the federal government for the rest of the year, the Rural Utilities Service’s (RUS) Rural Broadband Access Loan and Loan Guarantee Program should be at the top of the list.
RUS was created in 1994 as a successor to the Rural Electrification Administration, which was established in 1936 to bring electricity and phone service to rural areas. It has now morphed into an agency that gives loans to provide broadband service to rural parts of the country. RUS has done a horrible job at this, but there is now an opportunity to rescind some unspent funds.
RUS’s Rural Broadband Access Loan and Loan Guarantee Program was established by Congress as part of the 2002 farm bill, and modified as part of the 2008 farm bill. Its primary goal is to provide loans to help bring Internet broadband service to unserved rural communities, which are generally defined as communities with fewer than 20,000 residents.
According to a February 12, 2009 Washington Post article about the RUS broadband program:
“Since it began 6 years ago, $1.8 billion in loans have been distributed. Of the 68 projects funded, 21 are nearly complete and about half have not begun. An Agriculture spokesman could not confirm whether the rural utilities service program has completed any projects.”
RUS has also been criticized for directing its loans to areas that aren’t rural or unserved. The U.S. Department of Agriculture’s Office of Inspector General (OIG) observed in a September 2005 audit report that “the agency . . . issued over $103.4 million in grants and loans (nearly 12 percent of $895 million in total program funds) to communities near metropolitan areas” because its definition of “rural area” was too broad. The OIG found that RUS had not maintained its focus on rural communities and had instead issued loans to communities near large cities.
According to the 2005 report, “In one of the more highly publicized cases, RUS issued loans to a company providing broadband access to affluent suburban communities a few miles outside of Houston, Texas . . . The subdivisions’ proximity to urban areas also made broadband services available to them through means other than the pilot loan program.”
The OIG concluded that “in this case, the Government’s loan was not being used to extend service to rural areas that would not otherwise receive access to broadband, but instead to subsidize a company that would have provided the same service without the loan.”
In March 2009, the OIG found that in the period between the publication of its 2005 report and the passage of the 2008 farm bill modifying the broadband program and narrowing the definition of “rural area,” RUS continued to issue loans in exurban and suburban areas. Instead of funding deployment in unserved rural areas, RUS funded service in 148 communities that are within 30 miles of cities with 200,000 inhabitants, including communities near very large urban areas such as Chicago and Las Vegas. That same report reiterated that the OIG remained concerned that the existing broadband program may not meet the Recovery Act’s objective of awarding funds “to projects that provide service to the most rural residents that do not have access to broadband service.”
Any vote on a CR that doesn’t include serious spending cuts like zeroing out the $28.96 million in budget authority for fiscal year 2011 from RUS’s Rural Broadband Access Loan and Loan Guarantee Program is a vote against fiscal common sense.
David Williams is the President of the Taxpayers Protection Alliance, a non-profit, non-partisan organization dedicated to educating the public through the research, analysis and dissemination of information on the government’s effects on the economy. In his 18 years in Washington, D.C., David has become an expert in finding and exposing government waste and has helped fine tune criteria in identifying and ultimately eliminating earmarks.