GAO Report Underscores Sen. Cruz’s Concerns Over Wasteful Broadband Spending and Hidden Phone Bill Tax

New GAO report finds rising costs and weak FCC oversight

WASHINGTON, D.C. - This week, the Government Accountability Office (GAO) released a report requested by U.S. Senate Commerce Committee Ranking Member Ted Cruz (R-Texas) that found the Universal Service Fund (USF) operator is burning through cash with only minimal government oversight of its budget. The report confirms the need for greater Congressional oversight of the USF as Sen. Cruz laid out in his Blueprint for Universal Service Fund Reform, published last year. Most significantly, the report's findings underscored Sen. Cruz's call for greater accountability of a hidden regressive tax on Americans' phone bills.

On May 10, 2023, Sen. Cruz asked GAOto probe the private non-profit, the Universal Service Administrative Company (USAC), -which operates USF-funded programs meant to expand high-speed Internet access. According to the GAO's findings, USAC's operational costs have surged by 27.5% over the past five years, with 2023 expenses reaching nearly $248 million-an amount that is almost half of the FCC's 2023 annual budget of $514 million. This represents a growing share of the total USF tax, with USAC's administrative costs rising from 2.2% in 2018 to 3% in 2023, surpassing the typical 2% cap set by Congress for administrative expenses.

Ranking Member Ted Cruz said:

"These findings underscore my concerns about USF's history of waste, fraud, and abuse, and the serious transparency and performance failures of its administrator, USAC. The GAO report comes at a pivotal time in the debate over USF reform, especially with ongoing legal challenges, including the Fifth Circuit's recent ruling that the USF's structure is an unconstitutional delegation of Congress' taxing power. It's time to reform the USF by subjecting it to the appropriations process, eliminating duplicative programs, and preserving only initiatives that deliver measurable benefits to American consumers."

The GAO report points out that the Federal Communications Commission has only weak oversight of USAC's financial management. While the FCC is responsible for regulating USAC, it has little insight or control over how the company administers and allocates the resources it manages. The report notes that while program-specific committees, such as those for High Cost, Low-Income, and Schools and Libraries (E-Rate), are tasked with developing budgets, the USAC Board has the final say in budget approvals-with no modifications allowed without a two-thirds majority vote of a quorum of the board. Notably, the FCC does not have a seat on the USAC board, further limiting its influence over USAC's decisions.

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