TUSF Reform

The Public Utility Commission of Texas released the latest quarterly Texas Universal Service Fund (TUSF) Financial Report for the period ending February 2020, indicating that the fund balance continues to decline.

For the quarter, expenditures outpaced income by $18.9 million with an ending balance of $95.8 million. Cash flow from operations declined 3.17% to $32.8 million with program and administrative expenditures increasing by $2.4 million up to a total of $51.7 million. Low income support continues to remain flat for the latest quarter at $401 thousand. While there was small dip in small and rural ILEC high-cost support, there was a $1.3 million increase in PURA § 56.025 support.

TTA’s TUSF work group has prepared some projections based on the rate of decline in the contribution base and anticipated increases in expenditures. According to the latest projections, TTA anticipates that the TUSF assessment rate would need to increase from 3.3% to 6.6% in order to remain revenue neutral. If the Commission was inclined to initiate a rulemaking to revise the assessment methodology to a per-connection mechanism, TTA projects that the per-connection fee would fall between $0.60 and $0.80 per month.

TTA’s TUSF work group continues to meet and work with state policy makers and has recently begun discussions with other industry participants in an effort to see if the industry can reach a consensus to protect the TUSF program. TTA has identified a number of potential solutions to preserve the fund balance including, raising the assessment rate on intrastate revenues, closing the VoIP loophole to ensure that more taxable telecommunications revenues are assessed, and revamping the contribution methodology to a connections-based program. However, to date, all levels of state government are dealing with the bigger COVID-19 impacts to the state’s health and economy.

TTA’s TUSF work group will continue to press for solutions in an effort to protect the TUSF program. Based on the latest quarterly report and using TTA’s TUSF working groups’ projections, absent reform, the TUSF fund balance will fall below the $50 million cushion that the Commission appears interested in preserving before November 2020 and will run out of funds to cover current obligations in February of 2021.

If you have any comments or questions, please contact TTA.