Schools and Libraries (E-Rate)

FY2018 Application Filing Window Closes at 11:59 PM EDT March 22






FAQs: Category Two Budgets

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Q1: How do the budgets for Category Two services work?

A1: Starting in FY2015, requests for Category Two funding – that is, internal connections (IC), managed internal broadband services (MIBS), and basic maintenance of internal connections (BMIC) – are limited to a budget based on the number of students in a school or the number of square feet of a library outlet. A school or library can decide if it wants to spend all of its budget in one year or if it wants to spread it out over any of the five years. Additionally, the school or library can decide if it wants to use all of its Category Two funding on one of the three service types, or for a combination of all three. For example, you could request the entire Category Two five-year budget in FY2015 for just internal connections products, or you could divide up your request over multiple years and request support for IC, MIBS, and BMIC products and services.

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Q2: What are the Category Two budgets for schools?

A2: Individual schools are eligible for E-rate Program discounts on pre-discount purchases of up to $150 per student over a five-year budget. To ensure that all schools receive sufficient support, there is a pre-discount funding floor of up to $9,200 over five years for each school.

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Q3: What are the Category Two budgets for libraries?

A3: Depending on their IMLS locale codes, libraries qualify for one of two different budget rates. Libraries that are located in the IMLS locale code of 11-City, Large, 12-City, Midsize, or 21-Suburb are eligible for a pre-discount budget of up to $5.00 per square foot over five years. All other libraries are eligible for a pre-discount budget of up to $2.30 per square foot over five years. To ensure that all libraries receive sufficient support, there is a pre-discount funding floor of up to $9,200 over five years for each library outlet.

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Q4: Is the budget pre-discount or post-discount?

A4: The Category Two budget is pre-discount. Even though all schools are eligible for $150 per student, a school with an 80 percent discount rate will be eligible for $120 in E-rate Program support per student, while a school with a 40 percent discount will be eligible for $60 in E-rate Program support per student.

Similarly, a library eligible for $5 per square foot with an 80 percent discount rate will be eligible for $4 in E-rate Program support per square foot, while a library eligible for $5 per square foot with a 40 percent discount rate will be eligible for $2 in E-rate Program support per square foot.

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Q5: Does E-rate Program funding received prior to FY2015 count against the five-year budget for Category Two purchases?

A5: No. FY2015 is a clean slate. In FY2015, all schools and libraries will be eligible for the full amount of their five-year budgets.

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Q6: How long will the Category Two budgets be in effect?

A6: The Category Two budgets are in effect for schools and libraries that receive Category Two funding for one or more funding years between FY2015-19. The first year that an eligible school or library receives E-rate Program support will be the first year of its five-year funding cycle.

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Q7: The cost to update the network and maintain the eligible equipment exceeds my budget. If I spend more than my budget will that affect my E-rate Program request?

A7: No. Although the Category Two request limits what the E-rate Program will pay for, you can spend more than your Category Two budget as long as you pay for those additional products and services out of your own pocket.

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Q8: Are contracts for managed internal broadband services limited to $30 per student (or a fifth of the per square foot library budget) each year?

A8: No. You decide how to spend your Category Two budget. You can, for example, choose to spread your budget evenly over five years, or you can spend your entire budget in the first year, regardless of the Category Two service type. Remember that if you have a multiyear contract, you can only receive reimbursements for the portion of the contract that is delivered during the funding year. You will have to request E-rate Program funding for those services annually.

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Q9: What happens if my plans change and I can't use all of the Category Two funding committed in a year? Can I reduce or cancel funding that USAC has already approved for the current funding year to "free up" money in its budget for the next funding year's requests?

A9: Yes. If you find that you will not spend the entire amount of Category Two funding that USAC has committed in a particular funding year, you can file an FCC Form 500 to return unused funds. School districts and library systems may need to provide additional information so that you and USAC are in agreement about the impact on a particular school or library outlet's five year budget.

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Q10: How do I indicate which products or services should be counted against which budgets?

A10: In the new online FCC Form 471, you will indicate which school or library is getting the products and services in an FRN. For Category Two FRNs, you will have to indicate how much of the FRN line item costs should be allocated to each school or library. A single FRN line item for the same product or service can include multiple schools or libraries, each with their own cost allocation.

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Q11:Can school districts or library systems shift funds or average costs between their schools and libraries?

A11: No, Category Two funding must be spent for the specific school or library for which they are allotted. These funds cannot be shifted or averaged across your school district or library system.

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Q12: Is the three-year non-transferability rule still in effect?

A12: Transferring equipment is prohibited unless (1) three years have passed since the services were purchased or (2) the equipment is being transferred from a school or library that closed. Applicants transferring equipment from a school or library that closed to another eligible school or library must notify USAC of the transfer.

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Q14: Are the service substitution requirements – which permit applicants to replace an approved purchase with a similar purchase, under limited conditions – still in effect?

A14: Yes. If you need to request a service substitution, remember to follow the guidance on USAC's website to request approval for such substitution requests.

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Q15. Do non-instructional facilities (NIFs) get their own Category Two budget?

A15: No, NIFs do not get their own Category Two budget because a NIF is not a school or a library.

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Non-instructional Facilities

Q16. How does a tech center that houses internal connections equipment, like a central switch, get Category Two support?

A16: Although NIFs do not get a Category Two budget of their own, to the extent that a NIF houses a piece of shared equipment that is essential to connecting a school's or library's network to the Internet, the cost of that equipment can be allocated between the budgets of the schools or libraries that are sharing that piece of equipment.

If the equipment is also used by the NIF itself, then an appropriate portion of the cost must be allocated to the ineligible NIF and removed from the funding request. When completing your application, if you have shared equipment that is located in a NIF, you must indicate in the “Narrative” section of the funding request in which NIF the piece of equipment is located.

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Q17. Are NIFs with classrooms eligible for a Category Two budget?

A17: No. Because NIFs are not considered schools, they do not qualify for their own Category Two budgets, even if students attend a class in the NIF. Starting in FY2015, there is no longer a distinction between NIFs and NIFs with classrooms, since all entities within in a school district qualify for the same, single discount rate and NIFs are not eligible for their own Category Two budget.

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Q18. Are residential facilities of a school eligible for a Category Two budget?

A18: No, residential facilities are not eligible for a separate Category Two budget. If, however, the residential facility is eligible for E-rate Program funding because it serves unique populations as set out in paragraph 31 of the Sixth Report and Order, the cost of the internal connections, basic maintenance of internal connections or managed internal broadband services for the dormitory can come from the associated school's Category Two budget.

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Q19. Can a school's budget change from year to year?

A19: Yes, a school's Category Two budget is based on the school's student count, and therefore it can increase or decrease year to year.

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Q20. How do I count part-time students?

A20: Schools may count part-time students for the purposes of determining the school's Category Two budget. However, schools should include part-time students in their student count only when doing so regularly increases the maximum number of students on the school premises at the same time during the school day. For example, a vocational school that has 100 students in the morning and 100 different students in the afternoon should report a student count of 100. Furthermore, students attending after-school activities or after-school events cannot be included in the student counts.

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Q21. How do I count virtual students?

A21: Students who attend a virtual class that originates at a school, but who are not on the school premises, cannot be counted in that school's student count for the purposes of Category Two budgets.

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Q22. What types of documentation should I have in order to validate a regular increase in enrollment due to part-time students?

A22: Acceptable third party documentation of full and part-time students can include, for example, an official state report or state website indicating the total numbers of full and part-time students, or other types of documentation held by the school or school district that will help ensure a timely review of the indicated student counts.

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Q23. What happens if I spend my school's entire Category Two budget and then my student population decreases in a subsequent year? Do I have to return any funding?

A23: No, schools with decreasing student counts do not have to repay funding received in prior years in excess of the current year's budget. There is an exception, however, for new schools, as discussed immediately below.

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Q24. How should new schools determine their Category Two budgets before they have enrolled students?

A24: If you are applying for a new school that has not yet opened, you can determine your Category Two budget based on an estimate of the number of students that will attend that school in the upcoming funding year. However, in order to decrease the incentive for schools to overestimate student counts to obtain more funding, these schools will be required to repay USAC in the subsequent funding year for any E-rate Program support received in excess of the available budget based on the actual student enrollment. The school should report the actual student count to USAC within the year. USAC will follow up with the schools to determine their actual student enrollment counts and will seek recovery of funds if necessary.

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Q25. If a new school estimates that it will have 1,000 students in FY2015, but only 800 enroll, how does it determine its FY2016 budget?

A25: A new school may request Category Two services based on the estimate of 1,000 students, but it will have to repay any support received in excess of available funding based on actual enrollment.

Funding Year

Student Count

Five-year Pre-discount Budget

Five-year Post-discount Amount

2015 (Estimate)


1,000 * $150 = $150,000 

$150,000 * 50% = $75,000 

2015 (Actual)


800 * $150 = $120,000 

$120,000 * 50% = $60,000 

Difference between actual and estimate: $60,000 - $75,000 = -$15,000

For the example above, the school would have to return any committed support above $60,000, which is the Category Two post-discount amount based on the actual student population. If the school requested and received commitments for their entire Category Two budget based on the estimated student population ($75,000), USAC would then rescind commitments for the difference between the actual and the estimated budget amounts, which in this case would be $15,000.

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Q26. Can a library's budget change from year to year?

A26: Yes, a library's Category Two budget is based on the library's square footage. If a library increases in square footage, its budget can increase.

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Q27. How should a library determine its square footage for purposes of determining its Category Two budget? Can it include outdoor spaces that get Wi-Fi service?

A27: To determine a library outlet's Category Two budget, add up the total square footage for all floors occupied by the library outlet and enclosed by the outer walls of the library outlet, including those areas off-limits to the public. This is the same floor area collected by the Institute of Museum and Library Services (IMLS) annually. Libraries cannot include patios or other outdoor spaces such as parking lots unless they are enclosed by the outer walls of the library.

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Q28. How should libraries count the square footage of bookmobiles?

A28: They should be counted like any other outlet – count the area enclosed by the outer walls of the bookmobile. Generally speaking, bookmobiles would qualify for the funding floor minimum Category Two pre-discount amount of $9,200.

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