Category Two Budgets

Equipment and services eligible for E-Rate program discounts are divided into Category One (C1) and Category Two (C2). Each independent school, school district, library or library system receiving C2 funding has a five-year, pre-discount budget for those equipment and services based on the number of students in the school district or the number of square feet in the library system. There is no budget for C1 services. 

Fixed, Five-Year C2 Funding Cycle

The FCC’s Category Two Report and Order (FCC 19-117) established the rules, C2 budget multipliers, and the funding floor for the fixed, five-year funding cycles. The FCC’s 2023 Tribal Order (DA 23-56) provided a new C2 funding floor for Tribal libraries only. 

The C2 budget multipliers and the funding floor are adjusted for inflation and released by the FCC in advance of the start of each five-year cycle. Applicants must validate their student counts or library square footage in the first year they apply for C2 funding in the relevant five-year funding cycle. 

C2 Budget Multipliers and the Funding Floor

The C2 budget multipliers and the funding floor for each five-year funding cycle are set once at the beginning of the cycle and apply to the entire cycle. The first five-year C2 budget funding cycle began in FY 2021 and runs through FY 2025.  

For the FY2021-FY2025 cycle:

• The school multiplier is $167.00 per student.
• The library multiplier is $4.50 per square foot for all libraries.
• The funding floor is $25,000 for all schools and libraries, with the exception of Tribal libraries, which have a $55,000 funding floor.

Applicants calculate their C2 budget using their student counts (in the case of a school or district) or library square footage (in the case of a library or system) and the respective multiplier.  They receive the funding floor when the C2 budget calculation for an entity results in a figure below their respective funding floor. Examples of entities eligible for the funding floor: 

• A school with fewer than 150 students ($167/student * 149 students = $24,883)
  • This school receives the funding floor: $25,000
• A library with less than 5556 square feet ($4.50/square foot * 5555 square feet = $24,997.50)
  • This library receives the funding floor: $25,000 
• A Tribal library with less than 12,223 square feet ($4.50/square foot * 12,222 square feet = $54,999) 
  • This library receives the Tribal library funding floor: $55,000 

Calculating Your C2 Budget

School districts and library systems calculate their five-year, pre-discount C2 budgets at the district or system level, not at the site level. School districts and library systems are no longer required to maintain separate budgets for each school or library and can allocate funding among their eligible sites as they see fit.

An independent school or independent library calculates its five-year, pre-discount C2 budget for itself using its student count or square footage, respectively. 

Libraries shall provide the total area for all floors, in square feet, of each library outlet separately, including all areas enclosed by the outer walls of the library outlet and occupied by the library, including those areas off-limits to the public. Outdoor space used for programming cannot be included in this C2 calculation. Bookmobiles calculate the square footage of the area enclosed by the outer walls of the bookmobile. 

Schools only count full-time students for their C2 budget calculations. Schools do not report part-time students to USAC or include them in their C2 budget calculation. 

School District and Library System Calculations

Most school districts will add the number of full-time students of each of their individual schools and then multiply this total by the C2 budget cycle school multiplier. 

However, if the number of individual schools in the school district multiplied by the $25,000 funding floor results in a larger C2 budget (the “aggregate funding floor”), that aggregate funding floor becomes the school district’s C2 budget. 

• For example, a district with 11 schools and fewer than 1647 students ($167/student * 1646 students = $274,882) would get the aggregate funding floor C2 budget of $275,000 (11 schools * $25,000 funding floor) over the five-year cycle. 

 Most library systems will add the square footage of each of their library branches and then multiply the total by the C2 budget cycle library multiplier. 

However, if the number of library branches multiplied by $25,000 results in a larger C2 budget, that aggregate funding floor becomes the library system’s C2 budget.

• For example, a library system with 11 library branches with less than 5556 square feet each ($4.50/square foot * 5555 square feet = $24,997.50) would get the aggregate funding floor C2 budget of $275,000 (11 library branches * $25,000 funding floor) over the five-year cycle.

Calculating C2 Budgets with 10 or Fewer Sites

School districts with 10 or fewer schools and library systems with 10 or fewer library branches have the option to calculate their C2 budgets on a per-site basis and then combine the results.

Small school district example: A school district consists of three schools – one school with 50 students, one school with 100 students, and one school with 200 students. This school district can calculate its C2 budget as $25,000 + $25,000 + $33,400 = $83,400, because the first and second schools would be eligible for the funding floor. 

Small library system example: A library system consists of a bookmobile, a library branch with 4,000 square feet, and a library branch with 7,500 square feet. This library system could calculate its C2 budget as $25,000 + $25,000 + $33,750 = $83,750, because the bookmobile and the smaller library branch would be eligible for the funding floor. If a library in that system is a Tribal library, the funding floor calculation would include $55,000 for each Tribal library and $25,000 for each non-Tribal library. 

Aggregating C2 Budget funding floors with 2 or more Tribal Libraries 

A library system containing two or more Tribal libraries that is aggregating funding floor amounts can include $55,000 for each Tribal library.

• For example, a library system with 5 small library branches (3 Tribal and 2 non-Tribal) with 1000 square feet each ($4.50/square foot * 5000 square feet = $22,500) would get the aggregate funding floor C2 budget of $215,000 (2 library branches * $25,000 PLUS 3 library branches * $55,000) over the five-year cycle.

Estimates for Buildings Under Construction

Schools

Large school districts cannot estimate the number of students for buildings under construction; however, independent schools with their own entity-level budgets and small school districts (10 child entities or less who report C2 enrollment at a school level) can estimate student counts for a new school while construction is underway. If the school overestimates, it must return to USAC any funding received in excess of the amount it was entitled to, based on the actual enrollment by the end of the next funding year. 

Libraries

Library systems can provide planned square footage for buildings under construction that will open during the funding year. 

Option to Adjust C2 Budget

If the total student count or square footage changes during the five-year funding cycle, applicants may request a C2 budget recalculation, but are not required to do so. This is referred to as a “replacement C2 budget” request. However, if an applicant does not request a recalculation, the C2 budget student count for the school district or the C2 budget library square footage for the library system remains fixed throughout the five-year cycle. Replacement C2 budgets can be requested during the EPC administrative window and during the FCC Form 471 filing window (up until the budgeted entity’s first C2 FCC Form 471 for that funding year is certified). 

For step-by-step filing guidance on the FCC Form 471, watch the “Request a C2 Replacement Budget” video.

Transferring Equipment

School districts and library systems can transfer equipment between schools within a district and libraries within a system. Starting As of July 1, 2021, applicants may transfer purchased equipment regardless of the funding year of the equipment purchase. Applicants will are also no longer be required to notify USAC of the equipment transfers, but both the transferor and recipient must maintain detailed records documenting the transfer and the reason for the transfer for five years. 

Schools, libraries, and consortia are still required to maintain asset and inventory records of equipment purchased and the actual locations of such equipment for at least 10 years after purchase. 

C2 Budget Tool for FY2021-FY2025

The Category Two (C2) budget tool provides data on the FY 2021-FY 2025 C2 budget cycle. It is available on the Tools page along with a video on how to use the tool and a glossary of terms. 

The following terms are used in the tool: 

Budgeted Entities and Child Entity Count

• Each entity that has a C2 budget is called a budgeted entity. A budgeted entity must be an independent school, independent library, school district, or library system. 
• For the purpose of calculating a C2 budget, the child entity count is the number of the individual schools in a school district or the library branches in a library system.
  • With a few exceptions, an individual school must have a student count greater than zero in the entity profile to be included in the child entity count. 
  • A library branch must have a square footage greater than zero in the entity profile to be included in the child entity count. Note that bookmobiles and kiosks will not be counted if their square footage is zero. 
  • Non-instructional facilities (NIFs) and annexes are not considered child entities. 

C2 Budget Algorithms

There are eight different possible C2 budget calculations for budgeted entities, depending on the entity type and size (independent school or library, large or small school district, large or small library system). In the tool, these are referred to as C2 budget algorithms. 

For some budgeted entities, only one C2 budget algorithm applies. For others, two or three may apply. 
The C2 budget displayed is the entity’s highest C2 budget pursuant to FCC rules. 

Forecast, Preliminary, and Confirmed Versions

There are three different versions of C2 budgets in the tool: forecast, preliminary, and confirmed. 

• The  forecast  version of an entity’s C2 budget is based on the current student count or square footage in the applicant organization’s profile. If you change a student count or a square footage entry related to the C2 budget in the entity profile, the forecast version of the C2 budget will show the result of the change the following day.
• The  preliminary  version of an entity’s C2 budget is based on the information on the first certified FCC Form 471. Note, an independent school designated as new construction that provides an estimated student count will also show a preliminary budget until the actual student count is verified. 
• The  confirmed  version of an entity’s C2 budget is based on the information in an FCC Form 471 for which USAC has issued a funding decision for a C2 funding request, unless all funding requests have been canceled. Note, you will not see confirmed C2 budgets until after the first commitment wave for FY 2021. (The first year of the current five-year C2 budget cycle.)