20090406_2524.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:GRACE SEAMAN
DATE:APRIL 2, 2009
RE:2008 IDAHO TELEPHONE SERVICE ASSISTANCE PROGRAM ANNUAL
REPORT; CASE NO. GNR- T -09-
BACKGROUND
The Idaho Telephone Service Assistance Program (ITSAP) was established by the Idaho
Legislature in 1987 to provide income-eligible recipients with a reduction in costs of
telecommunications services. The Idaho Public Utilities Commission determines a uniform statewide
monthly surcharge on each end user business, residential and wireless access service lines and the
Idaho Department of Health and Welfare administers the program. The ITSAP program maximizes
federal "lifeline" and "link-up" contributions to Idaho s low-income customers. Idaho Code ~ 56-
901. Telephone companies provide assistance in the form of a monthly discount of$3.50 to eligible
subscribers of residential basic local exchange service. Idaho Code ~ 56-902. To be eligible for the
ITSAP program, an applicant must be the head of a household and meet narrowly targeted eligibility
criteria established by the Department of Health and Welfare. Idaho Code ~ 56-903.
THE 2008 ANNUAL REPORT
On March 5 , 2009, the Idaho Telephone Service Assistance Program (ITSAP) Administrator
Alyson Anderson, filed the ITSAP annual report for the fiscal year ending December 31 , 2008. Ms.
Anderson reported that 2008 saw a drop in local access lines (4.5%), an increase in wireless lines
(3.5%), and a decrease in the number oflTSAP recipients (8%). Ms. Anderson reported gross
revenues from surcharges of$I 190 003 , of which $434 381 (37%) was assessed on local exchange
services and $755 622 (63%) was assessed on wireless services. Additional revenue for 2008
DECISION MEMORANDUM - 1 -APRIL 2, 2009
included $11 914 from U.S. Treasury coupon payments and accrued interest from a Merrill Lynch
CMA-Government Securities Fund. The U.S. Treasury note was redeemed in March 2008. With the
inclusion of interest payments, the total fund amount collected in 2008 was $1 201 917.
The average number of local access lines per month reported to the Administrator for 2008
decreased by 4.5% to approximately 618 000. The average number of wireless access lines per
month increased by 3.5% to approximately 984 500. The total average number of lines per month
decreased slightly by 4 900 for an average monthly total of approximately 1 602 500.
The 2008 average number of ITSAP recipients per month (28 006) decreased by 8% from
2007 (30,448). Telecommunications companies provided $1 172 978 in credits to eligible recipients
compared to $1 324 118 in 2007, and disbursements for telephone company administrative costs were
$129 341 , nearly the same as the 2007 amount ($130 673).
The ITSAP Administrator s fees and expenses were $10 025 for the year. The fund's cash
balance at the end of the year was reported at $340 917. In March 2008 the ITSAP fund had
$400 000 in U.S. Treasury notes mature (purchased in April 2007 at 4.67% interest rate). In the past
when U.S. Treasury notes matured, Ms. Anderson repurchased an equal amount of notes for the next
year. In 2008, Ms. Anderson determined it was best to keep the cash in reserve. She based this
decision on the negligible interest rates, combined with the instability of the banking industry, which
suggested to her that the fund balance maintained should be only that which is absolutely necessary to
keep the fund viable.
2009 BUDGET AND TRENDS
In Ms. Anderson s 2009 budget, she projects the funding requirement to be $933 467. The
number oflocal access lines is expected to decrease by 3.5% and the number of wireless lines is
expected to increase by 2.5%. The average number of recipients per month is expected to decrease at
a slower rate from that seen in the past few years. Based on the December 2008 data, Ms. Anderson
anticipates the average number of recipients in 2009 to be approximately 26 877 per month, a slight
decrease from 2008.
The estimated ITSAP recipient reimbursement is expected to be approximately $1 128 834
and the ITSAP expenses are estimated to be $145 550 for costs associated with administration of the
ITSAP program. Telephone company administrative costs are estimated to be $127 550, and the
ITSAP Administrator and outside audit costs is expected to be $18 000. The surcharge revenue
DECISION MEMORANDUM - 2 -APRIL 2, 2009
received from local access and wireless telephone companies, at the current rate of $0.06, is projected
to be $1 156 828. With the 2008 end-of-year cash balance of$340 917 and an interest accrual of
approximately $240, the 2009 year-end cash balance is estimated to be $223 600.
ADMINISTRATOR'S 2009 FUNDING RECOMMENDATIONS
Based upon the estimated 2009 budget, Ms. Anderson believes adequate ITSAP funding will
be supported at the current surcharge rate of $.06 per line. She, therefore, recommends the current
rate to be maintained during 2009. The surcharge rate of $0.06 combined with the 2008 year-end
cash balance would result in a 2009 year-end fund balance of approximately $223 600. This amount
is sufficient to provide a 3-month cushion.
ST AFF RECOMMENDATION
Staff has reviewed both the ITSAP annual report and the proposed 2009 budget. Staff agrees
with the Administrator s recommendation to maintain the current ITSAP surcharge rates at $0.06 per
access line. Staff, therefore, recommends that the Commission approve both the Administrator s rate
proposal and the 2009 budget.
COMMISSION DECISION
1. Does the Commission wish to maintain the monthly Idaho Telephone Service Assistance
Program surcharge rate of $0.06 per line as adopted in Order No. 305357
2. Does the Commission wish to accept the annual report and adopt the Administrator
budget for 20097
4a& Jc~
Grace Seaman
i:udmemosl2008 Annual Report.doc
DECISION MEMORANDUM - 3 -APRIL 2, 2009