Schools and Libraries (E-Rate)

Step 3 Applying for Discounts

Updated September 2015

Category Two Budget

Starting with Funding Year (FY) 2015, products and services eligible for E-rate Program discounts will be divided into Category One and Category Two. Category Two consists of the internal connections equipment or services necessary to bring broadband into, and provide it throughout, schools and libraries. Connections are limited to broadband connections used for educational purposes within, between, or among instructional buildings that comprise a school campus or library branch, basic maintenance of these connections, and services that manage and operate owned or leased broadband internal connections.

  • The service types included in Category Two are Internal Connections, Managed Internal Broadband Services, and Basic Maintenance of Internal Connections.
  • The highest discount level for Category Two services will be 85 percent. Applicants eligible for a 90 percent discount for Category One services will be eligible for an 85 percent discount for Category Two services. Other discount levels will not change.

What are Category Two budgets?

Each school or library receiving Category Two support in FY2015 or FY2016 will have a five-year, pre-discount budget for those products and services.

  • Eligible products and services will be included on the final FY2015 Eligible Services List.
  • Each school or library can receive discounts on eligible products and services up to the pre-discount budget amount.
  • There is no budget for Category One services.

Which entities have Category Two budgets?

Each individual school and each library outlet/branch has a Category Two budget. School districts and library systems may not average their costs across multiple school or library budgets.

Non-instructional facilities (NIFs) do not have Category Two budgets. If a NIF is essential for the effective transport of information to or within a school or library, the applicant must allocate the cost of the eligible product or service associated with the NIF to one or more of the entities benefiting from the service.

  • School NIFs are school buildings or buildings on school property that generally don't contain classrooms – e.g., administrative buildings, school bus barns and garages, cafeteria offices, and facilities associated with athletic activities. However, even school NIFs that contain classrooms do not have Category Two budgets.
  • Library NIFs are library buildings or buildings on library property without public areas – e.g., administrative buildings, bookmobile garages, interlibrary loan facilities, and library technology centers.
How do I calculate the Category Two budget for a school?

To calculate the budget for a school, multiply the number of students who attend the school by $150. Because there is a funding floor, if fewer than 62 students attend the school, the budget is set at $9,200.

If a student attends more than one school (e.g., if the student from one school attends a vocational training school one afternoon a week), both schools can count that student for the purpose of calculating their respective budgets.

How do I calculate the Category Two budget for a library?

To calculate the budget for a library, multiply the total area of the library in square feet, including all areas enclosed by the outer walls of the library and occupied by the library, by $2.30. Because there is a funding floor, if the library's total area is less than 4,000 square feet, the budget is set at $9,200.

Libraries that serve populations of 250,000 or more are eligible for a $5.00 per square foot budget. If such a library's total area is less than 1,840 square feet, that library's budget is also set at $9,200.

What time period does my Category Two budget cover?

Category Two budgets are subject to a five-year cycle beginning with the first funding year in which you receive Category Two support. However, the budgets can be used as needed, and schools and libraries are not required to use one-fifth of the budget each year.

  • For example, if your student population or library area in square feet does not change and you use some or all of your budget in FY2015, your available budget for FY2016 would be your original budget for FY2015 less any of that budget you used in FY2015, and so on for the remainder of the five-year period that started with FY2015.
  • If you receive funding in FY2015 and/or FY2016, the Two-in-Five rule will not apply. Rather, you can continue to use your Category Two budget for the five-year period that started with FY2015 (or FY2016, if you did not receive a commitment for FY2015).

Can my Category Two budget change from year to year?

Your budget is impacted by commitments featuring your school or library, which could be on an application you file or an application filed on your behalf, such as a consortium application.

  • Your budget could increase for FY2016 if your student count increases or you build an addition on your library, or it could decrease if your student count decreases or you downsize the internal area of your library.
  • For existing schools, if you have used your entire budget for FY2015 and your student count for FY2016 decreases, you do not have to repay the money disbursed in excess of the budget.
  • For new schools or new construction, however, if you overestimate your student count and exceed the five-year pre-discount budget the next funding year, you must return any funds disbursed in excess of the actual discount amount calculated from the allowable budget.

How is the cost of services counted against my Category Two budget?

On the FCC Form 471, each applicant will allocate the cost of the Category Two products and services to the entities sharing them. Each amount allocated to a particular school or library will count against the budget for that school or library.

Remember that your Category Two budget is based on the pre-discount cost of the products and services allocated to your school or library. A change in your E-rate Program discount from year to year does not affect the amount of your Category Two budget, only the amount of the cost that USAC will reimburse.