State begins bid for more than $7 billion in broadband funding

As billions of federal stimulus dollars begin to pour into the state, the Legislature is starting to track the money coming in, and exert some influence over which projects receive some of the new federal funding.

And judging from the testimony at this week’s joint meeting of the Assembly and Senate Utilities Committees, the stimulus package seems to translate into state government on steroids.

Small state programs that currently receive a few million dollars are set to balloon into hundreds of millions, and state lawmakers are trying to ensure they have some say in how the money is divided and spent.

“The president has made it abundantly clear,” said Sen. Alex Padilla, D-Pacoima, chairman of the Senate Energy and Utilities Committee, who called the hearing Tuesday to begin monitoring the energy and telecommunications portions of the federal stimulus plan. “As much of a commitment as the federal government has made to move federal resources to states for the sake of our economy, there’s an equal commitment to ensure that there’s no waste or abuse. This is absolutely a place for [the Legislature] to step in.”

The scramble for federal dollars is already well under way. Take, for example, the efforts to expand access to high-speed Internet access. In 2007, the Public Utilities Commission levied a 0.25 percent surcharge on telephone bills to fund a $100 million program to subsidize broadband services in underserved areas of the state. The federal stimulus plan could offer an additional $400 million to that fund.

“A lot is happening under a very short tight frame,” said Padilla. ”The governor has already convened working groups. But we need to start asking, ‘What’s the role of the Legislature in setting priorities for this funding?’”

Padilla said the Legislature must have a say in how the money is being spent. “Outside the context of the federal stimulus, the role of the Legislature is to set policy. There’s no reason why the stimulus should change that.”

Padilla’s hearing Tuesday was a first look at the energy and communications portions of the federal plan. The federal government has tagged more than $7 billion to expand access to broadband Internet access nationwide, and now, what was a $100 million state program could turn into a $500 million program with the injection of the new federal money.

Under guidelines in the federal bill, states must provide 20 percent of the funding for any broadband project to receive federal matching money. Approved projects will have 80 percent of the cost picked up by the federal government.

There were hints in the hearing of some of the power struggles to come over the influx of federal cash. It was clear from the hearing Tuesday is that state agencies want to retain control over which projects receive funding. And Padilla and Assembly Utilities Chairman Felipe Fuentes, D-Sylmar, consistently emphasized the importance of legislative oversight.

“What we’re trying to do is gather California’s grant applications,” said Rachelle Chong, who serves on the California Public Utilities Commission. “State agencies would review and rank the proposals, and send the applications on to the federal government.”

Chong hailed the federal government for giving states wide discretion over how to spend those stimulus dollars.

“The flexibility is amazing,” she said. But there is one major caveat. “The federal government has made it very clear that all of the money is to be out the door by September 2010,” she said. “They really want this to be a stimulus.”

Padilla said he was encouraged that the federal money could be used to build new computer centers and increase computer literacy in poorer neighborhoods.

“There’s been a hesitancy (in the past) to use public money for [expanding computer literacy],” Padilla said. “Part of it is a justifiable concern about where the money comes from. If the funding is coming from telephone ratepayers, we need to be very thoughtful about how far we’re willing to go, and make sure we’re not charging phone customers ad nauseam.”

But with millions in new federal money coming into the state, Padilla sees an opportunity to expand services to underserved communities, and perhaps offer low-cost broadband access to the state’s poorest residence, similar to existing state programs for telephone and natural gas service.

“There’s a reason we have Lifeline service for phones. It’s the policy of the state of California to provide a base level of service. Same thing for natural gas. Everybody should be able to stay warm in the winter. I believe broadband has fallen into the same category. There needs to be a base level of service for people regardless of income.”

Meanwhile, Republicans also began staking their claim, saying some streamlining of regulations may be necessary to spend the money quickly. "What is not doable is getting these projects underway by 2010," said John Benoit, R-Riverside, the ranking Republican on the Senate Energy Committee.  "Enviromental rules drag the process out over 4-6 years to get a simple project going. This is one area where the Legislature could weigh in: streamline that process to get a one-stop shop for environmental approval of infrastructure projects may become critical."

Assemblyman Mike Duvall, R-Yorba Linda, said he was concerned Democrats would use one-time stimulus money to create ongoing state obligations. "There’s a lot of excitement about this funding that is supposed to be coming to California, but frankly I think we ought to be a lot more worried about how this money is going to be spent," Duvall said. "My biggest concern right now is about all of the comments made yesterday in the joint hearing about the need for more staffing in order to deal with the influx of stimulus funds the state is anticipating."

While the federal government is dangling millions before the state, there is no agreement over who should administer these new dollars.

The Schwarzenegger administration is seeking to organize all of the grant applications for broadband money through the office of the State Information Officer. But at Tuesday’s hearing, Assemblyman Felipe Fuentes, D-Sylmar, chairman of the Assembly Utilities Committee, said he would like to see the CPUC take the lead role.

“That’s a good example of why the governor is clearly interested in moving quickly. When the Legislature provides its point of view and takes a deep breath it may think differently,” Padilla said.

The PUC is already taking a lead role in harnessing applications for the broadband piece of the stimulus money. The commission will host a workshop on March 23 in San Francisco “to gather input regarding the process for the California  Governor’s submission  (to federal government) for federal stimulus funds for broadband. “

Chong said it makes sense for the state to maintain a role in prioritizing applications for federal money.

“In broadband, we have a clear view of where we need to go,” she said. And while she said companies could apply directly to the federal government for some grants, “even as to those, the state would like to opine.”