Calif. Assembly Chair Defends Governor's Trims to State Broadband Budget

California legislators must approve a state budget by June 15. The state had earlier proposed adding $1.5 billion to existing funding for building the state’s middle-mile network, with $250 million in FY 2024-25 and $1.25 billion in FY 2025-26. However, the May revision would scrap that schedule. Instead, the state would allow the state finance director to “augment” the middle mile’s budget by up to $1.5 billion if it notifies the legislature. “This would leave the same amount for the program as planned at the 2023 Budget Act -- $3.9 billion -- but with the option to increase that amount for a potential total of $5.4 billion,” clarified a California Finance Department spokesperson, who we were referred to by the governor's office. “Without the additional $1.5 billion, there is $250 million currently scheduled for 2024-25 from the 2022 Budget Act.” California ordered the state-owned, open-access middle mile network in its $6 billion broadband law from 2021. The state plans a middle-mile network of more than 10,500 miles.

Newsom additionally proposed cutting California’s broadband loan loss reserve fund, which was originally allocated $750 million to support broadband deployment costs by nonprofits, local and tribal governments. The governor’s January budget had already reduced the fund by $250 million. The May revision “would remove the remaining $500 million for the program -- which has not awarded any funds to date,” the Finance spokesperson said. However, the California Public Utilities Commission already accepted applications for the fund from March 12 to April 9. When the deadline closed, the CPUC had received about 400 applications requesting $430 million, Commissioner Darcie Houck said at a workshop last month (see 2404290040). The CPUC can’t comment on draft budgets, a spokesperson said Wednesday.

Finally, the May proposal would delay $200 million for last-mile broadband to FY 2027-28 from FY 2025-26. That change is “intended to align budget availability with expected expenditure time frames,” the spokesperson said.

“We've been stress-testing our broadband strategy in the middle mile and the last mile, and we think we've come up with a plan to actually achieve similar goals at a lower cost,” Newsom explained at a news conference recorded Friday. “We think it's appropriate to claw back those dollars without a diminution in terms of programming and advancing the commitments that we've made."

Boerner defended Newsom's plan. The governor “proposes eliminating $2 billion in broadband funding -- of which $1.5 billion was new funding included in” January’s budget proposal, noted the Assembly Communications Committee chair. “This elimination encourages our state to use federal dollars first, especially funds from the American Rescue Plan Act, which have seen significant delays in disbursement. Then in later years we hope to look at where the gaps in the digital divide remain to ensure that no community in California is left behind.”

Senate Communications Committee Chair Steven Bradford (D) praised the governor’s overall proposal without specifically addressing broadband aspects. “It's important for all of us in the Legislature to meet California's challenging fiscal reality head on,” said Bradford in a statement. “We will have to make some tough decisions and reductions and, as we do, we must remain focused on protecting those Californians who are most in need.”

‘Broken Promise’

Some digital equity advocates aren’t happy. “We are actively in conversations with legislators whose districts include high-need communities that … see these cuts as another broken promise,” said Shayna Englin, California Community Foundation director-digital equity initiative. Her group is part of the California Alliance for Digital Equity (CADE). Newsom had promised the additional cash in January in response to advocates’ concerns about a proposed map of the middle-mile network that “moved segments through California's least connected communities to an unfunded ‘Phase 2,’” she said. “So far, we haven't received any specific information about what the cuts mean for the network segments that are not currently under contract.”

CADE condemned middle-mile budget changes in a statement Friday. The middle-mile project “is once again at risk of becoming a wasted broadband infrastructure investment, maintaining a status quo that effectively perpetuates the same divestment practices of industry stakeholders who have bypassed high-poverty urban, rural and tribal communities for generations,” the alliance said. The League of California Cities also raised concerns that Newsom has proposed “reductions to some hard-fought broadband victories.”

Englin interprets the middle-mile budget change to mean that, “rather than include funding in the budget,” the administration may “direct excess resources … without going through the budget process if the revenue becomes available.” She said “the practical implication is that the segments left out of the network's lease contracts and buildout to date -- including most segments in low-income communities and communities of color in Los Angeles, Oakland, and Fresno -- will not have funding to move forward unless there are dramatic changes to the State's budget and revenue outlook over the next couple of years.”

However, another group that seeks to close the digital divide, the California Emerging Technology Fund, believes that the May revision merely restructures how the additional $1.5 billion from the January budget will be paid, CEO Sunne Wright McPeak told us Wednesday. “There’s no cuts,” but the governor's proposal leaves it to the finance department to encumber the money for the middle mile. The budget revision recognizes “the reality that it is damn hard for the government to spend anything,” said McPeak. She said that CETF planned to verify its interpretation of the changes with the administration later Wednesday.

CETF earlier suggested cutting the loan loss program, said McPeak. “We didn’t think [the administration was] listening.” The $750 million program was meant to guarantee public agencies got into the ISP business or contracted with private ISPs, she said. But CETF argued that if the state is “so confident in the economic viability” of that approach, it should “simply pledge the full faith and credit of the state of California behind the financing,” McPeak said. “You can recapture that cash because it was intended to be the equivalent of [California’s] full faith and credit.” However, what puzzles McPeak about Friday’s proposal is that the CPUC already collected proposals for the loan loss fund, she said. The $250 million reduction proposed in January made sense since just short of $500 million was requested, she said. “Given that the state did the loan loss reserve to begin with … it would be totally disingenuous to pull back those dollars that they planned to use.”

Newsom “is responding to the state’s ongoing fiscal challenges,” said the California Broadband & Video Association President Janus Norman in a statement Wednesday. “Understanding the need to be adaptable, we look forward to working collaboratively with the Governor to make sure that all Californians are connected to high-speed Internet.”