Idaho pays $3.5 million to feds in final settlement over defunct school broadband network

BOISE – Idaho has sent $3.5 million to the Federal Communications Commission to repay federal funds used for a defunct broadband contract for schools across the state.

The payment helps settle claims that the state improperly used about $14 million in federal funds that were paid to the defunct Idaho Education Network.

Gov. Butch Otter announced Wednesday that the payment was issued Tuesday from funds previously appropriated by the Legislature in 2016 in anticipation of a legal settlement.

“I appreciate the willingness of all parties involved to work toward a resolution of these issues so that we can move forward with a clean slate,” Otter said.

The IEN was championed by Otter and then-state schools Superintendent Tom Luna as a broadband network linking every Idaho high school. But the state’s $60 million contract for the service, issued to two politically connected vendors who had been big givers to Otter’s campaigns, was declared illegal in court, shutting the service down. Lawmakers then allocated state funds to school districts to purchase their own broadband services, which ended up costing millions less.

In the end, the IEN debacle cost the state millions in legal fees, settlements and other costs.

“I believe the months of work that went into crafting this agreement resulted in a settlement that’s in the best interest of everyone involved,” Senate President Pro Tem Brent Hill said. “The Legislature and local districts throughout Idaho are more than ready to move on.”

The governor, legislative leaders and lawyers for the school districts have been negotiating with the FCC since August 2016 to settle the FCC-related claims, after the Idaho Supreme Court declared the contract void in March 2016. Those negotiations started after the Universal Service Administrative Co., or USAC, which administers the E-Rate program for the FCC, informed the state and districts of its intent to deny funding requests for 2013 and 2014, totaling approximately $13.8 million; and also to seek repayment of E-Rate funds received in Idaho from 2009-2012, totaling about $14.1 million.

The E-rate program, which grants funds for educational broadband service from a fee paid by telecommunications companies, was supposed to cover up to 75 percent of the IEN’s cost, but the legal problems with the contract erased that prospect.

Otter’s office said the $3.5 million settlement resolves both the $13.8 million in denied funding requests and the $14.1 million that Idaho had received but for which the FCC had demanded repayment; Idaho won’t have to make any additional payments, nor will the FCC.

While the settlement and payment resolves those claims, another $3.4 million settlement announced in March settled claims from Education Networks of America and CenturyLink, the two IEN vendors. In return for that state payment, the firms agreed to drop all claims against the state and its agencies, including Idaho school districts; the firms claimed they were owed $11 million by the state and nearly $2 million from school districts for unpaid bills, as they continued to provide IEN services after the state stopped paying because the contract was voided.

Syringa Networks, which had bid on the original $60 million contract, sued over the contract award. The Idaho Supreme Court ordered the state to pay Syringa nearly $1 million in legal fees; the state also spent $1.1 million on outside legal counsel to unsuccessfully defend the deal.

“This finishes it up,” said House Speaker Scott Bedke. “I think that having this issue behind us is a net good thing for education in Idaho. Broadband service to high schools is integral to the delivery of education services, and having this issue behind us is a very positive move.”

Jon Hanian, Otter’s spokesman, said, “With this settlement, everything is resolved.”