Abstract

The Internet School Scam

The author reports that the U.S. General Accounting Office is investigating claims that a number of tech companies have overcharged poor schools for computer technology and Internet systems they do not need. When large amounts of cash and the entrepreneurial spirit intersect with an institution as impoverished and trusting as schools, it's not long before financial scandal strikes. That time is now here, and the nation's public schools are getting a spectacular Enron-style education, soon to be elevated to the investigative chambers of Congress. The story begins with the schools' rapid investment over the past decade in computer technology and Internet systems. The dollars for many of those purchases have come from a little-known federal program called the "e-rate" (for education rate). The subsidies come from a tax on everyone's phone bill--a line innocuously labeled "universal service fee"--which started at 3 percent but now hovers around 9 percent. The revenues from this tax cover up to 90 percent of a poor school's costs for Internet systems. This has allowed school districts to contract with some of the nation's top-of-the-line technology firms---outfits like NEC, Verizon and IBM. Various Republican Congress members, wary of anything that smells like a new tax, have long been questioning the necessity of the e-rate program. In 1998 Senator John McCain was concerned enough about oversight weaknesses in the program that he asked the General Accounting Office to investigate. Before the rest of the nation's schools and their federal benefactors buy more fancy digital novelties, they should get their houses in order on academic basics of this sort.