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Updated: Feds block education funding because of lawsuit

The federal government said Jan. 30 it has blocked millions in funding to Idaho’s education broadband system because a lawsuit over the project’s $60 million contract raised questions about who should get the cash.

The Federal Communications Commission withheld $7 million for the Idaho Education Network, a high-speed broadband network for Idaho high schools.

Idaho legislative budget writers learned Jan. 30 telecom giant CenturyLink and Education Networks of America haven’t been paid by the federal government since last March.

That’s when the Idaho Supreme Court resurrected a lawsuit in which Idaho-based telecom provider Syringa Networks accused the Department of Administration and its then-director Mike Gwartney, of inappropriately awarding the contract to its rivals. Last March, justices concluded Gwartney inappropriately helped CenturyLink win the IEN deal.

With ongoing litigation – the most recent hearing in Idaho’s 4th District Court in Boise was Jan. 14 – the FCC won’t pay any more money until doubts about the contract’s legality have been resolved.

The FCC “is currently reviewing the funding in question in light of the Syringa Idaho Supreme Court case which alleges problems with the procurement process for the Idaho State Education Network,” said spokesman Mark Wigfield.

The Idaho Education Network connects 218 Idaho high schools, allowing for videoconferencing and distance-learning opportunities, in particular in rural areas without access to advanced or college-level courses.

Four years ago, Syringa Networks sued the Department of Administration and Gwartney, an ally of Gov. C. L. “Butch” Otter, on grounds the phone company was improperly denied in the bidding to lay out the project’s broadband infrastructure linking it to schools.

Syringa initially lost in state court, but the Idaho Supreme Court resurrected the case last March – the same time the FCC payments stopped – on grounds Gwartney tinkered with bidding to help the state’s biggest phone company win a big share of the IEN deal.

According to the state high court, “Gwartney appears to have been the architect of the state’s effort to bend the contracting rules” to CenturyLink’s advantage, Justice Jim Jones wrote. “All contracts made in violation of these statutes are void and any money advanced by the state … must be repaid.”

Gwartney, who retired from Administration in 2010, has insisted he’s done nothing wrong.

With the FCC funding in limbo, the Legislature’s budget committee must figure out how to make up a total of about $14.4 million – $7 million for money outstanding since March, as well as a similar amount for fiscal year 2015 starting in July – in hopes the lawsuit is resolved and the FCC eventually makes the payments.

On Jan. 30, Otter’s budget director Jani Revier asked the budget panel to pay CenturyLink and other contractors on the IEN project out of funds tentatively directed toward a public education rainy day account.

Later in the day, the Republican governor further went on the offensive in an email, saying this is a “temporarily bridge funding” necessary to “prevent disruption of services to Idaho schools and districts on the network.”

However, lawmakers were upset it took until now for the person in charge of the contract, Department of Administration director Teresa Luna, an Otter appointee, to tell them of the outstanding FCC payments. Lawmakers from both parties said Luna should have been more vigilant, especially with millions at stake.

“Who’s paying attention to who is getting paid when?” said Sen. Dan Schmidt, D-Moscow.

“I’m not satisfied with the answers we’ve gotten,” said Sen. Dean Cameron, R-Rupert and the Senate co-chair of Joint Finance-Appropriations budget writing panel.

Luna says one problem was the FCC funding doesn’t come through her office, but goes directly to the private contractors.

“The communication could be better, if we did a monthly reconciliation to ensure that they’re making their payments,” she said.

Cameron fears this funding glitch, at least near term, could have broader effects.

For instance, there’s a pending proposal in the Legislature to spend another $3.5 million to expand the broadband network from high schools to middle and elementary schools. But with FCC funding uncertain, that might be put on hold.

“It puts a lot of things in jeopardy,” Cameron said. “That’s a significant chunk of change.”

Updated throughout with new information Jan. 31.

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