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House hearing loomed as CPB panel rushed to fix grant rules

Originally published in Current, Nov. 2, 2001
By Dan Odenwald

As Congress threatened to convene a hearing on how CPB distributes its money, a public TV review panel released a proposal last month to change the formula that allocates grants to stations.

The fixes ought to please North Carolina's UNC-TV, which had complained to hometown members of Congress--who pressed for the hearing--that several state networks like itself pay more in PBS dues than they receive in Community Service Grants (CSGs). The proposal would aid state nets by establishing a credit for licensees that operate three or more transmitters.

If the recommendation is adopted by the CPB Board, UNC-TV would see an 80 percent increase--about $320,000--in its base grant in fiscal year 2003, according to CPB. The changes would also reduce the gap between the dues that UNC-TV pays to PBS and the grants it gets from CPB.

Public TV lobbyists hope the new rules will also disperse congressional interest in the parochial details of public TV's grants and fees structure.

Andy Russell, CPB's senior v.p. of media, acknowledged that the panel finished its work two months earlier than predicted. "We were trying to be mindful" of what was happening on Hill, he says.

Though it appears UNC-TV may have hurried the process, the CSG review panel denies that pressure from the Hill had anything to do with the suggested policy change itself. The panel makes its recommendations independent of political firestorms, says David Clark, CPB's director of television operations.

The funding controversy threatened to derail public TV's attempts to secure funding in Congress this fall and reminded pubcasters what can happen when they take internal squabbles to Capitol Hill.

Federal appropriations to CPB are distributed according to a formula laid out by Congress. But station leaders and CPB work out the policies by which CSGs are distributed among public TV licensees.

Each public TV station's CSG includes a base grant--a flat sum of about $400,000 that goes to every station--and a variable incentive grant based on the amount of nonfederal financial support the stations raise themselves.

The North Carolina controversy has been all the more difficult to resolve because it brought together complaints about PBS dues and CPB grants--each governed by a separate formula under separate control and with no official connection. But the two formulas had grown up together and were based in part on some of the same major factors--essentially, the financial ability of the stations. Over the past decade, the two formulas had grown apart.

In that time, some licensees saw their PBS dues rise while their CSGs fell. UNC-TV was particularly aggrieved, according to station execs. Since 1990, the state network paid $5.5 million more in PBS dues than it received in CSGs, according to Gail Zimmerman, UNC-TV's assistant g.m. The disparity in 2001 was $773,000.

The discrepancy originated when PBS changed its dues structure in the early 90s. And the gap grew some more with CPB's 1996 rule changes that eliminated the practice of distributing multiple base grants to licensees that operate more than one transmitter.

"No one should have a disparity," Zimmerman says. "There's a problem, and it has to be solved." UNC-TV tried for years to get the formula changed, she says, but its pleas went unheeded. Frustrated with the lack of response from CPB and PBS, UNC-TV contacted its Washington legislators for help.

Reps. Richard Burr (R-N.C.) and David Price (D-N.C.) answered the call and brought the issue to House Commerce Committee Chairman Billy Tauzin (R-La.), who oversees authorization of public broadcasting funding. When the committee signed off on $20 million in digital money this summer, it asked CPB to report back on the funding disparity. Shortly after the Sept. 11 attacks, CPB sent the demanded explanation to Tauzin.

CPB's letter fell way short in addressing the needs of the disadvantaged stations, Rep. Burr says. "It even said there wasn't a problem," he recalls. CPB, Tauzin and Burr declined to release a copy of the letter.

Burr urged Tauzin to hold public hearings and begin a "long and in-depth process" to examine the funding levels. "These are federal funds," he says. "We have an obligation to make sure they're used in the most effective way and that all stations are treated fairly."

At the same time, the annual CPB funding process was grinding away. A House subcommittee proposed appropriating $365 million for CPB, which would make fiscal year 2004 the first no-growth year for the corporation since 1999. John Lawson, president of APTS, says the CSG issue was a major factor in keeping the appropriation flat.

Seemingly unmoved by the flap in the House, a Senate subcommittee proposed funding CPB at $395 million, the full amount sought by public TV lobbyists. The House and Senate bills will be reconciled in Congress, and APTS is uncertain how the CSG issue will affect the process.

The FCC ruling in mid-October allowing public TV stations to use excess digital spectrum to generate commercial revenue made matters worse. Confusion over the scope of the decision led to exaggerated press accounts of Big Bird doing on-air commercials. Rep. Cliff Stearns (R-Fla.) proposed taking $12 million away from CPB's 2004 allocation because of stations' new moneymaking powers. The Stearns' amendment was defeated 107-312.

All of this led Tauzin's committee to propose an Oct. 31 hearing to examine how CPB distributes its funds and what the FCC ruling would do, according to a House spokesman. Last week, just days after the CSG review panel released its recommendations, the hearing was postponed indefinitely.

According to CPB, the TV panel had been crafting its proposal for ten months as part of a periodic review of the grants formula, and the North Carolina complaint was already under consideration.

The suggested transmitter credit tweaks the formula by adding 5 percent of a licensee's base grant if it has three transmitters, 7.5 percent if four, 10 percent if five, 20 percent if six, and so on, up to a total of 80 percent of a base grant. Those with lots of low-power translators could count 10 of them as one transmitter.

For the roughly 35 licensees that pay more in PBS dues than they receive from CSGs, all but a handful should see that gap disappear, Clark says. In total, the transmitter credit would restore about $3.8 million to the base grants of affected licensees.

Because the CPB appropriation is set to leap by $15 million from fiscal year 2002 to 2003, the year the credit kicks in, only a few licensees will see a sum loss in their grants when the CSG pie is resliced. CPB puts the number at less than 10. Russell says the amended formula "makes good policy sense."

Although many pubcasters are pleased to see UNC-TV's funding woes mitigated, many also objected to the way Congress was brought into a system issue.

"Going beyond CPB and PBS has been a real complication," says Maine PTV's Rob Gardiner. "Most managers are really mad at stations that go up on the Hill with independent agendas. It's been done in the past, and every time it's been a disaster."

South Carolina ETV President Moss Bresnahan agrees that the CSG needs to be adjusted to reflect the challenges of multitransmitter licensees, but he advises against taking internal problems to the Hill. "I understand the frustrations of some people," he says, "but there's no problem we can't solve ourselves."

But UNC-TV found no redress for its grievances within public broadcasting, according to Steve Volstad, a UNC-TV spokesman. "The issue had been discussed at great length for a number of years in the system," Volstad says. "We felt it was appropriate to let our legislators know."

Volstad says UNC-TV wouldn't have gone to the Hill if it didn't think the issue was of "significant concern to the entire system and Congress."

Meanwhile, the PBS Finance Committee is reviewing its dues structures and plans to announce its proposed changes after the CSG panel finishes its work. After seeking comment on its recommendations, the 2001 CSG review panel plans to draft a final report at its meeting in San Francisco late this month. The proposal will then go the CPB board for approval.


North Carolina's 11-transmitter public TV network lost some of its federal aid when CPB stopped funding unstaffed repeaters as well as full stations. It took the issue to Congress, arguing that it was penalized for operating efficiently. (Map: UNC-TV.)

Later story
PBS revises policy, defusing dispute over UNC dues

Originally published in Current, Dec. 3, 2001

The executive committee of the PBS Board last month voted to heal a station dues dispute that had become a sore point with North Carolina congressmen. PBS would aid multiple-transmitter pubcasters by boosting the transmitter credit used in figuring the dues they pay to the network. Before the rule change, stations that operated more than two transmitters got a credit of $150,000 for each additional transmitter. Now stations that operate more than one transmitter will get a $500,000 credit for each additional transmitter. The change goes into effect in 2003. The change responds to complaints by North Carolina's state public TV network, UNC-TV, that concerned House members from the state. A CPB review committee already had recommended changes in a CPB grant formula that put UNC-TV and other state networks at a disadvantage (Current, Nov. 5). Prompted by complaints from UNC-TV, members of the House Commerce Committee had planned a hearing for Oct. 31 on divergent trends in PBS dues and CPB grants. That hearing was postponed indefinitely after the respective review panels released their revamps. In recent years, UNC-TV said, CPB and PBS formulas both changed to its disadvantage. Its Community Service Grant from CPB and its PBS dues were each about $1.2 million in fiscal 1991, but a decade later the annual CPB grant had grown to just $1.9 million while the PBS bill was up to $2.7 million. PBS President Pat Mitchell said the review committee did "a commendable job of separating politics and good public policy; safeguarding the independence of our system while reflecting an appropriate sensitivity to its supporters in Congress."

That's not all of the CSG tweaks

In addition to creating a transmitter credit for public TV licensees that serve multiple communities (story at left), the television Community Service Grant review panel proposes to adjust CPB's formulas in several other ways:

Giving a new credit to stations that differentiate their programming from that of other public TV stations in the same market. In 1996, CPB decided to encourage consolidation by giving only a single CSG base grant in an overlap market to be shared by all the local public TV stations. Rather than see these markets as "over-built" with stations, several managers encouraged the panel to see them as opportunities to serve historically neglected audiences. Under the proposal, CPB would increase the incentive grant of stations that offer schedules differentiated from the primary station's. Differentiated content could include non-English-language programming, instructional or educational content, and time-shifted national programming. The panel is refining the formula for the credit and will likely cap the amount of nonfederal funding support (NFFS) it will match. Though the new money will come nowhere near the $10 million that these stations collectively have lost, CPB's David Clark says, it ought to help minimize harm done to smaller stations.

Dividing base grants equally in overlap markets. In recent years, CPB has divided base grants among overlap stations in inverse proportion, giving more money to licensees with the least amount of NFFS. CPB established this practice in 1996 and renewed it in 1998. Beginning in 2003, the grant would be divided equally among stations.

Establishing a local service grant to aid the financially weakest stations. Available to stations with NFFS of less than $2 million, this new grant would replace the special assistance grant, created in 1998 to assist with DTV planning. Licensees with the least fundraising revenue would get the biggest grants, while those that raise more money would get smaller ones. Grantees would be required to use the funds for activities such as outreach, educational projects, creating operational efficiencies, implementation of best development practices, financial planning and professional development.

Encouraging cooperation with a new collaboration fund. The panel recommends using $1 million from the CSG pool to support DTV planning, collaborative infrastructure projects and shared distribution entities. This collaboration fund is modeled on the Overlap Market Fund, which sought to build operating efficiencies in overlap markets. All stations would be eligible to apply.

Lowering the grant eligibility hurdle. In 1998, the review panel raised the minimum NFFS level for stations to be eligible for CSGs from $650,000 in 1999 to $1 million in 2003. The panel believed $1 million was the minimum amount needed to operate both analog and digital signals during the DTV conversion. In light of DTV's slowed rollout, the panel agreed that figure was too high. It proposes holding minimum NFFS at $800,000 for the next three years.

Continuing the Transition Fund. Created in 1996, the Transition Fund supports licensees' local projects to build revenue and explore operating efficiencies. Open to grantees with NFFS of less than $2 million, the Transition Fund is currently funded at $1.5 million taken from the CSG pool. The panel recommends dipping into fund reserves (currently at $2 million) and CPB savings to fund the program at $1 million for the next three years. In effect, this would return $1.5 million to the CSG pool.

Continuing the Future Fund. The panel proposes continued funding of the Future Fund at $4 million taken from the CSG pool with an additional $4 million match from CPB's discretionary funds.


To Current's home page
Earlier news: With other grant policies CPB encourages nearby stations to consolidate.
Related document: UNC-TV's Q&A on the CPB and PBS formulas, fall 2001.
Outside link: UNC-TV describes its statewide network.

Web page posted Nov. 21, 2001 and revised Nov. 30, 2001
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