Each school or library receiving Category Two funding support is subject to a **five year pre-discount budget** for Category Two products and services.

Each school within a school district has its own budget that is separate and distinct from any other schools in that district.

The five year budget funding plan is in effect for Funding Year 2015 through Funding Year 2019.

Budgets are calculated at the individual school level and cannot be spread across other schools in the district.

- Funding cannot be moved from one school to another.
- Districts may not average their costs across multiple schools.
- One school in multiple buildings that is recognized as one single school gets one budget to work with, not two.

Non-instructional facilities (NIFs) do not have Category Two budgets. This includes school NIFs with classrooms and administrative buildings. However, if and only if a NIF is essential for the effective transport of information to or within a school, the applicant must allocate the NIF costs to the entities benefiting from the service and additionally the costs for the ineligible services to the NIF must be allocated out.

Although it is a five year budget, the entire budget can be spent in one funding year or spread across any or all of the five funding years.

If the funding request in the first year is for less than the total five year budget amount, the applicant can apply in the subsequent years for the remainder of their budget.

Funding commitments must be spent in the funding year in which they are awarded.

Products and services ordered in excess of an entity's Category Two budget will not receive E-Rate discounts.

For an independent school or independent library, the first year of the Category Two budget is the first year, starting with FY2015, in which the school or library receives a positive commitment from USAC on a Category Two funding request.

For a school district, the first year of the Category Two budget for all of the individual schools in the school district is the first year, starting with FY2015, in which ANY individual school in the school district receives a positive commitment from USAC on a Category Two funding request. While the dollar amount for each school within the district is calculated at the school level, year one of the five year plan is determined for the entire district.

Budgets are recalculated every year based on current student population (schools) or square footage (libraries). As populations and square footage increase or decrease each year, the budget can go up or down accordingly.

For each funding year in an applicant's five year Category Two budget cycle, USAC compares the Category Two budget calculated for that funding year against the pre-discount total of Category Two commitments made for ALL funding years in that applicant's five year budget cycle.

Any Category Two funding commitments that include an entity as a recipient of service beginning in FY2015 will count against the pre-discount budget for that entity. For example, any Category Two funding commitments that include an entity as a recipient of service in FY2015 will count against the pre-discount budget for that entity in FY2016.

The pre-discount cost of the products and services approved for E-Rate discounts is charged against the Category Two budget. Budgets are not based on the committed amount (the share of the cost of the product or service paid for by E-Rate funds).

Budgets are assessed as follows:

**School budget = up to $150 (pre-discount) per student over 5 years****Library budget = up to $2.30 (pre-discount) per square foot over 5 years**

There are two exceptions to the budget calculations indicated above:

- A pre-discount funding floor of $9200 is available in Category Two support. All schools, regardless of size, are eligible to request pre-discount support of a minimum of $9200 for Category Two services over any given five year period.
- The budget for large urban libraries serving populations of 250,000 or more is increased from $2.30 per square foot to $5.00 per square foot. This increased budget applies only to libraries located in cities and urbanized areas with a population of 250,000 or more, as identified by the Institute of Museum and Library Services (IMLS) locale codes of 11, 12, and 21.

The base $150 per student and $2.30 per square foot are adjusted annually for inflation.

To calculate a budget:

- Multiply the number of students (as entered in EPC) who attend the school by $150
- Because there is a funding floor, if fewer than 62 students attend the school, the budget is set at $9,200
- Multiply the budget by the district's discount percentage to determine the amount of E-Rate funding the school is eligible for across five years

**For a School with 50 Students:**

- 50 students x $150 = Pre-Discount Budget is adjusted to the floor of $9,200
- At the 85% discount rate (the maximum discount rate for Category Two):

$9,200 budget x 85% discount = up to $7,820 in E-Rate support - At the 50% discount rate:

$9,200 budget x 50% discount = up to $4,600 in E-Rate support - At the 20% discount rate:

$9,200 budget x 20% discount = up to $1,840 in E-Rate support

**For a School with 200 Students:**

- 200 students x $150 = Pre-Discount Budget of $30,000
- At the 85% discount rate (the maximum discount rate for Category Two):

$30,000 budget x 85% discount = up to $25,500 in E-Rate support - At the 50% discount rate:

$30,000 budget x 50% discount = up to $24,000 in E-Rate support - At the 20% discount rate:

$30,000 budget x 20% discount = up to $6,000 in E-Rate support

**For a School with 1000 Students:**

- 1000 students x $150 = Pre-Discount Budget of $150,000
- At the 85% discount rate (the maximum discount rate for Category Two):

$150,000 budget x 85% discount = up to $127,500 in E-Rate support - At the 50% discount rate:

$150,000 budget x 50% discount = up to $75,000 in E-Rate support - At the 20% discount rate:

$150,000 budget x 20% discount = up to $30,000 in E-Rate support

As discussed above, the base rate for schools is $150 per student. When doing quick math to figure out a ballpark budget, use that figure. However, when making your actual funding requests, you will want to use the exact figure so you can utilize every penny of your Category 2 budget.

The inflation factors applied to the multipliers and the budget floor are:

- FY2015 - base year - multiply the number of students by the FY2015 multiplier of $150.00
- FY2016 - 1.0 percent - multiply the number of students by the FY2016 multiplier of $151.50
- FY2017 - 1.3 percent - multiply the number of students by the FY2017 multiplier of $153.47
- FY2018 - 1.8 percent - multiply the number of students by the FY2018 multiplier of $156.23

Therefore, to calculate a school's FY2018 Category 2 Budget, you would:

- Take the enrollment figure that was entered into the school's EPC profile during the FY2018 Admin Window
- Multiply that number by $156.23
- Then subtract any Category 2 pre-discount amounts that have been committed (not disbursed) in FY2015, FY2016, and FY2017 for that school

If several entities are sharing a Category Two service, funding must be allocated among the entities.

Allocations can be calculated using the methods below:

- Straight-line Allocation (where all entities share the cost equally)
- Proportional Allocation (based on the student count or square footage of each entity)
- User-defined Allocation (where the applicant specifies each entity's share)

USAC assumes that, if a commitment has been made on a Category Two request, that the pre-discount amount of that request should be charged against the Category Two budget.

Applicants can file an FCC Form 500 to return unused Category Two funds. Unless funding is returned via an FCC Form 500, USAC assumes that the applicant is using the entire Category Two funding that has been committed (not the amount disbursed via BEAR or SPI), and the full pre-discount amount of the committed funding request will remain charged against the entity's budget.