Two separate funding plans go up to the Hill

By Steve Behrens and Jacqueline Conciatore

Pubcasters have given Congress two separate proposals for future funding of the field: one from CPB and the other a joint effort backed by APTS, NPR, PBS and Public Radio International. [Comparative summary.]

Both proposals took a dim view of the revenue potential of on-air advertising and placed greater hope in further enhancement of underwriting.

But they diverged on several matters, with CPB detailing cost-saving proposals that will be controversial among some stations.

Congress makes moderate cuts in CPB appropriations already passed

A House-Senate conference committee answered two of the questions hanging over public broadcasting: $275 million next year and $260 million the year after. For comparison, CPB funding this year is $285.6 million.

With the rescissions approved by the committee May 12, Congress knocked down CPB advance appropriations 12 percent for fiscal 1996 and 17 percent for fiscal 1997. Senate supporters of the field helped pull up the steeper House-approved rescissions, 15 and 30 percent.

The portion of the conference committee that handled the CPB question included Sens. Ted Stevens (R-Alaska), Daniel Inouye (D-Hawaii) and Mark Hatfield (R-Ore.), Tom Harkin (D-Iowa) and other friends of public broadcasting.

Sources said there was support among Senate conferees for a higher level of CPB funding in 1997, but that House members expressed concern public broadcasting would “lose its momentum” on system reform if there weren’t any cuts at all.

Next question: what does this say about 1998 and beyond?

It’s easier to block cutbacks when funds are already appropriated, observes a spokesman for House Appropriations Chairman Bob Livingston (R-La.). “On future funding, during the normal appropriation cycle, if one house says zero and sticks with it, there’s nothing anyone can do to force them to change.”

And zero is exactly the number coming in for CPB in 1998, as proposed last week by the House Budget Committee, which is advising Congress how it can reach its deficit reduction goals.

Both had to venture onto unfirm ground to find a revenue source that would fill the gap that would be left if Congress defunds CPB. While CPB dared to suggest continued but reduced federal appropriations, the alphabet quartet dared to recommend legislation to fund a massive trust fund for public broadcasting.

On May 2, while the quartet was presenting its proposal to the press, CPB President Richard Carlson was taking CPB’s to Rep. John Porter (R-Ill.), the appropriations subcommittee chairman.

A spokesman said Porter had not expressed a preference for one proposal or the other, but it was “productive to have the public broadcasting community get involved in this debate and advance some of their ideas about how public broadcasting could continue in the future without an annual federal appropriation.”

Rep. Jack Fields (R-Tex.), whose subcommittee may take the first crack at reauthorizing CPB’s funding for 1988 and beyond, had insisted on seeing their fiscal plan by the end of April, but was now swamped with the mammoth telecom rewrite bill and not available to meet with pubcasters.

While Carlson worked the Hill without them, the presidents of APTS, NPR, PBS and PRI were explaining why they reluctantly parted company with CPB two weeks ago, after spending weeks preparing a joint financing proposal.

Building a trust fund

“We do not believe their plan goes far enough,” said NPR’s Del Lewis.

The APTS/NPR/PBS/PRI plan did indeed go deeper into the touchy matter of financing a trust fund that would give public broadcasting its long-sought steady income source to replace the shrinking federal outlay.

The quartet said the trust fund would amass a huge sum of $3 billion to $5 billion — figures volunteered by PRI President Stephen Salyer — large enough that the annual payout on investment would replace federal appropriations. At that point, the temporary financing mechanism that built up the nest-egg would cease operating.

Without projecting figures, they named six potential revenue sources to build up the trust fund, including the familiar proposals for a spectrum fee and Fields’ proposal for selling off public TV’s digital transition channel.

If Congress, for example, directed a portion of spectrum auction proceeds to support public broadcasting, Lewis said pointedly, that would be “private” funding, not new taxes.

As all were aware, Fields had warned the pubcasters not to bring back a financing plan that relies on new taxes. CPB paid heed to that admonition. Though it endorsed the idea of a trust fund, and though the quartet pointed out some funding mechanisms that would rely on private funds, CPB avoided mentioning any mechanisms that could be used to put money in the trust.

“[Rep. David] Obey’s person told us, ‘Don’t get suckered into coming back with a plan that has taxes,” CPB General Counsel Lillian Fernandez recalls. If members of Congress want to explore trust-fund financing mechanisms, it’s always an option, she said.

Porter observed that financing the trust fund through fees on commercial broadcasters “might not get very warm reception because to many members it would look like a tax increase,” his spokesman said.

The National Association of Broadcasters quickly opposed any trust fund that took money from commercial stations. “The public broadcasters’ idea of a ‘road to self-sufficiency’ seems to be ‘let’s take it from someone else.’ ” NAB charged that a big trust fund “would produce a gold-plated public broadcasting system that any Hollywood studio or entertainment conglomerate would envy. We’re sympathetic to public broadcasters’ plight, but have no interest in assuming the financial responsibility for their so-called ‘self-sufficiency’ plans.”

A House appropriations staffer complained that the APTS/NPR/PBS/PRI report was full of “old, stale, liberal ideas of how to do things.” Trust-fund mechanisms were rejected back in the 1960s, he said. “If it’s a bad idea then, why all of a sudden is it a good idea?” He was reminded of Lyndon Johnson’s Great Society, which he said Congress is now trying to get rid of.

CPB, in contrast, was “coming up with innovative ideas that are fresh and new,” the House staffer said.

Trimming the grantee list

Perhaps the freshest CPB ideas to some congressional staffers weren’t exactly new but were given their biggest-ever boost toward becoming reality.

Fernandez said the cutbacks were a crucial part of the package. “If we didn’t have the efficiencies, we wouldn’t be sitting at the table.”

CPB listed a number of major cost-saving proposals that would cut dozens or hundreds of stations off of its grantee list. The grant rules would protect many minority and rural stations, but many weaker, overlapped stations could lose their CPB aid (see table).

Savings from trimming the list would grow from $5.5 million in 1997 to $34.6 million a year in 2000, Lehman Brothers projected. But these savings were much smaller than those tallied up without explanation under the heading “automation.” CPB spokesman Michael Schoenfeld said that meant economical state-of-the-art broadcast technology.

In a Lehman Brothers table, the automation savings were nearly equal to the largest “new revenue” source, enhanced underwriting.

Both the fiscal proposals from CPB and the quartet concluded that on-air advertising would be a net money-loser, and enhanced underwriting would have a much better net result if FCC guidelines were loosened somewhat.

CPB cited projections by its hired analysts from Lehman Brothers, estimating that a particular limited form of advertising, with no program interruptions, would be earning $163.5 million a year by the year 2000, but about half of that would be taken out of the underwriting category. Taxes, increased production costs and loss of membership income would make advertising a net loswer by $41.1 million a year.

When CPB officials called on Porter, Fernandez recalled, he asked whether advertising had good prospects as a revenue source. He was told it looks like a loser. “He said, ‘Good, because I don’t want advertising.’ ”

But other members of Congress may not accept the prediction that advertising is a loser.

In the Senate Budget Committee’s consideration of CPB, at the behest of Sen. Hank Brown (R-Colo.), the committee is assuming that public broadcasting will begin earning more money by selling advertising.

During a recent mark-up session the committee defeated an amendment by Sen. Patty Murray (D-Wash.), who sought to prohibit blatantly commercial messages on public broadcasting’s air. A Senate staffer said Murray plans to bring the same motion before the full Senate. “I think she’s pretty determined to do it again and revisit the issue,” said the staff member. “She’s instructed her staff to build a coalition … and then will appeal to her colleagues to get this done.”

CPB sat on a fence on the issue. Though it declared that advertising doesn’t look like a net moneymaker, it also proposed an advertising experiment to know for sure.

“I don’t think there’s interest in an experiment in Congress,” Fernandez said. “If the stations want an experiment and can get Congress and the FCC to make the necessary changes, we’ll support them.”

The four other organizations, in contrast, oppose an ad experiment, and APTS said it was undertaking a study to resolve questions about advertising.

By adding cost savings to new revenues from enhanced underwriting and other sources, CPB’s advisors from Lehman Brothers estimated that public broadcasting could find $51.8 million in 1997 and $172.2 million by 2000, but neither sum would equal the loss of the present federal money distributed through CPB.

To close the gap, CPB proposed continued appropriations at a lower level.

They admitted this when they visited Porter this month. “We told him right off the top that that the plan didn’t get to zero,” said Fernandez. Finding a way was not possible in a short period of time, she said.

It won’t be much longer until Congress begins to make decisions about 1998 and later. Senate Commerce Committee Chairman Larry Pressler has said he’ll hold reauthorization hearings beginning next fall, according to a Senate staff member, and Fields’ House subcommittee probably will do so even sooner.

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