June 26, 1998 Minutes

Board of Directors, Schools and Libraries, Rural Health Care Joint Meeting

A joint meeting of the Boards of Directors of the Universal Service Administrative Company (USAC), the Schools and Libraries Corporation (SLC) and the Rural Health Care Corporation (RHCC) (collectively the Corporations) was held at the International Trade Center & Ronald Reagan Building, 1300 Pennsylvania Avenue, Waghington, D.C. On the above date. The meeting was called to order at 10:00 A.M. EDST by Lisa Rosenblum, Edward English, USAC Secretary and Treasurer called the roll. Members were present as follows:

The following members were absent:

Others present for portions of the meeting:

1. Ms. Rosenblum welcomed the members of the USAC, SLC and RHCC Boards. Mr. Lee Bailey, President of RHCC, was asked to join the meeting. The announced purpose of the meeting was to finalize the content of the Report and plan of Reorganization (the Report) to be submitted to the FCC. Mr. Eichler gave a brief introduction describing the efforts of the USAC Long Range Planning Committee working with the heads of the Corporations to come up with the draft Report before the joint meeting.
   
   
2. The floor was then turned over to Cheryl Parrino, CEO of USAC, who summarized contents of the Report. She outlined the various Chapters of the Report, described the efficiencies of a combined organization and depicted some of the common and unique characteristics of the universal service programs. Mr. Fishman and Mr. Bailey supplemented her presentation. Ms. Parrino indicated that the universal service programs were under intense scrutiny by members in Congress. The Corporations were being asked to streamline and unify the administration of the funds so that there would be one point of responsibility for all programs. The agenda for this meeting was set to discuss remaining issues as a group, break into separate Bo)ard meetings for adoption and then to reconvene in the afternoon to arrive at a consensus. Ms. Parrino emphasized there were four issues which required further deliberation by the Boards.:

   a. The size of the Board of Directors of a combined USAC/SLC/RHCC.

   b. The autonomy of the committees formed to oversee the unique operations of school/libraries, rural health care and the high cost/low -income funds

   c. The composition and structure of the committees, and

   d. The option to merge verses maintain separate subsidiaries.

Size of the Board of Directors of a combined USAC/SLC/RHCC

The draft before the joint Board meeting included a recommendation to expand the USAC Board to 22 from 17. The five additional board members included two representatives from the schools and libraries, two representatives from rural health care and the CEO of the combined entity. The Boards discussed the desire to obtain meaningful representation for beneficiaries of the universal service programs on the combined Board while maintaining the perception that the entity was streamlined. Mr. Bailey indicated that RHCC was in favor of expanding the Board to include more representation for rural health care. Others commented that representation should be in proportion to relative fund size which would indicate no increase in representation for the rural health care and low income funds. After much discussion, the sense of the meeting was to recommend that each Board consider that the combined Board be increased to 18 by adding the CEO of the combined entity.

Committee Autonomy

Under the merger option, separate subsidiaries would be merged into divisions within USAC. The unique operations of these funds would be controlled by committees comprised of subsets of the full Board. The discussion revolved around the ability of the committees to bind the full Board and the authority vested in the CEO to control the budgets and spending decisions. The sense of the meeting was that the CEO must control the budgets and hire/fire decisions for all staff. The group differentiated between budget and programmatic issues and the ability of the USAC Board to override programmatic decisions made by the committees. A compromise was suggested. If there were a conflict between the objectives of the combined entity and one or more of the committees, it would require a 2/3 rote of the full USAC Board to override a committee decision. It was recommended that each Board consider this proposal.

Committee Composition and Subsidiary versus Merger Option

The separate Boards were asked to make recommendations as to these issues during their separate sessions.

Ms. Rosenblum adjourned the joint meeting at 12:25 P.M.

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Edward R. English
Secretary

June 26, 1998
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