E-Rate Category Two Funding

Understanding E-Rate Category Two Funding

What is Category 2 E-Rate funding:

E-Rate has two different Categories of service. Category 1, which is internet access and WANs and Category 2, which is network equipment, basic maintenance of network equipment and Managed Internal Broadband Services (MIBS). 

To start, here are the answers to four very common Category 2 questions that we often answer, and then we will move through greater detail.

Are Category 2 budgets per year?

No Category 2 budgets are per 5-year budget cycle.

What is the current 5-year budget cycle?

The current 5-year budget cycle is FY2026 through FY 2030 (July 1, 2026, to June 30, 2031)

Can a library system use their Category 2 budget at whatever location they want?

Yes, library systems and school districts can use their Category 2 budget at whatever location they have need.

Is my Category 2 budget the amount of money E-Rate will give me?

No, your Category 2 budget is pre-discount.  Think of it as the most money you can spend and still get a discount. 

Category Two Service Type What It Includes (Examples)
Internal Connections (IC)
Wireless access points, switches, routers, firewalls, wireless controllers, cabling, racks, UPS/battery backup, caching, related software and licenses, etc.
Managed Internal Broadband Services (MIBS)
Services provided by a third party for the operation, management, and monitoring of eligible broadband internal connections are eligible Managed Internal Broadband Services (e.g., managed Wi-Fi).
Basic Maintenance of Internal Connections (BMIC)
Repair and upkeep of eligible hardware, wire and cable maintenance and configuration changes, performed in person, on-site.

Unlike Category 1, Category 2 has a budget. This budget is yours for a 5-year cycle. The current budget cycle is for FY2026-2030.

FY2026-2030 Budget Cycle and how it works:

  • Every applicant that applies for E-Rate has a 5-year budget for buying Category 2 equipment and/or services
  • The current 5-year budget cycle runs from FY2026 through FY2030 (July 1, 2026 – June 30, 2031.
  • All applicant budgets are set the first year that an applicant applies for Category 2, within the current budget cycle. Schools use their student count and libraires use their square footage to validate their budgets.
  • All budgets are “pre-discount,” meaning that your budget is before any E-Rate discounts and then you get your discount off that amount.
  • Library systems and school districts calculate their Category 2 budgets across their whole organization and can then spend their budgets where they see fit.
  • You can request a replacement budget if your enrollment or square footage increases.
  • Category 1 has no budget cap.
FY2026–2030 FY2021–2025
School multiplier
$201.57 per full-time student
$167.00 per student
Library multiplier
$5.43 per square foot
$4.50 per square foot
Funding floor (schools & libraries)
$30,175
$25,000
Funding floor (Tribal libraries)
$66,385
$55,000

Who gets a Category 2 Budget: 

Independent schools, school districts, independent libraries and libraries systems are all considered “budgeted entities” and all have budgets. 

  • Schools
  • Schools count full-time students only.  Part-time students are not included for Category 2 budgets. 
  • Libraries 
  • Libraries count total square footage of every floor enclosed by the outer walls of the library.  This includes staff-only areas.  Outdoor areas do not count for total square footage, but bookmobiles should count their enclosed areas.   
  • Non-Instructional Facilities (NIFs) and annexes 
  • NIFs are not eligible for Category 2 and do not have a budget. Annexes do not have their own Category 2 budget, but their enrollment is counted under their respective school. 
  • Building under construction 
  • Both independent schools and school districts with 10 or fewer schools can estimate enrollment for a new school.  Library systems can use planned square footage for a new branch that may open.   

 

How Category 2 Budgets are Calculated: 

For independent schools and libraries 

  • Schools 
  • Whichever is greater: $30,175 or total full-time students x $201.57 
  • Libraries 
  • Whichever is greater: $30,175 ($66,385 for Tribal library) or Total square feet x $5.43 
  • School Districts or library systems with more than 10 sites: 
  • School district 
  • Total full-time students x $201.57 or number of schools x $30,175 
  • Library system 
  • Total square feet x $5.43 or number of branches x $30,175 
  • School Districts or library systems with fewer than 10 sites: 
  • You can calculate the budget for each site and add them together or use the multiplier with the total enrollment/square footage. You should use whichever method leads to a higher budget. 

 

Examples: 

EXAMPLE #1 – Independent school with 950 students: 

  • 950 x $201.57 = $191,491.50, which results in a five-year pre-discount budget. With a 60% discount, E-Rate would cover $114,894.90 and the school would pay $76,596.60 

 

EXAMPLE #2 – Small Independent school with 100 students: 

  • 100 x $201.57 = $20,157 which results in a five-year pre-discount budget. Since this is below the funding floor, the school would get a $30,175 five-year pre-discount budget.  With an 80% discount, E-Rate would cover $24,140 and the school would pay $6,035. 

 

EXAMPLE #3 – Small school district with 6 school and 2,000 students: 

  • Compare the two methods in the chart below: district-wide student budget ($403,140.00), and per-site calculations ($417,128.90). The per-site method has the best results, adding $13,988.90 of budget. 
School Students Students × $201.57 Per-site budget
Elementary A
90
$18,141.30
$30,175.00 (floor)
Elementary B
140
$28,219.80
$30,175.00 (floor)
Elementary C
310
$62,486.70
$62,486.70
Middle School
420
$84,659.40
$84,659.40
Intermediate
480
$96,753.60
$96,753.60
High School
560
$112,879.20
$112,879.20
Total
2,000
$403,140.00
$417,128.90

EXAMPLE #4 – Library System with 3 outlets (A bookmobile, a 2,000 sq. ft. branch and a 7,500 sq. ft. branch.

  • $30,175 + $30,175 + (7,500 x $5.43 = $40,725) = $101,075 five-year-pre-discount budget. With an 80% discount, E-Rate would cover $80,860 and the library system would pay $20,215. 

 

General Tips Regarding Category 2 Planning: 

  • Decide when to lock your budgets.
  • Schools with growing enrollment may want to request replacement budgets each year, to maximize their Category 2 budgets.
  • Use the per-site budget option.
  • If you have fewer than 10 schools and some are small, the per-site budget option is usually the best option.
  • Think at least 5-years out.
  • Planning is the best way to maximize your Category 2 budget.
  • Unused budgets do not roll over to the new budget year – – Therefore, you want to make sure you are calculating your budgets correctly and tracking your budget cycle, to make sure you use the entire budget within the five-years if you have a need for it.

For even further research and reading, please find the following USAC and FCC links for official information on Category 2:

 

If you have more questions or want to speak with a consultant, please give us a call 908-892-0705, or e-mail us info@erateadvantage.com.

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