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Radio CSG Review 2019 Panel Report

Overview

During the past year, a panel of public radio system representatives has reviewed the policies governing the Radio Community Service Grant (CSG) program, which provides support to 401 public radio grantees across the country. We believe this has been the most extensive Radio review in more than a decade. We received detailed presentations from CPB staff and examined large quantities of data, and in the process we have gained a deeper understanding of the Radio CSG program parameters, which are interrelated and complex. The changes we are recommending be made to the Radio CSG Program are transformational and will ensure that Radio CSG funds are supporting valued, diverse, sustainable, local public service while fulfilling the mandates of the program as outlined in the Public Broadcasting Act (Act).

Our 21-member Panel represented a variety of system perspectives, including grantees of various sizes and circumstances as well as national organizations that serve and advocate for particular station groups. In our first meeting, we agreed on a set of principles to ground and guide our deliberations. Some are mandated by or flow from the Public Broadcasting Act. Others have emerged over time. All are essential to defining the work of the public radio system:

  • Universal service – Free, over-the-air broadcast must be accessible to all
  • Unserved and underserved audiences – The system must meet the needs of audiences not otherwise served
  • Public/private partnership – Grantees demonstrate local financial support (NFFS) as a way to earn federal support
  • Local circumstances – Grantees should be viewed in relation to the communities and audiences they undertake to serve
  • Localism – Grantee decision-making, programming, governance, and support takes place at the local level
  • Fairness – Each grantee must be treated equitably
  • Healthy System – The fates of all grantees are interrelated, and the health of individual grantees contributes to the overall health of the system

Also, the Panel and CPB agreed on the importance of both the confidentiality of Panel discussions and a high level of transparency with the system for the review process. Panel members received input from grantees through a dedicated email address and fielded questions from colleagues as the review process unfolded.
CPB provided a summary of Panel discussions to the system and stakeholders after each Panel meeting.

Environment and Context

The public radio system comprises a diverse set of stations that serve a wide range of communities, from very small towns of a few hundred people to major urban centers with millions of residents. Stations have a variety of formats, from news/talk to classical to jazz to AAA to a mix of many programs. Some grantees have special designations, such as rural and/or minority, based on qualifying criteria1. In fact, 40% of Radio CSG grantees qualify as rural, and one in five qualifies as minority. The CSG program has long recognized that rural and minority stations exist in communities with fewer resources, and that these stations depend heavily on their CSG funding to remain sustainable. Through larger base grants, the Rural Support Grant (RSG), and multipliers on base grants, RSG, and NFFS, CPB distributes additional funding to these grantees that helps them compensate for the challenging economic circumstances in which they operate.

Rural grantees are those with a coverage area population density of less than or equal to 40 people per square kilometer. Minority grantees are those: 1) with a measured minority audience composition (Cume) greater than 51 percent averaged over the previous three consecutive measured quarters; 2) licensed to a designated Historically Black College or University; or 3) licensed to a Native American Tribe, consortium of Tribes, or tribal entity.

Radio CSG grantees operate with a variety of budget sizes. Nearly half generated less than $1 million in Non- Federal Financial Support (NFFS), and only 12 generated more than $15 million in NFFS in FY 2018 (see chart below). The amount of NFFS raised each year is used by CPB to calculate the incentive or matching portion of CSGs for Level C and D grantees (the only grantees that currently qualify for incentive grants). In FY 2018, the incentive match was calculated by multiplying a grantee’s NFFS by 0.0521.

 

Since the last Radio CSG Review in 2012-2013, shifts in technology, audience behavior, demographics, competition, and the economy have dramatically changed the landscape for public media. Overall, public radio has successfully responded to the environment and seen strong growth in audience and revenue, with the system reaching a record high $1.1 billion in NFFS in FY 2017.

However, the aggregate numbers conceal a large gap in revenue generation between a small group of major market stations and many mid-and small-market stations. The largest stations have experienced accelerated rates of growth, compared to the majority of other grantees, and have raised unprecedented amounts of NFFS for their organizations. Other stations have seen a mix of growth rates, with some making strong gains, some losing revenue, and others struggling to stay even. The disparity in NFFS amounts and growth rates,
combined with CPB’s flat funding level and the current formula used to determine the incentive portion of CSG grants, has resulted in some grantees seeing a decrease in their CSG amounts despite having an increase in their NFFS. It’s also shifted significant incentive grant dollars to the ten largest grantees over the past five years:

The disproportionate distribution of CSG incentive funds was a primary focus for the Panel, along with an examination of minimum NFFS (in particular, looking at the result of changes made in the 2012-2013 Radio CSG review) and Indirect Administrative Support (IAS). In the course of our discussions, however, it became clear that a comprehensive review of the Radio CSG program was needed to better align the program with the broad range of station sizes, market conditions, local socioeconomic factors, licensee types, formats, and capacities that exist across the system. Subsequently, the Panel also examined categorization of grantees, base grant amounts, minimum staffing requirements, program eligibility, and the status of Rural Audience Service Stations (RASS) and Minority Audience Service Stations (MASS).

Recommendations

Radio CSG policies must be applied across a wide range of grantees while meeting the requirements of the Public Broadcasting Act. The Act states that all eligible licensees receive a “basic grant,” which is distributed to stations in the form of base grants. The remaining funds must be distributed based on a formula designed to provide for the grantee’s financial needs in relation to communities served and to maintain and increase NFFS. In 1981, Congress stipulated that the CSG be used for “purposes related primarily to the production or acquisition of programming.” Because the Act states that CSG funds are to be used “at the discretion of the recipient,” CPB may not require stations to use CSG funds for specific purposes or projects. Congress further stipulated in the Act that 23 percent of grant funds available to radio CSG recipients should be used solely for acquiring or producing programming that is distributed nationally and designed to serve the needs of a national audience. The Panel had to work within these parameters as it considered recommendations.

Panelists participated in two online sessions and five on-site meetings over a nine-month review period, and, after careful consideration, are recommending multiple changes to ensure that Radio CSG policies better support the intent of CSG funding and better position the system for the future. The recommendations are:

1. Categorize grantees by coverage area population (CAP)

Radio grantees are currently grouped into four levels:

  • Level A – Sole Service, the only station within a 50-mile service area (12 grantees)
  •  Level B – Smaller (54 grantees)
  • Level C – Large Rural (130 grantees)
  • Level D – Larger (210 grantees)

The number of levels has been reduced over time, and the similarities among grantees that originally defined the levels have largely been lost. For this review, CPB analyzed socioeconomic and market factors along with grantee data to determine how to group radio grantees in a manner that best recognizes their similarities. This analysis showed that coverage area population (CAP) is an important distinguishing characteristic. CAP correlates with socioeconomic factors such as household income and poverty rates and is the most significant factor in a grantee’s ability to raise NFFS. Categorizing by CAP places grantees with similar socioeconomic and market conditions together.

CAP is defined as the population within a station’s coverage area based on contours specified by CPB (consistent with the rules and policies of the Federal Communications Commission) and the most recent population data published by the U.S. Census Bureau. A station’s coverage area is defined by the primary signal coverage standard of 1mV/m (60 dBu) for FM and 5mV/m (73.979 dBu) daytime, ground wave for AM.

The Panel endorses the concept of reorganizing stations based on CAP to improve the CSG program’s ability to provide for the financial needs of stations in relation to the communities they serve, a fundamental principle of the Act. The Panel recommends the following six CAP categories:

CAP Category 1 2 3 4 5 6
 

CAP Range

 

< 20K*

 

20K to <100K

 

100K to <300K

 

300K to <1M

 

1M to <3M

 

> 3M

 

# Grantees

 

34

 

44

 

58

 

110

 

103

 

50

  • The Radio CSG program would continue to recognize Sole Service grantees, which are all within CAP 1, and their unique circumstances.
2. Align base grants with CAP categories

Data analysis showed that most small CAP grantees operate in communities that experience lower levels of household income and higher levels of poverty compared to large CAP grantees that operate in localities with higher household income and lower levels of poverty. Because of these conditions and market size, grantees in smaller CAP categories face more challenges raising NFFS and rely heavily on base grants, while grantees in larger CAP categories generally raise more NFFS and receive larger incentive grants. The Panel, therefore, recommends an increase in base grants for grantees in the lower CAP categories and a decrease in the base grants in larger CAP categories to accommodate different market sizes and financial conditions:

CAP Category 1 2 3 4 5 6
 

CAP Range

 

< 20K

 

20K to <100K

 

100K to <300K

 

300K to <1M

 

1M to <3M

 

> 3M

 

Base grant

 

$90,000

 

$85,000

 

$75,000

 

$60,000

 

$50,000

 

$35,000

  • Grantees designated as Sole Service will receive a 1.25 multiplier on their base
  • Grantees designated as MASS will receive a 1.50 multiplier on their base
  • The minimum base grant for grantees designated as MASS or RASS is $75,000, regardless of CAP
  • All base grants would change proportionately with the CPB appropriation. Currently, all base grants, except for those in Level A, change proportionately with the CPB
3. Align minimum NFFS amounts with CAP categories

The Panel evaluated the minimum NFFS eligibility requirement within the context of the proposed CAP framework. As stated above, data analysis revealed that stations that operate in smaller CAPs also tend to operate in the most challenging socioeconomic environments, both of which impact their ability to raise NFFS. Accordingly, the Panel believes that minimum NFFS values should be aligned with each CAP category to ensure that the CSG program is responsive to local market sizes and financial conditions and recommends the following minimum NFFS amounts:

CAP Category 1 2 3 4 5 6
 

CAP Range

 

< 20K

 

20K to <100K

 

100K to <300K

 

300K to <1M

 

1M to <3M

 

> 3M

Minimum NFFS  

$250,000

 

$275,000

 

$300,000

 

$300,000

 

$400,000

 

$500,000

  • Sole Service grantees have no minimum NFFS requirement.
  • MASS grantees with a minority cume composition of at least 75% and grantees that meet the criteria for both MASS and RASS must have a minimum NFFS of $100,000.
  • MASS grantees must have the minimum NFFS of the preceding CAP category to maintain eligibility.
4. Align minimum staffing with CAP categories

The Panel evaluated the minimum staffing eligibility requirement within the context of the proposed CAP framework. The Panel believes that minimum staffing should be aligned with each CAP category to ensure that the CSG program is responsive to local markets. Accordingly, the Panel recommends the following minimum staffing requirements:

CAP Category 1 2 3 4 5 6
 

CAP Range

 

< 20K

 

20K to <100K

 

100K to <300K

 

300K to <1M

 

1M to <3M

 

> 3M

Minimum Staff  

2FT

 

2FT

 

2FT

3

(min. 2FT)

4

(min. 2FT)

4

(min. 2FT)

  • Sole Service grantees have no minimum NFFS
  • MASS grantees with a minority cume composition of at least 75% and grantees that meet the criteria for both MASS and RASS must have a minimum NFFS of $100,000.
  • MASS grantees must have the minimum NFFS of the preceding CAP category to maintain
5. Implement a system of tiered NFFS for incentive grants; make all grantees eligible for incentive grants

As described above, a large gap in revenue generation between a small group of large market stations and many mid-and small-market stations has contributed to a disproportionate distribution of incentive grant funds over the last five years, with the larger grantees receiving an increasing percentage of such funds. To address this issue, the Panel is recommending tiering NFFS. With tiering, NFFS is placed into three tiers, with each tier assigned a percentage of NFFS to be used for calculating incentive grants:

NFFS Tier NFFS Range Percent of

Qualifying NFFS

A < $300K 90%
B $300K to <15M 100%
C ≥$15M 80%

CPB would use 90% of NFFS up to $300,000; 100% of NFFS from $300,000 up to $15 million; and 80% of NFFS above $15 million to calculate incentive grants.
Grantees with special designations would continue to receive additional incentive grant amounts through the use of multipliers on NFFS:

  • MASS grantees receive a 1.25 multiplier on NFFS (change from 1.50) on NFFS up to $5 million.
  • RASS grantees receive a 1.25 multiplier on NFFS.
  • MASS + RASS grantees receive a 1.75 multiplier on NFFS.

In addition, the panel is recommending extending incentive grants to all grantees to better align with the Public Broadcasting Act, which requires CPB to help stations “maintain existing and stimulate new sources of NFFS.”

6. Simplify the method by which Indirect Administrative Support (IAS) is reported as NFFS

Some CSG grantees are institutional stations, meaning the grantee is a department, division, or unit of a licensee that is not devoted primarily to public broadcasting. Such licensees include state and local governments, public and private colleges and universities, and governments of United States territories. These licensees can include IAS as part of their NFFS. IAS is the portion of a licensee’s general and administrative costs (Institutional Support) and facilities costs (Operations and Maintenance of Plant) attributable to station operations.

CPB currently has three approved ways to calculate IAS, all of which are complex and can result in misreporting. As part of the TV and Radio CSG reviews, CPB sought to simplify the methodology of calculating IAS and convened a subcommittee of the Radio and Television CSG panels to test a new approach. The IAS subcommittee overwhelmingly agreed that the new methodology will provide a simpler, consistent and transparent calculation process that is more easily verifiable. The new method would have grantees:

  1. Derive a rate by dividing the licensee’s indirect costs by its direct costs.
  2.  Apply the rate to a base comprised of the station’s net direct expenses.
  3. To this, add occupancy value, if applicable, computed using CPB’s current instructions.
  4. Deduct any payments made by the station to its licensee for direct services.

After a year of testing, CPB will apply this methodology systemwide in FY 2022. The Panel recommends adopting the new methodology if there is extensive due diligence on the impact of the reporting changes before implementation, an option for a phase-in period, and in-depth training for grantees.

7. Extend the probationary period for grantees at risk of removal from the CSG program for NFFS and/or Audience Service Criteria (ASC) failure

The current timelines for removing grantees that fail to meet the eligibility requirements for NFFS and ASC may not give grantees enough time to make changes in order to satisfy the requirements. This is particularly true with regard to the NFFS criteria because the Radio CSG program relies on financial information from two years earlier than the current CPB fiscal year, and Radio grantees operate on various fiscal years. Therefore, given the same notification date, grantees with fiscal years ending December 31, for example, will have more time to meet the criteria than grantees with fiscal years ending April 30.

The Panel recommends extending the probationary periods for grantees that fail to meet eligibility requirements by one year.

Grantees that do not meet the required minimum NFFS for their CAP category for three consecutive years may lose their CSG eligibility, as outlined below:

New NFFS removal timeline
Year 1 Notification Year 1; full CSG
Year 2 Notification Year 2; full CSG
Year 3 Notification Year 3; full CSG
Year 4 Determine status based on most recent NFFS

reported; disqualify with no CSG

Grantees that do not meet the required ASC for three consecutive years may lose their CSG eligibility and must use 25% percent of their unrestricted CSG funds to cover the cost of activities designed to restore compliance, as outlined below:

New ASC removal timeline
Year 1 Notification Year 1; full CSG;

25% for improvement

Year 2 Notification Year 2; full CSG;

25% for improvement

Year 3 Notification Year 3; full CSG;

25% for improvement

Year 4 Determine status based on most recent data reported; disqualify with no CSG
8. Phase-in the changes affecting CSG amounts over a three-year period

Given the extent of the changes recommended for the Radio CSG program, the Panel recommends that CPB phase-in new elements of the program over three years.

Year 1 (FY2021)

  • Implement the following changes, which will apply to existing grantees and applicants to the program:
    • CAP categories
    • New base grants
    • New NFFS minimums
    • New staffing minimums
    • Incentive grants to all grantees
    • Tiering of NFFS as follows:
      NFFS Tier NFFS Range Percent of Qualifying NFFS
      A < $300K 90%
      B $300K to <15M 100%
      C ≥$15M 100%
    • New IAS calculation method introduced and compared to current method; current IAS calculation methods determine CSG amounts
      o New NFFS and ASC probationary periods

Year 2 (FY2022)

  • Tiering of NFFS as follows:
    NFFS Tier NFFS Range Percent of Qualifying NFFS
    A < $300K 90%
    B $300K to <15M 100%
    C ≥$15M 90%
  • New IAS calculation method considered for implementation.

Year 3 (FY2023)

  • Tiering of NFFS as follows:
    NFFS Tier NFFS Range Percent of Qualifying NFFS
    A < $300K 90%
    B $300K to <15M 100%
    C ≥$15M 80%

The Panel recommended no changes to several other policies it examined. It determined that the Radio CSG program should be kept open and the current prioritization of admitting Sole Service, rural and minority grantees remain intact. The Panel reaffirmed support for rural and minority grantees through the continuation of multipliers on base and RSGs grants for minority grantees, and NFFS multipliers on incentive grants for both rural and minority grantees. It also agreed to keep the current Audience Service Criteria in place to allow more time for analysis by CPB under the new CAP categorization of grantees.

Impact of Recommended Changes

If these proposed changes are adopted by CPB management and, in turn, approved by the CPB Board, their implementation will result in significant shifts in the Radio CSG program:

  • CAP categories will group similar grantees together in a more effective manner than the previous levels, allowing the CSG program to better provide for the financial needs of stations in relation to the communities they serve.
  • For the first time, ALL grantees will receive incentive grants based on their NFFS. In FY19, 66 grantees were ineligible to receive incentive grants despite raising nearly $15 million in NFFS.
  • By tiering the amount of NFFS used to determine incentive grants, the CSG program will address the impact to the CSG program of the widening gap in revenue between a small number of very large grantees and the remainder of program participants. This change will allow the CSG program to support a more equitable distribution of incentive grant funds across all grantees.
  • Based on projections using FY 2018 station financial data and the current amount of the Radio CSG fund pool and applying the recommended changes to base and incentive grants:
    •  Nearly two-thirds of CSG recipients are projected to receive increases in their CSGs, while slightly more than one-third of CSG recipients are projected to see decreases in their CSGs
      • Grantees with CAP under 100,000 (CAP categories 1 & 2), which face the most challenges in raising NFFS, are projected to receive an average CSG increase of over $23,000.
      • Grantees with CAP from 100,000 up to 1 million (CAP categories 3 & 4) are projected to receive an average CSG increase of $6,200.
      •  All rural only grantees are projected to receive increases, with an average CSG gain of $6,900.
      •  All but three minority only grantees are projected to receive increases, with an average CSG gain of almost $15,000.
      • All grantees that are both rural and minority are projected to receive increases, with an average gain of nearly $22,000.
      • Grantees with CAP between 1 and 3 million (CAP category 5) are projected to receive an average decrease of $3,100.
      • Grantees with CAP over 3 million (CAP category 6) are projected to receive an average decrease of $49,000.
      •  Grantees in CAP category 6 with annual NFFS of more than $15 million are projected to receive an average decrease of $163,000.
  •  The new method for calculating IAS will provide a more simple, consistent approach across grantees. CPB has not been able to identify a pattern of impact based on the small group of institutional grantees that have tested this new method, however, and will need to assess its effect carefully once all grantees have tested it.

Conclusion

This Panel recommends these policy changes to CPB management for review and consideration in order to present a final set of recommendations to the CPB Board at its December 2019 meeting.

Any approved changes to the Radio CSG program will phase in beginning in fiscal year 2021.

Radio CSG Review Panel

Steve Bass Oregon Public Broadcasting
Richard Davis Native Public Media
Anthony Dean WJSU (Jackson, MS)
Scott Finn Vermont Public Radio
John Hess University: Station Alliance & Arizona Public Media
Gemma Hooley NPR
Staci Hoste WNIJ (DeKalb, IL)
Mollie Kabler Coast Alaska & APBI
Sally Kane National Federation of Community Broadcasters
Dave Kansas Minnesota Public Radio & American Public Media
Carlos Lando KUVO (Denver, CO)
Nico Leone KCUR (Kansas City, MO)
Corey Lewis WBUR (Boston, MA)
Joyce MacDonald Greater Public
Joe O’Connor WFAE (Charlotte, NC)
LaFontaine Oliver WMFE (Orlando, FL)
Silvia Rivera Latino Public Radio Consortium & WBEZ Vocalo
Flo Rogers Nevada Public Radio
Sue Rogers WXXI (Rochester, NY)
Loris Taylor Native Public Media
Tom Thomas Station Resource Group
Stewart Vanderwilt Colorado Public Radio