WASHINGTON — Internet access is jeopardized for rural schools and libraries across Maine and the country unless federal funding for the program called E-rate is fixed, a Senate panel was told Monday. Even as Congress debates the issue, the surcharge on all long-distance phone calls that pays billions of dollars to the program has already risen dramatically and could still double because of a disputed Bush administration accounting change.

"Clearly there have been obstacles and impediments to the program that has served the country well in schools and libraries," Sen. Olympia Snowe, R-Maine, who helped create E-rate in 1996, said at a Commerce Committee hearing on the program. "To respond in this fashion clearly does not make any sense."

But Sen. John Sununu, R-N.H., argued that E-rate should follow common government accounting practices, as the administration proposed. He noted that the program has been plagued by problems with fraud, mismanagement and overbilling.

"We know that these things have happened in this program to a greater degree than anyone in this room would like to see," he said.

The E-rate program provides discounts of 20 percent to 90 percent to schools and libraries for Internet access and equipment for connections. In 1996, only 3 percent of the country's schools and libraries had Internet access. The portion grew to 92 percent by 2002. Maine schools and libraries have received $32 million of the $13 billion distributed nationwide.

But a change in accounting rules threatened the program's funding. The problem was that the White House Office of Management and Budget and the Federal Communications Commission changed the program's accounting rules in a way that would have required it to keep more cash on hand.

That requirement restricts the Universal Service Administration Co., which runs the E-rate program, from investing in anything other than government securities. The company had to sell investments within three days in September - at a loss of $4.6 million - when the accounting rule temporarily went into effect.

The company suffered an immediate 20 percent loss on investment returns, according to Brian Talbott, chairman of the company board.

In addition, the company stopped distributing funds from August to November last year because of uncertainty about the accounting. The delay led schools and libraries to stall or abandon parts of their technology programs.

To rescue the program in the final minutes before adjourning for the year in December, Congress fixed the problem temporarily by exempting it from the new accounting rule. But that remedy lasts only until Dec. 31. Lawmakers are now debating a permanent solution.

Meanwhile, the surcharge on interstate phone calls rose in December from 8.9 percent to 10.7 percent because of the accounting concerns. If Congress doesn't extend its exemption, the surcharge would need to rise to 21 percent, according to the Universal Service Administration.

"We are faced with a real problem," said Sen. Ted Stevens, R-Alaska and chairman of the Commerce Committee that oversees the program.

But the program has become the subject of criminal and congressional investigations for wasting more than Maine has received.

In May 2004, one service provider pleaded guilty to bid rigging and wire fraud, and agreed to pay $20 million in criminal fines, civil payments and restitution, according to the Government Accountability Office. On Thursday, a federal grand jury in San Francisco indicted six companies and five individuals on charges of fraud, collusion and conspiracy.