[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 277 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                 S. 277

             To improve elementary and secondary education.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 21, 1999

 Mr. Coverdell (for himself, Mr. Lott, Mr. Craig, Mr. Mack, Mr. Gregg, 
 and Mr. Sessions) introduced the following bill; which was read twice 
                and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
             To improve elementary and secondary education.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Educational Opportunities and 
Excellence Act of 1999''.

SEC. 2. TABLE OF TITLES.

    The table of titles is as follows:

                  TITLE I--EDUCATION SAVINGS ACCOUNTS

                   TITLE II--DOLLARS TO THE CLASSROOM

           TITLE III--MEASURES TO ENHANCE RESULTS IN TEACHING

   TITLE IV--FUNDING FOR PART B OF THE INDIVIDUALS WITH DISABILITIES 
                             EDUCATION ACT

  TITLE V--TAX CREDITS FOR SUPPORT OF ELEMENTARY AND SECONDARY SCHOOL 
                                STUDENTS

           TITLE VI--COLLEGIATE LEARNING AND STUDENT SAVINGS

SEC. 3. FINDINGS.

    Congress makes the following findings:
            (1) Returning control to parents.--Parents have the primary 
        responsibility for their children's education. Parents are the 
        first and best educators of their children. Congress supports 
        proposals which provide parents greater control to choose new 
        and unique opportunities to meet the educational needs of their 
        children.
            (2) Dollars to the classroom.--Congress rejects a one-size-
        fits-all approach to education. America's rural schools often 
        face challenges quite different than their urban counterparts. 
        Congress believes that students should be the primary 
        beneficiaries of educational spending. Congress should ensure 
        that the maximum amount of Federal education dollars are spent 
        directly in the classrooms. State and local communities should 
        have the freedom to tailor their education plans and reforms 
        according to the unique educational needs of their children.
            (3) Giving families greater educational choice.--For too 
        long, many children have been failed by our Nation's education 
        system. Scholastic aptitude test (SAT) and achievement test 
        scores have lagged behind other nations, crime and drugs have 
        overrun many schools, and too often the well-being and 
        education of students is ignored because of other concerns. 
        Congress should craft proposals that give families more options 
        to improve the education of their children. Whether it is 
        scholarships that open the door to success for low-income 
        children, or savings accounts that allow family and friends to 
        help with the purchase of a computer or payment of a tutor, our 
        Nation's policies must be geared to giving moms and dads the 
        power they need to help their children.
            (4) Supporting exceptional teachers.--Every child should 
        have an exceptional teacher in the classroom. Congress supports 
        rewarding teachers for their successful efforts. Congress 
        believes in schools being more accountable to parents. Every 
        parent deserves to know if their child is being taught by a 
        teacher who is highly qualified.
            (5) Basic academics.--Success in education is best achieved 
        when instruction is focused on basic academics and fundamental 
        skills. Students should no longer be subjected to untried and 
        untested educational theories, instead our Nation's education 
        efforts should be geared to proven methods of instruction.
            (6) Safer and more secure.--Quality instruction and 
        learning can only occur in a first class school that is safe 
        and orderly. No child can learn when schoolyards attract random 
        violence or classrooms are interrupted by disruptive behavior. 
        Congress supports proposals that give schools the tools the 
        schools need to protect teachers and students, remove 
        disruptive influences, and create a positive learning 
        atmosphere.

SEC. 4. PURPOSE.

    The purpose of this Act is--
            (1) to restore American education to its preeminent role in 
        the world community; and
            (2) to achieve educational excellence by providing parents, 
        local schools, and States with the flexibility and control they 
        need to provide high-quality instruction with an emphasis on 
        basic academics in a safe and secure environment for all 
        students.

                  TITLE I--EDUCATION SAVINGS ACCOUNTS

SEC. 101. SHORT TITLE; AMENDMENT TO 1986 CODE.

    (a) Short Title.--This title may be cited as the ``Education 
Savings Accounts Act of 1999''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 102. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.

    (a) Tax-Free Expenditures for Elementary and Secondary School 
Expenses.--
            (1) In general.--Section 530(b)(2) (defining qualified 
        higher education expenses) is amended to read as follows:
            ``(2) Qualified education expenses.--
                    ``(A) In general.--The term `qualified education 
                expenses' means--
                            ``(i) qualified higher education expenses 
                        (as defined in section 529(e)(3)); and
                            ``(ii) qualified elementary and secondary 
                        education expenses (as defined in paragraph 
                        (4)).
                Such expenses shall be reduced as provided in section 
                25A(g)(2).
                    ``(B) Qualified state tuition programs.--Such term 
                shall include amounts paid or incurred to purchase 
                tuition credits or certificates, or to make 
                contributions to an account, under a qualified State 
                tuition program (as defined in section 529(b)) for the 
                benefit of the beneficiary of the account.''.
            (2) Qualified elementary and secondary education 
        expenses.--Section 530(b) (relating to definitions and special 
        rules) is amended by adding at the end the following new 
        paragraph:
            ``(4) Qualified elementary and secondary education 
        expenses.--
                    ``(A) In general.--The term `qualified elementary 
                and secondary education expenses' means--
                            ``(i) expenses for tuition, fees, academic 
                        tutoring, special needs services, books, 
                        supplies, computer equipment (including related 
                        software and services), and other equipment 
                        which are incurred in connection with the 
                        enrollment or attendance of the designated 
                        beneficiary of the trust as an elementary or 
                        secondary school student at a public, private, 
                        or religious school; or
                            ``(ii) expenses for room and board, 
                        uniforms, transportation, and supplementary 
                        items and services (including extended day 
                        programs) which are required or provided by a 
                        public, private, or religious school in 
                        connection with such enrollment or attendance.
                    ``(B) Special rule for homeschooling.--Such term 
                shall include expenses described in subparagraph (A)(i) 
                in connection with education provided by homeschooling 
                if the requirements of any applicable State or local 
                law are met with respect to such education.
                    ``(C) School.--The term `school' means any school 
                which provides elementary education or secondary 
                education (kindergarten through grade 12), as 
                determined under State law.''.
            (3) Special rules for applying exclusion to elementary and 
        secondary expenses.--Section 530(d)(2) (relating to 
        distributions for qualified higher education expenses) is 
        amended by adding at the end the following new subparagraph:
                    ``(E) Special rules for elementary and secondary 
                expenses.--
                            ``(i) In general.--The aggregate amount of 
                        qualified elementary and secondary education 
                        expenses taken into account for purposes of 
                        this paragraph with respect to any education 
                        individual retirement account for all taxable 
                        years shall not exceed the sum of the aggregate 
                        contributions to such account for taxable years 
                        beginning after December 31, 1998, and before 
                        January 1, 2003, and earnings on such 
                        contributions.
                            ``(ii) Special operating rules.--For 
                        purposes of clause (i)--
                                    ``(I) the trustee of an education 
                                individual retirement account shall 
                                keep separate accounts with respect to 
                                contributions and earnings described in 
                                clause (i); and
                                    ``(II) if there are distributions 
                                in excess of qualified elementary and 
                                secondary education expenses for any 
                                taxable year, such excess distributions 
                                shall be allocated first to 
                                contributions and earnings not 
                                described in clause (i).''.
            (4) Conforming amendments.--Subsections (b)(1) and (d)(2) 
        of section 530 are each amended by striking ``higher'' each 
        place it appears in the text and heading thereof.
    (b) Maximum Annual Contributions.--
            (1) In general.--Section 530(b)(1)(A)(iii) (defining 
        education individual retirement account) is amended by striking 
        ``$500'' and inserting ``the contribution limit for such 
        taxable year''.
            (2) Contribution limit.--Section 530(b) (relating to 
        definitions and special rules), as amended by subsection 
        (a)(2), is amended by adding at the end the following new 
        paragraph:
            ``(5) Contribution limit.--The term `contribution limit' 
        means $500 ($2,000 in the case of any taxable year beginning 
        after December 31, 1998, and ending before January 1, 2003).''.
            (3) Conforming amendment.--Section 4973(e)(1)(A) is amended 
        by striking ``$500'' and inserting ``the contribution limit (as 
        defined in section 530(b)(5)) for such taxable year''.
    (c) Waiver of Age Limitations for Children With Special Needs.--
Section 530(b)(1) (defining education individual retirement account) is 
amended by adding at the end the following flush sentence:
        ``The age limitations in the preceding sentence shall not apply 
        to any designated beneficiary with special needs (as determined 
        under regulations prescribed by the Secretary).''.
    (d) Corporations Permitted To Contribute to Accounts.--Section 
530(c)(1) (relating to reduction in permitted contributions based on 
adjusted gross income) is amended by striking ``The maximum amount 
which a contributor'' and inserting ``In the case of a contributor who 
is an individual, the maximum amount the contributor''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

                   TITLE II--DOLLARS TO THE CLASSROOM

SECTION 201. SHORT TITLE.

    This title may be cited as the ``Dollars to the Classroom Act''.

SEC. 202. DIRECT AWARDS OF CERTAIN EDUCATION FUNDING TO STATES.

    (a) Direct Awards of Certain Education Funding.--
            (1) In general.--Notwithstanding any other provision of 
        law, for each fiscal year the Secretary shall award the total 
        amount of funds described in paragraph (2) directly to States 
        in accordance with this subsection.
            (2) Applicable funding.--The total amount of funds referred 
        to in paragraph (1) are all funds not used to carry out 
        paragraph (6)(B) for the fiscal year that are appropriated for 
        the Department of Education for the fiscal year to carry out 
        programs or activities under the following provisions of law:
                    (A) Title III of the Goals 2000: Educate America 
                Act (20 U.S.C. 5881 et seq.).
                    (B) Title IV of the Goals 2000: Educate America Act 
                (20 U.S.C. 5911 et seq.).
                    (C) Title VI of the Goals 2000: Educate America Act 
                (20 U.S.C. 5951).
                    (D) The Educational Research, Development, 
                Disseminations, and Improvement Act of 1994 (20 U.S.C. 
                6001 et seq.).
                    (E) Titles II, III, and IV of the School-to-Work 
                Opportunities Act of 1994 (20 U.S.C. 6121 et seq., 6171 
                et seq., and 6191 et seq.).
                    (F) Part B of title I of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 6361 et 
                seq.).
                    (G) Section 1502 of the Elementary and Secondary 
                Education Act of 1965 (20 U.S.C. 6492).
                    (H) Part A of title II of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 6621 et 
                seq.).
                    (I) Part B of title II of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 6641 et 
                seq.).
                    (J) Title III of the Elementary and Secondary 
                Education Act of 1965 (20 U.S.C. 6801 et seq.) (other 
                than section 3132 of such title).
                    (K) Section 3132 of the Elementary and Secondary 
                Education Act of 1965 (20 U.S.C. 6842 et seq.).
                    (L) Subpart 1 of part A of title IV of the 
                Elementary and Secondary Education Act of 1965 (20 
                U.S.C. 7111 et seq.).
                    (M) Subpart 2 of part A of title IV of the 
                Elementary and Secondary Education Act of 1965 (20 
                U.S.C. 7131 et seq.).
                    (N) Part A of title V of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 7201 et 
                seq.).
                    (O) Part B of title V of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 7231 et 
                seq.).
                    (P) Title VI of the Elementary and Secondary 
                Education Act of 1965 (20 U.S.C. 7311 et seq.).
                    (Q) Part B of title IX of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 7901 et 
                seq.).
                    (R) Part C of title IX of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 7931 et 
                seq.).
                    (S) Part A of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8001 et 
                seq.).
                    (T) Part B of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8031 et 
                seq.).
                    (U) Part D of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8091 et 
                seq.).
                    (V) Part F of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8141 et 
                seq.).
                    (W) Part G of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8161 et 
                seq.).
                    (X) Part I of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8241 et 
                seq.).
                    (Y) Part J of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8271 et 
                seq.).
                    (Z) Part K of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8331 et 
                seq.).
                    (AA) Part L of title X of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8351 et 
                seq.).
                    (BB) Part A of title XIII of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8621 et 
                seq.).
                    (CC) Part C of title XIII of the Elementary and 
                Secondary Education Act of 1965 (20 U.S.C. 8671 et 
                seq.).
                    (DD) Part B of title VII of the Stewart B. McKinney 
                Homeless Assistance Act (42 U.S.C. 11421 et seq.).
            (3) Timelines.--
                    (A) Census determination.--
                            (i) In general.--Not later than 21 days 
                        after the beginning of an academic year, each 
                        State shall conduct a census to determine the 
                        number of kindergarten through grade 12 
                        students in the State for the academic year.
                            (ii) Submission.--Each State shall submit 
                        the number described in clause (i) to the 
                        Secretary not later than February 1 of the 
                        academic year.
                    (B) Publication.--The Secretary shall publish in 
                the Federal Register not later than March 15 of each 
                fiscal year the amount each State shall receive under 
                this subsection for the succeeding fiscal year.
                    (C) Disbursal.--The Secretary shall disburse the 
                amount awarded to a State under this subsection for a 
                fiscal year not later than July 1 of the fiscal year.
            (4) Determination of award.--From the total amount made 
        available under paragraph (1) and not used to carry out 
        paragraph (6)(B), the Secretary, using the information provided 
        under paragraph (3), shall award to each State an amount that 
        bears the same relation to the total amount as the number of 
        kindergarten through grade 12 students in the State for the 
        academic year preceding the fiscal year bears to the total 
        number of all such students in all States for the academic 
        year.
            (5) Penalty.--If the Secretary determines that a State has 
        knowingly submitted false information under paragraph (3) for 
        the purpose of gaining additional funds under paragraph (1), 
        then the State shall be fined an amount equal to twice the 
        difference between the amount the State received under this 
        subsection, and the correct amount the State would have 
        received if the State had submitted accurate information under 
        paragraph (3).
            (6) Hold harmless.--
                    (A) In general.--No State shall receive an award 
                under this subsection--
                            (i) for fiscal year 2000 in an amount that 
                        is less than the amount the State would have 
                        received to carry out programs or activities 
                        under the provisions of law described in 
                        subparagraphs (A), (F), (I), (J), (L), (P) and 
                        (DD) of paragraph (2) for fiscal year 2000;
                            (ii) for fiscal year 2001 in an amount that 
                        is less than 95 percent of the minimum amount 
                        the State is eligible to receive under clause 
                        (i) for fiscal year 2000;
                            (iii) for fiscal year 2002 in an amount 
                        that is less than 90 percent of the minimum 
                        amount the State is eligible to receive under 
                        clause (ii) for fiscal year 2001;
                            (iv) for fiscal year 2003 in an amount that 
                        is less than 85 percent of the minimum amount 
                        the State is eligible to receive under clause 
                        (iii) for fiscal year 2002; and
                            (v) for fiscal year 2004 in an amount that 
                        is less than 80 percent of the minimum amount 
                        the State is eligible to receive under clause 
                        (iv) for fiscal year 2003.
                    (B) Multiyear awards.--The Secretary shall use 
                funds appropriated to carry out the programs or 
                activities under the provisions of law described in 
                paragraph (2) (other than subparagraphs (A), (F), (I), 
                (J), (L), (P) and (DD) of paragraph (2)) to make 
                payments to eligible recipients under such provisions 
                pursuant to any multiyear award made under 
such provisions prior to the date of enactment of this Act.
            (7) Special rule.--References to funds for the provisions 
        of law set forth in paragraph (2) shall be considered to be 
        references to funds for the Dollars to the Classroom Act.
    (b) Payments and Availability.--
            (1) Payments.--Funds awarded to a State under this 
        subsection shall be paid to the Governor of the State.
            (2) Availability.--The Governor of the State shall make the 
        funds provided under this subsection available to the 
        individual or entity in the State that is responsible for the 
        State administration of Federal education funds pursuant to 
        State law.
    (c) Use of State Awards.--
            (1) In general.--From the amount made available to a State 
        under subsection (a) for a fiscal year, the State--
                    (A) shall use not more than 5 percent of the amount 
                to support programs or activities, for kindergarten 
                through grade 12 students, that the State determines 
                appropriate, of which the State shall distribute 20 
                percent of the 5 percent to local educational agencies 
                in the State to pay the administrative expenses of the 
                local educational agencies that are associated with the 
                activities and services assisted under this section; 
                and
                    (B) shall distribute not less than 95 percent of 
                the amount to local educational agencies in the State 
                for the fiscal year to enable the local educational 
                agencies to pay the costs of activities or services, 
                for kindergarten through grade 12 students, that--
                            (i) the local educational agencies 
                        determine appropriate; and
                            (ii) are provided in the classroom.
            (2) Classroom activities and services.--For the purpose of 
        paragraph (1)(B), the costs of activities and services provided 
        in the classroom--
                    (A) exclude the administrative expenses associated 
                with the activities and services; and
                    (B) subject to paragraph (1)(B)(i), include 
                nonadministrative expenses associated with statewide or 
                districtwide initiatives directly affecting classroom 
                learning.
    (d) Regulations.--
            (1) In general.--No head of a Federal department or agency 
        other than the Secretary may promulgate regulations under this 
        section.
            (2) Classroom activities and services.--The Secretary of 
        Education shall not issue any regulation regarding the type of 
        classroom activities or services that may be assisted under 
        this section.
    (e) Report.--Each Governor of a State receiving assistance under 
this section shall prepare and submit, not later than 60 days after the 
date of enactment of this Act, to the Committee on Health, Education, 
Labor, and Pensions of the Senate and the Committee on Education and 
the Workforce of the House of Representatives, a report that describes 
the classroom activities and services provided in the State under this 
section.

SEC. 203. TITLE I FUNDING.

    Section 1603 of the Elementary and Secondary Education Act of 1965 
(20 U.S.C. 6513) is amended by adding at the end the following:
    ``(d) Dollars to the Classroom.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, from the funds made available to a local educational 
        agency under this part for a fiscal year, not less than 95 
        percent of the funds shall be used for the costs of activities 
        and services that--
                    ``(A) the local educational agency deems 
                appropriate; and
                    ``(B) are provided in the classroom.
            ``(2) Classroom activities and services.--For the purpose 
        of paragraph (1), the costs of activities and services provided 
        in the classroom--
                    ``(A) exclude the administrative expenses 
                associated with the activities and services; and
                    ``(B) subject to paragraph (1)(A), include 
                nonadministrative expenses associated with statewide or 
                districtwide initiatives directly affecting classroom 
                learning.
            ``(3) Plan.--Not later than 6 months after the date of 
        enactment of the Dollars to the Classroom Act, the Secretary 
        shall--
                    ``(A) develop and implement a plan for streamlining 
                regulations and eliminating bureaucracy so that 95 
                percent of the funds made available to local 
                educational agencies under this part are used for the 
                costs of activities and services provided in the 
                classroom; and
                    ``(B) prepare and submit to Congress recommended 
                legislation containing changes to Federal law that are 
                needed for 95 percent of the funds to be so used.''.

SEC. 204. PARTICIPATION OF CHILDREN ENROLLED IN PRIVATE AND HOME 
              SCHOOLS.

    Each local educational agency that receives funds under section 202 
shall provide for the participation of children enrolled in private and 
home schools in the activities and services assisted under such section 
in the same manner as private school children participate in activities 
and services under the Elementary and Secondary Education Act of 1965 
(20 U.S.C. 6301 et seq.) pursuant to sections 14503, 14504, 14505, and 
14506 of such Act (20 U.S.C. 8893, 8894, 8895, and 8896).

SEC. 205. DEFINITIONS.

    In this title--
            (1) the term ``local educational agency'' has the meaning 
        given the term in section 14101 of the Elementary and Secondary 
        Education Act of 1965 (20 U.S.C. 8801);
            (2) the term ``Secretary'' means the Secretary of 
        Education; and
            (3) the term ``State'' means each of the several States of 
        the United States, the District of Columbia, the Commonwealth 
        of Puerto Rico, Guam, American Samoa, the Commonwealth of the 
        Northern Mariana Islands, and the United States Virgin Islands.

           TITLE III--MEAURES TO ENHANCE RESULTS IN TEACHING

SECTION 301. SHORT TITLE; FINDINGS; AND PURPOSES.

    (a) Short Title.--This title may be cited as the ``Merit Act of 
1999''.
    (b) Findings.--Congress makes the following findings:
            (1) All students deserve to be taught by well-educated, 
        competent, and qualified teachers.
            (2) More than ever before, education has and will continue 
        to become the ticket not only to economic success but to basic 
        survival. Students will not succeed in meeting the demands of a 
        knowledge-based, 21st century society and economy if the 
        students do not encounter more challenging work in school. For 
        future generations to have the opportunities to achieve success 
        the future generations will need to have an education and a 
        teacher workforce second to none.
            (3) No other intervention can make the difference that a 
        knowledgeable, skillful teacher can make in the learning 
        process. At the same time, nothing can fully compensate for 
        weak teaching that, despite good intentions, can result from a 
        teacher's lack of opportunity to acquire the knowledge and 
        skill needed to help students master the curriculum.
            (4) The Federal Government established the Dwight D. 
        Eisenhower Professional Development Program in 1985 to ensure 
        that teachers and other educational staff have access to 
        sustained and high-quality professional development. This 
        ongoing development must include the ability to demonstrate and 
        judge the performance of teachers and other instructional 
        staff.
            (5) States should evaluate their teachers on the basis of 
        demonstrated ability, including tests of subject matter 
        knowledge, teaching knowledge, and teaching skill. States 
        should develop a test for their teachers and other 
        instructional staff with respect to the subjects taught by the 
        teachers and staff, and should administer the test every 3 to 5 
        years.
            (6) Evaluating and rewarding teachers with a compensation 
        system that supports teachers who become increasingly expert in 
        a subject area, are proficient in meeting the needs of students 
        and schools, and demonstrate high levels of performance 
        measured against professional teaching standards, will 
        encourage teachers to continue to learn needed skills and 
        broaden teachers' expertise, thereby enhancing education for 
        all students.
    (c) Purposes.--The purposes of this title are as follows:
            (1) To provide incentives for States to establish and 
        administer periodic teacher testing and merit pay programs for 
        elementary school and secondary school teachers.
            (2) To encourage States to establish merit pay programs 
        that have a significant impact on teacher salary scales.
            (3) To encourage programs that recognize and reward the 
        best teachers, and encourage those teachers that need to do 
        better.

SEC. 302. STATE INCENTIVES FOR TEACHER TESTING AND MERIT PAY.

    (a) Amendments.--Title II of the Elementary and Secondary Education 
Act of 1965 (20 U.S.C. 6601 et seq.) is amended--
            (1) by redesignating part E as part F;
            (2) by redesignating sections 2401 and 2402 as sections 
        2501 and 2502, respectively; and
            (3) by inserting after part D the following:

      ``PART E--STATE INCENTIVES FOR TEACHER TESTING AND MERIT PAY

``SEC. 2401. STATE INCENTIVES FOR TEACHER TESTING AND MERIT PAY.

    ``(a) State Awards.--Notwithstanding any other provision of this 
title, from funds described in subsection (b) that are made available 
for a fiscal year, the Secretary shall make an award to each State 
that--
            ``(1) administers a test to each elementary school and 
        secondary school teacher in the State, with respect to the 
        subjects taught by the teacher, every 3 to 5 years; and
            ``(2) has an elementary school and secondary school teacher 
        compensation system that is based on merit.
    ``(b) Available Funding.--The amount of funds referred to in 
subsection (a) that are available to carry out this section for a 
fiscal year is 50 percent of the amount of funds appropriated to carry 
out this title that are in excess of the amount so appropriated for 
fiscal year 2000, except that no funds shall be available to carry out 
this section for any fiscal year for which--
            ``(1) the amount appropriated to carry out this title 
        exceeds $600,000,000; or
            ``(2) each of the several States is eligible to receive an 
        award under this section.
    ``(c) Award Amount.--A State shall receive an award under this 
section in an amount that bears the same relation to the total amount 
available for awards under this section for a fiscal year as the number 
of States that are eligible to receive such an award for the fiscal 
year bears to the total number of all States so eligible for the fiscal 
year.
    ``(d) Use of Funds.--Funds provided under this section may be used 
by States to carry out the activities described in section 2207.
    ``(e) Definition of State.--For the purpose of this section, the 
term `State' means each of the 50 States and the District of 
Columbia.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on October 1, 2000.

SEC. 303. TEACHER TESTING AND MERIT PAY.

    (a) In General.--Notwithstanding any other provision of law, a 
State may use Federal education funds--
            (1) to carry out a test of each elementary school or 
        secondary school teacher in the State with respect to the 
        subjects taught by the teacher; or
            (2) to establish a merit pay program for the teachers.
    (b) Definitions.--In this section, the terms ``elementary school'' 
and ``secondary school'' have the meanings given the terms in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801).

   TITLE IV--FUNDING FOR PART B OF THE INDIVIDUALS WITH DISABILITIES 
                             EDUCATION ACT

SEC. 401. FUNDING.

    Section 611(j) of the Individuals with Disabilities Education Act 
(20 U.S.C. 1411(j)) is amended by striking ``such sums as may be 
necessary'' and inserting ``not less than $5,810,700,000 for fiscal 
year 2000, not less than $7,310,700,000 for fiscal year 2001, not less 
than $8,810,700,000 for fiscal year 2002, not less than $10,310,700,000 
for fiscal year 2003, not less than $11,810,700,000 for fiscal year 
2004, not less than $13,310,700,000 for fiscal year 2005, not less than 
$14,810,700,000 for fiscal year 2006, and such sums as may be necessary 
for each succeeding fiscal year.''.

  TITLE V--TAX CREDITS FOR SUPPORT OF ELEMENTARY AND SECONDARY SCHOOL 
                                STUDENTS

SEC. 501. SHORT TITLE.

    This title may be cited as the ``K-12 Community Participation Act 
of 1999''.

SEC. 502. CREDIT FOR ELEMENTARY AND SECONDARY SCHOOL EXPENSES AND FOR 
              CONTRIBUTIONS TO CHARITABLE ORGANIZATIONS WHICH PROVIDE 
              SCHOLARSHIPS FOR STUDENTS ATTENDING SUCH SCHOOLS.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 30B. CREDIT FOR ELEMENTARY AND SECONDARY SCHOOL EXPENSES AND FOR 
              CONTRIBUTIONS TO CHARITABLE ORGANIZATIONS WHICH PROVIDE 
              SCHOLARSHIPS FOR STUDENTS ATTENDING SUCH SCHOOLS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the sum of--
            ``(1) the qualified elementary and secondary education 
        expenses which are paid or incurred by the taxpayer during such 
        taxable year, and
            ``(2) the qualified charitable contributions of the 
        taxpayer for the taxable year.
    ``(b) Maximum Credit.--The credit allowed by subsection (a) for any 
taxable year shall not exceed--
            ``(1) $100 in the case of taxable years beginning in 
        calendar year 1999,
            ``(2) $150 in the case of taxable years beginning in 
        calendar year 2000,
            ``(3) $200 in the case of taxable years beginning in 
        calendar year 2001, and
            ``(4) $250 in the case of taxable years beginning after 
        calendar year 2001.
In the case of a joint return, the limitation under this subsection 
shall be twice the dollar amount otherwise applicable under the 
preceding sentence.
    ``(c) Qualified Elementary and Secondary Education Expenses.--For 
purposes of this section--
            ``(1) In general.--The term `qualified elementary and 
        secondary education expenses' means tuition, fees, tutoring, 
        special needs services, books, supplies, computer equipment 
        (including related software and services) and other equipment, 
        transportation, and supplementary expenses required for the 
        enrollment or attendance of any individual at a public, 
        private, or religious school.
            ``(2) Special rule for home-schooling.--Such term shall 
        include expenses described in paragraph (1) required for 
        education provided for homeschooling if the requirements of any 
        applicable State or local law are met with respect to such 
        education.
            ``(3) School.--The term `school' means any school which 
        provides elementary education or secondary education (through 
        grade 12), as determined under State law.
    ``(d) Qualified Charitable Contribution.--For purposes of this 
section--
            ``(1) In general.--The term `qualified charitable 
        contribution' means, with respect to any taxable year, the 
        amount allowable as a deduction under section 170 (determined 
        without regard to subsection (e)(1)) for cash contributions to 
        a school tuition organization.
            ``(2) School tuition organization.--
                    ``(A) In general.--The term `school tuition 
                organization' means any organization described in 
                section 170(c)(2) if the annual disbursements of the 
                organization for elementary and secondary school 
                scholarship are normally not less than 90 percent of 
                the sum of such organization's annual gross income and 
                contributions and gifts.
                    ``(B) Elementary and secondary school 
                scholarship.--The term `elementary and secondary school 
                scholarship' means any scholarship excludable from 
                gross income under section 117 for expenses related to 
                education at or below the 12th grade.
    ``(e) Special Rules.--
            ``(1) Denial of double benefit.--No deduction shall be 
        allowed under this chapter for any contribution for which 
        credit is allowed under this section.
            ``(2) Application with other credits.--The credit allowable 
        under subsection (a) for any taxable year shall not exceed the 
        excess (if any) of--
                    ``(A) the regular tax for the taxable year, reduced 
                by the sum of the credits allowable under subpart A and 
                the preceding sections of this subpart, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
            ``(3) Controlled groups.--All persons who are treated as 
        one employer under subsection (a) or (b) of section 52 shall be 
        treated as 1 taxpayer for purposes of this section.
    ``(f) Election To Have Credit Not Apply.--A taxpayer may elect to 
have this section not apply for any taxable year.''
    (b) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 30B. Credit for elementary and 
                                        secondary school expenses and 
                                        for contributions to charitable 
                                        organizations which provide 
                                        scholarships for students 
                                        attending such schools.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

           TITLE VI--COLLEGIATE LEARNING AND STUDENT SAVINGS

SEC. 601. SHORT TITLE; AMENDMENT TO 1986 CODE.

    (a) Short Title.--This title may be cited as the ``CLASS Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 602. ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO MAINTAIN 
              QUALIFIED TUITION PROGRAMS.

  (a) In General.--Section 529(b)(1) (defining qualified State tuition 
program) is amended by inserting ``or by 1 or more eligible educational 
institutions or a consortium that consists solely of eligible 
educational institutions'' after ``maintained by a State or agency or 
instrumentality thereof''.
    (b) Private Qualified Tuition Programs Limited to Benefit Plans.--
Section 529(b)(1) is amended by adding at the end the following flush 
sentence:
        ``Clause (ii) of subparagraph (A) shall only apply to a program 
        established and maintained by a State or agency or 
        instrumentality thereof.''.
    (c) Conforming Amendments.--
            (1) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 
        530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are each amended by 
        striking ``qualified State tuition'' each place it appears and 
        inserting ``qualified tuition''.
            (2) The headings of sections 72(e)(9) and 135(c)(2)(C) are 
        each amended by striking ``qualified state tuition'' and 
        inserting ``qualified tuition''.
            (3) The heading of section 529(b) is amended by striking 
        ``Qualified State Tuition'' and inserting ``Qualified 
        Tuition''.
            (4) The heading of section 530(b)(2)(B) is amended by 
        striking ``Qualified state tuition'' and inserting ``Qualified 
        tuition''.
            (5) The section heading of section 529 is amended to read 
        as follows:

``SEC. 529. QUALIFIED TUITION PROGRAMS.''.

            (6) The item relating to section 529 in the table of 
        sections for part VIII of subchapter F of chapter 1 is amended 
        by striking ``State''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 603. EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM 
              QUALIFIED TUITION PROGRAMS.

    (a) In General.--Section 529(c)(3)(B) (relating to distributions) 
is amended to read as follows:
                    ``(B) Distributions for qualified higher education 
                expenses.--
                            ``(i) In general.--If a distributee elects 
                        the application of this clause for any taxable 
                        year--
                                    ``(I) no amount shall be includible 
                                in gross income under subparagraph (A) 
                                by reason of a distribution which 
                                consists of providing a benefit to the 
                                distributee which, if paid for by the 
                                distributee, would constitute payment 
                                of a qualified higher education 
                                expense, and
                                    ``(II) the amount which (but for 
                                the election) would be includible in 
                                gross income under subparagraph (A) by 
                                reason of any other distribution shall 
                                not be so includible in an amount which 
                                bears the same ratio to the amount 
                                which would be so includible as such 
                                expenses bear to such aggregate 
                                distributions.
                            ``(ii) In-kind distributions.--Any benefit 
                        furnished to a designated beneficiary under a 
                        qualified tuition program shall be treated as a 
                        distribution to the beneficiary for purposes of 
                        this paragraph.
                            ``(iii) Disallowance of excluded amounts as 
                        credit or deduction.--No deduction or credit 
                        shall be allowed to the taxpayer under any 
                        other section of this chapter for any qualified 
                        higher education expenses to the extent taken 
                        into account in determining the amount of the 
                        exclusion under this subparagraph.''.
    (b) Beneficiary May Change Program.--Section 529(c)(3)(C) (relating 
to change in beneficiaries) is amended--
            (1) in clause (i), by inserting ``to another qualified 
        tuition program for the benefit of the designated beneficiary 
        or'' after ``transferred'', and
            (2) in the heading, by inserting ``or programs'' after 
        ``beneficiaries.
    (c) Additional Tax on Amounts Not Used for Higher Education 
Expenses.--Section 529(c)(3) (relating to distributions) is amended by 
adding at the end the following:
                    ``(E) Additional tax on amounts not used for higher 
                education expenses.--The tax imposed by section 
                530(d)(4) shall apply to payments and distributions 
                from qualified tuition programs in the same manner as 
                such tax applies to education individual retirement 
                accounts.''.
    (d) Coordination With Education Credits.--Section 25A(e)(2) 
(relating to coordination with exclusions) is amended--
            (1) by inserting ``a qualified tuition program or'' before 
        ``an education individual retirement account'', and
            (2) by striking ``section 530(d)(2)'' and inserting 
        ``section 529(c)(3)(B) or 530(d)(2)''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to distributions 
        made after December 31, 1999, for education furnished in 
        academic periods beginning after such date.
            (2) Private programs.--In the case of a qualified tuition 
        program established and maintained by an entity other than a 
        State or agency or instrumentality thereof, the amendments made 
        by subsections (a), (c), and (d) shall apply to distributions 
        made after December 31, 2003, for education furnished in 
        academic periods beginning after such date.

SEC. 604. QUALIFIED TUITION PROGRAMS INCLUDED IN SECURITIES EXEMPTION.

    (a) Exempted Securities.--Section 3(a)(4) of the Securities Act of 
1933 (15 U.S.C. 77c(a)(4)) is amended by striking ``individual;'' and 
inserting ``individual or any security issued by a prepaid tuition 
program described in section 529 of the Internal Revenue Code of 
1986;''.
    (b) Qualified Tuition Programs Not Investment Companies.--Section 
3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)) is 
amended by adding at the end the following:
            ``(15) Any prepaid tuition program described in section 529 
        of the Internal Revenue Code of 1986.''.
                                 <all>