[Congressional Record Volume 143, Number 35 (Tuesday, March 18, 1997)]
[Senate]
[Pages S2416-S2439]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Ms. MOSELEY-BRAUN (for herself, Mr. Kennedy, Mr. Graham, Mr. 
        Kerry, Mr. Levin, Mr. Torricelli, Mrs. Murray, Ms. Mikulski, 
        Mr. Dodd, and Mr. Wellstone):
  S. 456. A bill to establish a partnership to rebuild and modernize 
America's school facilities; to the Committee on Labor and Human 
Resources.


        THE PARTNERSHIP TO REBUILD AMERICA'S SCHOOLS ACT OF 1997

  Ms. MOSELEY-BRAUN. Mr. President, I send to the desk, and I am 
pleased to introduce, along with a number of my colleagues, the 
Partnership To Rebuild America's School Act of 1997. This legislation 
is designed to address one of the most fundamental problems that we 
currently face as a nation with regard to public elementary and 
secondary education: many of our schools are literally falling down 
around our children. This legislation will help us address this 
problem, the crisis of crumbling schools in America.
  On Friday, the President officially transmitted this legislation to 
the Congress. The bill is the result of months of work by the 
Department of Education, the Department of the Treasury, the White 
House, my office, and a number of other congressional offices.
  At the outset, I commend and thank everyone who has participated in 
the development of this legislation for their efforts.
  Mr. President, the Partnership To Rebuild America's Schools Act of 
1997 will help States and local school districts finance the repair, 
renovation, modernization and construction of their schools. States and 
school districts will be able to use the Federal funds to assist them 
in financing their highest priority projects.
  This bill will allow school districts to do more of what they need to 
be doing, educating our children for the 21st century.
  In America, the rungs on the ladder of opportunity are still crafted 
in the classroom. High school graduates earn, on average, 46 percent 
more every year than those who do not graduate. College graduates earn 
155 percent more every year than those who do not graduate from high 
school. Over the course of a lifetime, the most educated Americans will 
earn five times as much as the least educated.
  Education, however, is not just a matter of individual benefit. It is 
a public good as well. It affects and correlates to the status and the 
quality of life for our entire community. It correlates to just about 
every indicia of economic and social well-being. Educational attainment 
can be directly tied to income, health, the likelihood of being on 
welfare, the likelihood of being incarcerated, and the likelihood of 
voting and participating in our democracy. Education, therefore, has 
both national as well as individual implications.
  In a recent Wall Street Journal survey of leading U.S. economists, 43 
percent of those surveyed said the single most important thing that we 
could do to increase our long-term economic growth rate would be to 
invest more in education and research and development. Nothing else 
even came close to education in the survey. One economist said, ``One 
of the few things that economists will agree upon is the fact that 
economic growth is very strongly dependent on our own abilities.''
  In his State of the Union Address, President Clinton noted that 
education is a critical national security issue for our future. I 
believe this notion should be at the heart of our debate over 
education.
  In order to compete with cheap, Third World labor in a global 
economy, in an information age, and to maintain the standard of living 
to which we have grown accustomed as Americans, we will have to have a 
work force that works smarter, that works better, that can hold its own 
in this global economy at the high end of the productivity scale.
  So education then becomes a matter of national concern and, indeed, 
as the President pointed out, a matter of our national security, 
because it is directly linked to our ability to be able to maintain the 
standard of living that we have come to appreciate as Americans and our 
ability to compete in this global marketplace.
  We all have a role to play. That is why this legislation starts off 
calling itself a partnership, because there must be a partnership 
between State, local and National Government to

[[Page S2417]]

meet the challenge that this global economy, and changes in the world, 
have given us all to face.
  The Partnership To Rebuild America's Schools Act of 1997 will help us 
to meet the challenge by investing in education in ways that preserve 
the fundamental tenet of local control of education.
  By investing in bricks and mortar the Federal Government can 
contribute to a more balanced partnership among all levels of 
Government and in the private sector to rebuild and modernize our 
schools so they can serve all of our children in the 21st century. This 
legislation strikes that balance. This legislation does preserve local 
control, but, much to the point, it says that we at the national level 
have an obligation to participate in addressing those needs that can be 
most appropriately addressed at the national level; and that is 
rebuilding our crumbling schools.
  The bill uses 5 billion Federal dollars to leverage an additional $15 
billion worth of State, local and private resources. Half of the money 
will be apportioned to States using the existing Title I basic grants 
formula. The remainder will flow directly to the 100 school districts 
in the country with the largest numbers of children living below the 
poverty level.

  Of the amount available for direct assistance to these impoverished 
communities, the Department of Education will apportion 70 percent by 
formula and will make the remaining 30 percent available on a 
competitive basis.
  In addition, the bill will allocate 2 percent of the funds to the 
Secretary of the Interior for administration to Indian schools and to 
the Secretary of Education for the outlying territories.
  Under both the State and local programs, States and school districts 
would have an enormous amount of flexibility in the use of these 
Federal funds to help finance school improvement projects. They could 
use the funds to subsidize State or local bond issues, certificates of 
participation, purchase or lease agreements, or other financial 
transactions used to finance school improvements.
  In addition, the States would be allowed to capitalize on entities 
similar to the State infrastructure banks which are currently used by a 
number of States to help finance highway improvement projects. These 
infrastructure banks could be used to leverage additional resources.
  This program is designed to stimulate new construction and 
renovation, and there are specific provisions in the bill to ensure 
that Federal funds are not used simply to finance school improvements 
that would have occurred anyway. The bill is designed to fill a real 
need that exists at both the State and local levels for school 
financing assistance, not to supplement districts that would have 
otherwise been able to finance their projects.
  It is carefully crafted to minimize administrative costs at the 
Federal level and to maximize local control over decisions that must be 
made with regard to school improvements.
  States and districts will be required to submit applications to the 
Secretary of Education describing their needs and the process that will 
be used to award the Federal funds. Once these applications are 
approved, grantees will immediately receive the full share of the $5 
billion.
  In addition, other than following certain criteria, States and local 
districts will be free to finance their top-priority projects. The 
Federal Government will not be in the business of dictating priorities 
and needs to State and local school districts who know their schools 
best.
  This bill helps address a need that has completely overwhelmed States 
and local school districts. The magnitude of the school facilities 
problem is so great today that many districts cannot maintain the kind 
of educational environment necessary to teach all of our children the 
kind of skills they will need to compete in the 21st century, global 
economy.
  The U.S. General Accounting Office, which at my request conducted an 
intensive 2-year study of the condition of America's schools, recently 
concluded that 14 million children attend schools in need of major 
renovations or outright replacement, and 7 million children attend 
schools with life-threatening safety code violations. They found that 
it will cost $112 billion to essentially bring schools up to code, not 
to equip them with new computers and cosmetic improvements, but just to 
address the toll that decades of deferred maintenance have taken on our 
Nation's school facilities.
  That $112 billion price tag, as enormous as it may sound, does not 
include the cost of wiring schools for modern technology. One of the 
greatest barriers to the incorporation of modern computers into the 
classroom is the physical condition of many school buildings. You 
cannot very well use a computer if you do not have the electrical 
system to plug it into the wall. Too many schools across the country do 
not have the physical capacity to provide our youngsters with the 
instruments they will need in order to be educated for this information 
age.
  According to the General Accounting Office, almost half of all 
schools lack enough electrical power for the full-scale use of 
computers, 60 percent of them lack enough conduits in the walls 
to connect classroom computers to a network, and more than 60 percent 
lack enough phone lines for instructional use.

  For this generation, computers really are the functional equivalent 
of books. My son sometimes is amazed that computers were not around 
when I was in school. The fact of the matter is, though, that many of 
our schools were built before the advent of these technologies, and 
they have not been upgraded so that modern teaching tools can be used 
in the classroom. Our youngsters need modern technology if they are to 
be prepared for this information age and for this global economy.
  That $112 billion price tag also does not include the cost of 
expanding capacity to accommodate soaring enrollments. According to the 
U.S. Department of Education, just to keep up with growing enrollment, 
we will need to build 6,000 new schools over the next 10 years.
  Teachers and parents know full well that these conditions directly 
affect the ability of children to learn. Recent research, however, has 
lent scientific proof to that intuitive knowledge. Two separate studies 
found a 10 to 11 percent achievement gap between students in good 
school buildings and those in poor school buildings after controlling 
for all other factors.
  Other studies have found that when buildings are in poor condition, 
students are more likely to misbehave. That should come as no surprise 
to parents. Three leading researchers in this area recently concluded, 
``Based on our research, there is no doubt that building condition 
affects academic performance.''
  Mr. President, this legislation is in the interest, I believe, of not 
just the children of America who have to go to these school buildings, 
many of which are dilapidated and rundown and neglected, but it is also 
in the interest of communities that will need the help to finance 
school repairs, and it is in the interest of our Nation that will need 
to have an educated work force.
  Mr. President, the current system of school finance, which relies 
primarily on local property taxes, is not flexible enough to meet the 
enormous needs of our Nation's schools. This country, I believe, needs 
a new approach to solve the problem of crumbling schools, a partnership 
among all levels of government and the private sector that preserves 
local control of education, but creates some balance, and infuses, 
frankly, a little more reason into our school finance system that does 
not now adequately serve the schools, the children, the country, or the 
local property taxpayers.
  The Department of Education has looked closely at a number of 
communities around the country and assessed the effect that this 
legislation would have on their ability to finance their construction 
needs. The Department looked at, for example, Los Angeles. Most of the 
school buildings there are more than 40 years old and are not wired for 
technology. Mr. President, 245 schools need roof replacements, and 50 
of them need new boilers. According to the Department, this legislation 
could accelerate many long overdue projects and facilitate the passage 
of bond referenda at the local level.
  The Department also looked at the State of Maine, which has many 100-
year-old buildings and one-room

[[Page S2418]]

schoolhouses. According to the Department, most districts in that State 
cannot cover the total cost of bonds issued to finance repair and 
modernization projects. Again, this legislation would allow needed 
projects to go forward.
  The Department also looked at a school district in southern Florida 
suffering from severe overcrowding. Mr. President, 34,000 students in 
that district do not have permanent desks. There are 10,000 new 
students added to the system each year. The district would have to 
build a new school every month to keep up with this demand. According 
to the Department this legislation will help this district move away 
from the use of portable classrooms, which do not provide as conducive 
a learning environment as real schools.
  My own State of Illinois would benefit greatly from this legislation. 
As the GAO reported last week, my State has unfortunately one of the 
most inequitable school finance systems in the Nation. With a low State 
contribution to school resources, and with a poor State effort to 
target funds to the neediest districts, local property taxpayers in 
Illinois are saddled with almost 60 percent of the costs of educating 
their children. It is no wonder, then, that the State board of 
education estimates that Illinois' construction needs are $13 billion. 
Too many of Illinois' school districts have a difficult time even 
providing textbooks and pencils, let alone major capital improvements. 
This legislation would free up local resources in Illinois for 
education by providing Federal support for the construction, 
rehabilitation and renovation of the school buildings.
  I urge all my colleagues to take a close look at the needs of the 
schools in their States and consider joining us in cosponsoring this 
legislation. This initiative is not about partisan politics. In fact, I 
think most Americans would agree wholeheartedly with the President when 
he said that partisan politics should stop at the schoolhouse door. 
This is something that transcends partisan differences and goes to the 
heart of our ability to provide for our children's well-being and their 
needs going into the 21st century.
  Congress has a unique opportunity to take a fundamentally new 
approach to improving the quality of elementary and secondary 
education. This bill represents a chance to improve our system of 
school finance and help prepare our children for the 21st century. I 
believe this will be welcomed by taxpayers at the local level, 
particularly those who, at this point, are unfairly burdened with the 
costs of trying to keep up a school system that deserves the support of 
all levels of government in our country.
  Mr. President, I have several documents from the Department of 
Education that I would like to have printed in the Record. I have the 
letter of transmittal from the Secretary of Education to the President 
of the Senate, a fact sheet regarding the correlation between building 
conditions and student achievement, and seven case studies assessing 
the impact this legislation would have on communities across America. I 
ask unanimous consent that these materials, as well as the text of the 
bill itself, be printed at this point in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 456

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled, That this 
     Act may be cited as the ``Partnership to Rebuild America's 
     Schools Act of 1997.''

            TITLE I--SCHOOL CONSTRUCTION ASSISTANCE PROGRAM

                           TABLE OF CONTENTS

SEC. 101. The table of contents for this Act is as follows:

            TITLE I--SCHOOL CONSTRUCTION ASSISTANCE PROGRAM

Sec. 101. Table of contents.

                       Part 1--Program Authorized

Sec. 102. Findings and purpose.
Sec. 103. Definitions.
Sec. 104. Funds appropriated.
Sec. 105. Allocation of funds.

                        Part 2--Grants to States

Sec. 111. Allocation of funds.
Sec. 112. Eligible State agency.
Sec. 113. Allowable uses of funds.
Sec. 114. Eligible construction projects; period for initiation.
Sec. 115. Selection of localities and projects.
Sec. 116. State applications.
Sec. 117. Amount of Federal subsidy.
Sec. 118. Separate funds or accounts; prudent investment.
Sec. 119. State reports.

          Part 3--Direct Grants to Local Educational Agencies

Sec. 121. Eligible local educational agencies.
Sec. 122. Grantees.
Sec. 123. Allowable uses of funds.
Sec. 124. Eligible construction projects; redistribution.
Sec. 125. Local applications.
Sec. 126. Formula grants.
Sec. 127. Competitive grants.
Sec. 128. Amount of Federal subsidy.
Sec. 129. Separate funds or accounts; prudent investment.
Sec. 130. Local reports.

                      TITLE II--GENERAL PROVISIONS

Sec. 201. Technical employees.
Sec. 202. Wage rates.
Sec. 203. No liability of Federal Government.
Sec. 204. Consultation with Secretary of the Treasury.

                       Part 1--Program Authorized


                          findings and purpose

       Sec. 102. (a) Findings.--The Congress finds as follows:
       (1) According to the General Accounting Office, one-third 
     of all elementary and secondary schools in the United States, 
     serving 14,000,000 students, need extensive repair or 
     renovation.
       (2) School infrastructure problems exist across the 
     country, but are most severe in central cities and in schools 
     with high proportions of poor and minority children.
       (3) Many States and school districts will need to build new 
     schools in order to accommodate increasing student 
     enrollments; the Department of Education has predicted that 
     the Nation will need 6,000 more schools by the year 2006.
       (4) Many schools do not have the physical infrastructure to 
     take advantage of computers and other technology needed to 
     meet the challenges of the next century.
       (5) While school construction and maintenance are primarily 
     a State and local concern, States and communities have not, 
     on their own, met the increasing burden of 
     providing acceptable school facilities for all students, 
     and the poorest communities have had the greatest 
     difficulty meeting this need.
       (6) The Federal Government, by providing interest subsidies 
     and similar types of support, can lower the costs of State 
     and local school infrastructure investment, creating an 
     incentive for States and localities to increase their own 
     infrastructure improvement efforts and helping ensure that 
     all students are able to attend schools that are equipped for 
     the 21st century.
       (b) Purpose.--The purpose of this Act is to provide Federal 
     interest subsidies, or similar assistance, to States and 
     localities to help them bring all public school facilities up 
     to an acceptable standard and build the additional public 
     schools needed to educate the additional numbers of students 
     who will enroll in the next decade.


                              definitions

       Sec. 103. Except as otherwise provided, as used in this 
     Act, the following terms have the following meanings:
       (1) Charter school.--The term ``charter school'' has the 
     meaning given that term in section 10306(1) of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 8066(1)).
       (2) Community school.--The term ``community school'' means 
     a school, or part of a school, that serves as a center for 
     after-school and summer programs and the delivery of 
     education, tutoring, cultural, and recreational services, and 
     as a safe haven for all members of the community by--
       (A) collaborating with other public and private nonprofit 
     agencies (including libraries and other educational, human-
     service, cultural, and recreational entities) and private 
     businesses in the provision of services;
       (B) providing services such as literacy and reading 
     programs; senior citizen programs; children's day-care 
     services; nutrition services; services for individuals with 
     disabilities; employment counseling, training, and placement; 
     and other educational, health, cultural, and recreational 
     services; and
       (C) providing those services outside the normal school day 
     and school year, such as through safe and drug-free safe 
     havens for learning.
       (3)(A) Construction.--The term ``construction' means----
       (i) the preparation of drawings and specifications for 
     school facilities;
       (ii) erecting, building, acquiring, remodeling, renovating, 
     improving, repairing, or extending school facilities;
       (iii) demolition, in preparation for rebuilding school 
     facilities; and
       (iv) the inspection and supervision of the construction of 
     school facilities.
       (B) The term ``construction'' does not include the 
     acquisition of any interest in real property.
       (4) Local educational agency.--The term ``local educational 
     agency'' has the meaning given that term in section 14101(18) 
     (A) and (B) of the Elementary and Secondary Education Act of 
     1965 (20 U.S.C. 8801(18) (A) and (B)).
       (5) School facility.--(A) The term ``school facility'' 
     means--
       (i) a public structure suitable for use as a classroom, 
     laboratory, library, media center, or related facility, whose 
     primary purpose is the instruction of public elementary or 
     secondary students; and

[[Page S2419]]

       (ii) initial equipment, machinery, and utilities necessary 
     or appropriate for school purposes.
       (B) The term ``school facility'' does not include an 
     athletic stadium, or any other structure or facility intended 
     primarily for athletic exhibitions, contests, games, or 
     events for which admission is charged to the general public.
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Education.
       (7) State.--The term ``State'' means each of the 50 States 
     and the Commonwealth of Puerto Rico.
       (8) State educational agency.--The term ``State educational 
     agency'' has the meaning given that term in section 14101(28) 
     of the Elementary and Secondary Education Act of 1965 (20 
     U.S.C. 8801(28)).


                           funds appropriated

       Sec. 104. There are appropriated $5,000,000,000 for the 
     purpose of carrying out this Act, which shall be available 
     for obligation by the Secretary of Education from October 1, 
     1997 until September 30, 2001.


                          allocation of funds

       Sec. 105. (a) Reservation for the Secretary of the Interior 
     and the Outlying Areas.--(1) The Secretary shall reserve up 
     to two percent of the funds appropriated by section 104 to--
       (A) provide assistance to the Secretary of the Interior, 
     which the Secretary of the Interior shall use for the school 
     construction priorities described in section 1125(c) of the 
     Education Amendment of 1978 (25 U.S.C. 2005(c)); and
       (B) make grants to America Samoa, Guam, the Virgin Islands, 
     and the Commonwealth of the Northern Mariana Islands, in 
     accordance with their respective needs, as determined by the 
     Secretary.
       (2) Grants provided under paragraph (1)(B) shall be used 
     for activities that the Secretary determines best meet the 
     school infrastructure needs of the areas identified in that 
     paragraph, subject to the terms and conditions, consistent 
     with the purpose of this Act, that the Secretary may 
     establish.
       (b) Allocation of Remaining Funds.--Of the remaining funds 
     appropriated by section 104--
       (1) 50 percent shall be used for formula grants to States 
     under section 111;
       (2) 35 percent shall be used for direct formula grants to 
     local educational agencies under section 126; and
       (3) 15 percent shall be used for competitive grants to 
     local educational agencies under section 127.

                        Part 2--Grants to States


                          allocation of funds

       Sec. 111. (A) Formula Grants to States.--Subject to 
     subsection (b), the Secretary shall allocate the funds 
     available under section 105(b)(1) among the States in 
     proportion to the relative amounts each State would have 
     received for Basic Grants under subpart 2 of part A of title 
     I of the Elementary and Secondary Education Act of 1965 (20 
     U.S.C. 6331 et seq.) for the most recent fiscal year if the 
     Secretary had disregarded the numbers of children counted 
     under that subpart who were enrolled in schools of local 
     educational agencies that are eligible to receive direct 
     grants under section 126 of this Act.
       (b) Adjustments to Allocations.--The Secretary shall adjust 
     the allocations under subsection (a), as necessary, to ensure 
     that, of the total amount allocated to State under subsection 
     (a) and to local educational agencies under section 126, the 
     percentage allocated to a State under this section and to 
     localities in the State under section 126 is at least the 
     minimum percentage for the State described in section 1124(d) 
     of the Elementary and Secondary Education Act of 1965 (20 
     U.S.C. 6334(d)) for the previous fiscal year.
       (c) Reallocations.--If a State does not apply for its 
     allocation, applies for less than its full allocation, or 
     fails to submit an approvable application, the Secretary may 
     reallocate all or a portion of the State's allocation, as the 
     case may be, to the remaining States in the same proportions 
     as the original allocations were made to those States under 
     subsections (a) and (b).


                         eligible state agency

       Sec. 112. The Secretary shall award each State's grant to 
     the State agency, such as a State educational agency, a State 
     school construction agency, or a State bond bank, that the 
     Governor, with the agreement of the chief State school 
     officer, designates as best able to administer the grant.


                        allowable uses of funds

       Sec. 113. Each State shall use its grant under this part 
     only for one or more of the following activities to subsidize 
     the cost of eligible school construction projects described 
     in section 114:
       (1) Providing a portion of the interest cost (or of another 
     financing cost approved by the Secretary) on bonds, 
     certificates of participation, purchase or lease 
     arrangements, or other forms of indebtedness issued or 
     entered into by a State or its instrumentality for the 
     purpose of financing eligible projects.
       (2) State-level expenditures approved by the Secretary for 
     credit enhancement for the debt or financing instruments 
     described in paragraph (1).
       (3) Making subgrants, or making loans through a State 
     revolving fund, to local educational agencies or (with the 
     agreement of the affected local educational agency) to other 
     qualified public agencies to subsidize--
       (A) the interest cost (or another financing cost approved 
     by the Secretary) of bonds, certificates of participation, 
     purchase or lease arrangements, or other forms of 
     indebtedness issued or entered into by a local educational 
     agency or other agency or unit of local government for the 
     purpose of financing eligible projects; or
       (B) local expenditures approved by the Secretary for credit 
     enhancement for the debt or financing instruments described 
     in subparagraph (A).
       (4) Other State and local expenditures approved by the 
     Secretary that leverage funds for additional school 
     construction.


         eligible construction projects; period for initiation

       Sec. 114 (a) Eligible Projects.--States and their 
     subgrantees may use funds under this part, in accordance with 
     section 113, to subsidize the cost of--
       (1) construction of elementary and secondary school 
     facilities in order to ensure the health and safety of all 
     students, which may include the removal of environmental 
     hazards; improvements in air quality, plumbing, lighting, 
     heating and air conditioning, electrical systems, or basic 
     school infrastructure; and building improvements that 
     increase school safety;
       (2) construction activities needed to meet the requirements 
     of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 
     794) or of the Americans with Disabilities Act of 1990 (42 
     U.S.C. 12101 et seq.);
       (3) construction activities that increase the energy 
     efficiency of school facilities;
       (4) construction that facilitates the use of modern 
     educational technologies;
       (5) construction of new school facilities that are needed 
     to accommodate growth in school enrollments; or
       (6) construction projects needed to facilitate the 
     establishment of charter schools and community schools.
       (b) Period for Initiation of Project.--(1) Each State shall 
     use its grant under this part only to subsidize construction 
     projects described in subsection (a) that the State or its 
     localities have chosen to initiate, through the vote of a 
     school board, passage of a bond issue, or similar public 
     decision, made between July 11, 1996 and September 30, 2001.
       (2) If a State determines, after September 30, 2001, that 
     an eligible project for which it has obligated funds under 
     this part will not be carried out, the State may use those 
     funds (or any available portion of those funds) for other 
     eligible projects selected in accordance with this part.
       (c) Reallocation.--If the Secretary determines, by a date 
     before September 30, 2001 selected by the Secretary, that a 
     State is not making satisfactory progress in carrying out its 
     plan for the use of the funds allocated to it under this 
     part, the Secretary may reallocate all or part of those 
     funds, including any interest earned by the State on those 
     funds, to one or more other States that are making 
     satisfactory progress.


                  selection of localities and projects

       Sec. 115. (a) Priorities.--In determining which localities 
     and activities to support with grant funds, each State shall 
     give the highest priority to--
       (1) localities with the greatest needs, as demonstrated by 
     inadequate educational facilities, coupled with a low level 
     of resources available to meet school construction needs; and
       (2) localities that will achieve the greatest leveraging 
     effect on school construction from assistance under this 
     part.
       (b) Additional Criteria.--In addition to the priorities 
     required by subsection (a), each State shall consider each of 
     the following in determining the use of its grant funds under 
     this part:
       (1) The condition of the school facilities in different 
     communities in the State.
       (2) The energy efficiency and the effect on the environment 
     of projects proposed by communities, and the extent to which 
     these projects use cost-efficient architectural design.
       (3) The commitment of communities to finance school 
     construction and renovation projects with assistance from the 
     State's grant, as demonstrated by their incurring 
     indebtedness or by similar public or private commitments for 
     the purposes described in section 114(a).
       (4) The ability of communities to repay bonds or other 
     forms of indebtedness supported with grant funds.
       (5) The particular needs, if any, of rural communities in 
     the State for assistance under this Act.
       (6) The receipt by local educational agencies in the State 
     of grants under part 3, except that a local educational 
     agency is not ineligible for a subgrant under this part 
     solely because it receives such a grant.


                           state applications

       Sec. 116. (a) Application Required.--A State that wishes to 
     receive a grant under this part shall submit an application 
     to the Secretary, in the manner the Secretary may require, 
     not later than two years after the date of enactment of this 
     Act.
       (b) Development of Application.--(1) The State agency 
     designated under section 112 shall develop the State's 
     application under this part only after broadly consulting 
     with the State board of education, and representatives of 
     local school boards, school administrators, the business 
     community, parents, and teachers in the State about the best 
     means of carrying out this part.
       (2) If the State educational agency is not the State agency 
     designated under section

[[Page S2420]]

     112, the designated agency shall consult with the State 
     educational agency and obtain its approval before submitting 
     the State's application.
       (c) State Survey.--(1) Before submitting the State's 
     application, the State agency designated under section 112, 
     with the involvement of local school officials and experts in 
     building construction and management, shall survey the need 
     throughout the State (including in localities receiving 
     grants under part 3) for construction and renovation of 
     school facilities, including, at a minimum--
       (A) the overall condition of school facilities in the 
     State, including health and safety problems;
       (B) the capacity of the schools in the State to house 
     projected enrollments; and
       (C) the extent to which the schools in the State offer the 
     physical infrastructure needed to provide a high-quality 
     education to all students.
       (2) A State need not conduct a new survey under paragraph 
     (1) if it has previously completed a survey that meets the 
     requirements of that paragraph and that the Secretary finds 
     is sufficiently recent for the purpose of carrying out this 
     part.
       (d) Application Contents.--Each State application under 
     this part shall include--
       (1) an identification of the State agency designated by the 
     Governor under section 112 to receive the State's grant under 
     this party;
       (2) a summary of the results of the State's survey of its 
     school facility needs, as described in subsection (c);
       (3) a description of how the State will implement its 
     program under this part;
       (4) a description of how the State will allocate its grant 
     funds, including a description of how the State will 
     implement the priorities and criteria described in section 
     115;
       (5)(A) a description of the mechanisms that will be used to 
     finance construction projects supported by grant funds; and
       (B) a statement of how the State will determine the amount 
     of the Federal subsidy to be applied, in accordance with 
     section 117(a), to each local project that the State will 
     support;
       (6) a description of how the State will ensure that the 
     requirements of this part are met by subgrantees under this 
     part;
       (7) a description of the steps the State will take to 
     ensure that local educational agencies will adequately 
     maintain the facilities that are constructed or improved with 
     funds under this part;
       (8) an assurance that the State will use its grant only to 
     supplement the funds that the State, and the localities 
     receiving subgrants, would spend on school construction 
     and renovation in the absence of a grant under this part, 
     and not to supplant those funds;
       (9) an assurance that, during the four-year period 
     beginning with the year the State receives its grant, the 
     combined expenditures for school construction by the State 
     and the localities that benefit from the State's program 
     under this part (which at the State's option, may include 
     private contributions) will be at least 125 percent of those 
     combined expenditures for that purpose for the four preceding 
     years; and
       (10) other information and assurances that the Secretary 
     may require.
       (e) Waiver of Requirement to Increase Expenditures.--The 
     Secretary may waive or modify the requirement of subsection 
     (d)(9) for a particular State if the State demonstrates to 
     the Secretary's satisfaction that that requirement is unduly 
     burdensome because the State or its localities have incurred 
     a particularly high level of school construction expenditures 
     during the previous four years.


                       AMOUNT OF FEDERAL SUBSIDY

       Sec. 117. (a) Projects Funded with Subgrants.--For each 
     construction project assisted by a State through a subgrant 
     to a locality, the State shall determine the amount of the 
     Federal subsidy under this part, taking into account the 
     number or percentage of children from low-income families 
     residing in the locality, subject to the following limits:
       (1) If the locality will use the subgrant to help meet the 
     cost of repaying bonds issued for a school construction 
     project, the Federal subsidy shall be not more than one-half 
     of the total interest cost of those bonds, determined in 
     accordance with paragraph (4).
       (2) If the bonds to be subsidized are general obligation 
     bonds issued to finance more than one type of activity 
     (including school construction), the Federal subsidy shall be 
     not more than one-half of the interest cost for that portion 
     of the bonds that will be used for school construction 
     purposes, determined in accordance with paragraph (4).
       (3) If the locality elects to use its subgrant for an 
     allowable activity not described in paragraph (1) or (2), 
     such as for certificates of participation, purchase or lease 
     arrangements, reduction of the amount of principal to be 
     borrowed, or credit enhancements for individual construction 
     projects, the Federal subsidy shall be not more than one-half 
     of the interest cost, as determined by the State in 
     accordance with paragraph (4), that would have been incurred 
     if bonds had been used to finance the project.
       (4) the interest cost referred to in paragraphs (1), (2), 
     and (3) shall be--
       (A) calculated on the basis of net present value; and
       (B) determined in accordance with an amortization schedule 
     and any other criteria and conditions the Secretary considers 
     necessary, including provisions to ensure comparable 
     treatment of different financing mechanisms.
       (b) State-Funded Projects.--For a construction project 
     under this part funded directly by the State through the use 
     of State-issued bonds or other financial instruments, the 
     Secretary shall determine the Federal subsidy in accordance 
     with subsection (a).
       (c) Non-Federal Share.--A State, and localities in the 
     State receiving subgrants under this part, may use any non-
     Federal funds, including State, local, and private-sector 
     funds, for the financing costs that are not covered by the 
     Federal subsidy under subsection (a).


             SEPARATE FUNDS OR ACCOUNTS; PRUDENT INVESTMENT

       Sec. 118. (a) Separate Funds or Accounts Required.--Each 
     State that receives a grant, and each recipient of a subgrant 
     under this part, shall deposit the grant or subgrant proceeds 
     in a separate fund or account, from which it shall make bond 
     repayments and pay other expenses allowable under this part.
       (b) Prudent Investment Required.--Each State that receives 
     a grant, and each recipient of a subgrant under this part, 
     shall--
       (1) invest the grant or subgrant in a fiscally prudent 
     manner, in order to generate amounts needed to make 
     repayments on bonds and other forms of indebtedness described 
     in section 113; and
       (2) Notwithstanding section 6503 of title 31, United States 
     Code or any other law, use the proceeds of that investment to 
     carry out this part.


                             state reports

       Sec. 119. (a) Reports Required.--(1) Each State receiving a 
     grant under this part shall report to the Secretary on its 
     activities under this part, in the form and manner the 
     Secretary may prescribe.
       (2) If the State educational agency is not the State agency 
     designated under section 112, the State's report shall 
     include the approval of the State educational agency or its 
     comments on the report.
       (b) Contents.--Each report shall--
       (1) describe the State's implementation of this part, 
     including how the State has met the requirements of this 
     part;
       (2) identify the specific school facilities constructed, 
     renovated, or modernized with support from the grant, and the 
     mechanisms used to finance those activities;
       (3) identify the level of Federal subsidy provided to each 
     construction project carried out with support from the 
     State's grant; and
       (4) include any other information the Secretary may 
     require.
       (c) Frequency.--(1) Each State shall submit its first 
     report under this section not later than 24 months after it 
     receives its grant under this part.
       (2) Each State shall submit an annual report for each of 
     the three years after submitting its first report, and 
     subsequently shall submit periodic reports as long as the 
     State or localities in the State are using grant funds.

          Part 3--Direct Grants to Local Educational Agencies


                  eligible local educational agencies

       Sec. 121. (a) Eligible Agencies.--Except as provided in 
     subsection (b), the local educational agencies that are 
     eligible to receive formula grants under section 126 and 
     competitive grants under section 127 from the Secretary are 
     the 100 local educational agencies with the largest numbers 
     of children aged 5 through 17 from families living below the 
     poverty level, as determined by the Secretary using the most 
     recent data available from the Department of Commerce that 
     are satisfactory to the Secretary.
       (b) Certain Jurisdictions Ineligible.--For the purpose of 
     this part, the local educational agencies for Hawaii and the 
     Commonwealth of Puerto Rico are not eligible local 
     educational agencies.


                                grantees

       Sec. 122. For each local educational agency described in 
     section 121(a) for which an approvable application is 
     submitted, the Secretary shall make any grant under this part 
     to the local educational agency or to another public agency, 
     on behalf of the local educational agency, if the Secretary 
     determines, on the basis of the local educational agency's 
     recommendation, that the other agency is better able to carry 
     out activities under this part.


                        allowable uses of funds

       Sec. 123. Each grantee under this part shall use its grant 
     only for one or more of the following activities to reduce 
     the cost of financing eligible school construction projects 
     described in section 124:
       (1) Providing a portion of the interest cost (or of any 
     other financing cost approved by the Secretary) on bonds, 
     certificates of participation, purchase or lease 
     arrangements, or other forms of indebtedness issued or 
     entered into by a local educational agency or other unit or 
     agency of local government for the purpose of financing 
     eligible school construction projects.
       (2) Local expenditures approved by the Secretary for credit 
     enhancement for the debt or financing instruments described 
     in paragraph (1).
       (3) Other local expenditures approved by the Secretary that 
     leverage funds for additional school construction.


             eligible construction projects; redistribution

       Sec. 124. (a) Eligible Projects.--A grantee under this part 
     may use its grant, in accordance with section 123, to 
     subsidize the cost of the activities described in section 
     114(a) for projects that the local educational agency has 
     chosen to initiate, through the

[[Page S2421]]

     vote of the school board, passage of a bond issue, or similar 
     public decision, made between July 11, 1996 and September 
     30, 2001.
       (b) Redistribution.--If the Secretary determines, by a date 
     before September 30, 2001 selected by the Secretary, that a 
     local educational agency is not making satisfactory progress 
     in carrying out its plan for the use of funds awarded to it 
     under this part, the Secretary may redistribute all or part 
     of those funds, and any interest earned by that agency on 
     those funds, to one or more other local educational agencies 
     that are making satisfactory progress.


                           local applications

       Sec. 125. (a) Application Required.--A local educational 
     agency, or an alternative agency described in section 122 
     (both referred to in this part as the ``local agency''), that 
     wishes to receive a grant under this part shall submit an 
     application to the Secretary, in the manner the Secretary may 
     require, not later than two years after the date of enactment 
     of this Act.
       (b) Development of Application.--(1) The local agency shall 
     develop the local application under this part only after 
     broadly consulting with parents, administrators, teachers, 
     the business community, and other members of the local 
     community about the best means of carrying out this part.
       (2) If the local educational agency is not the applicant, 
     the applicant shall consult with the local educational 
     agency, and shall obtain its approval before submitting its 
     application to the Secretary.
       (c) Local Survey.--(1) Before submitting its application, 
     the local agency, with the involvement of local school 
     officials and experts in building construction and 
     management, shall survey the local need for construction and 
     renovation of school facilities, including, at a minimum--
       (A) the overall condition of school facilities in the local 
     educational agency, including health and safety problems;
       (B) the capacity of the local educational agency's schools 
     to house projected enrollments; and
       (C) the extent to which the local educational agency's 
     schools offer the physical infrastructure needed to provide a 
     high-quality education to all students.
       (2) A local educational agency need not conduct a new 
     survey under paragraph (1) if it has previously completed a 
     survey that meets the requirements of that paragraph and that 
     the Secretary finds is sufficiently recent for the purpose of 
     carrying out this part.
       (d) Application Contents.--Each local application under 
     this part shall include--
       (1) an identification of the local agency to receive the 
     grant under this part;
       (2) a summary of the results of the survey of school 
     facility needs, as described in subsection (c);
       (3) a description of how the local agency will implement 
     its program under this part;
       (4) a description of the criteria the local agency has used 
     to determine which construction projects to support with 
     grant funds;
       (5) a description of the construction projects that will be 
     supported with grant funds;
       (6) a description of the mechanisms that will be used to 
     finance construction projects supported by grant funds;
       (7) a requested level of Federal subsidy, with a 
     justification for that level, for each construction project 
     to be supported by the grant, in accordance with section 
     128(a), including the financial and demographic information 
     the Secretary may require;
       (8) a description of the steps the agency will take to 
     ensure that facilities constructed or improved with funds 
     under this part will be adequately maintained;
       (9) an assurance that the agency will use its grant only to 
     supplement the funds that the locality would spend on school 
     construction and renovation in the absence of a grant under 
     this part, and not to supplant those funds;
       (10) an assurance that, during the four-year period 
     beginning with the year the local educational agency receives 
     its grant, its expenditures for school construction (which, 
     at that agency's option, may include private contributions) 
     will be at least 125 percent of its expenditures for that 
     purpose for the four preceding years; and
       (11) other information and assurances that the Secretary 
     may require.
       (e) Waiver of Requirement To Increase Expenditures.--The 
     Secretary may waive or modify the requirement of subsection 
     (d)(10) for a local educational agency that demonstrates to 
     the Secretary's satisfaction that that requirement is unduly 
     burdensome because that agency has incurred a particularly 
     high level of school construction expenditures during the 
     previous four years.


                             formula grants

       Sec. 126. (a) Allocations.--The Secretary shall allocate 
     the funds available under section 105(b)(2) to the local 
     educational agencies identified under section 121(a) on the 
     basis of their relative allocations under section 1124 of the 
     Elementary and Secondary Education Act of 1965 (20 U.S.C. 
     6333) in the most recent year for which that information is 
     available to the Secretary.
       (b) Reallocations.--If a local educational agency does not 
     apply for its allocation, applies for less than its full 
     allocation, or fails to submit an approvable application, the 
     Secretary may reallocate all or a portion of its allocation, 
     as the case may be, to the remaining local educational 
     agencies in the same proportions as the original allocations 
     were made to those agencies under subsection (a).


                           competitive grants

       Sec. 127. (a) Grants Authorized.--The Secretary shall use 
     funds available under section 105(b)(3) to make additional 
     grants, on a competitive basis, to recipients of formula 
     grants under section 126.
       (b) Additional Application Materials.--Any eligible 
     applicant under section 126 that wishes to receive additional 
     funds under this section shall include in its application 
     under section 125 the following additional information:
       (1) The amount of funds requested under this section, in 
     accordance with ranges or limits that the Secretary may 
     establish based on factors such as relative size of the 
     eligible applicants.
       (2) A description of the additional construction activities 
     that the applicant would carry out with those funds.
       (3) Information on the current financial effort the 
     applicant is making for elementary and secondary education, 
     including support from private sources, relative to its 
     resources.
       (4) Information on the extent to which the applicant will 
     increase its own (or other public or private) spending for 
     school construction in the year in which it receives a grant 
     under this section, above the average annual amount for 
     construction activity during the preceding four years.
       (5) A description of the energy efficiency and the effect 
     on the environment of the projects that the applicant will 
     undertake, both with its grant under this section and its 
     grant under section 126, and of the extent to which those 
     projects will use cost-efficient architectural design.
       (6) Other information that the Secretary may require.
       (c) Selection of Grantees.--The Secretary shall select 
     grantees under this section on the basis of criteria, 
     consistent with the purpose of this Act, that the Secretary 
     may establish, which shall include--
       (1) the relative need of applicants, as demonstrated by 
     inadequate educational facilities and a low level of 
     resources to meet their school construction needs;
       (2) the commitment of applicants to meet their school 
     construction needs and the leveraging effect that assistance 
     under this part would have, as demonstrated by the additional 
     resources that they will provide, from non-Federal sources, 
     to meet those needs, in accordance with subsection (b)(4).


                       amount of federal subsidy

       Sec. 128. (a) Amount of Federal Subsidy.--For each 
     construction project assisted under this part, the Secretary 
     shall determine the amount of the Federal subsidy in 
     accordance with section 117(a).
       (b) Non-Federal Share.--A grantee under this part may use 
     any non-Federal funds, including State, local, and private-
     sector funds, for the financing costs that are not covered by 
     the Federal subsidy under subsection (a).


             separate funds or accounts; prudent investment

       Sec. 129. (a) Separate Funds or Accounts Required.--Each 
     grantee under this part shall deposit the grant proceeds in a 
     separate fund or account, from which it shall make bond 
     repayments and pay other expenses allowable under this part.
       (b) Prudent Investment Required.--Each granteee under this 
     part shall--
       (1) invest the grant funds in a fiscally prudent manner, in 
     order to generate amounts needed to make repayments on bonds 
     and other forms of indebtedness; and
       (2) notwithstanding section 6503 of title 31, United States 
     Code or any other law, use the proceeds of that investment to 
     carry out this part.


                             local reports

       Sec. 130. (a) Reports Required.--(1) Each grantee under 
     this part shall report to the Secretary on its activities 
     under this part, in the form and manner the Secretary may 
     prescribe.
       (2) If the local educational agency is not the grantee 
     under this part, the grantee's report shall include the 
     approval of the local educational agency or its comments on 
     the report.
       (b) Contents.--Each report shall--
       (1) describe the grantee's implementation of this part, 
     including how it has met the requirements of this part;
       (2) identify the specific school facilities constructed, 
     renovated, or modernized with support from the grant, and the 
     mechanisms used to finance those activities; and
       (3) other information the Secretary may require.
       (c) Frequency.--(1) Each grantee shall submit its first 
     report under this section not later than 24 months after it 
     receives its grant under this part.
       (2) Each grantee shall submit an annual report for each of 
     the three years after submitting its first report, and 
     subsequently shall submit periodic reports as long as it is 
     using grant funds.

                      TITLE II--GENERAL PROVISIONS


                          technical employees

       Sec. 201. For the purpose of carrying out this Act, the 
     Secretary, without regard to the provisions of title 5, 
     United States Code, governing appointments in the competitive 
     service, may appoint not more than 10 technical employees who 
     may be paid without regard to the provisions of chapter 51 
     and subchapter IV of chapter 5 of that title relating

[[Page S2422]]

     to classification and General Schedule pay rates.


                               wage rates

       Sec. 202. (a) Prevailing Wage.--The Secretary shall ensure 
     that all laborers and mechanics employed by contractors and 
     subcontractors on any project assisted under this Act are 
     paid wages at rates not less than those prevailing as 
     determined by the Secretary of Labor in accordance with the 
     Act of March 3, 1931, as amended (40 U.S.C. 276a et seq.). 
     The Secretary of Labor has, with respect to this section, the 
     authority and functions established in Reorganization Plan 
     Numbered 14 of 1950 (effective May 24, 1950, 64 Stat. 
     1267) and section 2 of the Act of June 13, 1934 (40 U.S.C. 
     276c).
       (b) Waiver for Volunteers.--Section 7305 of the Federal 
     Acquisition Streamlining Act of 1994 (40 U.S.C. 276d-3) is 
     amended--
       (1) in paragraph (5), by striking out the ``and'' at the 
     end thereof'
       (2) in paragraph (6), by striking out the period at the end 
     thereof and inserting a semi-colon and ``and''; and
       (3) by adding at the end thereof the following new 
     paragraph:
       ``(7) The Partnership Rehabilitate America's Schools Act of 
     1997.''.


                   NO LIABILITY OF FEDERAL GOVERNMENT

       Sec. 203. (a) No Federal Liability.--Any financial 
     instruments, including but not limited to contracts, bonds, 
     bills, notes, certificates of participation, or purchase or 
     lease arrangements, issued by States, localities or 
     instrumentalities thereof in connection with any assistance 
     provided by the Secretary under this Act are obligations of 
     such States, localities or instrumentalities and not 
     obligations of the United States and are not guaranteed by 
     the full faith and credit of the United States.
       (b) Notice Requirement.--Documents relating to any 
     financial instruments, including but not limited to 
     contracts, bonds, bills, notes, offering statements, 
     certificates of participation, or purchase or lease 
     arrangements, issued by States, localities or 
     instrumentalities thereof in connection with any assistance 
     provided under this Act, shall include a prominent statement 
     providing notice that the financial instruments are not 
     obligations of the United States and are not guaranteed by 
     the full faith and credit of the United States.


              Consultation with Secretary of the Treasury

       Sec. 204. The Secretary shall consult with the Secretary of 
     the Treasury in carrying out this Act.
                                                                    ____

                                     U.S. Department of Education,


                                                 The Secretary

                                                   March 13, 1997.
     Hon. Albert Gore, Jr.,
     President of the Senate, Washington, DC.
       Dear Mr. President: Enclosed for consideration of the 
     Congress is the Partnership to Rebuild America's Schools Act 
     of 1997, a bill that would provide a one-time Federal 
     stimulus to help States and localities bring all public 
     school facilities up to acceptable standards and build the 
     additional schools needed to serve increasing enrollments. 
     Also enclosed is a section-by-section analysis summarizing 
     the contents of the bill. I am sending an identical letter to 
     the Speaker of the House.
       Mr. President, a number of factors have led the 
     Administration to conclude that the Federal Government must 
     assist the States and localities in providing the school 
     facilities that our children will need if they are to achieve 
     to challenging educational standards. First of all, recent 
     General Accounting Office reports have documented the 
     deplorable condition of too many of the Nation's schools. 
     According to the GAO, one-third of all schools, serving more 
     than 14 million students, need extensive repair or renovation 
     of one or more buildings. Students are attending schools that 
     have antiquated heating, plumbing, and electrical systems and 
     even fail to meet local health and safety codes. Some schools 
     do not provide full access to individuals with disabilities, 
     and many do not have the infrastructure needed to adopt new 
     educational technologies. All of these problems are most 
     prevalent in urban districts.
       In addition to making repairs and renovations to their 
     existing schools, many districts will have to build new 
     schools in order to accommodate increasing enrollments. In 
     fact, the Department has projected that States and localities 
     will need to build 6,000 more schools in order to serve an 
     additional 2.9 million students who will enroll in the next 
     decade. This need will put further pressure on already 
     strained school budgets.
       Clearly, school construction is, and will remain, primarily 
     a State and local responsibility, and the vast majority of 
     facilities needs will have to be met with non-Federal 
     resources. Unfortunately, however, for a variety of reasons 
     State and local governments have not been making substantial 
     progress even in clearing the existing backlog of 
     construction needs. The Federal Government can play a crucial 
     role in addressing this problem by providing limited 
     resources, on a one-time basis, in a manner that spurs 
     States, communities, and even the private sector to bear the 
     burden and provide adequate school facilities for all 
     children. That is the purpose of the enclosed legislation.
       In order to have maximum impact, our bill would leverage 
     State, local, and private support for school construction, 
     rather than paying for 100 percent of the cost of 
     construction projects. The proposal would provide interest 
     subsidies for school construction bonds, or other financing 
     mechanisms, to States and major urban school districts. 
     States would, in turn, pass these subsidies along to 
     localities, use them to reduce the servicing costs of State 
     bonds or other financing vehicles, use them to capitalize 
     State revolving funds for school construction, or use them 
     for other, similar purposes. The maximum amount of Federal 
     subsidy would be the equivalent of 50 percent of the interest 
     cost on bonds. Through this mechanism, every dollar of 
     Federal money would be matched by a minimum of three dollars 
     of State, local, or private money.
       The Federal Government would not determine the specific 
     construction projects that would be funded. Rather, States 
     and localities would use the Federal subsidy for the costs of 
     construction projects that reflect their highest needs, such 
     as addressing health and safety problems or problems with air 
     quality, plumbing, heating, and lighting; removal of 
     architectural barriers in order to ensure access for 
     individuals with disabilities; projects to increase energy 
     efficiency; construction to facilitate the use of modern 
     educational technologies; and new construction needed to 
     accommodate increased enrollments. While the State and local 
     recipients would have the flexibility to determine which of 
     these types of construction activities are their highest 
     priority, they would have to base their use of the Federal 
     funds on a thorough survey of State or local school 
     construction needs and use the funds in a manner consistent 
     with several other general criteria such as, at the State 
     level, awarding the subsidy to communities with the greatest 
     construction needs and the least ability to meet those needs 
     with their own resources.
       Under the program, the Department would allocate one-half 
     of a $5 billion mandatory appropriation to States using the 
     existing ``Title I'' basic grants formula. The remainder 
     would flow directly to the 100 districts that enroll the 
     greatest numbers of children living in poverty; those urban 
     districts, according to the GAO data, have far and away the 
     greatest school construction needs. Of the amount available 
     for direct assistance to urban districts, the Department 
     would allocate seventy percent by formula, again on a Title I 
     basis, and make the remainder available competitively to 
     districts that have particularly severe needs and are willing 
     to provide the most support for infrastructure improvements 
     from non-Federal resources.
       Under both the State and local programs, a critical 
     objective would be to spur additional construction paid for 
     with non-Federal dollars. For this reason, the bill would 
     prohibit recipients from using the Federal funds to supplant 
     State and local support for school construction. In addition, 
     each State or locality receiving assistance would have to 
     assure the Department that it will increase, over a four-year 
     period, the amount of school construction paid for with non-
     Federal funds compared to the level expended during the 
     preceding four-year period. These provisions would ensure 
     that a one-time Federal stimulus has an impact far beyond the 
     immediate benefit attributable to the Federal expenditures.
       Administration of the program would be kept simple. The 
     Department would make a single award to each State and 
     locality receiving direct assistance. We would allow the 
     recipients to invest the Federal funds in a prudent manner, 
     and use the returns from that investment to meet bond 
     payments and other costs. All of the mandatory appropriation 
     would become available in fiscal year 1998, and all the 
     payments would be made within a four-year period.
       To summarize, our bill reflects the following principles: 
     (1) The Federal Government should make available a one-time 
     $5 billion mandatory appropriation to address the major 
     national problem of inadequate school infrastructure; (2) The 
     Federal funds will have their greatest impact if they are 
     used to leverage additional State, local, and private effort 
     rather than for direct support for the entire cost of 
     construction projects; (3) Because the largest cities have 
     the most school construction needs, and often the fewest 
     resources for meeting those needs, they should receive a 
     major share of the funding; and (4) States and localities 
     should have the flexibility to use the Federal subsidy to 
     carry out the construction projects they deem most important, 
     but they should do so only after completing a careful survey 
     of their construction needs. Further, both the States and the 
     Federal Government should direct the subsidy to the most 
     needy communities.
       I urge the Congress to take prompt and favorable action on 
     this proposal. Its enactment would spur States and 
     communities nationwide to bring their school facilities up to 
     the standard our children need and deserve.
       The Office of Management and Budget advises that there is 
     no objection to the submission of this proposal to the 
     Congress and that its adoption would be in accord with the 
     program of the President.
           Yours sincerely,
     Richard W. Riley.
                                                                    ____


       Impact of Inadequate School Facilities on Student Learning

       A number of studies have shown that many school systems, 
     particularly those in urban and high-poverty areas, are 
     plagued by decaying buildings that threaten the health, 
     safety, and learning opportunities of students. Good 
     facilities appear to be an important precondition for student 
     learning, provided that other conditions are present that

[[Page S2423]]

     support a strong academic program in the school. A growing 
     body of research has linked student achievement and behavior 
     to the physical building conditions and overcrowding.


                      Physical Building conditions

       Decaying environmental conditions such as peeling paint, 
     crumbling plaster, nonfunctioning toilets, poor lighting, 
     inadequate ventilation, and inoperative heating and cooling 
     systems can affect the learning as well as the health and the 
     morale of staff and students.

                     Impact on student achievement

       A study of the District of Columbia school system found, 
     after controlling for other variables such as a student's 
     socioeconomic status, that students' standardized achievement 
     scores were lower in schools with poor building conditions. 
     Students in school buildings in poor condition had 
     achievement that was 6% below schools in fair condition and 
     11% below schools in excellent condition. (Edwards, 1991)
       Cash (1993) examined the relationship between building 
     condition and student achievement in small, rural Virginia 
     high schools. Student scores on achievement tests, adjusted 
     for socioeconomic status, was found to be up to 5 percentile 
     points lower in buildings with lower quality ratings. 
     Achievement also appeared to be more directly related to 
     cosmetic factors than to structural ones. Poorer achievement 
     was associated with specific building condition factors such 
     as substandard science facilities, air conditioning, locker 
     conditions, classroom furniture, more graffiti, and noisy 
     external environments.
       Similarly, Hines' (1996) study of large, urban high schools 
     in Virginia also found a relationship between building 
     condition and student achievement. Indeed, Hines found that 
     student achievement was as much as 11 percentile points lower 
     in substandard buildings as compared to above-standard 
     buildings.
       A study of North Dakota high schools, a state selected in 
     part because of its relatively homogeneous, rural population, 
     also found a positive relationship between school condition 
     (as measured by principals' survey responses) and both 
     student achievement and student behavior. (Earthman, 1995)
       McGuffey (1982) concluded that heating and air conditioning 
     systems appeared to be very important, along with special 
     instructional facilities (i.e., science laboratories or 
     equipment) and color and interior painting, in contributing 
     to student achievement. Proper building maintenance was also 
     found to be related to better attitudes and fewer 
     disciplinary problems in one cited study.
       Research indicates that the quality of air inside public 
     school facilities may significantly affect students' ability 
     to concentrate. The evidence suggests that youth, especially 
     those under ten years of age, are more vulnerable than adults 
     to the types of contaminants (asbestos, radon, and 
     formaldehyde) found in some school facilities (Andrews and 
     Neuroth, 1988).

                           Impact on teaching

       Lowe (1988) interviewed State Teachers of the Year to 
     determine which aspects of the physical environment affected 
     their teaching the most, and these teachers pointed to the 
     availability and quality of classroom equipment and 
     furnishings, as well as ambient features such as climate 
     control and acoustics as the most important environmental 
     factors. In particular, the teachers emphasized that the 
     ability to control classroom temperature is crucial to the 
     effective performance of both students and teachers.
       A study of working conditions in urban schools concluded 
     that ``physical conditions have direct positive and negative 
     effects on teacher morale, sense of personal safety, feelings 
     of effectiveness in the classroom, and on the general 
     learning environment.'' Building renovations in one district 
     led teachers to feel ``a renewed sense of hope, of 
     commitment, a belief that the district cared about what went 
     on in that building.'' In dilapidated buildings in another 
     district, the atmosphere was punctuated more by despair and 
     frustration, with teachers reporting that leaking roofs, 
     burned out lights, and broken toilets were the typical 
     backdrop for teaching and learning.'' (Corcoran et al., 1988)
       Corcoran et al. (1988) also found that ``where the problems 
     with working conditions are serious enough to impinge on the 
     work of teachers, they result in higher absenteeism, reduced 
     levels of effort, lower effectiveness in the classroom low 
     morale, and reduced job satisfaction. Where working 
     conditions are good, they result in enthusiasm, high morale, 
     cooperation, and acceptance of responsibility.''
       A Carnegie Foundation (1988) report on urban schools 
     concluded that ``the tacit message of the physical 
     indignities in many urban schools is not lost on students. It 
     bespeaks neglect, and students' conduct seems simply an 
     extension of the physical environment that surrounds them.'' 
     Similarly, Poplin and Weeres (1992) reported that, based on 
     an intensive study of teachers, administrators, and students 
     in four schools, ``the depressed physical environment of many 
     schools . . . is believed to reflect society's lack of 
     priority for these children and their education.''


                              Overcrowding

       Overcrowded schools are a serious problem in many school 
     systems, particularly in the inner cities, where space for 
     new construction is at a premium and funding for such 
     construction is limited. As a result, students find 
     themselves trying to learn while jammed into spaces never 
     intended as classrooms, such as libraries, gymnasiums, 
     laboratories, lunchrooms, and even closets. Although research 
     on the relationship between overcrowding and student learning 
     has been limited, there is some evidence, particularly in 
     high-poverty schools, that overcrowding can have an adverse 
     impact on learning.
       A study of overcrowded schools in New York City found that 
     students in such schools scored significantly lower on both 
     mathematics and reading exams than did similar students in 
     underutilized schools. In addition, when asked, students and 
     teachers in overcrowded schools agreed that overcrowding 
     negatively affected both classroom activities and 
     instructional techniques. (Rivera-Batiz and Marti, 1995)
       Corcoran et al. (1988) found that overcrowding and heavy 
     teacher workloads created stressful working conditions for 
     teachers and led to higher teacher absenteeism.
       Crowded classroom conditions not only make it difficult for 
     students to concentrate on their lessons, but inevitably 
     limit the amount of time teachers can spend on innovative 
     teaching methods such as cooperative learning and group work 
     or, indeed on teaching anything beyond the barest minimum of 
     required material. In addition, because teachers must 
     constantly struggle simply to maintain order in an 
     overcrowded classroom, the likelihood increases that they 
     will suffer from burnout earlier than might otherwise be the 
     case.
                                                                    ____


                              Case Studies


                     broward county/ft. lauderdale

                              The problem

       Broward County is located in Southern Florida and is the 
     fifth largest school district in the nation. Its schools 
     suffer from severe overcrowding: 34,000 students without 
     permanent desks; approximately 10,000 new students added to 
     the school system each year; and in the past nine years, 
     Broward has built 36 new schools and rebuilt 23 schools, and 
     continues to have a difficult time meeting its demand.
       Broward would have to build a new school every month to 
     meet this demand adequately. Citing the approximately 2,000 
     portable classrooms in the county, the budget director for 
     the county public schools described Broward as ``the portable 
     capital of the world.'' One high school has 46 portable 
     classrooms in use during this school year alone.

                     Needs and available resources

       A recent needs analysis estimated Broward's capital 
     construction needs at $2.4 billion, $200 million of which is 
     needed for technology improvements alone. The last bond 
     approved for school construction was for $317 million in 
     1987. Mobilizing local support for new tax or bond referenda 
     has been difficult. In fact, in September, 1995, a tax 
     referendum to increase the sales tax by one penny to raise $1 
     billion for school construction was defeated.

  Potential impact of the Partnership to Rebuild America's Schools Act

       Under the President's legislative proposal, approximately 
     $16.4 million would be allocated to the county school 
     district. Broward could use these funds to subsidize interest 
     costs for a local bond to cover a substantial part of its 
     school construction costs. This funding could support nearly 
     $70 million in leveraged funds to assist in rebuilding a 
     number of local schools.
       These new funds would be used primarily to ease 
     overcrowding in schools by funding new schools as well as 
     renovations and additions to existing schools that would 
     expand seating capacity. Broward also wants to reduce its 
     reliance on portable classrooms due to the fact that--with a 
     life expectancy of approximately 20 years--portables are not 
     a good long-term investment compared to a traditional school 
     structure. In addition, portables cannot be wired for 
     technology the same way as a traditional classroom.


                  LOS ANGELES UNIFIED SCHOOL DISTRICT

                      I. The problem/current needs

       The Los Angeles Unified School District is one of the 
     largest institutions of any kind in the nation with an 
     enrollment of 670,000 students. The prevalence of aging 
     school facilities in Los Angeles poses a number of expensive 
     problems for the district, which estimates its current 
     deferred maintenance costs at more than $600 million. A 
     majority of Los Angeles school buildings are more than 40 
     years old. As a result, most schools are not wired for 
     technology, and most are not equipped with modern security 
     systems, telecommunications systems, or air conditioning. 
     Many facilities face similar repair needs--roof replacement 
     is needed for 245 schools, repainting at more than 600 
     schools, boiler replacement at more than 50 schools, and 
     playground re-pavement at almost 400 schools.
       A rebounding economy and an influx of immigrants is driving 
     steady growth in the Los Angeles schools. The number of 
     students grew by 18,000 this year, and school officials 
     predict enrollment will grow another 15,000 next year.
       A State of California mandate to lower class size in the 
     earliest grades consumed the limited number of vacant 
     classrooms that existed. The need for more classrooms is 
     illustrated by the fact that the district transports about 
     12,000 students a day to more distant schools because of 
     overcrowding in their area school.

[[Page S2424]]

                  II. Needs versus available resources

       The State of California school construction program uses 
     two mechanisms to provide funds to local districts for new 
     construction and modernization. In the more common approach, 
     the state pays one-half of the ``allowable'' costs as defined 
     by the state. Otherwise, the state pays the full bill, but in 
     a very limited number of projects. Additionally, the state 
     offers a small deferred maintenance program in which it 
     provides matching funds of up to one-half of 1 percent of the 
     district's general funds. In recent years, the Los Angeles 
     district has been eligible for about $17 million through this 
     program, but the state has not fully funded it in recent 
     budgets.
       District officials in Los Angeles report that a significant 
     impediment to raising funds for construction is the 
     requirement imposed by the state Constitution, which requires 
     a two-third majority vote for the passage of school bonds 
     financed by property tax increases. The last time the Los 
     Angeles Unified School District passed a bond measure was 
     1971. (This vote came shortly after the Sylmar earthquake 
     closed many schools and raised serious safety questions about 
     others. The measure received 66.5 percent of the vote, but 
     under state law, this bond required only a majority vote 
     because it pertained to buildings deemed structurally 
     unsafe.)

             III. The impact of the President's initiative

       A $2.4 billion school bond measure on the ballot in 
     November 1996 for school construction and modernization 
     received 65.5 percent of the vote, just missing the two-
     thirds majority needed for passage. In December 1996, the 
     board of Education voted to put another $2.4 billion bond 
     measure on the ballot in April 1997. The President's 
     initiative could accelerate the development of the long 
     overdue projects that would be financed by this bond.


                           THE STATE OF MAINE

                      1. The problem/current needs

       Maine is struggling to cope with two major factors related 
     to school facilities--booming economy driving explosive 
     growth in the southern part of the state, and the continued 
     use of one-room schools and other antiquated buildings--some 
     dating 100 years--throughout the state.
       The Bowdoin Community School offers an instructive example. 
     The dozen portable classrooms now in use exceed the number of 
     permanent classrooms inside the main structure. A proposed 
     expansion of the school has been shelved since 1987 because 
     of insufficient state funding to support the project.

                  II. Needs versus available resources

       Support from the state of Maine for local school 
     construction projects is restricted to debt service 
     subsidies, and the level of available support is extremely 
     limited. In fiscal 1998, school districts requested such 
     subsidies for 83 projects. However, the $65.8 million 
     authorized by the state is expected to be consumed by the 
     four projects given the highest priority.
       Schools districts in Maine are generally successful in 
     getting voter approval for bond measures, but most districts 
     in the state cannot cover the total cost of the bond. The 
     lack of support from the state for debt service is cited as 
     the leading reason why school districts fall short in raising 
     financing, leading to the deferment of these sorely needed 
     projects.

        III. The potential impact of the Presidential Initiative

       The executive director of the Maine Municipal Bond Bank 
     noted that the President's school construction initiative 
     could help Maine schools in two ways. The state could choose 
     to use its allocation all at once to supplement its debt 
     service subsidy program, or it could use that money to 
     establish a revolving loan fund that would commit its 
     revenues to debt service subsidies.


                         the state of maryland

                      I. The problem/current needs

       There are two primary problems facing Maryland school 
     facilities: aging structures and rising enrollments.
       A review of the list of Capital Improvement requests to the 
     state for the coming year reveals the extent of aging school 
     facilities. Requests are filled with descriptions of items in 
     need of repair or replacement, such as roofs as much as 44 
     years old, HVAC systems that are 25 years old or more, 
     boilers and chillers that date to the 1950s, and windows and 
     doors in use since the 1960s.
       Over the last decade, enrollment in Maryland schools has 
     grown by approximately 150,000 students. State officials 
     expect enrollment to continue climbing by another 30,000 or 
     so annually over the next five to ten years. Overall, local 
     districts requested approximately $310 million for 459 
     construction and renovation projects for FY 1998. While a 
     district might request more than one project for a school, 
     these figures suggest that districts are seeking assistance 
     with construction and renovation projects that could affect a 
     third of the state's 1,280 schools.

                  II. Needs versus available resources

       The Maryland State Public School Construction Program is 
     designed to help local districts with costs related to 
     planning and funding of school construction and renovation 
     projects.
       Early in the program, the state covered 100 percent of 
     eligible costs for approved projects. However, since the mid-
     1980s, the state use a sliding scale based on need to 
     determine how much assistance a district receives.
       Since the program's inception,the amount of funds requested 
     each year by local districts has exceeded program 
     allocations. For example, in FY 73, the program funded 72 
     percent of district requests--the highest proportion in the 
     program's history. In FY 89, the state supported an all-time 
     low of 24 percent of requests. In the current fiscal year, 
     the state funded 51 percent of requests, totaling $274 
     million.

        III. The potential impact of the Presidential initiative

       State officials see three possibilities for the use of 
     federal funds from the proposed School Construction 
     Initiative.
       First, the funds could subsidize additional state general 
     obligation bonds. Therefore, the amount of assistance going 
     to local districts with eligible costs would increase, and 
     more projects would be funded. The federal funds could be 
     targeted at poorer districts with larger projects that have 
     been delayed due to fiscal constraints. It should be noted 
     that an increase in the state funds for the Public School 
     Construction Program might lead more districts to seek state 
     assistance for additional projects. At this time, there are 
     projects for which local districts do not submit requests 
     because the district senses these projects will be deferred 
     due to state fiscal constraints.
       A second option would allow the state to use a portion of 
     the funds to subsidize a combination of additional state 
     bonds and country general obligation bonds. Finally, the 
     state could use all the federal funds to subsidize additional 
     county general obligation bonds.


                     new york city school district

                      I. The problem/current needs

       New York is experiencing enrollment growth of 20,000 to 
     23,000 students a year. In addition, more than half of the 
     over 1,000 school buildings are 50 years old or more. The 
     district must upgrade these facilities and accommodate its 
     burgeoning student population.
       There are limits to the amount of money the district can 
     raise through general obligation bonds, and this mechanism is 
     not sufficient to meet the district's needs. There is a state 
     constitutional limit on the amount of debt the district can 
     issue (as a percentage of total assessed property value), and 
     the district is running up against this limit.
       The fiscal year 1997 capital expenditures budget for the 
     Board of Education is just over $1 billion, out of a total 
     city capital budget of just over $4 billion. A proposed 10-
     year capital plan has just been put forth for $12.6 billion, 
     which includes an amount contingent on receipt of federal 
     funds. One of the main emphasis of this plan is to address 
     the district's overcrowding, using strategies such as new 
     construction, other ways of handling seating capacity, and 
     converting some schools to a year-round schedule, which could 
     increase seating capacity by 25 to 33 percent.

        II. The potential impact of the Presidential initiative

       New York expects that it could leverage federal funds to 
     address several needs. Among the most dire needs is for 
     additional seats for children. The districts proposed 10-year 
     plan was increased by about $700 million to address seating 
     capacity needs. The district envisions six different avenues 
     for the use of this money to increase seating capacity: 
     Leasing new facilities, transportables, modular construction, 
     rehabilitation of existing facilities to increase size, new 
     construction, and converting schools to a year-round schedule 
     (which necessitates putting in air-conditioning.)


                      Philadelphia School District

                       The problem/current needs

       The Philadelphia story has two strands. First, the district 
     estimates that it will need about two-thirds of a billion 
     dollars to bring its 257 existing building sites up to 
     standard. This includes major renovations, repairs, 
     improvements, and technology needs (schools need to be wired 
     for computers, but 60 of Philadelphia's schools are over 70 
     years old.)
       Second, to accommodate expected population growth, 
     approximately one-quarter of a billion dollars in additional 
     funding may be necessary. In the past five years, the public 
     school population has grown 9.2 percent, and in the past 
     seven years it has grown 12.6 percent. The district expects 
     this growth to continue by 1.4 percent the next year and by 
     2.5 percent the following year. In one area, the district 
     deals with overcrowding through a combination of classrooms 
     under stairwells, walling off the ends of hallways to create 
     classrooms, and portables.

                 II. Needs versus available resources.

       The district knows that its capital needs in the next 5 to 
     10 years seriously exceed its current budgeted capital 
     capacity. A Long Range Facilities Plan is being developed, 
     and it is expected that the total need will ultimately be 
     between $1-$1.4 billion.

        III. The potential impact of the Presidential Initiative

       The district says that federal funds could be extremely 
     helpful by supporting preventive maintenance projects. With 
     shrinking operation budgets, it is preventive maintenance 
     that gets cut from the budget. These projects include minor 
     roof and gutter repair, HVAC system cleaning, and yearly 
     boiler maintenance. These activities get pushed aside for 
     emergency projects and educational needs. Yet today's 
     preventive maintenance

[[Page S2425]]

     project is tomorrow's capital project. Roofs, boilers, and 
     heating systems wear out years before their time because 
     preventive maintenance funds are scarce. The failure of these 
     systems also causes additional capital damage, such as water 
     and pipe damage. Much of this could be avoided and long-term 
     capital budget could be brought down with additional 
     resources for preventive maintenance.


                   Santa Ana Unified School District

                      I. The problem/current needs

       Santa Ana is an extremely densely populated area. In its 24 
     square miles, there are 350,000 resident, and 52,000 
     students. There is a school approximately every two blocks.
       The primary problem in the district is school overcrowding, 
     the result of a lack of construction funding during a period 
     of raid enrollment growth. The district has grown from 31 
     thousand student in 1980 to 52,000 students in 1996.
       The school district has converted 22 of 31 elementary 
     schools and four of seven intermediate schools to multi-
     track, year-round schedules. Although other school districts 
     in California and around the country use year-round 
     schooling, it is unusual to have such a high percentage of 
     schools on this tract. The district has 534 portable 
     classrooms on existing sites, which is the equivalent of 24 
     free standing elementary schools. Santa Ana estimates that it 
     now spends $1 million to lease portable classrooms.
       A secondary, but also severe problem is maintaining ill-
     equipped and deteriorating facilities. The district prepared 
     a state-mandated five-year plan to deferred maintenance 
     needs, which is updated annually--the currently version 
     projects a $15 million need.

                  II. Needs versus available resources

       Santa Ana Unified has a need for three elementary schools 
     plus a new high school. Enrollment growth has averaged over 
     1300 students annually since 1980. The need is accentuated by 
     the fact that the State School Building Program is, ``broke'' 
     and it is not clear when there will be another bond measure.

        III. The potential impact of the President's initiative

       President Clinton's initiative would potentially provide 
     major benefits to the Santa Ana Community. The district needs 
     adequate classrooms equipped with up-to-date education 
     technology will be available to educate the rapidly growing 
     student population. If the district received an estimated six 
     million dollars from the federal government, it could 
     leverage those funds to pay for additional elementary 
     schools.

  Ms. MOSELEY-BRAUN. I would also like to call to my colleagues' 
attention the reports and the work done by the General Accounting 
Office recently, both with regard to the condition of America's 
schools, State efforts to address the issue of crumbling schools, and 
the most recent GAO report on school finance generally. These reports 
speak to the ability or the efforts taken by State and local 
governments to address the disparities between wealthy and poor and 
middle-class school districts.
  The fact of the matter is that this disparity, this gap in school 
funding, does not serve our national interest, does not serve the 
interest of taxpayers, and does not serve the interest of our children.
  I believe we have an obligation to put aside the old debates of 
whether or not school funding should happen here or happen there, and 
we should look at developing a partnership in which everybody plays a 
part, in which all levels of government collaborate, in which 
communities, parents, property taxpayers, and income taxpayers 
cooperate to prepare our people for the 21st century and the challenges 
they face.
  Mr. KENNEDY. Mr. President, I give my strong support to President 
Clinton's Partnership to Rebuild America's Schools Act of 1997, 
introduced today by Senator Moseley-Braun.
  The Nation's schools are facing enormous problems of physical decay. 
Fourteen million children in one-third of the schools are learning in 
substandard school buildings. Half the schools have at least one 
unsatisfactory environmental condition.
  Massachusetts is no exception. Forty-one percent of Massachusetts 
schools report that at least one building needs extensive repair or 
should be replaced; 75 percent report serious problems in buildings, 
such as plumbing or heating defects; 80 percent have at least one 
unsatisfactory environmental factor.
  It is difficult to teach or learn in dilapidated classrooms. Student 
enrollments are at an alltime high and are continuing to rise. We 
cannot tolerate a situation in which facilities deteriorate while 
enrollments escalate.
  GAO estimates that schools need $112 billion just to repair their 
facilities. Obviously, the Federal Government cannot meet all of these 
needs. The Partnership to Rebuild America's Schools Act encourages 
State, local, and private support by providing interest subsidies for 
school construction bonds. The Federal Government will pay up to 50 
percent of interest on bonds used to finance school repair, renovation, 
modernization, and construction.
  Half of the $5 billion in Federal funds earmarked for this program 
over the next four years will be allocated to States using the existing 
title I formula. States and localities will distribute these funds to 
communities with the greatest construction needs and the least ability 
to meet their needs with their own resources. Massachusetts would 
receive $48 million for grants to local communities.
  The remaining Federal funds will be distributed by the U.S. 
Department of Education among the 100 school districts that enroll the 
greatest number of students living in poverty. Thirty percent of this 
funding will be allocated competitively to school districts that have 
particularly severe needs and obtain the most support for their 
construction projects from non-Federal sources. Under this part of the 
bill, Massachusetts would receive an estimated $25 million.
  I hope that the Partnership To Rebuild America's Schools Act will 
receive the bipartisan support it deserves, so that it can be in place 
for the beginning of the next academic year. Investing in education is 
investing in a stronger America here at home and around the world. I 
look forward to working with my colleagues on both sides of the aisle 
to enact this important measure.
                                 ______
                                 
      By Mr. CAMPBELL:
  S. 457. A bill to amend section 490 of the Foreign Assistance Act of 
1961 to provide alternative certification procedures for assistance for 
major drug producing countries and major drug transit countries; to the 
Committee on Foreign Relations.


               THE MEXICO PROBATIONARY CERTIFICATION ACT

  Mr. CAMPBELL. Mr. President, this month Congress has been considering 
the important issue of whether to uphold or overturn the President's 
certification of Mexico as fully cooperating with the United States to 
fight drug trafficking. I am concerned that without congressional 
action, the Senate must choose between two less than ideal options: 
First, to support the President's certification of Mexico and continue 
business as usual, thereby downplaying serious deficiencies in Mexico's 
efforts; or second, to decertify Mexico, with or without a waiver, 
which might destabilize an important country along our southern border.
  Under current law, notice provided to the target country is often too 
late and not specific enough to fix the problems. Moreover, access to 
more timely and specific information would assist Congress in 
exercising its legislative and oversight responsibilities.
  Therefore, today I propose a bill to provide an alternative approach. 
This legislation would provide the administration a new option to 
certify countries such as Mexico on probationary status for 7 months, 
which extends from March 1 through September 30, the end of the fiscal 
year. However, during this time period, the country on probationary 
certification is expected to comply with certain conditions stipulated 
by the President. If these conditions are not met at the end of this 7-
month period, the United States will act firmly, such as by cutting off 
aid.
  This alternative would put countries on notice that the United States 
has serious concerns about their lack of cooperation. But, it would 
provide a fair period of time during which those countries could 
address U.S. concerns.
  This constructive notice period would be less disruptive to our 
bilateral relations. We saw last week some of the damage which could 
occur in our relationship with Mexico after the House voted to 
decertify Mexico within 90 days if certain criteria are not met. News 
reports quoted Mexico's President, Ernesto Zedillo, as stating: ``This 
is where we draw the line. Our sovereignty and dignity as a nation are 
not negotiable.''
  My bill also provides better notice to Congress. Under this 
alternative, Congress would be informed about those specific concerns 
which the President identified regarding a country's lack of 
cooperation. Congress also would be

[[Page S2426]]

able to track that country's progress during the 7-month probationary 
period and, of course, maintain its prerogative to pass legislation as 
it deems necessary. I believe this would help avoid the contentious 
battle in which the Congress and the administration currently are 
engaged this month over Mexico.
  It is no surprise that many Senators feel strongly about decertifying 
Mexico. Reports indicate that as much as 70 percent of the cocaine 
entering the United States comes through Mexico; up to 30 percent of 
the heroin used in the United States comes through Mexico; and 80 
percent of imported marijuana comes through Mexico.

  Recent developments in that country have exacerbated what is already 
a serious flow of illegal drugs into the United States. For example, 
according to a news report in the March 2 San Diego Union Tribune, 
Mexican authorities are now preventing our DEA agents and law 
enforcement officers from carrying their weapons into Mexico. In 
response, the DEA reportedly pulled its agents out of cross-training 
and intelligence-gathering projects in Mexico along the border. Agents 
and officers now fear they will become targets for gangs and drug 
traffickers, especially if Mexico's certification is revoked. This is 
intolerable.
  Further motivating the push to decertify Mexico is the recent arrest 
of Mexico's drug czar, Gen. Jesus Gutierrez Rebollo, on allegations he 
was being paid to protect one of Mexico's top drug lords. The general 
is reported to have extensive drug ties, dating back to at least 1993, 
at the same time he was supposed to be fighting drug use and trade in 
his country.
  Any information that the general may have possessed has been 
compromised. Nor is he alone in being corrupt. According to a Los 
Angeles Times report on March 3, court documents from two drug gang 
assassins indicate that approximately 90 percent of the law enforcement 
officers in Tijuana and the State of Baja California in Mexico are 
corrupt.
  These developments raise serious concerns among DEA agents, who 
cannot adequately do their job if they do not receive the help of their 
Mexican counterparts. During his testimony before the House 
Subcommittee on National Security on February 27, 1997, Thomas 
Constantine, the Administrator of the DEA, called fighting drug 
trafficking without assistance from other countries nearly impossible.
  In light of these disturbing developments, I wrote to the President 
last Friday expressing my concern with his certification of Mexico. I 
also urged the administration to take all necessary steps to ensure 
Mexico does its fair share in controlling the flow of illicit drugs 
across its border into the United States.
  Decertifying Mexico will not make this process any easier. Yet, we 
cannot risk the implication that we condone Mexico's failed drug policy 
by fully certifying Mexico without certain conditions. Certification of 
Mexico in light of the compelling facts of that country's involvement 
in drug trafficking also makes a mockery of the certification 
provisions of the Foreign Assistance Act.
  In light of these facts, I am concerned that the President has 
certified Mexico as fully cooperating with the United States. However, 
I am also concerned that decertifying Mexico could destabilize a 
country important to us and cause a potential crisis on our southern 
border. Unfortunately, that is the choice the administration has under 
existing law.
  Therefore, the bill I introduce today would amend the existing law to 
avoid this type of problem in the future. The current certification 
process is set forth in section 490 of the Foreign Assistance Act of 
1961. It requires the President to submit to Congress by March 1 of 
each year a list of major illicit drug producing and transiting 
countries which he certifies are fully cooperating with the United 
States. This bill offers a good middleground--I urge support.
  Under existing law, the President has three options: One, certify a 
country which has cooperated fully with U.S. anti-drug efforts or has 
taken adequate steps on its own to comply with the 1988 U.N. anti- drug 
trafficking convention. Two, decertify a country for not fully 
cooperating. Or three, decertify a country but provide a waiver because 
it is in the national interests of the United States to continue to 
provide aid.

  Under this law, when a country is decertified, at least 50 percent of 
U.S. bilateral foreign aid is suspended in the current fiscal year. In 
fact, that county may lose more than 50 percent of its current funding 
if the State Department has not yet released the aid. Unless the 
country is recertified, all U.S. aid is suspended in subsequent fiscal 
years. And, the United States is required to vote against loans in the 
multilateral development banks, such as the World Bank and the Inter-
American Development Bank.
  Congress has 30 days from receipt of the President's certification to 
enact a joint resolution disapproving the President's action. If 
Congress passes such a resolution, the President can veto it and 
require a two-thirds majority vote in Congress to override the veto.
  Congress also has its prerogative to pass a resolution with other 
timeframes, which would be subject to a Presidential veto. We saw this 
last week when the House passed a resolution to decertify Mexico within 
90 days if certain criteria are not met.
  On February 28, 1997, the President submitted his annual list to 
Congress. This report indicated that 23 countries, including Mexico, 
are certified as fully cooperating; three countries were determined not 
to be fully cooperating, but were deemed in the national interest--
Belize, Lebanon, and Pakistan--and six countries were decertified 
(Afghanistan, Burma, Colombia, Iran, Nigeria, and Syria.
  The impact of this process on Mexico could be dramatic. If Congress 
were to pass a resolution of disapproval within the 30-day review 
period and the President does not exercise his waiver authority, the 
impact would include: Suspension of at least 50 percent of United 
States assistance for the current fiscal year; total suspension of aid 
in the next fiscal year, unless Mexico were recertified; and the United 
State would vote against loans to Mexico in the multilateral 
development banks. Mexico receives $17 million in bilateral aid from 
the United States and, according to the Export-Import Bank, 56 
applications from Mexico could be affected which total $3.24 billion.
  The alternative that I am proposing today provides a middle ground 
because it revisits the certification issue more often during the 
course of the year. The President also is given more flexibility in 
labelling countries more accurately.
  I'm also concerned that under existing law, we are giving a free ride 
to countries which are decertified but then are granted a waiver and 
continue to receive aid because it is deemed in the national interest 
of the United States. These waivers, in essence, allow the provision of 
aid year after year to countries not fully cooperating with the United 
States. What incentive do these countries have to improve their 
cooperation?
  My legislation builds on the existing carrot and stick approach in 
the certification process. This type of approach has been successful 
with other problems in the past, and I think it would go a long way to 
avoid similar controversies in the future like the one we have seen 
surrounding the Mexico certification this month.
  Under my bill, the carrot is certification, although for a finite 
period of time of 7 months. During this probationary period, all U.S. 
aid continues to flow and the United States remains supportive in 
international development banks. The President also stipulates which 
specific conditions must be met by that country to improve its 
cooperation with the United States and to continue receiving U.S. aid. 
Not only is sufficient notice provided to the country, but to the 
Congress as well.
  The stick is a penalty similar to that under existing law. If after 7 
months the country does not comply with the stipulations made by the 
President to improve its cooperation with the United States, 100 
percent of U.S. bilateral aid is cut off. The United States also would 
vote against aid in the multilateral development banks if the country 
does not comply with U.S. stipulations, as provided for under current 
law. These penalties would remain in effect until the President 
notifies Congress that the country has complied with the stipulations 
made in the President's original probationary certification.

[[Page S2427]]

  In my opinion, this alternative approach would force fuller 
compliance by countries and, in future cases similar to Mexico, help 
avoid a potential crisis in those countries.
  We need to send a very strong message to our neighbors in Mexico and 
similarly situated countries when we do not believe that they are fully 
cooperating with United States efforts to combat drug trafficking. But, 
to risk a crisis along our own border is asking for greater trouble.
  I believe that a compromise solution, as outlined in my proposal, is 
the most reasonable way to address similar circumstances in the future, 
and I urge my colleagues to support this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 457

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

     SECTION 1. ALTERNATIVE CERTIFICATION PROCEDURES FOR 
                   ASSISTANCE FOR MAJOR DRUG PRODUCING AND DRUG 
                   TRANSIT COUNTRIES.

       (a) In General.--Section 490 of the Foreign Assistance Act 
     of 1990 (22 U.S.C. 2291j) is amended by adding at the end the 
     following:
       ``(i) Alternative Certification Procedures.--
       ``(1) In general.--In lieu of submitting a certification 
     with respect to a country under subsection (b), the President 
     may submit the certification described in paragraph (2). The 
     President shall submit the certification under such paragraph 
     at the time of the submission of the report required by 
     section 489(a).
       ``(2) Certification.--A certification with respect to a 
     country under this paragraph is a certification specifying--
       ``(A) that the withholding of assistance from the country 
     under subsection (a)(1) and the opposition to assistance to 
     the country under subsection (a)(2) in the fiscal year 
     concerned is not in the national interests of the United 
     States; and
       ``(B) the conditions which must be met in order to 
     terminate the applicability of paragraph (4) to the country.
       ``(3) Effect of certification in fiscal year of 
     certification.--If the President submits a certification with 
     respect to a country under paragraph (1) for a fiscal year--
       ``(A) the assistance otherwise withheld from the country 
     pursuant to subsection (a)(1) may be obligated and expended 
     in that fiscal year; and
       ``(B) the requirement of subsection (a)(2) to vote against 
     multilateral development bank assistance to the country shall 
     not apply to the country in that fiscal year.
       ``(4) Effect of certification in later fiscal years.--
       ``(A) In general.--Subparagraph (B) shall apply to a 
     country covered by a certification submitted under this 
     subsection during the period beginning on October 1 of the 
     year in which the President submits the certification and 
     ending on the date on which the President notifies Congress 
     that the conditions specified with respect to the country 
     under paragraph (2)(B) have been met.
       ``(B) Prohibition on Assistance.--
       ``(i) Bilateral assistance.--During the applicability of 
     this subparagraph to a country, no United States assistance 
     allocated for the country in the report required by section 
     653 may be obligated or expended for the country.
       ``(ii) Multilateral assistance.--During the applicability 
     of this subparagraph to a country, the Secretary of the 
     Treasury shall instruct the United States Executive Director 
     of each multilateral development bank to vote against any 
     loan or other utilization of the funds of such institution to 
     or by the country.
       ``(5) Definition.--For purposes of this subsection, the 
     term `multilateral development bank' shall have the meaning 
     given the term in subsection (a)(2).''.
       (b) Conforming Amendments.--Subsection (a) of such section 
     is amended by striking ``subsection (b)'' each place it 
     appears and inserting ``subsections (b) and (i)''.
                                 ______
                                 
      By Mr. FAIRCLOTH (for himself, Mr. Kyl, Mr. Warner, Mr. Lugar, 
        Mr. Shelby, Mr. Inhofe, Mr. Bennett, Mr. Craig, Mr. Enzi and 
        Mr. Hagel):
  S. 458. A bill to provide for State housing occupancy standards, and 
for other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.


                       THE HOUSING PROTECTION ACT

  Mr. FAIRCLOTH. Mr. President, I am pleased to introduce today a bill 
to protect housing. This bill will ensure that all residents have a 
peaceful, well-maintained, and managed community with the services they 
deserve.
  The Housing Protection Act prohibits the Department of Housing and 
Urban Development [HUD] from establishing a national occupancy standard 
and transfers the authority to set those standards to the States. In 
the absence of a State standard, a two-person-per-bedroom standard 
would be presumed reasonable.
  In 1995, Senator Kyl and I introduced this same piece of legislation, 
after HUD's General Counsel Nelson Diaz issued a memorandum which, in 
effect, attempted to supplant the reasonable two-person-per-bedroom 
standard with conditions which could have forced housing owners to 
accept six, seven, even eight people in a two-bedroom apartment. The 
House of Representatives passed it as part of its public housing reform 
bill, but the bill failed to pass out of conference last year.
  Too often apartments are crowded with excessive numbers of people. 
When this happens, apartment complexes experience excessive noise, 
lower levels of safety and most often deterioration of the units. 
Building codes are in place for a reason. They are designed to 
determine the maximum amount of people who may safely exit a building 
during a fire or other emergency. Occupancy standards, on-the-other-
hand, determine how many residents can be accommodated and for whom 
they can properly provide services on the premises.
  The purpose of occupancy standards is to provide decent, safe, 
comfortable housing and a peaceful living environment for all 
residents. They also help maintain properties in excellent condition. 
While housing providers set their own occupancy standards, such private 
standards are in effect limited by state-set laws or policies which 
establish the minimum occupancy levels at which housing providers 
achieve safe harbor from charges of familial discrimination.
  This bill is widely supported by housing industry associations such 
as the National Association of Homebuilders and the National Apartment 
Association, among others. Many of our colleagues have joined us in 
support of this bill, and I urge others to consider cosponsoring it.
  Mr. KYL. Mr. President, I am pleased to introduce the State Housing 
Protection Act. I thank Senator Faircloth for his leadership on this 
issue and joining in sponsoring this bill. This bill prohibits the 
Department of Housing and Urban Development [HUD] from enforcing a 
complaint of discrimination on the basis of a housing provider's 
occupancy standard, and thereby, transfers from HUD to the States the 
authority to set occupancy standards.
  Mr. President, in July 1995, HUD General Counsel Diaz issued a 
memorandum which, in effect, tried to supplant the traditional two-per-
bedroom occupancy standard, and could have forced housing owners to 
accept six, seven, eight, or even nine people in a two-bedroom 
apartment. HUD should not be establishing national occupancy standards.
  In 1995, Senator Faircloth and I blocked HUD from imposing national 
occupancy standards until it completed an official rule. Soon 
thereafter, along with Representative McCollum, we introduced our bill 
to permanently transfer authority back to the States. The House passed 
it as part of its public housing reform bill, but it died in the 
conference committee late last year.
  By pursuing a policy that encourages overcrowding, thereby 
depreciating housing stock that is scarce to begin with, HUD is poorly 
serving lower income families and defeating its own charter. Our bill 
will help correct the problem. It is supported by the Council for 
Affordable and Rural Housing, the Council of Larger Public Housing 
Authorities, the Multi Housing Institute, the National Apartment 
Association, the National Assisted Housing Management Association, the 
National Association of Home Builders, the National Association of 
Housing and Redevelopment Officials, the National Leased Housing 
Association, the National Multi Housing Council, and the Public Housing 
Authorities Directors Association.
  Several States have an occupancy standard; the one in my own home 
State of Arizona has worked well. The intrusion of a Federal 
bureaucracy often does more harm than good. That is why Senator 
Faircloth and I have reintroduced this bill. I urge my colleagues to 
join us and cosponsor it.
                                 ______
                                 


[[Page S2428]]

       By Mr. CAMPBELL (for himself, Mr. McCain, Mr. Domenici, Mr. 
     Murkowski, and Mr. Inouye):
  S. 459. A bill to amend the Native American Programs Act of 1974 to 
extend certain authorizations, and for other purposes; to the Committee 
on Indian Affairs.


  THE NATIVE AMERICAN PROGRAMS ACT OF 1974 REAUTHORIZATION ACT OF 1997

  Mr. CAMPBELL. Mr. President, I am pleased to introduce a bill to 
extend the authorization for certain programs under the Native American 
Programs Act of 1974. This bill is critical to continue the 
availability of a modest amount of grant funds used by native 
communities nationwide to foster economic growth, develop tools for 
good governance methods, and promote social welfare.
  The authorization for most of these programs has expired and though 
the administration has requested funding for fiscal year 1998 at fiscal 
year 1997 levels, it has not introduced legislation to reauthorize the 
act. The legislation I am introducing today would do just that.
  These programs are administered through the Administration for Native 
Americans [ANA] located within the Department of Health and Human 
Services. By awarding annual grants on a competitive basis, the Native 
American Programs Act promotes self-sufficiency and self-determination 
by encouraging tribes, villages, and other native communities to 
develop and plan local strategies in economic and social development. 
The program is designed to build greater capacity at the tribal level 
for better governance, more vibrant and diversified economies, and 
social development.
  The ANA Program has proven successful for native communities since 
its inception and has generated widespread support by America's native 
communities. The centerpiece of the program are grants made under the 
Social and Economic Development Strategies (SEDS) Program; grants to 
tribes enhance tribal environmental regulatory capabilities; and grants 
made to preserve and rehabilitate native languages.
  This legislation will simply extend for 4 years until fiscal year 
2000 the authorization for these modestly funded yet very successful 
programs to strengthen and rebuild tribal communities around the United 
States.
  I urge my colleagues to join with me in enacting this reauthorization 
so that these proven tools for development can again be made available 
to native peoples around the Nation. I ask unanimous consent that a 
section-by-section summary and the bill language be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                             BILL LANGUAGE

     SECTION 1. AUTHORIZATION OF CERTAIN APPROPRIATIONS UNDER THE 
                   NATIVE AMERICAN PROGRAMS ACT OF 1974.

       Section 816.--Section 816 of the Native American Programs 
     Act of 1974 (42 U.S.C. 2992d) is amended--

       (1) in subsection (a), by striking ``for fiscal years 1992, 
     1993, 1994, and 1995.'' and inserting ``for each of fiscal 
     years 1997, 1998, 1999, and 2000'';
       (2) in subsection (c), by striking ``for each of the fiscal 
     years 1992, 1993, 1994, 1995, and 1996,'' and inserting ``for 
     each of fiscal years 1997, 1998, 1999, and 2000,''; and
       (3) in subsection (e), by striking ``$2,000,000 for fiscal 
     year 1993 and such sums as may be necessary for fiscal years 
     1994, 1995, 1996, and 1997.'' and inserting ``such sums as 
     may be necessary for fiscal years 1997, 1998, 1999, and 
     2000.''
                                                                    ____


                      Section-by-Section Analysis

       The purpose of this bill is to amend the 1974 Native 
     American Programs Act, P.L. 93-644 (42 U.S.C. 2991 et seq.) 
     to extend to fiscal year 2000 the authorization of 
     appropriations for three grant programs administered by the 
     Administration for Native Americans (ANA) in the Department 
     of Health and Human Services (HHS).
       Section 1. Authorization of Certain Appropriations Under 
     the Native American Programs Act of 1974.
  Section 816.--

       (a) this subsection provides for a four year extension to 
     fiscal year 2000 of the present authority to appropriate such 
     sums as may be necessary to carry out the general grant 
     provisions of the Native American Programs Act of 1974 (42 
     U.S.C. 2992d). The bill would continue the current ``such 
     sums as may be necessary'' language contained in current law.
       (c) this subsection provides for a four year extension to 
     fiscal year 2000 of the present authority to appropriate 
     funds for the purpose of carrying out the provisions related 
     to grants for tribal regulation of environmental quality (42 
     U.S.C. Sec. 2991b(d). The bill would continue the current 
     authorized level of $8 million for such grants.
       (e) this subsection provides for a four year extension to 
     fiscal year 2000 of the present authority to appropriate such 
     sums as may be necessary for the purpose of carrying out the 
     provisions related to grants for the preservation of Native 
     languages (42 U.S.C. Sec. 2991b-3). The bill would strike the 
     current authorized appropriaitons level of $2 million for 
     Native language grants and instead would substitute ``such 
     sums as may be necessary''.
  Mr. DOMENICI. Mr. President, I am pleased to join my colleagues 
Senators Campbell, McCain, and Murkowski in sponsoring this act to 
extend the authorization of several important programs for American 
Indians. The U.S. Department of Health and Human Services [HHS] 
administers these programs through the Administration for Native 
Americans [ANA]. Over the past 5 years, funding has ranged from $34.5 
million to $38.6 million. In fiscal year 1997, the funding was $34.9 
million.
  Our bill will reauthorize important programs to promote economic 
development, strengthen tribal governments, and provide for the better 
coordination of social programs available to tribes. The ANA funding 
policy is to assist Indian Tribes and Native American organizations to 
plan and implement their own long-term strategies for social and 
economic development. The aim is to increase local productivity and 
reduce dependence on government social services.
  Competitive grants are the means for distributing these vital funds. 
In New Mexico, the Pueblos of Laguna ($382,000), Picuris ($167,000), 
Pojoaque ($120,000), Sandia ($133,890), Tesuque ($125,000), San Juan 
($232,000), Santa Ana ($112,000), and Santo Domingo ($110,464) all 
received grants from fiscal year 1996 funds. New Mexico Tribes and 
Pueblos have participated in ANA grant activity for about three 
decades.
  The Social and Economic Development Strategies [SEDS] program fosters 
the development of stable, diversified local economies. SEDS grant 
funds are used to develop the physical, commercial, industrial and/or 
agricultural components necessary for a functioning local economy. 
Social infrastructure includes the maintenance of a tribe's cultural 
integrity. Pojoaque Pueblo's Cultural Center is the beneficiary of an 
ANA grant.
  Other ANA grants are used to establish or expand business activity or 
to stabilize and diversify a tribe's economic base. Micro enterprises 
and other private sector development are encouraged.
  Mr. President, I thank Chairman Campbell of the Senate Committee on 
Indian Affairs for his good work to extend the authorization for these 
valuable resources to improve tribal opportunities for self-
sufficiency. I urge my colleagues to support the reauthorization of 
these Administration for Native Americans Programs.
  Mr. INOUYE. Mr. President, I rise today to cosponsor a measure to 
reauthorize the Native American Programs Act of 1974. The purpose of 
this bill is to amend the Native American Programs Act to extend the 
authorization of appropriations for programs administered by the 
administration for Native Americans within the Department of Health and 
Human Services to fiscal year 2000.
  In 1974, the Native American Programs Act was enacted by the Congress 
to assist tribes and other Native American entities with developing 
social, economic, and governance strategies in order to become viable 
and economically self-sufficient communities.
  In the decades since its enactment, hundreds of tribes, reservation 
communities, and native organizations have benefited from the programs 
funded under this act. In fiscal year 1994 alone, the administration 
for Native Americans provided 215 grants for governance, social, and 
economic development projects, several dozen grants to assist with 
tribal recognition efforts, 26 grants for projects to assist tribes in 
their capacity to meet environmental requirements, 18 grants to support 
projects assisting the survival and preservation of Native American 
languages, and funds to support the Native Hawaiian revolving loan 
fund.

[[Page S2429]]

These projects have served to improve the quality of living for 
thousands of Native American families and communities.
  Over 2 years ago, on March 7, 1995, Senators McCain, Campbell and I 
introduced S. 510, a bill which reauthorized programs under the Native 
American Programs Act. On May 11, 1996 this body passed S. 510, as 
amended in committee, by unanimous consent, but the bill was 
subsequently not acted upon by the House prior to the adjournment of 
the 104th Congress.
  The bill being introduced today is substantially similar to S. 510, 
as introduced in the last Congress. I am pleased that once again, the 
chairman, as his predecessor did, is willing to consider the inclusion 
of provisions that would reauthorize for a period of 1 year, the Native 
Hawaiian revolving loan fund.
  Mr. President, the programs authorized in this measure are critical 
to fostering Native American social and economic self-sufficiency--a 
goal shared by this Congress as we move toward greater fiscal 
responsibility.
  I urge my colleagues to act favorably and expeditiously on this 
measure.
                                 ______
                                 
      By Mr. BOND (for himself, Ms. Snowe, Mr. Nickles, Mr. Burns, Mr. 
        Warner, Mr. Faircloth, Mr. Murkowski, Mr. Inhofe, Mr. Enzi, Mr. 
        Hutchinson, Mr. Mack, Ms. Mikulski and Mr. Grams):
  S. 460. A bill to amend the Internal Revenue Code of 1986 to increase 
the deduction for health insurance costs of self-employed individuals, 
to provide clarification for the deductibility of expenses incurred by 
a taxpayer in connection with the business use of the home, to clarify 
the standards used for determining that certain individuals are not 
employees, and for other purposes; to the Committee on Finance.


              THE HOME-BASED BUSINESS FAIRNESS ACT OF 1997

  Mr. BOND. Mr. President, home-based businesses are a significant and 
often overlooked part of this country's economy. Some people may be 
surprised to learn that over 9 million men and women in this country 
now operate home-based businesses, and over 14 million individuals earn 
income through home-based businesses. Even more impressive is the fact 
that a majority of these enterprises are owned by women, and the Small 
Business Administration estimates that women in this country are 
starting over 300,000 new home-based businesses each year.

  There are a number of reasons for the explosive growth of home-based 
businesses. Recent innovations in computer and communication technology 
have made the virtual office a reality and allow many Americans to 
compete in marketplaces that a few years ago required huge investments 
in equipment and personnel. In addition, many men and women in this 
country turn to home-based business in an effort to spend more time 
with their children. By working at home, these families can bring in 
two incomes, while avoiding the added time and expense of day-care and 
commuting. Corporate down-sizing, too, contributes to the growth in 
this sector as many skilled individuals convert their knowledge and 
experience from corporate life into successful enterprises operated 
from their homes.
  The rewards of owning a home-based business are also numerous. The 
added independence and self-reliance of having your own business 
provides not only economic rewards but also personal satisfaction. You 
are the boss: you set your own hours, develop your own business plans, 
and choose your customers and clients. In many ways, home-based 
businesses provide the greatest avenue for the entrepreneurial spirit, 
which has long been the driving force behind the success of this 
country.
  But with these rewards comes a number of obstacles, not the least of 
which are regulations and burdens imposed by the Federal Government. In 
fact, the tax laws, and in particular the IRS, are frequently cited as 
the most significant problems for home-based businesses today. Changes 
in tax policy must be considered by this Congress to ensure that our 
laws do not stall the growth and development of this successful sector 
of our economy.
  Mr. President, in answer to this call for help, I am introducing 
today the Home-Based Business Fairness Act of 1997. This legislation is 
the product of extensive input from actual home-based business owners 
and the efforts of my colleagues Senators Olympia Snowe and Don 
Nickles. The bill is designed to address three tax issues that 
currently pose significant problems for home-based businesses.


     deductibility of health-insurance costs for the self-employed

  First, the bill addresses the deductibility of health-insurance costs 
for the self-employed. During the 104th Congress, we made significant 
progress in this area. First, we made the deduction permanent after 
years of uncertainty. Then, last summer, we passed legislation that 
will increase the deduction for these health-care costs to 80 percent 
incrementally by 2006. While I fully supported that increase, the self-
employed cannot wait 10 years for partial deductibility when their 
large corporate competitors can fully deduct such costs today.
  With the self-employed able to deduct only 40 percent of their 
health-insurance costs today, it comes as no surprise that nearly a 
quarter of the self-employed, many of whom operate home-based 
businesses, do not have health insurance. In fact, 4 million households 
in this country headed by a self-employed individual do not have health 
insurance.
  In order to make it easier for home-based business owners and their 
families to have health insurance, we must level this playing field. My 
bill will increase the deductibility of health insurance for the self-
employed to 100 percent beginning this year. A full deduction will make 
health insurance more affordable to home-based business owners and help 
them and their families get the health insurance coverage that they 
need and deserve.


                         home-office deduction

  Second, the Home-Based Business Fairness Act will restore the home-
office deduction and further level the playing field for home-based 
businesses. After the Supreme Court's 1993 Soliman decision, the only 
home-based businesses that can deduct the costs associated with their 
home office are those that see their clients in the home and that 
generate their income within the home office. That narrow 
interpretation of the law denies the home-office deduction to service 
providers like construction contractors, landscaping professionals, and 
sales representatives, who must by necessity perform their services 
outside of the home.

  It is patently unfair to prevent these individuals from deducting 
their utility costs, property taxes, and other expenses related to the 
home office, when they could do so if they rented an office separate 
from the home. I thank my colleague from Utah, Senator Hatch, for his 
willingness to allow us to work together on this issue. My bill 
incorporates the legislation that Senator Hatch introduced earlier this 
month and will permit a home office to include one where the individual 
performs his essential administrative and management activities such a 
billing and record keeping. In order to qualify for the deduction, the 
bill requires that the business owner perform these activities on a 
regular, on-going, and nonincidental basis and have no other office in 
which to perform them.
  The restoration of the home-office deduction for home-based 
businesses not only puts them on an equal footing with their larger 
competitors, but also frees important capital that can be used to 
expand the business. For too long home-based businesses have lived with 
the fear of an IRS audit fueled by the Soliman decision. It is time to 
eliminate this obstacle to the continued success of these important 
entrepreneurs.


             Clarification of Independent-Contractor Status

  The final element of the Home-Based Business Fairness Act is relief 
for entrepreneurs seeking to be treated as independent contractors and 
for businesses needing to hire independent contractors. As the chairman 
of the Small Business Committee, I have heard from countless small 
business owners who are caught in the environment of fear and confusion 
that now surrounds the classification of workers. This situation is 
stifling the entrepreneurial spirit of many small business owners who 
find that they do not have the flexibility to conduct their businesses 
in a manner that makes the best economic

[[Page S2430]]

sense and that serves their personal and family goals.
  Mr. President, the root of this problem is found in the IRS' test for 
determining whether a worker is an independent contractor or an 
employee. Over the past three decades, the IRS has relied on a 20-
factor test based on the common law to make this determination. On 
first blush, a 20-factor test sounds like a reasonable approach: if a 
taxpayer demonstrates a majority of the factors, he or she is an 
independent contractor. Not surprisingly, the IRS' test is not that 
simple. It is a complex set of extremely subjective criteria with no 
clear weight assigned to any of the factors. As a result, a small 
business taxpayer is not able to predict which of the 20 factors will 
be most important to a particular IRS agent, and finding a certain 
number of these factors in any given case does not guarantee the 
outcome.
  To make matters worse, the IRS' determination inevitably occurs 2 or 
3 years after the parties have determined in good faith that they have 
an independent-contractor relationship. And the consequences can be 
devastating. The business recipient of the services is forced to 
reclassify the independent contractor as an employee and must pay the 
payroll taxes the IRS says should have been collected in the prior 
years. Interest and penalties are also added on. The result for many 
small businesses is a tax bill that bankrupts the company. And that's 
not the end of the story. The IRS then goes after the service provider, 
who is now classified as an employee, and disallows a portion of his 
business expenses--again resulting in additional taxes, interest, and 
penalties.
  Mr. President, all of us in this body recognize that the IRS is 
charged with the duty of collecting Federal revenues and enforcing the 
tax laws. The problem in this case is that the IRS is using a procedure 
that is patently unfair and is doing so on an increasingly frequent 
basis. Between 1988 and 1994, the IRS' use of the 20-factor test 
resulted in some 11,000 audits, 483,000 worker reclassifications, and 
$751 million in back taxes and penalties. These facts make me wonder 
whether the IRS is using this test as a de facto source of enhanced 
revenue collection when the classification decision does not alter the 
aggregate tax liability to the Federal Government at all.
  For its part, the IRS has just released its revised worker 
classification training manual. In the Commissioner's accompanying 
memo, she describes the manual as an ``attempt to identify, simplify, 
and clarify the relevant facts that should be evaluated in order to 
accurately determine worker classification. . . .'' There can be no 
more compelling reason for immediate action on this issue. The revised 
manual is over 150 pages--even longer than the original draft. If it 
takes this many pages to teach revenue agents how to simplify and 
clarify this small business tax issue, I think we can be fairly sure 
how simple and clear it is going to seem to the taxpayer who tries to 
figure it out on his own.

  The Home-Based Business Fairness Act removes the need for so many 
pages of instruction on the 20-factor test by establishing a clear safe 
harbor based on objective criteria. Under these criteria, if there is a 
written agreement between the parties, and if an individual 
demonstrates economic independence and independence with respect to the 
workplace, he will be treated as an independent contractor rather than 
an employee. And the service recipient will not be treated as an 
employer. In addition, individuals who perform services through their 
own corporations will also qualify for the safe harbor as long as there 
is a written agreement and the individuals provide for their own 
benefits.
  The safe harbor is simple, straightforward, and final. To take 
advantage of it, payments above $600 per year to an individual service 
provider must be reported to the IRS, just as is required under current 
law. This will help ensure that taxes properly due to the Treasury will 
continue to be collected.
  Mr. President, the IRS contends that there are millions of 
independent contractors who should be classified as employees, which 
costs the Federal Government billions of dollars a year. This assertion 
is plainly incorrect. Classification of a worker has no cost to the 
Government. What costs the Government are taxpayers who do not pay 
their taxes. My bill has two requirements that I believe will improve 
compliance among independent contractors using the safe harbor. First, 
there must be a written agreement between the parties--this will help 
the independent contractor know from the beginning that he is 
responsible for his own tax payments. Second, the safe harbor will not 
apply if the service recipient does not comply with the reporting 
requirements and issue 1099's to individuals who perform services.
  My bill also provides relief for businesses and independent 
contractors when the IRS determines that a worker was misclassified. 
Under the bill, if the business and the independent contractor have a 
written agreement, if the applicable reporting requirements were met, 
and if there was a reasonable basis for the parties to believe that the 
worker is an independent contractor, then any IRS reclassification 
upheld in court will only apply prospectively. This provision gives 
important peace of mind to small businesses that act in good faith by 
removing the unpredictable threat of retroactive reclassification and 
substantial interest and penalties.
  A final provision of this legislation, Mr. President, is the repeal 
of section 1706 of the 1986 Tax Reform Act. This provision effectively 
barred an entire group of independent contractors from the protection 
available in section 530 of the Revenue Act of 1978. When section 1706 
was enacted, its proponents argued that technical service workers--such 
as engineers, designers, and computer programmers--were less compliant 
in paying their taxes. Later examination of this issue by the Treasury 
Department found that technical service workers are in fact more likely 
to pay their taxes than most other types of independent contractors. 
This revelation underscores the need to repeal section 1706 and level 
the playing field for individuals in these professions. In the 104th 
Congress, proposals to repeal section 1706 enjoyed wide bi-partisan 
support, and it is my hope that the 105th Congress will finally act on 
this proposal to restore equality for these professionals.
  Mr. President, the importance of adding clarity to the independent-
contractor situation is underscored by the fact that the 2,000 
delegates to the 1995 White House Conference on Small Business voted to 
designate it as their top priority. At that conference, IRS 
Commissioner Richardson noted that either classification--independent 
contractor or employee--can be a valid and appropriate business choice 
as long as the individual pays his taxes. This conclusion was later 
affirmed in the IRS' new worker classification training manual. It is 
time that the law reflect this conclusion and allow small businesses to 
hire employees or independent contractors as their business needs 
demand, without the fear and uncertainty that now prevails.
  The Home-Based Business Fairness Act is a common-sense measure that 
will provide tax fairness for the increasing number of individuals who 
operate their businesses from home and contribute so significantly to 
the strength of our economy. These business owners have waited far too 
long. I urge the members of the Finance Committee to work with Senator 
Nickles and to report out a bill that provides these three much needed 
changes in the tax law so that we do not keep them waiting any longer.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 460

       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 ``Home-Based Business Fairness 
     Act of 1997''.

     SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
                   INDIVIDUALS INCREASED.

       (a) In General.--Section 162(l)(1) of the Internal Revenue 
     Code of 1986 (relating to special rules for health insurance 
     costs of self-employed individuals) is amended to read as 
     follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to the amount paid during

[[Page S2431]]

     the taxable year for insurance which constitutes medical care 
     for the taxpayer, the taxpayer's spouse, and dependents.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 3. CLARIFICATION OF DEFINITION OF PRINCIPAL PLACE OF 
                   BUSINESS.

       (a) In General.--Subsection (f) of section 280A of the 
     Internal Revenue Code of 1986 (relating to definitions and 
     special rules) is amended by redesignating paragraphs (2), 
     (3), and (4) as paragraphs (3), (4), and (5), respectively, 
     and by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Principal place of business.--For purposes of 
     subsection (c), a home office shall in any case qualify as 
     the principal place of business if--
       ``(A) the office is the location where the taxpayer's 
     essential administrative or management activities are 
     conducted on a regular and systematic (and not incidental) 
     basis by the taxpayer, and
       ``(B) the office is necessary because the taxpayer has no 
     other location for the performance of the essential 
     administrative or management activities of the business.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 4. SAFE HARBOR FOR DETERMINING THAT CERTAIN INDIVIDUALS 
                   ARE NOT EMPLOYEES.

       (a) In General.--Chapter 25 of the Internal Revenue Code of 
     1986 (relating to general provisions relating to employment 
     taxes) is amended by adding after section 3510 the following 
     new section:

     ``SEC. 3511. SAFE HARBOR FOR DETERMINING THAT CERTAIN 
                   INDIVIDUALS ARE NOT EMPLOYEES.

       ``(a) Safe Harbor.--
       ``(1) In general.--For purposes of this title, if the 
     requirements of subsections (b), (c), and (d), or the 
     requirements of subsections (d) and (e), are met with respect 
     to any service performed by any individual, then with respect 
     to such service--
       ``(A) the service provider shall not be treated as an 
     employee,
       ``(B) the service recipient shall not be treated as an 
     employer,
       ``(C) the payor shall not be treated as an employer, and
       ``(D) compensation paid or received for such service shall 
     not be treated as paid or received with respect to 
     employment.
       ``(2) Availability of safe harbor not to limit application 
     of other laws.--Nothing in this section shall be construed--
       ``(A) as limiting the ability of a service provider, 
     service recipient, or payor to apply other applicable 
     provisions of this title, section 530 of the Revenue Act of 
     1978, or the common law in determining whether an individual 
     is not an employee, or
       ``(B) as a prerequisite for the application of any 
     provision of law described in subparagraph (A).
       ``(b) Service Provider Requirements With Regard to the 
     Service Recipient.--For purposes of subsection (a), the 
     requirements of this subsection are met if the service 
     provider, in connection with performing the service--
       ``(1) has the ability to realize a profit or loss,
       ``(2) incurs unreimbursed expenses which are ordinary and 
     necessary to the service provider's industry and which 
     represent an amount at least equal to 2 percent of the 
     service provider's adjusted gross income attributable to 
     services performed pursuant to 1 or more contracts described 
     in subsection (d), and
       ``(3) agrees to perform services for a particular amount of 
     time or to complete a specific result or task.
       ``(c) Additional Service Provider Requirements With Regard 
     to Others.--For the purposes of subsection (a), the 
     requirements of this subsection are met if the service 
     provider--
       ``(1) has a principal place of business,
       ``(2) does not primarily provide the service at a single 
     service recipient's facilities,
       ``(3) pays a fair market rent for use of the service 
     recipient's facilities, or
       ``(4) operates primarily with equipment not supplied by the 
     service recipient.
       ``(d) Written Document Requirements.--For purposes of 
     subsection (a), the requirements of this subsection are met 
     if the services performed by the service provider are 
     performed pursuant to a written contract between such service 
     provider and the service recipient, or the payor, and such 
     contract provides that the service provider will not be 
     treated as an employee with respect to such services for 
     Federal tax purposes.
       ``(e) Business Structure and Benefits Requirement.--For 
     purposes of subsection (a), the requirements of this 
     subsection are met if the service provider--
       ``(1) conducts business as a properly constituted 
     corporation or limited liability company under applicable 
     State laws, and
       ``(2) does not receive from the service recipient or payor 
     benefits that are provided to employees of the service 
     recipient.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Failure to meet reporting requirements.--If for any 
     taxable year any service recipient or payor fails to meet the 
     applicable reporting requirements of section 6041(a) or 
     6041A(a) with respect to a service provider, then, unless the 
     failure is due to reasonable cause and not willful neglect, 
     the safe harbor provided by this section for determining 
     whether individuals are not employees shall not apply to such 
     service recipient or payor with respect to that service 
     provider.
       ``(2) Burden of proof.--For purposes of subsection (a), 
     if--
       ``(A) a service provider, service recipient, or payor 
     establishes a prima facie case that it was reasonable not to 
     treat a service provider as an employee for purposes of this 
     section, and
       ``(B) the service provider, service recipient, or payor has 
     fully cooperated with reasonable requests from the Secretary 
     or his delegate,

     then the burden of proof with respect to such treatment shall 
     be on the Secretary.
       ``(3) Related entities.--If the service provider is 
     performing services through an entity owned in whole or in 
     part by such service provider, the references to `service 
     provider' in subsections (b) through (e) may include such 
     entity, provided that the written contract referred to in 
     subsection (d) is with such entity.
       ``(g) Determinations by the Secretary.--For purposes of 
     this title--
       ``(1) In general.--
       ``(A) Determinations with respect to a service recipient or 
     a payor.--A determination by the Secretary that a service 
     recipient or a payor should have treated a service provider 
     as an employee shall be effective no earlier than the notice 
     date if--
       ``(i) the service recipient or the payor entered into a 
     written contract satisfying the requirements of subsection 
     (d),
       ``(ii) the service recipient or the payor satisfied the 
     applicable reporting requirements of section 6041(a) or 
     6041A(a) for all taxable years covered by the agreement 
     described in clause (i), and
       ``(iii) the service recipient or the payor demonstrates a 
     reasonable basis for determining that the service provider is 
     not an employee and that such determination was made in good 
     faith.
       ``(B) Determinations with respect to a service provider.--A 
     determination by the Secretary that a service provider should 
     have been treated as an employee shall be effective no 
     earlier than the notice date if--
       ``(i) the service provider entered into a contract 
     satisfying the requirements of subsection (d),
       ``(ii) the service provider satisfied the applicable 
     reporting requirements of sections 6012(a) and 6017 for all 
     taxable years covered by the agreement described in clause 
     (i), and
       ``(iii) the service provider demonstrates a reasonable 
     basis for determining that the service provider is not an 
     employee and that such determination was made in good faith.
       ``(C) Reasonable cause exception.--The requirements of 
     subparagraph (A)(ii) or (B)(ii) shall be treated as being met 
     if the failure to satisfy the applicable reporting 
     requirements is due to reasonable cause and not willful 
     neglect.
       ``(2) Construction.--Nothing in this subsection shall be 
     construed as limiting any provision of law that provides an 
     opportunity for administrative or judicial review of a 
     determination by the Secretary.
       ``(3) Notice date.--For purposes of this subsection, the 
     notice date is the 30th day after the earlier of--
       ``(A) the date on which the first letter of proposed 
     deficiency that allows the service provider, the service 
     recipient, or the payor an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals is 
     sent, or
       ``(B) the date on which the deficiency notice under section 
     6212 is sent.
       ``(h) Definitions.--For the purposes of this section--
       ``(1) Service provider.--The term `service provider' means 
     any individual who performs a service for another person.
       ``(2) Service recipient.--Except as provided in paragraph 
     (4), the term `service recipient' means the person for whom 
     the service provider performs such service.
       ``(3) Payor.--Except as provided in paragraph (4), the term 
     `payor' means the person who pays the service provider for 
     the performance of such service in the event that the service 
     recipient does not pay the service provider.
       ``(4) Exceptions.--The terms `service recipient' and 
     `payor' do not include any entity in which the service 
     provider owns in excess of 5 percent of--
       ``(A) in the case of a corporation, the total combined 
     voting power of stock in the corporation, or
       ``(B) in the case of an entity other than a corporation, 
     the profits or beneficial interests in the entity.
       ``(5) In connection with performing the service.--The term 
     `in connection with performing the service' means in 
     connection or related to the operation of the service 
     provider's trade or business.
       ``(6) Principal place of business.--For purposes of 
     subsection (c), a home office shall in any case qualify as 
     the principal place of business if--
       ``(A) the office is the location where the service 
     provider's essential administrative or management activities 
     are conducted on a regular and systematic (and not 
     incidental) basis by the service provider, and
       ``(B) the office is necessary because the service provider 
     has no other location for the performance of the essential 
     administrative or management activities of the business.
       ``(7) Fair market rent.--The term `fair market rent' means 
     a periodic, fixed minimum rental fee which is based on the 
     fair rental value of the facilities and is established 
     pursuant to a written agreement with

[[Page S2432]]

     terms similar to those offered to unrelated persons for 
     facilities of similar type and quality.''
       (b) Clarification of Rules Regarding Evidence of Control.--
     For purposes of determining whether an individual is an 
     employee under the Internal Revenue Code of 1986 (26 U.S.C. 1 
     et seq.), compliance with statutory or regulatory standards 
     shall not be treated as evidence of control.
       (c) Repeal of Section 530(d) of the Revenue Act of 1978.--
     Section 530(d) of the Revenue Act of 1978 (as added by 
     section 1706 of the Tax Reform Act of 1986) is repealed.
       (d) Clerical Amendment.--The table of sections for chapter 
     25 of such Code is amended by adding at the end the following 
     new item:

``Sec. 3511. Safe harbor for determining that certain individuals are 
              not employees.''

       (e) Effective Dates.--
       (1) In general.--The amendments made by, and the provisions 
     of, this section shall apply to services performed after the 
     date of enactment of this Act.
       (2) Determinations by secretary.--Section 3511(g) of the 
     Internal Revenue Code of 1986 (as added by subsection (a)) 
     shall apply to determinations after the date of enactment of 
     this Act.
       (3) Section 530(d).--The amendment made by subsection (c) 
     shall apply to periods ending after the date of enactment of 
     this Act.
                                                                    ____


  Home-Based Business Fairness Act of 1977--Description of Provisions


                              Short Title

       Under Section 1 of the bill, the name of the legislation is 
     ``Home-Based Business Fairness Act of 1997.''


 Increase in the Deduction for Health Insurance Costs of Self-Employed 
                              Individuals

       Section 2 of the bill amends section 162(l)(1) of the 
     Internal Revenue Code of 1986 to increase the deduction for 
     health insurance costs for self-employed individuals to 100 
     percent beginning on January 1, 1997. Currently the limit on 
     deductibility of health insurance costs for these individuals 
     is 40 percent, and it is scheduled to rise to 80 percent by 
     2006, under the provisions in the Health Insurance 
     Portability and Accountability Act of 1996, which was signed 
     into law in August 1996. The bill is designed to place self-
     employed individuals on an equal footing with large 
     businesses which can currently deduct 100% of the health 
     insurance costs of all of their employees.


                Restoration of the Home-Office Deduction

       Section 3 of the bill clarifies the definition of 
     ``principal place of business,'' which relates to the home-
     office deduction under section 280A of the Internal Revenue 
     Code. The bill permits a home office to include an office 
     where a taxpayer performs his or her essential administrative 
     or management activities such as billing and recordkeeping. 
     In order to qualify for the new definition, the taxpayer must 
     perform these activities on a regular, on-going, and non-
     incidental basis in the home office and have no other 
     location at which to perform these business activities. This 
     section of the bill will be effective on January 1, 1997.
       The bill is designed to address the ambiguities resulting 
     from the Supreme Court's 1993 decision, Commissioner v. 
     Soliman. That case has been interpreted to require two new 
     tests for the home-office deduction: (1) the customers of a 
     home business must physically visit the home office, and (2) 
     the taxpayer's business income must be generated within the 
     home office itself--not from transactions that occur outside 
     of the home office. The bill is intended to permit taxpayers 
     who perform their services outside the home but use their 
     home office for essential billing and recordkeeping to 
     qualify for the home-office deduction.


                Safe Harbor for Independent Contractors

       Section 4 of the bill addresses the worker-classification 
     issue (e.g., whether a worker is an employee or an 
     independent contractor) by creating a new section 3511 of the 
     Internal Revenue Code. The new section will provide a general 
     safe harbor and protection against retroactive 
     reclassification of an independent contractor in certain 
     circumstances. The bill is designed to provide certainty for 
     businesses that enter into independent-contractor 
     relationships and minimize the risk of huge tax bills for 
     back taxes, interest, and penalties if a worker is 
     misclassified.

                          General safe harbor

       Under the general safe harbor, if either of two tests is 
     met, an individual will be treated as an independent 
     contractor and the service recipient will not be treated as 
     an employer. The first test requires that the independent 
     contractor demonstrate economic independence and workplace 
     independence and have a written contract with the service 
     recipient.
       Economic independence exists if all of the following apply: 
     the independent contractor has the ability to realize a 
     profit or loss, he or she incurs unreimbursed expenses that 
     are consistent with industry practice and that equal at least 
     2 percent of the independent contractor's adjusted gross 
     income from the performance of services during the taxable 
     year, and the independent contractor agrees to perform 
     services for a particular amount of time or to complete a 
     specific result or task.
       Workplace independence exists if one of the following 
     applies: the independent contractor has a principal place of 
     business (the definition of which includes the provisions of 
     section 3 of the bill, which address the Soliman decision); 
     he or she performs services at more than one service 
     recipient's facilities; he or she pays a fair-market rent for 
     the use of the service recipient's facilities, or the 
     independent contractor uses his or her own equipment.
       The written contract between the independent contractor and 
     the service recipient must provide that the independent 
     contractor will not be treated as an employee.
       Under the second alternative test, an individual will be 
     treated as an independent contractor if he or she conducts 
     business through a corporation or a limited liability company 
     and the independent contractor does not receive benefits from 
     the service recipient--instead the independent contractor 
     would be responsible for his or her own benefits. The 
     independent contractor must also have a written contract with 
     the service provider stating that the independent contractor 
     will not be treated as an employee.
       The general safe-harbor provisions also apply to three-
     party situations in which the independent contractor is paid 
     by a third party, such as a payroll company, rather than 
     directly by the service recipient. The general safe harbor, 
     however, will not apply to a service recipient or a third-
     party payor if they do not comply with the existing reporting 
     requirements and file 1099s for individuals who work as 
     independent contractors. A limited exception is provided for 
     cases in which the failure to file a 1099 is due to 
     reasonable cause and not willful neglect.
       The bill also provides additional relief for cases in which 
     a worker is treated as an independent contractor under the 
     general safe harbor and the IRS later contends that the safe 
     harbor does not apply. In that case, the burden falls on the 
     IRS, rather than the taxpayer, to prove that the safe harbor 
     does not apply. To qualify for this relief the taxpayer must 
     demonstrate a credible argument that it was reasonable to 
     treat the service provider as an independent contractor, and 
     the taxpayer must fully cooperate with reasonable requests 
     from the IRS.
       In the event that the general safe harbor does not apply, 
     the bill makes clear that the independent contractor or 
     service recipient can still rely on the 20-factor common law 
     test or other provisions of the Internal Revenue Code 
     applicable in determining whether an individual is an 
     employee or an independent contractor. In addition, the bill 
     does not limit any relief that a taxpayer may be entitled to 
     under Section 530 of the Revenue Act of 1978. The bill also 
     makes clear that the general safe harbor will not be 
     construed as a prerequisite for these other provisions of the 
     law concerning worker classification.

            Protection against retroactive reclassification

       The bill also provides protection against retroactive 
     reclassification by the IRS of an independent contractor as 
     an employee. For many service recipients who make a good 
     faith effort to classify the worker correctly, this event can 
     result in extensive liability for back employment taxes, 
     interest, and penalties.
       Under the bill, if the IRS notifies a service recipient 
     that an independent contractor should have been classified as 
     an employee, the IRS' determination can become effective only 
     30 days after the date that the IRS sends the notification. 
     To qualify for this provision, the service recipient must 
     show that: There was a written agreement between the parties; 
     the service recipient satisfied the applicable reporting 
     requirements for all taxable years covered by the contract; 
     and there was a reasonable basis for determining that the 
     independent contractor was not an employee and the service 
     provider made the determination in good faith. The bill 
     provides similar protection for independent contractors who 
     are notified by the IRS that they should have been treated as 
     an employee.
       The protection against retroactive reclassification is 
     intended to remove some of the uncertainty for taxpayers who 
     must use the IRS's 20-factor common law test. While the bill 
     would prevent the IRS from forcing a service recipient to 
     treat an independent contractor as an employee for past 
     years, the bill makes clear that a service recipient or an 
     independent contractor can still challenge the IRS's 
     prospective reclassification of an independent contractor 
     through administrative or judicial proceedings.

              Additional independent contractor provisions

       Section 4 of the bill contains two additional provisions 
     designed to assist independent contractors. The first 
     clarifies that an individual's compliance with a statutory or 
     regulatory requirement will not be treated as evidence of 
     control. The 20-factor common law test focuses in part on the 
     business' control over a worker. When the business can direct 
     how, when and where a worker performs a task; such control 
     usually indicates that the worker is an employee rather than 
     an independent contractor. Certain statutory and regulatory 
     requirements, which a business and/or a worker must follow, 
     have been interpreted by the IRS as demonstrating evidence of 
     this type of control when the majority of other factors would 
     lead to the conclusion that a worker is an independent 
     contractor. The bill clarifies that compliance with statutory 
     or regulatory requirements should not be a factor in 
     determining whether an individual is an independent 
     contractor.
       Second, the bill would repeal section 530(d) of the Revenue 
     Act of 1978, which was added

[[Page S2433]]

     by section 1706 of the Tax Reform Act of 1986. This provision 
     precludes technical service providers (e.g., engineers, 
     designers, drafters, computer programmers, systems analysts, 
     and other similarly qualified individuals) who work through a 
     third party, such as a placement broker, from applying the 
     safe harbor under section 530. The bill is designed to level 
     the playing field for individuals in these professions.

                            Effective dates

       In general, the independent-contractor provisions of the 
     bill, including the general safe harbor, will be effective 
     for service performed after the date of enactment of the 
     bill. The protection against retroactive reclassification 
     will be effective for IRS determinations after the date of 
     enactment, and the repeal of section 530(d) will be effective 
     for periods ending after the date of enactment of the bill.

  Mr. NICKLES. Mr. President, I am pleased to join my friend and 
colleague from Missouri, Senator Bond, in the introduction of the Home-
Based Business Fairness Act. I compliment Senator Bond for his 
leadership on these issues and all matters affecting small business as 
chairman of the Senate Committee on Small Business.
  The small, independent business is the engine which drives 
innovation, job creation, and increased economic activity in this 
country. I am proud to live in a country where any person can use 
talent, intelligence, and hard work to start a business. I believe 
these businesses are the foundation of our free enterprise economy, and 
the very essence of capitalism.
  There are 5 million independent contractors in America according to 
the Small Business Administration, and almost one-third of all 
companies use independent contractors to some degree. Further, the SBA 
estimates that more than 14 million individuals earn some income from 
home-based businesses, and some 300,000 women start home-based 
businesses every year.
  Unfortunately, Mr. President, the Internal Revenue Code does not 
always treat small businesses fairly, and it often acts to limit and 
repress the entrepreneurial spirit. The legislation we are introducing 
today is intended to address some of the Tax Code's inequities and 
remove the roadblocks to the creation of new small businesses.
  A perfect example of the Tax Code's bias against small business is 
the treatment of health insurance expenses. Corporations can currently 
deduct 100 percent of the health insurance costs of their employees. As 
recently as 2 years ago, self-employed individuals were only allowed to 
deduct 25 percent of their health insurance costs. Fortunately, the 
Health Insurance Portability and Accountability Act of 1996 increased 
this limit to 40 percent this year, with a scheduled increase to 80 
percent by 2006. However, the bias against small business continues. 
Our legislation increases the deduction for health insurance cost for 
self-employed individuals to 100 percent beginning on January 1, 1997.
  For some small business taxpayers, the enemy has not been the IRS or 
the Congress, but the judiciary. A 1993 Supreme Court decision, 
Commissioner versus Soliman has been interpreted to require two new 
tests for the home-office deduction: First, the customers of a home 
business must physically visit the home office, and second, the 
taxpayer's business income must be generated within the home office 
itself--not from transactions that occur outside of the home office. 
This interpretation has effectively prevented millions of taxpayers 
from deducting valid, reasonable, and necessary business expenses. The 
Home-Based Business Fairness Act will permit taxpayers who perform 
their services outside the home but use their home office for essential 
billing and recordkeeping to qualify for the home-office deduction, 
provided they perform these activities on a regular, ongoing, and 
nonincidental basis in the home office and have no other location at 
which to perform these business activities. This section of the bill 
will be effective on January 1, 1997.
  Finally, Mr. President, our legislation addresses a major, continuing 
problem for the small business community. The problem is worker 
classification--independent contractor or employee. In a perfect world, 
this issue should be irrelevant. The relationship between a worker and 
a business would be strictly based on their individual needs, and the 
Government's only interest would be to collect the same amount of taxes 
regardless of the relationship.
  Unfortunately, however, this is not a perfect world. The complexity 
of the Tax Code and Congress' failure to provide adequate guidance to 
small businesses and their workers has resulted in a confusing mess. 
Left to their own devices, the Internal Revenue Service has adopted an 
aggressive, proemployee agenda.
  For the last 20 years, the classification of workers as contractors 
or employees has been controlled by a 20-factor common law test which 
attempts to define a business' control over a worker. This common law 
test is the bane of employers and workers across the country. The 
General Accounting Office has called the common law test unclear 
and subject to conflicting interpretations. Even the Treasury 
Department has testified that:

       Applying the common law test in employment tax issues does 
     not yield clear, consistent, or even satisfactory answers, 
     and reasonable persons may differ as to the correct 
     classification.

  Beyond the 20-factor test, some businesses may avail themselves of a 
safe harbor enacted in 1978. The section 530 safe harbor prohibits the 
IRS from reclassifying workers as employees if the business had a 
reasonable basis for treatment of the workers as independent 
contractors, or if a past IRS audit did not dispute the workers' 
classification.
  Our bill creates a new worker classification safe harbor and provides 
limited relief from retroactive worker reclassification, two changes 
which will resolve many of the problems small businesses face with the 
IRS. Our bill does not repeal the 20-factor common law test, it does 
not repeal the section 530 safe harbor, and it does not affect other 
special worker classification situations such as statutory employees or 
direct sellers. Put simply, our bill will benefit those businesses and 
contractors who have not resolved their status with the IRS, while 
preserving current law for those who are satisfied with it.
  To summarize briefly, our legislation protects businesses and 
contractors who meet one of two tests. The first test measures a 
worker's economic risk and workplace independence, and requires the two 
parties to have a written contract and comply with all tax reporting 
requirements. Under the second test, a worker who conducts business 
through a corporation or a limited liability company, does not receive 
benefits from the service recipient, and has a written contract will be 
treated as an independent contractor.
  Our bill also protects businesses from retroactive reclassification 
of workers and the associated liability for back taxes, interest, and 
penalties, provided the business had a written contract with the 
workers, complied with all tax reporting requirements, and had a 
reasonable basis to treat the workers as contractors. Finally, our 
legislation repeals section 1706 of the Tax Reform Act of 1986 which 
precludes third-party technical service workers from the section 530 
safe harbor, and it clarifies that compliance with a statutory or 
regulatory requirements will not be treated as evidence of control for 
the purpose of worker classification.
  Mr. President, the Tax Code reforms included in the Home-Based 
Business Fairness Act are commonsense solutions to the real problems 
faced by small businesses. With this bill, Senator Bond and I have 
tried to address those problems which we believe are most critical to 
the creation of new small businesses, new jobs, and new economic 
growth. I encourage my colleagues to give this legislation their 
thoughtful consideration and join us in this initiative.
  Mr. ENZI. Mr. President, I rise in strong support of The Home-Based 
Business Fairness Act of 1997, introduced today by the chairman of the 
Small Business Committee, Senator Bond. I know that Senator Bond, 
Senator Nickles and Senator Snowe have worked hard to draft this bill 
and I am proud to be an original cosponsor. It addresses three concerns 
that have weighed heavily on the small business community for years: 
First health insurance fairness; second the home-office deduction; and 
third the status of independent contractors. I hope the Senate and the 
House will move quickly to pass this legislation.
  It is a good bill because it responds directly to what small 
businesses have been asking us to do. It will help create

[[Page S2434]]

jobs that will put people on welfare back to work. This is an issue 
that policymakers have been concentrating on since last year's welfare 
debate--the President has proposed a Welfare to Work Program while 
Congress is looking at the best ways to stimulate the economy and 
create jobs. Toward that effort, it is impossible to overlook the 
importance of small business. Small businesses create nearly 100 
percent of this country's new jobs and employ over 65 percent of 
Americans working in the private sector. And I guarantee it would be 
small businesses that hire the majority of today's welfare recipients 
if Government would make it affordable to do so.
  Small business is more than the backbone of this country. Small 
business is the engine of the American Dream. But it needs a system 
that empowers people, not government. This bill would help people by 
removing just a couple of the obstacles in the way of that Dream.
  When I was elected to the Senate last November, my first choice of 
committee assignments was the Small Business Committee. My wife, Diana, 
and I were small businessowners and we have experienced--at one time or 
another--nearly all of the obstacles that can stand in the way of a 
successful small business. At this time last year, in fact, my wife and 
I were balancing our books and paying our taxes--hoping to find that 
the books still balanced after paying the taxes! So I know what small 
businessowners are going through. Very recently, I have been there.
  There is a lot of talk in this legislative body about improving the 
environment for small business. In fact, I doubt that any Member would 
stand up and say he or she does not support small business. We hold 
hearings and listen to testimony, we provide for White House 
conferences on small business, we receive stacks of polling data and we 
create commission after commission to tell us what needs to be done. In 
the end, we find out what I think we already know--the problem is 
taxes. Too many and too much.
  This bill is a small step in the Tax Code, but a giant step for 
sensibility. It recognizes some of the revolutionary changes in 
American business. The advent of personal computers, high speed modems, 
cell phones, pagers, and fax machines that have enabled Americans to 
work via audio and video conferencing, from satellite offices, and by 
telecommuting. Our tax laws have not kept up with the sea of change in 
American business.

  One example of this change is the increasing number of women in our 
Nation's work force. According to the Bureau of Labor Statistics, 76 
percent of mothers with school-age children now work. Among two-parent 
households, 63 percent report that both parents must work outside the 
home--in many cases, one works to pay the bills, while the other works 
to pay the taxes. And of these women entering the work force, 1 in 20 
are starting their own businesses and many are home based and that 
number is rising rapidly. In fact, women start new businesses at twice 
the rate of men--and with a very good success rate. But the Tax Code 
needs improvement. It discourages self-employment and home-based 
business through discrimination and complexity. This bill would change 
that.
  The Home-Based Business Fairness Act would finally put an end to our 
regressive, two-tiered system that makes self-employed people pay more 
for their health insurance. It is time to give small business 
competitive parity with big business. All the technical assistance and 
loan guarantees in the world cannot overcome unfair tax treatment and 
disproportionately burdensome regulations. Last year, Congress 
recognized the inequality by voting to phase in an 80-percent 
deductibility for health insurance costs. That's a good start. But if 
we know the tax treatment is not fair, then shouldn't we make it right? 
America's small businesses need fair and equal treatment.
  This legislation would also add fairness for people who work in their 
homes. Our current outdated Tax Code discriminates against home-based 
people by restricting their ability to deduct office expenses. The 
message is, if you can't afford a real office, then you can't deduct 
your expenses. In this way, we increase the hurdles for entrepreneurs 
who want to earn a living, but can't afford to rent separate office 
space. This part of the legislation will benefit thousands of home-
based women and men. It is very important and deserves a thoughtful 
consideration by the Senate.
  Another puzzling antibusiness setup that this bill would simplify is 
the definition of independent contractor. American entrepreneurs--and 
especially home-based business owners--need a simpler test. I have 
always believed we could make things a lot easier if we just followed 
the payroll taxes. Who pays them? Is there a written contract? It does 
not have to be ``rocket science.'' This legislation would simplify the 
test so that everyone can understand it--not just the tax attorneys at 
the Internal Revenue Service.
  On that subject, in Wyoming recently, the IRS has taken after the 
last bastion of budding entrepreneurs, our paper boys. Once again, the 
thirsty IRS auditors are devising ways to haunt working people--
presumed guilty until proven innocent. When did the IRS decide to pick 
on the hard-earned wages of independent paperboys and girls? They are 
not now, and never have been, salaried newspaper employees. They are 
just kids who want to earn some money by working before or after 
school.
  I think we should call this part of the bill, The Paperboy Protection 
Act. The last bastion for new entrepreneurs needs our help. The small 
business owners of tomorrow are counting on us to pass this 
legislation. I thank my colleagues on the Small Business Committee, and 
the assistant majority leader, for their hard work on the bill. I urge 
other Senators to support it.
                                 ______
                                 
       By Mrs. HUTCHISON (for herself, Mr. Inhofe, and Mr. Helms):
  S. 461. A bill to amend the Occupational Safety and Health Act of 
1970 and the National Labor Relations Act to modify certain provisions, 
to transfer certain occupational safety and health functions to the 
Secretary of Labor, and for other purposes; to the Committee on Labor 
and Human Resources.


         THE OCCUPATIONAL SAFETY AND HEALTH REFORM ACT OF 1997

  Mrs. HUTCHISON. Mr. President, I rise today to introduce, along with 
my colleagues, Mr. Inhofe and Mr. Helms, the Occupational Safety and 
Health Reform Act of 1997. This legislation will transform OSHA from an 
agency that generates fines and paperwork to one that plays a more 
constructive role in improving worker safety.
  Mr. President, the Occupational Safety and Health Act was enacted in 
1970. It may not surprise my colleagues that since that time, the 
incidence of work-related injuries and illnesses has steadily declined. 
But it may surprise them to learn that in the 25 years prior to 
enactment of OSHA, workplace injuries declined almost twice as fast as 
they have since the enactment of OSHA. The reduction of workplace 
injuries, which had been occurring before OSHA was created, has 
actually slowed since the agency was created.
  One may reasonably ask, why is that the case? Mr. President, I have 
talked to hundreds of business people throughout my State of Texas and 
throughout the Nation. Time and again, I have heard stories of 
burdensome and complex OSHA requirements and of arbitrary and unfair 
inspections and fines.
  The vast majority of other employers in this country desire and 
strive to see to it that their employees have a safe place to work. 
Indeed, it is in their own best interest to do so. Injuries are costly: 
They interrupt production schedules, cause a loss of productivity and 
increase the burgeoning expense of workers' compensation, not to 
mention the impact on overall employee morale and productivity.
  Many of the employers I speak with would like to work with, rather 
than against OSHA, but fear that if they take any affirmative steps to 
improve and review the safety of their workplace, it will only serve to 
attract aggressive OSHA inspectors. Thus, rather than helping to raise 
the safety level of American workers, the Occupational Safety and 
Health Act actually discourages employers in many cases from 
aggressively working to improve workplace health and safety.
  Remarkably, OSHA's response to the growing call for reform of its 
enforcement tactics has been to seek to expand its territory. Most 
recently,

[[Page S2435]]

OSHA has worked on establishing new and enormously costly standards on 
ergonomics and even on the prevention of nighttime crime at retail 
stores.

  Mr. President, when Congress established OSHA, it did so with the 
intent that the agency, employers, and employees would all work toward 
the common purpose of creating safer and healthier workplace 
environments. Unfortunately, the culture of OSHA has evolved into one 
of regulatory excess, punitive enforcement, and standard setting based 
on arbitrariness rather than sound cost/benefit analysis. Things have 
gotten so bad that OSHA inspectors have even testified that they have 
been required to meet monthly quotas for citations and fines.
  The bill I am introducing today will restore OSHA to its intended 
mission by requiring the agency to take a commonsense approach to 
establishing safety standards and by encouraging cooperation and 
voluntary improvement rather than confrontation. In brief, the bill:
  Requires that OSHA, prior to setting a new standard, establish that a 
worksite safety hazard exists and consider whether it can economically 
be corrected using feasible technology;
  It provides safety consultation and assistance to small businesses to 
encourage OSHA compliance;
  It gives employers an opportunity to correct problems identified by 
employees before a formal OSHA complaint is filed, and protects 
employees who raise safety concerns to their employers;
  It stops the practice of citing contractors for the violations of 
subcontractors whose employees are not under the contractor's control;
  It limits employers' liability for the unsafe conduct of employees 
who have been properly trained and equipped by their employer;
  It requires that fines for violations be proportional to their actual 
impact on employee safety; and
  It will end the de facto practice of establishing quotas for 
enforcement activities.
  Mr. President, I realize that there are employers out there who may 
not care about the safety of their employees. To them, I say, beware. 
Under this bill, OSHA will be freed to concentrate its resources and 
enforcement efforts on those employers who willfully disregard 
workplace safety.
  But to the other 99 percent of the honest, hardworking business 
people in America who want to do right by their employees, I say: We 
have heard your call for action, and help is on the way. I urge them 
and I urge my colleagues to support this important legislation.
  Mr. President, I ask unanimous consent that the text of my bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 461

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

     SECTION 1. SHORT TITLE; REFERENCE.

       (a) Short Title.--This Act may be cited as the 
     ``Occupational Safety and Health Reform Act of 1997''.
       (b) Reference.--Whenever in this Act 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 
     Occupational Safety and Health Act of 1970 (29 U.S.C. 651 et 
     seq.).

     SEC. 2. USE OF OSHA IN PRIVATE LITIGATION.

       Section 4(b)(4) (29 U.S.C. 653(b)(4)) is amended by adding 
     at the end the following: ``An allegation of a violation, a 
     finding of a violation, or an abatement of an alleged 
     violation, under this Act or the standards promulgated under 
     this Act shall not be admissible as evidence in any civil 
     action or used to increase the amount of payments received 
     under any workmen's compensation law for any work-related 
     injury.''.

     SEC. 3. DUTIES OF EMPLOYERS AND EMPLOYEES.

       Section 5 (29 U.S.C. 654) is amended by adding at the end 
     the following:
       ``(c) On multiemployer work sites, an employer may not be 
     cited for a violation of this section if the employer--
       ``(1) has no employees exposed to the violation; and
       ``(2) has not created the condition that caused the 
     violation or assumed responsibility for ensuring compliance 
     by other employers on the work site.''.

     SEC. 4. STANDARD SETTING.

       (a) Standards.--Section 6(b)(5) (29 U.S.C. 655(b)(5)) is 
     amended to read as follows:
       ``(5) The development of a standard under this section 
     shall be based on the latest scientific data in the field and 
     on research demonstrations, experiments, and other 
     information that may be appropriate. In establishing the 
     standard, the Secretary shall consider, and make findings 
     based on, the following factors:
       ``(A) The standard shall be needed to address a significant 
     risk of material impairment to workers and shall 
     substantially reduce that risk.
       ``(B) The standard shall be technologically and 
     economically feasible.
       ``(C) There shall be a reasonable relationship between the 
     costs and benefits of the standard.
       ``(D) The standard shall provide protection to workers in 
     the most cost-effective manner and minimize employment loss 
     due to the standard in the affected industries and sectors of 
     industries.
       ``(E) The standard shall set forth objective criteria and 
     the performance desired.''.
       (b) Variances.--Section 6(d) (29 U.S.C. 655(d)) is amended 
     by adding at the end the following: ``No citation shall be 
     issued for a violation of an occupational safety and health 
     standard that is the subject of a good faith application for 
     a variance during the period the application is pending 
     before the Secretary.''.
       (c) Standard Priorities.--The second sentence of section 
     6(g) (29 U.S.C. 655(g)) is amended to read as follows: ``In 
     determining the priority for establishing standards with 
     regard to toxic materials or the physical agents of toxic 
     materials, the Secretary shall consider the number of workers 
     exposed to the substance, the nature and severity of 
     potential impairment, and the likelihood of the impairment 
     based on information obtained by the Secretary from the 
     Environmental Protection Agency, the Department of Health and 
     Human Services, and other appropriate sources.''.
       (d) Regulatory Flexibility Analysis.--Section 6 (29 U.S.C. 
     655) is amended by adding at the end the following:
       ``(h) In promulgating an occupational safety and health 
     standard under subsection (b), the Secretary shall perform a 
     regulatory flexibility analysis described in sections 603 and 
     604 of title 5, United States Code.
       ``(i) In promulgating any occupational safety and health 
     standard under subsection (b), the Secretary shall minimize 
     the time, effort, and costs involved in the retention, 
     reporting, notification, or disclosure of information to the 
     Secretary, to third parties, or to the public. Compliance 
     with the requirement of this subsection may be considered in 
     a review of a petition filed under subsection (f).''.

     SEC. 5. INSPECTIONS.

       (a) Authority of Secretary.--Section 8(a) (29 U.S.C. 
     657(a)) is amended by striking paragraph (2) and inserting 
     the following:
       ``(2) to inspect and investigate during regular working 
     hours and at other reasonable times, and within reasonable 
     limits and in a reasonable manner, any such place of 
     employment and all pertinent conditions, structures, 
     machines, apparatus, devices, equipment, and materials in 
     such place of employment.

     In conducting inspections and investigations under paragraph 
     (2), the Secretary may question any such employer, owner, 
     operator, agent or employee. An interview of an employee by 
     the Secretary may only be in private with the consent of the 
     employee.''.
       (b) Recordkeeping.--
       (1) General maintenance.--The first sentence of section 
     8(c)(1) (29 U.S.C. 657(c)(1)) is amended to read as follows: 
     ``Each employer shall make, keep and preserve, and make 
     available, upon reasonable request and within reasonable 
     limits, to the Secretary or the Secretary of Health and Human 
     Services, such records regarding the activities of the 
     employer relating to this Act as the Secretary, in 
     cooperation with the Secretary of Health and Human Services, 
     may prescribe by regulation as necessary or appropriate for 
     the enforcement of this Act or for developing information 
     regarding the causes and prevention of occupational accidents 
     and illnesses.''.
       (2) Records or reports on injuries.--Section 8(c) (29 
     U.S.C. 657(c)) is amended by adding at the end the following:
       ``(4) In prescribing regulations under this subsection, the 
     Secretary may not require employers to maintain records of, 
     or to make reports on, injuries that do not involve lost work 
     time or that involve employees of other employers.
       ``(5) In prescribing regulations requiring employers to 
     report work-related deaths and multiple hospitalizations, the 
     Secretary shall include provisions that provide an employer 
     at least 24 hours in which to make the report.''.
       (c) Inspections Based on Employee Complaints.--Section 8(f) 
     (29 U.S.C. 657(f)) is amended to read as follows:
       ``(f)(1)(A) An employee or representative of an employee 
     who believes that a violation of a safety or health standard 
     promulgated under this Act exists in the place of employment 
     of the employee that threatens physical harm, or that an 
     imminent danger exists in the place of the employment of the 
     employee, may request an inspection by providing notice to 
     the Secretary or an authorized representative of the 
     Secretary of the violation or danger.
       ``(B) The notice under subparagraph (A) shall be reduced to 
     writing, shall set forth with reasonable particularity the 
     grounds for the notice, and shall state that the alleged 
     violation or danger described in this subparagraph has been 
     brought to the attention of the employer and the employer has 
     refused to take any action to correct the alleged violation 
     or danger.

[[Page S2436]]

       ``(C)(i) The notice under subparagraph (A) shall be signed 
     by the employee or representative of the employee and a copy 
     of the notice shall be provided to the employer or the agent 
     of the employer no later than the time of arrival of an 
     occupational safety and health agency inspector to conduct 
     the inspection.
       ``(ii) Upon the request of the employee providing the 
     notice under subparagraph (A), the name of the employee and 
     the names of individual employees referred to in the notice 
     shall not appear in the copy or on any record published, 
     released, or made available pursuant to subsection (i), 
     except that the name of the employee and the names of 
     individual employees shall not be privileged from discovery 
     in a contested case.
       ``(D) The Secretary may not make an inspection under this 
     subsection except upon request by an employee or a 
     representative of an employee.
       ``(E) If upon receipt of the notice under subparagraph (A), 
     the Secretary determines that the employee or the 
     representative of the employee has brought the alleged 
     violation or danger to the attention of the employer and the 
     employer has refused to take corrective action, and that 
     there are reasonable grounds to believe the alleged violation 
     or danger still exists, the Secretary shall make a special 
     inspection in accordance with this subsection not later than 
     30 days after the receipt of the notice under subparagraph 
     (A). The special inspection shall be conducted for the 
     limited purpose of determining whether the alleged violation 
     or danger exists.
       ``(2) If the Secretary determines either before, or as a 
     result of, an inspection that there are not reasonable 
     grounds to believe a violation or danger described in 
     paragraph (1)(A) exists, the Secretary shall notify the 
     complaining employee or the representative of the employee of 
     the determination and, upon request by the employee or the 
     representative of the employee, shall provide a written 
     statement of the reasons for the determination.''.
       (d) Training and Enforcement.--Section 8 (29 U.S.C. 657) is 
     amended--
       (1) by redesignating subsection (g) as subsection (j); and
       (2) by inserting after subsection (f) the following:
       ``(g) Inspections conducted under this section shall be 
     conducted by at least 1 person who has training in, and is 
     knowledgeable of, the industry or types of hazards being 
     inspected.
       ``(h)(1) Except as provided in paragraph (2), the Secretary 
     shall not conduct routine inspections of, or enforce any 
     standard, rule, regulation, or order under this Act with 
     respect to--
       ``(A) an employer who is engaged in a farming operation 
     that does not maintain a temporary labor camp and employs 50 
     or fewer employees; or
       ``(B) an employer of not more than 50 employees if the 
     employer is included within a category of employers having an 
     occupational injury or a lost workday case rate (determined 
     under the Standard Industrial Classification Code for which 
     such data are published) that is less than the national 
     average rate as most recently published by the Secretary 
     acting through the Bureau of Labor Statistics under section 
     24.
       ``(2) In the case of an employer described in subparagraph 
     (B) of paragraph (1), such paragraph shall not be construed 
     to prohibit the Secretary, with respect to the employer, 
     from--
       ``(A) providing under this Act consultations, technical 
     assistance, and educational and training services;
       ``(B) conducting under this Act surveys and studies;
       ``(C) conducting inspections or investigations in response 
     to employee complaints, issuing citations for violations of 
     this Act found during an inspection, and assessing a penalty 
     for the violations that are not corrected within a reasonable 
     abatement period;
       ``(D) taking any action authorized by this Act with respect 
     to imminent dangers;
       ``(E) taking any action authorized by this Act with respect 
     to a report of an employment accident that is fatal to at 
     least 1 employee or that results in hospitalization of at 
     least 3 employees and taking any action pursuant to an 
     investigation of such report; and
       ``(F) taking any action authorized by this Act with respect 
     to a complaint of discrimination against employees for 
     exercising their rights under this Act.
       ``(i) Any records or other information created by or for an 
     employer for the purpose of conducting safety and health 
     inspections, audits, or reviews not required by this Act 
     shall not be required to be disclosed by the employer or the 
     agent of the employer in any inspection, investigation, or 
     enforcement proceeding conducted pursuant to this Act.''.

     SEC. 6. VOLUNTARY COMPLIANCE.

       (a) Program.--The Occupational Safety and Health Act of 
     1970 (21 U.S.C. 651 et seq.) is amended by inserting after 
     section 8 the following:

     ``SEC. 8A. VOLUNTARY COMPLIANCE.

       ``(a) In General.--The Secretary shall by regulation 
     establish a program to encourage voluntary employer and 
     employee efforts to provide safe and healthful working 
     conditions.
       ``(b) Exemption.--In establishing a program under 
     subsection (a), the Secretary shall, in accordance with 
     subsection (c), provide an exemption from all safety and 
     health inspections and investigations with respect to a place 
     of employment maintained by the employer participating in the 
     program, except that this subsection shall not apply to 
     inspections and investigations conducted for the purpose of--
       ``(1) determining the cause of a workplace accident that 
     resulted in the death of 1 or more employees or the 
     hospitalization of 3 or more employees; or
       ``(2) responding to a request for an inspection pursuant to 
     section (8)(f)(1).
       ``(c) Requirements for Exemption.--In order to qualify for 
     the exemption provided under subsection (b), an employer 
     shall provide to the Secretary evidence that--
       ``(1) the place of employment of the employer or conditions 
     of employment have, during the preceding year, been reviewed 
     or inspected under--
       ``(A) a consultation program provided by any State agency 
     relating to occupational safety and health;
       ``(B) a certification or consultation program provided by 
     an insurance carrier or other private business entity 
     pursuant to a State program, law, or regulation; or
       ``(C) a workplace consultation program provided by any 
     other person certified by the Secretary for purposes of 
     providing workplace consultations; or
       ``(2) the place of employment has an exemplary safety 
     record and the employer maintains a safety and health program 
     for the workplace that--
       ``(A) includes--
       ``(i) procedures for assessing hazards to the employees of 
     the employer that are inherent to the operations or business 
     of the employer;
       ``(ii) procedures for correcting or controlling the hazards 
     in a timely manner based on the severity of the hazard; and
       ``(iii) employee participation in the program including, at 
     a minimum--

       ``(I) regular consultation between the employer and the 
     nonsupervisory employees of the employer regarding safety and 
     health issues; and
       ``(II) the opportunity for the nonsupervisory employees of 
     the employer to make recommendations regarding hazards in the 
     workplace and to receive responses or to implement 
     improvements in response to the recommendations; and

       ``(B) that requires that participating nonsupervisory 
     employees of the employer have training or expertise on 
     safety and health issues consistent with the responsibilities 
     of the employees.

     A program under subparagraph (A) or (B) of paragraph (1) 
     shall include methods that ensure that serious hazards 
     identified in the consultation are corrected within an 
     appropriate time.
       ``(d) Certification.--The Secretary may require that an 
     employer in order to claim the exemption under subsection (b) 
     provides certification to the Secretary, and notice to the 
     employees of the employer, of the eligibility of the employer 
     for an exemption.''.
       (b) Definition.--Section 3 (29 U.S.C. 652) is amended by 
     adding at the end the following:
       ``(15) The term `exemplary safety record' means that an 
     employer has had, in the most recent annual reporting of the 
     employer required by the Occupational Safety and Health 
     Administration, no employee death caused by occupational 
     injury and fewer lost workdays due to occupational injury and 
     illness than the average for the industry of which the 
     employer is a part.''.

     SEC. 7. EMPLOYER DEFENSES.

       Section 9 (29 U.S.C. 658) is amended by adding at the end 
     the following:
       ``(d) No citation may be issued under subsection (a) to an 
     employer unless the employer knew or with the exercise of 
     reasonable diligence would have known of the presence of an 
     alleged violation. No citation shall be issued under 
     subsection (a) to an employer for an alleged violation of 
     section 5, any standard, rule, or order promulgated pursuant 
     to section 6, any other regulation promulgated under this 
     Act, or any other occupational safety and health standard, if 
     the employer demonstrates that--
       ``(1) employees of the employer have been provided with the 
     proper training and equipment to prevent such a violation;
       ``(2) work rules designed to prevent such a violation have 
     been established and adequately communicated to employees by 
     the employer; and
       ``(3) the failure of employees to observe work rules led to 
     the violation.
       ``(e) A citation issued under subsection (a) to an employer 
     that violates the requirements of any standard, rule, or 
     order promulgated pursuant to section 6 or any other 
     regulation promulgated under this Act shall be vacated if the 
     employer demonstrates that employees of the employer were 
     protected by alternative methods that were equally or more 
     protective of the safety and health of the employees than the 
     methods required by the standard, rule, order, or regulation 
     in the factual circumstances underlying the citation.
       ``(f) Subsections (d) and (e) shall not be construed to 
     eliminate or modify other defenses that may exist to any 
     citation.''.

     SEC. 8. THE OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION.

       (a) Procedure for Enforcement.--
       (1) Notification.--The first sentence of section 10(b) (29 
     U.S.C. 659(b)) is amended to read as follows: ``If the 
     Secretary has reason to believe an employer has failed to 
     correct a violation, for which a citation has been issued, 
     within the period permitted for the correction of the 
     violation, the Secretary

[[Page S2437]]

     shall notify the employer by certified mail of such failure 
     and of the penalty proposed to be assessed under section 17 
     by reason of such failure, and that the employer has 15 
     working days after the receipt of such a notification to 
     notify the Secretary that the employer desires to contest the 
     notification of the Secretary or the proposed assessment of 
     penalty. The period for the correction of the violation 
     described in the first sentence shall not begin to run until 
     the time for contestation has expired or the entry of a final 
     order by the Commission in a contested case initiated by the 
     employer in good faith and not solely for delay or avoidance 
     of penalties.''.
       (2) Burden of proof.--Section 10 (29 U.S.C. 659) is amended 
     by adding at the end the following:
       ``(d) In all hearings before the Commission relating to a 
     contested citation, there shall be no presumption of a 
     violation of standard, or an existence of a hazard, under 
     this Act. In such cases, the Secretary shall have the burden 
     of proving by a preponderance of the evidence--
       ``(1) the existence of a violation;
       ``(2) that the violation for which the citation was issued 
     constitutes a realistic hazard to the safety and health of 
     the affected employees;
       ``(3) that there is a likelihood that the hazard will 
     result in employee injury;
       ``(4) that the employer knew or with the exercise of 
     reasonable diligence should have known of the hazard and 
     violation; and
       ``(5) that a technically and economically feasible method 
     of compliance exists.''.
       (b) Judicial Review.--Section 11(a) (29 U.S.C. 660(a)) is 
     amended by inserting after ``conclusive.'' at the end of the 
     sixth sentence the following: ``The court shall make its own 
     determination as to questions of law, including the 
     reasonable interpretation of standards promulgated under this 
     Act, and shall not accord deference to either the Commission 
     or the Secretary.''.

     SEC. 9. DISCRIMINATION.

       (a) Complaint.--Section 11(c)(2) (29 U.S.C. 660(c)(2)) is 
     amended to read as follows:
       ``(2)(A)(i) Any employee who believes that such employee 
     has been discharged or otherwise discriminated against by the 
     employer of the employee in violation of this subsection may, 
     within 30 days after such violation occurs, file a complaint 
     with the Secretary alleging the discrimination.
       ``(ii) A complaint may not be filed under clause (i) after 
     the expiration of the 30-day period described in such clause.
       ``(B)(i) Upon receipt of a complaint under subparagraph (A) 
     and as the Secretary considers appropriate, the Secretary 
     shall conduct an investigation.
       ``(ii) If upon such investigation, the Secretary determines 
     that the provisions of this subsection have been violated, 
     the Secretary shall attempt to eliminate the alleged 
     violation by informal methods.
       ``(iii) Nothing stated or done, during the use of the 
     informal methods applied under clause (ii) may be made public 
     by the Secretary or used as evidence in any subsequent 
     proceeding.
       ``(iv) The Secretary shall make a determination concerning 
     the complaint as soon as possible and, in any event, not 
     later than 90 days after the date of the filing of the 
     complaint.
       ``(C) If the Secretary is unable to resolve the alleged 
     violation through informal methods, the Secretary shall 
     notify the parties in writing that conciliation efforts have 
     failed.
       ``(D)(i) Not later than 90 days after the date on which the 
     Secretary notifies the parties under subparagraph (C) in 
     writing that conciliation efforts have failed, the Secretary 
     may bring an action in any appropriate United States district 
     court against an employer described in subparagraph (A).
       ``(ii) The employer against whom an action under clause (i) 
     is brought may demand that the issue of discrimination be 
     determined by jury trial.
       ``(E) Upon a showing of discrimination in an action brought 
     under subparagraph (D)(i), the Secretary may seek, and the 
     court may award, any and all of the following types of 
     relief:
       ``(i) An injunction to enjoin a continued violation of this 
     subsection.
       ``(ii) Reinstatement of the employee to the same or 
     equivalent position.
       ``(iii) Reinstatement of full benefits and seniority 
     rights.
       ``(iv) Compensation for lost wages and benefits.
       ``(F) This subsection shall be the exclusive means of 
     securing a remedy for any aggrieved employee.''.
       (b) Access to Records.--Section 11(c)(3) (29 U.S.C. 
     660(c)(3)) is amended to read as follows:
       ``(3) Any records of the Secretary, including the files of 
     the Secretary, relating to investigations and enforcement 
     proceedings pursuant to this subsection shall not be subject 
     to inspection and examination by the public while such 
     inspections and proceedings are pending in the United States 
     district court.''.

     SEC. 10. INJUNCTION AGAINST IMMINENT DANGER.

       Section 13 (29 U.S.C. 662) is amended--
       (1) by striking subsection (c);
       (2) by redesignating subsections (a) and (b) as subsections 
     (b) and (c), respectively; and
       (3) by inserting before subsection (b) (as so redesignated 
     by paragraph (2)) the following:
       ``(a)(1)(A)(i) If the Secretary determines, on the basis of 
     an inspection or investigation under this section, that a 
     condition or practice in a place of employment is such that 
     an imminent danger to safety or health exists that could 
     reasonably be expected to cause death or serious physical 
     harm or permanent impairment of the health or functional 
     capacity of employees if not corrected immediately or before 
     the imminence of such danger can be eliminated through the 
     enforcement procedures otherwise provided by this Act, the 
     Secretary--
       ``(I) may inform the employer, and provide notice, by 
     posting at the place of employment, to the affected employees 
     of the danger; and
       ``(II) shall request the employer that the condition or 
     practice be corrected immediately or that the affected 
     employees be immediately removed from exposure to such 
     danger.
       ``(ii) A notice under clause (i) shall be removed by the 
     Secretary from the place of employment not later than 72 
     hours after the notice was first posted unless a court in a 
     proceeding under subsection (c) requires that the notice be 
     maintained.
       ``(B) The Secretary shall not prevent the continued 
     activity of the employees of the employer whose presence in 
     the place of employment is necessary--
       ``(i) to avoid, correct, or remove the imminent danger;
       ``(ii) to maintain the capacity of a continuous process 
     operation to resume the normal operations of the employer 
     without a cessation of the operations; or
       ``(iii) to permit the cessation of the operations of the 
     employer to be accomplished in a safe and orderly manner, 
     where the cessation of the operations is necessary.
       ``(2) No employer shall discharge, or in any manner 
     discriminate against any employee, because the employee has 
     refused to perform a duty that has been identified as the 
     source of an imminent danger by a notice posted pursuant 
     to paragraph (1).''.

     SEC. 11. SMALL BUSINESS ASSISTANCE AND TRAINING.

       Section 16 (29 U.S.C. 665) is amended--
       (1) by inserting ``(a)'' after ``16.''; and
       (2) by adding at the end the following:
       ``(b) The Secretary shall publish and make available to 
     employers a model injury prevention program that if completed 
     by the employer shall be deemed to meet the requirement for 
     an exemption under section 8A or a reduction in penalty under 
     section 17(a)(3)(B).
       ``(c) The Secretary shall establish and implement a program 
     to provide technical assistance and consultative services for 
     employers and employees, either directly or by grant or 
     contract, concerning work site safety and health and 
     compliance with this Act. The assistance shall be targeted at 
     small employers and the most hazardous industries.
       ``(d) Consultative services shall be provided to employers 
     through cooperative agreements between the States and the 
     Occupational Safety and Health Administration. The 
     consultative services provided under a cooperative agreement 
     under this subsection shall be the same type of services 
     described in part 1908 of title 39 of the Code of Federal 
     Regulations.
       ``(e) Not less than one-fourth of the annual appropriation 
     made to the Secretary to carry out this Act shall be expended 
     for the activities described in this section.''.

     SEC. 12. PENALTIES.

       (a) In General.--Section 17 (29 U.S.C. 666) is amended--
       (1) by striking subsections (a), (b), (c), (f), (i), (j), 
     and (k);
       (2) by redesignating subsections (d), (e), (g), (h), and 
     (l) as subsections (b), (c), (d), (e), and (f), respectively; 
     and
       (3) by inserting after ``17.'' the following:
       ``(a)(1) Any employer who violates the requirements of 
     section 5, any standard, rule, or order promulgated pursuant 
     to section 6, or any other regulation promulgated under this 
     Act may be assessed a civil penalty of not more than $7,000. 
     The Commission shall have authority to assess all civil 
     penalties provided for in this section, giving due 
     consideration to the appropriateness of the penalty with 
     respect to--
       ``(A) the size of the employer;
       ``(B) the number of employees exposed to a violation;
       ``(C) the likely severity of any injuries directly 
     resulting from the violation;
       ``(D) the probability that the violation could result in 
     injury or illness;
       ``(E) the good faith of the employer in correcting the 
     violation after the violation has been identified;
       ``(F) the extent to which employee misconduct was 
     responsible for the violation; and
       ``(G) the effect of the penalty on the ability of the 
     employee to stay in business.
       ``(2) In assessing penalties for violations under this 
     section, the Commission shall have authority to determine 
     whether violations should be classified as willful, repeated, 
     serious, other than serious, or de minimus. Regardless of the 
     classification of a violation, there shall be only 1 penalty 
     assessed for each violation. The Commission may not enhance 
     the penalty based on the number of employees exposed to the 
     violation or the number of instances of the same violation.
       ``(3)(A) A penalty assessed under paragraph (1) shall be 
     reduced by 25 percent in any case in which the employer--
       ``(i) maintains a written safety and health program for the 
     work site where the violation, for which the penalty was 
     assessed, occurred; or

[[Page S2438]]

       ``(ii) shows that the work site where the violation, for 
     which the penalty was assessed, occurred has an exemplary 
     safety record.
       ``(B) If the employer maintains a program described in 
     subparagraph (A)(i) and has the record described in 
     subparagraph (A)(ii), the penalty shall be reduced by 50 
     percent.
       ``(4) No penalty shall be assessed against an employer for 
     a violation other than a violation previously cited by the 
     Secretary, a violation that creates an imminent danger, a 
     violation that has caused death, or a willful violation that 
     has caused serious injury to an employee, unless the 
     Secretary provides--
       ``(A) the employer with a written notification of the 
     violation; and
       ``(B) the employer a reasonable time (but not less than 10 
     days after the receipt by the employer of the written 
     notification) to correct the violation.''.
       (b) Criminal Penalties.--Section 17(c) (29 U.S.C. 666(c)) 
     (as so redesignated by subsection (a)) is amended by adding 
     at the end the following: ``No employer shall be subject to 
     any State or Federal criminal prosecution arising out of a 
     workplace accident other than under this subsection.''.

     SEC. 13. TRANSFER OF CERTAIN OCCUPATIONAL SAFETY AND HEALTH 
                   FUNCTIONS.

       (a) Transfer of Functions; Repeal.--
       (1) National institute of occupational safety and health.--
     The functions and authorities provided to the National 
     Institute of Occupational Safety and Health under section 22 
     of the Occupational Safety and Health Act of 1970 (29 U.S.C. 
     671) are transferred to the Secretary of Labor.
       (2) Secretary of health and human services.--The 
     responsibilities and authorities of the Secretary of Health 
     and Human Services under sections 20, 21, and 22 of the 
     Occupational Safety and Health Act of 1970 (29 U.S.C. 669, 
     670, and 671) are transferred to the Secretary of Labor.
       (3) Repeal.--Section 22 (29 U.S.C. 671) is repealed.
       (b) Additional Functions.--In carrying out the functions 
     transferred under subsection (a), the Secretary of Labor 
     shall take such actions as are necessary to avoid duplication 
     of programs and to maximize training, education, and research 
     under the Occupational Safety and Health Act of 1970 (29 
     U.S.C. 671 et seq.).
       (c) References.--
       (1) In general.--Each reference in any other Federal law, 
     Executive order, rule, regulation, or delegation of 
     authority, or any document of or relating to--
       (A) the head of the transferred office, or the Secretary of 
     Health and Human Services, with regard to functions 
     transferred under subsection (a), shall be deemed to refer to 
     the Secretary of Labor; and
       (B) a transferred office with regard to functions 
     transferred under subsection (a), shall be deemed to refer to 
     the Department of Labor.
       (2) Definition.--For the purpose of this subsection, the 
     term ``office'' includes any office, administration, agency, 
     institute, unit, organizational entity, or component thereof.
       (d) Conforming Amendments.--Not later than 180 days after 
     the effective date of this Act, if the Secretary of Labor 
     determines (after consultation with the appropriate 
     committees of Congress and the Director of the Office of 
     Management and Budget) that technical and conforming 
     amendments to Federal statutes are necessary to carry out the 
     changes made by this section, the Secretary of Labor shall 
     prepare and submit to Congress recommended legislation 
     containing the amendments.

     SEC. 14. ECONOMIC IMPACT ANALYSIS.

       The Secretary of Labor shall conduct a continuing 
     comprehensive analysis of the costs and benefits of each 
     standard in effect under section 6 of the Occupational Safety 
     and Health Act of 1970 (29 U.S.C. 655). The Secretary shall 
     report the results of the analysis to Congress upon the 
     expiration of the 2-year period beginning on the date of 
     enactment of this Act and every 2 years thereafter.

     SEC. 15. LABOR RELATIONS.

       (a) Definitions.--Paragraph (5) of section 2 of the 
     National Labor Relations Act (29 U.S.C. 152(5)) is amended by 
     adding at the end the following: ``The term does not include 
     a safety committee that is comprised of an employer and the 
     employees of the employer and that is jointly established by 
     the employer and the employees of the employer, or by the 
     employer and a labor organization representing the employees 
     of the employer, to carry out efforts to reduce injuries and 
     disease arising out of employment.''.
       (b) Unfair Labor Practices.--Section 8(a)(2) of the 
     National Labor Relations Act (29 U.S.C. 158(a)(2)) is amended 
     by inserting before the semicolon at the end the following: 
     ``: Provided further, That it shall not constitute an unfair 
     practice under this paragraph for an employer and the 
     employees of the employer, or for an employer and a labor 
     organization representing the employees of the employer, to 
     jointly establish a safety committee in which the employer 
     and the employees of the employer carry out efforts to reduce 
     injuries and disease arising out of employment''.
                                 ______
                                 
      By Mr. MACK (for himself, Mr. D'Amato, Mr. Bond, Mr. Faircloth 
        and Mr. Grams):

  S. 462. A bill to reform and consolidate the public and assisted 
housing programs of the United States, and to redirect primary 
responsibility for these programs from the Federal Government to States 
and localities, and for other purposes; to the Committee on Banking, 
Housing, and Urban Affairs.


        THE PUBLIC HOUSING REFORM AND RESPONSIBILITY ACT OF 1997

  Mr. MACK. Mr. President, I am today introducing, along with Senators 
D'Amato, Bond, Faircloth, and Grams, the Public Housing Reform and 
Responsibility Act of 1997. This bill is similar to public and assisted 
housing reform legislation, S. 1260, that was introduced in the 104th 
Congress and passed unanimously by the Senate.
  The Public Housing Reform and Responsibility Act of 1997 addresses a 
public housing system fraught with counterproductive rules and 
regulations that make it impossible for even the best run public 
housing authorities [PHA's] to operate effectively and efficiently. It 
will help to make public housing a platform from which residents can 
achieve the goal of economic independence and self-sufficiency. In 
addition, it promotes increased residential choice and mobility by 
increasing opportunities for residents to use tenant-based assistance.
  Most public housing today serves only the poorest of the poor--on 
average those with incomes at 17 percent of area median. The gap 
between tenant rent contributions and the cost of operating public 
housing is growing wider than the ability of Federal housing subsidy 
funds to close it. PHA's are denied the flexibility necessary to 
maintain the existing supply of public housing in decent and safe 
condition, and in some cases are even constrained from demolishing 
vacant or nonviable public housing developments.
  Just as these rules have made it difficult for housing authorities to 
provide and maintain decent and safe housing or to meet basic operating 
costs, these rules have been even worse for tenants. They have 
destroyed the ability of families to move up and out of public housing 
and become economically self-sufficient. Public housing rent rules, in 
particular, create strong economic disincentives for residents to work 
or seek higher paying jobs.
  The following reforms contained in the Public Housing Reform and 
Responsibility Act represent significant improvements in current public 
and assisted housing policies.
  First, the bill consolidates a multitude of programs into two 
flexible block grants to expand the eligible uses of funds and allow 
more creative and efficient use of resources. The bill also repeals a 
number of current programs that are obsolete, unused, or unfunded.
  Second, it institutes permanent rent reforms such as ceiling rents, 
earned income adjustments, and minimum rents that provide PHA's with 
the tools to develop rental policies that encourage and reward work and 
further the goal of creating mixed-income communities. The bill also 
removes the floor on rents that may be charged under the Brooke 
amendment, while assuring that poor families will not pay more than 30 
percent of their income for rent.
  Third, the bill requires tough, swift action against PHA's with 
severe management deficiencies and provides HUD or court-appointed 
receivers with the necessary tools and powers to deal with troubled 
agencies and protect public housing residents.
  Fourth, it requires intervention with respect to severely distressed 
public housing developments that trap residents in deplorable living 
conditions and are costly to operate or maintain. It provides residents 
with alternative housing using vouchers or other available housing.
  Fifth, the bill permanently repeals the one-for-one replacement 
requirement and streamlines the demolition and disposition process to 
permit PHA's to demolish or sell vacant or obsolete public housing.
  Sixth, it gives PHA's broad flexibility to develop or participate 
with other providers of affordable housing in the development of mixed-
income, mixed finance developments.
  Seventh, it repeals Federal preferences that have had the unintended 
consequence of concentrating the poorest of the poor in public housing 
developments and allows PHA's to operate according to locally 
established preferences consistent with local housing

[[Page S2439]]

needs. The bill still maintains the requirement that most housing 
assistance be targeted to very low-income households.
  Eighth, the Public Housing Reform and Responsibility Act calls on 
PHA's to increase coordination with State and local welfare agencies to 
ensure that welfare recipients living in public housing will have the 
full opportunity to move from welfare to work.
  Ninth, the bill provides residents with an active voice in developing 
the local PHA plans that will govern the operations and management of 
housing and for direct participation on housing authority boards of 
directors. It also authorizes funds for resident organizations to 
develop resident management and empowerment activities.
  Finally, it merges the Section 8 voucher and certificate programs 
into a single, choice-based program designed to operate more 
effectively in the private marketplace. It repeals requirements that 
are administratively burdensome to landlords, such as take-one, take-
all, endless lease and 90-day termination notice requirements. These 
reforms will make participation in the section 8 tenant-based program 
more attractive to private landlords and increase housing choices for 
lower income families.
  The reforms contained in this legislation will significantly improve 
the nation's public housing and tenant-based rental assistance program 
and the lives of those who reside in Federally assisted housing. The 
funding flexibility, substantial deregulation of the day-to-day 
operations and policies of public authorities, encouragement of mixed-
finance developments, policies to deal with distressed and troubled 
public housing, and rent reforms will change the face of public housing 
for PHA's, residents, and local communities.
  Reform of the public housing system has been and should remain a 
bipartisan effort. I look forward to working with all of my colleagues 
toward early passage of this legislation.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                          ____________________