[Congressional Record Volume 144, Number 20 (Wednesday, March 4, 1998)]
[Senate]
[Pages S1336-S1341]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. MOSELEY-BRAUN (for herself, Mr. Moynihan, Mrs. Murray, Mr. 
        Kennedy, Mr. Graham, Mr. Daschle, Mr. Reid, Mr. Glenn, Mr. 
        Lautenberg, Mr. Levin, Mr. Kerry, and Mr. Reed):
  S. 1705. A bill to amend the Internal Revenue Code of 1986 to expand 
the incentives for the construction and renovation of public schools; 
to the Committee on Finance.


              THE PUBLIC SCHOOL MODERNIZATION ACT OF 1998

  Ms. MOSELEY-BRAUN. Mr. President, I send to the desk a bill and ask 
for its appropriate referral.
  The PRESIDING OFFICER. The bill will be received and appropriately 
referred.
  Ms. MOSELEY-BRAUN. Mr. President, today I am pleased to introduce, 
along with a number of my colleagues, the Public School Modernization 
Act of 1998. This legislation addresses one of the most fundamental 
problems with public education in America, and that is that many of our 
elementary and secondary schools are literally falling down around our 
children.
  The Public School Modernization Act of 1998 will help States and 
school districts finance their school improvement priorities. It will 
help them modernize classrooms so that no child misses out on the 
information age. It will help them ease overcrowding so that no child 
is forced to learn the principles of geometry in a gymnasium. It will 
help them patch leaky roofs, fix broken plumbing, and strengthen the 
facilities that provide the foundation for our children's education. 
Without this support, schools will continue to crumble under the weight 
of deferred maintenance and neglect, and our children's education, and 
their future, and our Nation's future, will suffer as a result.
  Education in America correlates with opportunity for individuals, but 
also for our country as a whole. The rungs of the ladder of opportunity 
in America are crafted in the classroom. Consider that high school 
graduates earn 46 percent more each year than those who don't graduate 
from high school. 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 Americans. So education is clearly related to 
individual prosperity and the ability of people to function in this new 
economy.
  Education also correlates to almost all indicia of economic and 
social well-being. Educational attainment can directly be tied to 
income, to health, to the likelihood of being on welfare, to the 
likelihood of being incarcerated in a prison, and to the likelihood of 
voting and participating in our democracy.
  However, education is more than a tool simply to lift people out of 
poverty or to provide a better standard of living for individuals. It 
is also the engine that will drive America's economy in the 21st 
century. In a Wall Street Journal survey last year of leading U.S. 
economists, 43 percent of them said that the single most important 
thing that we could do to increase our long-term economic growth would 
be to invest more in education and research and development. Nothing 
else came close to education in that 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.''
  A recent study by the Manufacturing Institute concluded that 
increasing the education level of workers by 1 year raises the 
productivity level by 8.5 percent in manufacturing. Imagine, Mr. 
President, if you will, that in this global economy, the only way we 
will be able to hold on to our position as the country in the world 
with the highest standard of living is if we prepare our work force--as 
a whole, all of our workers--to compete at the highest level of 
competition and to produce at the highest level of productivity.

[[Page S1337]]

  The Public School Modernization Act of 1998 represents the kind of 
investment that will result in better futures for our children and a 
better future for our country. The bill strengthens the fundamental 
tenet of American education--local control. By helping schools finance 
their capital improvement priorities, the Federal Government can free 
local resources for educational activities and can help give 
communities the kind of buildings that they need before they can 
implement the kinds of school reforms that parents and educators are 
demanding.
  The Public School Modernization Act of 1998 creates a 
simple, effective, and easy-to-administer means of helping communities 
modernize their schools. The bill creates a new category of zero coupon 
bonds for States and school districts to issue to finance capital 
improvements. It allocates $21.8 billion worth of bonding authority to 
States and large school districts over the next 2 years.

  Over 5 years, the bill will cost our National Government only $3.3 
billion, but $21.8 billion worth of new construction and modernization 
will be made available by that $3.3 billion, which means for every 
Federal dollar that we invest over the next 5-year period, there will 
be an additional 6.6 in State and local dollars. That is a pretty good 
leverage capacity from this kind of investment.
  Perhaps most important, though, Mr. President, is that this bill is 
bureaucracy-free, or as close to bureaucracy-free as we can manage. 
States and school districts need only to comply with two main 
requirements before issuing these new school modernization bonds. 
First, they must conduct a survey of their school facility needs, which 
you would think that every school district would have already, but the 
truth is they don't, yet. Second, they must describe how they intend to 
allocate the bonding authority to assure that schools with the greatest 
needs and the least resources benefit. That is it. Those are the only 
strings. There is no reapplying for funds, no continuous oversight, no 
getting individual projects approved by some Federal agency. The plan 
is simple. It will work. And it will strengthen local schools.
  Mr. President, 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 kinds of skills 
they will need to compete in the 21st century, global economy.
  We commissioned a study by the GAO a couple years ago. What they 
concluded was that every day some 14 million children in this country--
14 million children--attend schools in need of major renovations or 
outright replacement, 7 million children every day attend schools with 
life-threatening safety code violations, and it will cost $112 billion 
to bring the schools up to code. This is not bells and whistles, this 
is not equipping them with computers and fancy new cosmetics, but just 
to address the toll that decades of deferred maintenance have taken on 
our school facilities across this country.
  In my State of Illinois, school modernization and construction needs 
top $13 billion. Many of our school districts have a difficult time 
enough just buying textbooks, pencils, and teacher salaries, let alone 
financing capital improvements. This would free local resources for 
education by providing Federal support for bricks and mortar.
  By the way, the national school repair price tag, as enormous as it 
sounds, does not include the cost of wiring our schools for modern 
technology. One of the greatest barriers to the incorporation of modern 
computers into classrooms is the physical condition of many school 
buildings. You can't very well use a computer if you don't have an 
electrical system working in the wall to plug it into. According to the 
GAO study, almost half of all schools--half of all schools--lack enough 
electrical power for the full-scale use of computers, 60 percent lack 
the conduits to connect classroom computers to a network, and more than 
60 percent of the schools lack enough phone lines for instructional 
use.
  Last year, principal Rita Melius from Waukegan, IL, came to 
Washington and told of her experience with computer technology at her 
school. She thought she was doing the right thing by equipping her 
schools with modern school technology, but when she deployed the 
computers around the schools, fires started in the building because the 
wiring was so old. Her experience is being replicated all over this 
country as communities try to bring their schools into the information 
age. This legislation will give Ms. Melius, and others like her, the 
resources to modernize their classrooms.

  Mr. President, it will also give communities the power to relieve 
overcrowding. According to the U.S. Department of Education, just to 
keep up with growing enrollment, we will need to build some 6,000 new 
schools over the next 10 years.
  I have visited schools in Illinois where study halls are being held 
in the hallways, literally, because there is no other space. I have 
seen stairway landings converted into computer labs. I have seen 
cardboard partitions used to turn one classroom into two. I point out, 
Mr. President, that particular school was in what could be called a 
basement. It wasn't exactly a basement, it was at ground level, but 
they had cardboard separating two classes from each other. There is a 
school, frankly, where the lunchroom has been converted into two 
classrooms, where students eat in the gymnasium. And instead of having 
gym, they have ``adaptive physical education'' while they stand next to 
their desks, because the gyms are being used for lunchrooms. It is 
really shameful, Mr. President, and it is the situation that we find in 
almost a third of the schools in this country.
  Again, I point out that this phenomenon is not just an inner-city 
problem. It exists in rural communities and suburban communities as 
well--just about one-third in each type of community across the United 
States.
  Teachers and parents know full well that these conditions directly 
affect the ability of their children to learn, and research backs up 
that intuition. Two separate studies found a 10 to 11 percent 
achievement gap between those students in good buildings and those in 
shabby or poor buildings, after controlling for all other factors.
  Other studies have found that when buildings are in poor condition, 
students are more likely to misbehave. Three leading researchers 
recently concluded, ``. . .there's no doubt that building condition 
affects academic performance.''
  This morning, in a press conference in which a student from a local 
school talked about overcrowded conditions, he mentioned that they were 
having discipline problems from fights breaking out from what he called 
``hall rage,'' because the overcrowding situation in the school was so 
perverse and extreme that students were literally bumping into each 
other trying to move from class to class. So we have a situation here 
in which academic performance is affected.
  I think it is time to mention something at this point. We just saw, 
this week, the grades come in on an international math and science 
test. The results were profoundly disturbing. American students scored 
close to the bottom, or at the bottom, on every math and physics test 
offered.
  Now, here we are. A new study of high school seniors in 23 countries 
shows U.S. students scored significantly lower than students in other 
countries. This is in math, nations with scores above the international 
level: Netherlands, Sweden, Denmark, Switzerland, Iceland, and Norway. 
Nations with scores close to the international average: Italy, Russia, 
Lithuania, Czech Republic, and the United States. Nations lower than 
the international level: Cyprus and South Africa. We are in the 
category of nations with scores lower than the international level, 
which includes: France, Russia, Switzerland, Denmark, Cyprus, 
Lithuania, Australia, Greece, Sweden, Canada, Slovenia, Italy, Czech 
Republic, Germany, and the United States is next to last in advanced 
mathematics. In physics: Norway, Sweden, Russia, Denmark, Slovenia, 
Germany, Australia, Cyprus, Latvia, Greece, Switzerland, Canada, 
France, Czech Republic, Austria, and the United States. We are last. 
From the President down to the local township officials, this should be 
a clarion call that we have to work to improve the quality of our 
schools.

[[Page S1338]]

  Our school facilities problems directly result, Mr. President, from 
our archaic school funding formula and system. The current system, the 
way we fund schools, was established a century ago when the Nation's 
wealth was measured in terms of property wealth, in terms of 
landholdings. Wealth is no longer accumulated just in land, and the 
funding mechanism that ties funding of our education to the local 
property tax is no longer appropriate, nor is it adequate.

  Again, according to the GAO, poor and middle-class school districts 
try the hardest to raise revenue from the property tax, but the system 
works against them. In some 35 States, poor districts--that is, 
districts with smaller property tax bases--have higher tax rates than 
wealthy districts, but they raise less revenue because there is less 
property wealth to tax.
  This local funding model, this model of depending on the local 
property tax to fund education, does not work for school 
infrastructure, just as it would not work for our highways or any other 
infrastructure.
  It is ironic that we are here talking about the highway bill. Imagine 
what would happen if we based our system of roads on the same funding 
model we use for education. Imagine if every community was responsible 
for the construction and maintenance of the roads within its borders. 
In all likelihood, we would see smooth, good roads in the wealthy 
towns, a patchwork of mediocre roads in middle-income towns, and very 
few roads at all in poor communities. Transportation would be hostage 
to the vagaries of wealth and geography. Commerce and travel would be 
difficult, and navigation of such a system would not serve the best 
interests of our whole country. That hypothetical, unfortunately, 
precisely describes the way that we fund our public education system.
  I believe we need a new approach. We need a partnership among all 
levels of government and the private sector that preserves local 
control in education but creates a financing balance that better serves 
local property taxpayers, children, schools, and indeed our entire 
country. This new act I am introducing today represents such a new 
partnership. It is a simple and effective means of leveraging limited 
Federal resources, strengthening local control of education, and 
improving the educational opportunity for every child.
  I urge my colleagues to take a close look at the needs of the schools 
in their own States and decide what they stand for: higher property 
taxes and crumbling schools, or lower property taxes and a new 
partnership to improve our schools for the 21st century. I believe that 
we have some opportunities here.
  Again, I have visited a lot of schools and I have seen what happens 
when we engage the resources sufficient to provide an environment and 
support needed for our children to learn. American kids are no dumber 
than kids anywhere else in the world. There is no reason for us to be 
at the bottom of this international testing. It is not their fault. It 
is our fault for failing to engage appropriately, to give public 
education the kind of support that it needs to have.
  Now, there is some good news I would like to call to your attention. 
A group of some 20 Illinois school districts, led by Superintendent 
Paul Kimmelman, banded together to form a group called the First in the 
World Consortium. Their goal was to score first in the world on the 
international math and science test. At the same time that these 
results came out, Mr. President, the results from the First in the 
World Consortium came out also. They succeeded. The students in that 
consortium placed first in the world when compared with other 
countries, which is far above the dismal performance of our country as 
a whole.
  What does this consortium have that the schools in our country lack? 
It is not the makeup of students. The kids are as capable anywhere in 
the country, whether they come from rich families or poor families. We 
have some of the brightest students in the world, who need only the 
opportunity to learn. The difference, however, is what supports we, as 
a community, a national community, can provide for them--schools with 
first-rate facilities, small classes, modern technology, and supportive 
communities.
  So I hope that we will all take a look at the importance of this 
legislation. This is a way that we can engage the support of the 
National Government, our national community, acting in our national 
interest to serve our most important resource, which is our children. 
If we don't invest in them and if we don't build up these schools, many 
of which were built--I am making an assumption about age, but when you 
and I were in grammar school, Mr. President, these schools were built 
almost a generation ago and, in many instances, more than a generation 
ago. That generation saw fit to provide facilities that were suitable 
for learning. That we have not, I believe, speaks volumes for us.
  I think our generation has an absolute obligation and duty to provide 
for this generation, the next generation of Americans, no less an 
opportunity than we inherited from the last generation of Americans. We 
have a duty to see to it that they have the ability to get educated and 
to take their talent as far as those talents will take them, to 
maximize the ability of every person to rise to the absolute best level 
that he or she can, based on his or her natural talents.
  Those natural talents, though, Mr. President, have to be nurtured in 
an environment and in facilities that are suitable for learning. This 
legislation will begin, hopefully, to create the kind of partnership 
that will allow the National, State, and local governments to stop the 
finger-pointing, stop the blame game, stop pushing the buck, and say it 
is somebody else's duty, or responsibility, or fault, and allow us to 
come together on behalf of what is clearly in our interest as citizens 
not only of cities and States and local communities, but as citizens of 
this great country.
  This is why we have to come together. This is why we have to put the 
old, tired arguments behind us. This is why I think we should take a 
variety of ideas and put them out so that we can reach a consensus on 
getting some results, getting results that will serve our children's 
interests.
  The public certainly wants us to do it. According to a bipartisan 
poll released earlier this year, some 76 percent of registered voters 
would support a $30 billion, 10-year Federal commitment to rebuild and 
modernize our schools. This legislation provides for that kind of a 
partnership. I certainly hope, Mr. President, that the Members of this 
body will review the GAO reports regarding their own States, because 
this is not just an Illinois problem, this is not just a North Carolina 
problem, or a Wyoming problem; this is a problem for America, and every 
State in this country has the same problem in the same ways. I urge 
them to examine the reports by the General Accounting Office regarding 
the condition of schools in their States, I ask them to examine the 
report of the General Accounting Office regarding the property tax 
dependence in their States, and I urge them to sign on and cosponsor 
this legislation.
  Mr. President, I ask unanimous consent that the bill and a summary of 
the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1705

       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 ``Public School Modernization 
     Act of 1998''.

     SEC. 2. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

       (a) In General.--Part IV of subchapter U of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to incentives for 
     education zones) is amended to read as follows:

 ``PART IV--INCENTIVES FOR QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS

``Sec. 1397E. Credit to holders of qualified public school 
              modernization bonds.
``Sec. 1397F. Qualified zone academy bonds.
``Sec. 1397G. Qualified school construction bonds.

     ``SEC. 1397E. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified public school modernization bond on the 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year the amount 
     determined under subsection (b).
       ``(b) Amount of Credit.--

[[Page S1339]]

       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any qualified public 
     school modernization bond is the amount equal to the product 
     of--
       ``(A) the credit rate determined by the Secretary under 
     paragraph (2) for the month in which such bond was issued, 
     multiplied by
       ``(B) the face amount of the bond held by the taxpayer on 
     the credit allowance date.
       ``(2) Determination.--During each calendar month, the 
     Secretary shall determine a credit rate which shall apply to 
     bonds issued during the following calendar month. The credit 
     rate for any month is the percentage which the Secretary 
     estimates will on average permit the issuance of qualified 
     public school modernization bonds without discount and 
     without interest cost to the issuer.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Public School Modernization Bond; Credit 
     Allowance Date.--For purposes of this section--
       ``(1) Qualified public school modernization bond.--The term 
     `qualified public school modernization bond' means--
       ``(A) a qualified zone academy bond, and
       ``(B) a qualified school construction bond.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means, with respect to any issue, the last day of the 
     1-year period beginning on the date of issuance of such issue 
     and the last day of each successive 1-year period thereafter.
       ``(e) Other Definitions.--For purposes of this part--
       ``(1) Local educational agency.--The term `local 
     educational agency' has the meaning given to such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965. Such term includes the local educational agency that 
     serves the District of Columbia but does not include any 
     other State agency.
       ``(2) Bond.--The term `bond' includes any obligation.
       ``(3) State.--The term `State' includes the District of 
     Columbia and any possession of the United States.
       ``(4) Public school facility.--The term `public school 
     facility' shall not include any stadium or other facility 
     primarily used for athletic contests or exhibitions or other 
     events for which admission is charged to the general public.
       ``(f) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section and the amount so included shall be 
     treated as interest income.
       ``(g) Bonds Held By Regulated Investment Companies.--If any 
     qualified public school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.

     ``SEC. 1397F. QUALIFIED ZONE ACADEMY BONDS.

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     part--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(D) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(E)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) providing equipment for use at such academy,
       ``(C) developing course materials for education to be 
     provided at such academy, and
       ``(D) training teachers and other school personnel in such 
     academy.
       ``(5) Temporary period exception.--A bond shall not be 
     treated as failing to meet the requirement of paragraph 
     (1)(A) solely by reason of the fact that the proceeds of the 
     issue of which such bond is a part are invested for a 
     reasonable temporary period (but not more than 36 months) 
     until such proceeds are needed for the purpose for which such 
     issue was issued. Any earnings on such proceeds during such 
     period shall be treated as proceeds of the issue for purposes 
     of applying paragraph (1)(A).
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $1,400,000,000 for 1999,
       ``(C) $1,400,000,000 for 2000, and
       ``(D) except as provided in paragraph (3), zero after 2000.
       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998 limitation.--The national zone academy bond 
     limitation for calendar year 1998 shall be allocated by the 
     Secretary among the States on the basis of their respective 
     populations of individuals below the poverty line (as defined 
     by the Office of Management and Budget).
       ``(ii) Limitation after 1998.--The national zone academy 
     bond limitation for any calendar year after 1998 shall be 
     allocated by the Secretary among the States in the manner 
     prescribed by section 1397G(d); except that, in making the 
     allocation under this clause, the Secretary shall take into 
     account Basic Grants attributable to large local educational 
     agencies (as defined in section 1397G(e)).
       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State education agency to qualified 
     zone academies within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) with respect to qualified 
     zone academies within such State,

     the limitation amount under this subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. The preceding sentence shall not apply 
     if such following calendar year is after 2002.

     ``SEC. 1397G. QUALIFIED SCHOOL CONSTRUCTION BONDS.

       ``(a) Qualified School Construction Bond.--For purposes of 
     this part, the term `qualified school construction bond' 
     means any bond issued as part of an issue if--

[[Page S1340]]

       ``(1) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a public school facility,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(3) the issuer designates such bond for purposes of this 
     section, and
       ``(4) the term of each bond which is part of such issue 
     does not exceed 15 years.

     Rules similar to the rules of section 1397F(a)(5) shall apply 
     for purposes of paragraph (1).
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
     There is a national qualified school construction bond 
     limitation for each calendar year. Such limitation is--
       ``(1) $9,700,000,000 for 1999,
       ``(2) $9,700,000,000 for 2000, and
       ``(3) except as provided in subsection (f), zero after 
     2000.
       ``(d) Half of Limitation Allocated Among States.--
       ``(1) In general.--One-half of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     among the States under paragraph (2) by the Secretary. The 
     limitation amount allocated to a State under the preceding 
     sentence shall be allocated by the State education agency to 
     issuers within such State and such allocations may be made 
     only if there is an approved State application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     the States in proportion to the respective amounts each such 
     State 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 
     ending before such calendar year. For purposes of the 
     preceding sentence, Basic Grants attributable to large local 
     educational agencies (as defined in subsection (e)) shall be 
     disregarded.
       ``(3) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,

     is not less than an amount equal to such State's minimum 
     percentage of one-half of the national qualified school 
     construction bond limitation under subsection (c) for the 
     calendar year.
       ``(B) Minimum percentage.--A State's minimum percentage for 
     any calendar year is the minimum percentage described in 
     section 1124(d) of the Elementary and Secondary Education Act 
     of 1965 (20 U.S.C. 6334(d)) for such State for the most 
     recent fiscal year ending before such calendar year.
       ``(4) Allocations to certain possessions.--The amount to be 
     allocated under paragraph (1) to any possession of the United 
     States other than Puerto Rico shall be the amount which would 
     have been allocated if all allocations under paragraph (1) 
     were made on the basis of respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget). In making other allocations, the 
     amount to be allocated under paragraph (1) shall be reduced 
     by the aggregate amount allocated under this paragraph to 
     possessions of the United States.
       ``(5) Approved state application.--For purposes of 
     paragraph (1), the term `approved State application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the State with the involvement of local 
     education officials, members of the public, and experts in 
     school construction and management) of such State's needs for 
     public school facilities, including descriptions of--
       ``(i) health and safety problems at such facilities,
       ``(ii) the capacity of public schools in the State to house 
     projected enrollments, and
       ``(iii) the extent to which the public schools in the State 
     offer the physical infrastructure needed to provide a high-
     quality education to all students, and
       ``(B) a description of how the State will allocate to local 
     educational agencies, or otherwise use, its allocation under 
     this subsection to address the needs identified under 
     subparagraph (A), including a description of how it will--
       ``(i) give highest priority to localities with the greatest 
     needs, as demonstrated by inadequate school facilities 
     coupled with a low level of resources to meet those needs,
       ``(ii) use its allocation under this subsection to assist 
     localities that lack the fiscal capacity to issue bonds on 
     their own, and
       ``(iii) ensure that its allocation under this subsection is 
     used only to supplement, and not supplant, the amount of 
     school construction, rehabilitation, and repair in the State 
     that would have occurred in the absence of such allocation.

     Any allocation under paragraph (1) by a State education 
     agency shall be binding if such agency reasonably determined 
     that the allocation was in accordance with the plan approved 
     under this paragraph.
       ``(e) Half of Limitation Allocated Among Largest School 
     Districts.--
       ``(1) In general.--One-half of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     under paragraph (2) by the Secretary among local educational 
     agencies which are large local educational agencies for such 
     year. No qualified school construction bond may be issued by 
     reason of an allocation to a large local educational agency 
     under the preceding sentence unless such agency has an 
     approved local application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     large local educational agencies in proportion to the 
     respective amounts each such agency 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 ending before such calendar year.
       ``(3) Large local educational agency.--For purposes of this 
     section, the term `large local educational agency' means, 
     with respect to a calendar year, any local educational agency 
     if such agency is--
       ``(A) among 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, or
       ``(B) 1 of not more than 25 local educational agencies 
     (other than those described in clause (i)) that the Secretary 
     of Education determines (based on the most recent data 
     available satisfactory to the Secretary) are in particular 
     need of assistance, based on a low level of resources for 
     school construction, a high level of enrollment growth, or 
     such other factors as the Secretary deems appropriate.
       ``(4) Approved local application.--For purposes of 
     paragraph (1), the term `approved local application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the local educational agency with the 
     involvement of school officials, members of the public, and 
     experts in school construction and management) of such 
     agency's needs for public school facilities, including 
     descriptions of--
       ``(i) the overall condition of the local educational 
     agency's school facilities, including health and safety 
     problems,
       ``(ii) the capacity of the agency's schools to house 
     projected enrollments, and
       ``(iii) the extent to which the agency's schools offer the 
     physical infrastructure needed to provide a high-quality 
     education to all students,
       ``(B) a description of how the local educational agency 
     will use its allocation under this subsection to address the 
     needs identified under subparagraph (A), and
       ``(C) a description of how the local educational agency 
     will ensure that its allocation under this subsection is used 
     only to supplement, and not supplant, the amount of school 
     construction, rehabilitation, or repair in the locality that 
     would have occurred in the absence of such allocation.

     A rule similar to the rule of the last sentence of subsection 
     (d)(5) shall apply for purposes of this paragraph.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds
       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,

     the limitation amount under such subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. A similar rule shall apply to the 
     amounts allocated under subsection (e). The subsection shall 
     not apply if such following calendar year is after 2002.''.
       (b) Reporting.--Subsection (d) of section 6049 of such Code 
     (relating to returns regarding payments of interest) is 
     amended by adding at the end the following new paragraph:
       ``(8) Reporting of Credit on Qualified Public School 
     Modernization Bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest` includes amounts includible in gross income under 
     section 1397E(f) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1397E(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''

[[Page S1341]]

       (c) Clerical Amendments.--
       (1) The table of parts for subchapter U of chapter 1 of 
     such Code is amended by striking the item relating to part IV 
     and inserting the following new item:

``Part IV. Incentives for qualified public school modernization 
              bonds.''.

       (2) Part V of subchapter U of chapter 1 of such Code is 
     amended by redesignating both section 1397F and the item 
     relating thereto in the table of sections for such part as 
     section 1397H.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to obligations 
     issued after December 31, 1998.
       (2) Repeal of restriction on zone academy bond holders.--
     The repeal of the limitation of section 1397E of the Internal 
     Revenue Code of 1986 (as in effect on the day before the date 
     of the enactment of this Act) to eligible taxpayers (as 
     defined in subsection (d)(6) of such section) shall apply to 
     obligations issued after December 31, 1997.
                                                                    ____


                              Bill Summary

       The Public School Modernization Act creates and expands tax 
     incentives to help States and school districts meet their 
     school modernization and construction priorities. The bill 
     includes two major provisions.


                  Qualified school modernization bonds

       The bill allows state and local governments to issue 
     ``qualified school modernization bonds'' to fund the 
     construction, modernization, and rehabilitation of public 
     schools. Bondholders, instead of receiving interest, would 
     receive annual Federal income tax credits. The maximum term 
     of the bonds would be 15 years.
       A total of $9.7 billion of authority to issue qualified 
     school modernization bonds would be allowed in each of 1999 
     and 2000, half to States and half to the 100 school districts 
     with the largest numbers of poor children (The District of 
     Columbia is considered a State.) The authority allocated to 
     the 100 large districts would be based on the amounts of 
     Federal assistance received under Title I, Basic Grants. In 
     addition, the Secretary of Education would have the authority 
     to designate 25 additional districts to receive bond 
     authority directly from the Federal government. The authority 
     allocated to States would also be based on the State's share 
     of Title I, Basic Grants, excluding the 100 large districts 
     and any others designated by the Secretary to receive bond 
     authority directly from the Federal government. A small 
     portion of the total amount of bond authority would be set 
     aside for each U.S. possession (other than Puerto Rico, which 
     is considered a State) based on its share of the total U.S. 
     poverty population. A State, possession, or eligible school 
     district would be permitted to carry forward any unused 
     portion of its allocation until September 30, 2003.
       Under the proposal, a bond would be treated as a qualified 
     school modernization bond if three requirements are met. 
     First, the Department of Education must approve a school 
     construction plan of the State, territory, or school district 
     that: (1) demonstrates that a survey has been undertaken of 
     the construction and renovation needs in the jurisdiction, 
     (2) describes how the jurisdiction will assure that bond 
     proceeds are used for the purposes of this proposal, and (3) 
     explains how it will use its allocation to assist localities 
     that lack the fiscal capacity to issue bonds on their own. 
     Second, the issuing government must receive an allocation for 
     the bond from the State, territory, or eligible district. 
     Third, 95 percent or more of the bond proceeds must be used 
     to construct or rehabilitate public school facilities.


                      Qualified Zone Academy Bonds

       The bill makes three changes to the existing qualified zone 
     academy bonds (created in the Taxpayer Relief Act of 1997). 
     First, the bill increases the 1999 bond cap from $400 million 
     to $1.4 billion and adds an additional $1.4 billion of bond 
     cap in 2000. Second, the bill expands the list of permissible 
     uses of proceeds to include new school construction. Third, 
     the bill sets the maximum term of qualified zone academy 
     bonds at 15 years.
       Qualified zone academy bonds can be used by school 
     districts, starting this year, for school improvement 
     purposes. The subsidy mechanism is the same as with the new 
     school modernization bonds--Federal tax credits to 
     bondholders in lieu of interest--but there are several 
     requirements associated with zone academy bonds. First, 
     schools must secure 10% of the funding for the school 
     improvement project from the private sector before issuing 
     the zone academy bonds. Second, the school must work with the 
     private sector to enhance the curriculum and increase 
     graduation rates and employment rates. Finally, in order to 
     be eligible, the school must either have 35% of students 
     eligible for the free- and reduced-price lunch program, or be 
     located in an empowerment zone or enterprise community.


                                  cost

       The Joint Committee on Taxation estimates the total cost of 
     this proposal is $3.3 billion/5 years and $9 billion/10 
     years. The Department of Treasury estimates the cost is $5 
     billion/5 years.
       The proposal is fully paid for within President Clinton's 
     balanced budget.

  Mr. KENNEDY. Mr. President, I am honored to be a sponsor of the 
Public School Modernization Act of 1998, introduced today by Senator 
Moseley-Braun to help communities across the country in their struggle 
to modernize, repair, and rebuild their school facilities.
  Schools across the nation face serious problems of overcrowding. 
Antiquated facilities are suffering from physical decay, and are not 
equipped to handle the needs of modern education.
  Across the country, 14 million children in a third of the nation's 
schools are learning in substandard buildings. Half the schools have at 
least one unsatisfactory environmental condition. It will take over 
$100 billion just to repair existing facilities nationwide.
  Massachusetts is no exception. 41% of our schools across the state 
report that at least one building needs extensive repair or should be 
replaced. Three-quarters report serious problems in buildings, such as 
plumbing or heating defects. 80% have at least one unsatisfactory 
environmental factor.
  In Boston, many schools cannot keep their heating systems functioning 
properly. On a given day, 15 to 30 schools complain that their heat is 
not working.
  The leaking roof at Revere High School is so serious that the new 
fire system is threatened. School Committee members estimate that 
fixing the roof will cost an additional $1 million, and they don't know 
where to get the money.
  It is difficult enough to teach or learn in dilapidated classrooms. 
But now, because of escalating enrollments, those classrooms are 
increasingly overcrowded. The nation will need 6,000 new schools in the 
next few years, just to maintain current class sizes.
  State governments and local communities are working hard to meet 
these challenges. In Massachusetts, under the School Building 
Assistance Act, the state will pay 50-90% of the most severe needs. 124 
schools now have approved projects, and are on a waiting list for 
funding. The state share should be $91 million this year, but only $35 
million is available. More than 50 other projects are awaiting 
approval. With that kind of deficit at the state and local level, it is 
clear that the federal government has a responsibility to act.
  I am pleased that President Clinton has made this issue one of his 
highest priorities. The legislation we are introducing will allow 
states and local governments to issue $22 billion in bonds over the 
next five years for school repairs and construction. Half of the amount 
will go to state governments, and the other half will go to the 100 
cities across the nation with the largest numbers of low-income 
children, including Boston and Springfield. The bonds will be interest-
free for the states and cities--Uncle Sam will pay the interest.
  Under this plan, the state government in Massachusetts can issue $230 
million in bonds for construction and renovation of school buildings. 
The City of Boston can issue an additional $90 million, and the City of 
Springfield can issue an additional $36 million, so that a total of 
$356 million in bonds will be available to help Massachusetts schools 
under this legislation.
  Good teaching and good schools are threatened if school buildings are 
unsafe and need repairs. President Clinton has made it a top priority 
to see that America has the best public schools in the world. And my 
Democratic colleagues and I intend to do all we can to see that we 
reach that goal.
  Investing in schools is one of the best investments America can 
possibly make. For schools across America, help is truly on the way--
and it can't come a minute too soon.
                                 ______