[Congressional Record Volume 144, Number 26 (Thursday, March 12, 1998)]
[Senate]
[Pages S1887-S1890]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN:
  S. 1173. A bill to amend the Internal Revenue Code of 1986 to 
encourage school construction and rehabilitation through the creation 
of a new class of bond, and for other purposes; to the Committee on 
Finance.


          the expand and rebuild america's schools act of 1998

  Mrs. FEINSTEIN. Mr. President, today I am introducing a bill to help 
our public schools reduce overcrowding. The bill is the companion of 
H.R. 2695, a bill introduced by my California colleague, Representative 
Loretta Sanchez, a member of the House Education and Workforce 
Committee.


                            the legislation

  This legislation has several major provisions:
  It provides a tax credit for the bond holders of school construction 
bonds. Under the 1997 Taxpayer Relief Act, schools which meet specific 
criteria can issue ``qualified zone academy bonds.'' The bonds generate 
a tax credit, rather than interest, for the bond holder, but can only 
be used to rehabilitate existing schools, not construct new facilities. 
Our bill allows the credit for school construction, as well.
  It revises the criteria to address high growth areas and increase the 
number of schools who qualify. Under current law, only school districts 
with a poverty rate of 35 percent or more (as measured by participation 
in the school lunch program) and can demonstrate public support by 
raising at least 10 percent of the bond amount from private individuals 
or companies could take advantage of the credit. State education 
officials indicate schools, particularly small districts who need 
federal assistance, have difficulty reaching the private support 
requirement. This bill deletes the private support requirement of 
current law.
  To qualify to use the bonds, the bill requires schools to meet state 
academic achievement standards and to have an average student-teacher 
ratio of 28 to one. Clear student achievement standards are essential 
to make schools accountable for learning and many states are developing 
those standards. California, for example, has adopted math and language 
content standards. Research shows that smaller classes improve learning 
and teaching and California is now implementing a class size reduction 
program in grades K-3.
  Under the bill, bonds may be used if school districts meet one of 
three criteria:
  The school is over 30 years old or the bonds will be used to install 
advanced or improved telecommunications equipment;
  The student growth rate will be at least 10 percent over the nest 5 
years; and
  The construction or rehabilitation is needed to meet natural disaster 
requirements.
  The legislation focuses the tax credit assistance on our most serious 
construction needs. In my State, for example, 60 percent of our schools 
are over 30 years old and our schools must be built to withstand 
earthquakes, floods, El Nino and other natural disasters. California's 
State earthquake building standards can add 3 to 4 percent to 
construction costs.
  The bond program will provide important assistance for school 
districts across America. Because the bonds provide a tax credit to the 
bond holder, the bond is supported by the Federal treasury, not the 
local school district. This helps small and low-income area school 
districts, because low-income communities with the highest school 
rehabilitation/construction needs may have to pay the highest interest 
rates in order to issue the bonds, if they can be issued at all.

[[Page S1888]]

                      school enrollment is soaring

  Our public schools face a daunting challenge for the 21st century. 
This year, a record 52.2 million children will attend America's 
schools, a growth trend that will continue, reaching more than 54 
million by 2007.
  Growth over the next decade will be most severe at the secondary 
school level, with enrollment growth expected to grow by 1.7 million or 
more than 13 percent.
  Nearly one-half of all states will experience a 15 percent growth in 
the number of public high school graduates by 2007.
  More than one-third of the nation's existing schools are currently 
over 50 or more years old and need to be repaired or replaced.
  Unlike the previous baby boom, there will be no sharp decline in 
enrollment after 2007; enrollment will maintain a stable level 
afterwards. Thus, school districts face escalating long-term needs.
  Schools are costly. Modern schools are a significant investment for 
even the wealthiest of communities. Average elementary school 
construction costs are $6.3 million, while average high school 
construction costs exceed $15 million. School facilities can be well 
beyond the reach of many local communities. The federal government 
should become a partner by providing targeted assistance for high 
growth areas.


                        the california challenge

  In California, construction needs are soaring. My state will have the 
nation's largest enrollment increases of all states during the next ten 
years.
  California's 18.3 percent school enrollment rate will triple the U.S. 
rate of 5.7 percent between 1996 and 2006.
  Each year between 160,000 and 190,000 new students enter California 
classrooms.
  California's high school enrollment is projected to increase by 35.3 
percent by 2007. Approximately 920,000 students are expected to be 
admitted to schools in the State during that period, boosting total 
enrollment from 5.6 million to 6.8 million.
  California needs to build 12 new classrooms a day until 2001 just to 
keep up with the growth in student population.
  The California Department of Finance forecasts that the State must 
spend $22 billion on schools during the next decade to keep pace with 
growth and to modernize and repair schools that have been allowed to 
deteriorate.
  Based on growth forecasts, California would need to add about 327 
schools over the next three years just to keep pace with the projected 
growth. Yet these phenomenal construction rates would only maintain 
current use and would not even begin to relieve current overcrowding.
  In addition to new facilities, existing education facilities need to 
be renovated to meet today's learning needs. Today's schools require a 
modern infrastructure, with wiring capable of meeting today's computer 
needs. However, more than 60 percent of California's schools were built 
over 30 years ago. According to the General Accounting Office, 87 
percent of the public schools in California indicate they need to 
upgrade and repair buildings.
  The burden on local school districts is overwhelming school districts 
and local taxpayers. As an example, in order to build it's way out of 
overcrowding, Oceanside School District in San Diego, would need to 
build four elementary schools, two middle schools, and a high school at 
an estimated cost of $110 to $140 million.
  In addition to these pressures, our state, commendably, is reducing 
class sizes in grades K through 3 because smaller classes improve 
teaching and learning. We have the largest pupil-teacher ratios on the 
country and fortunately, are beginning to address what is a most 
serious education problem. But smaller classes mean more classrooms.
  In short, California's needs are immense and States and local 
communities need the federal partner.


                         important to education

  School overcrowding places a heavy burden on teachers and students. 
Studies show that the test scores of students in schools in poor 
condition can fall as much as 11 percentage points behind scores of 
students in good buildings. Other studies show improvements of up to 20 
percent in test scores when students move to a new facility.
  Here are several examples of the toll that crowding is taking in my 
State.
  At Horace Mann Year-round School in Oakland, increasing enrollment 
and class size reductions require some teachers and students to pack up 
and move to a new classroom every month.

  At John Muir Elementary School in San Bruno, one class spent much of 
the year on the stage of the school's multipurpose room as it waited 
for portables to arrive.
  Anaheim City School District has a 6% enrollment growth rate, double 
the state average and recently approved the purchase of 10 portable 
buildings, at a cost of $235,000 to relieve overcrowding.
  This bill will concentrate tax benefits on high growth areas across 
the country and improve education. Teachers and students must be free 
to concentrate on learning, yet school overcrowding undermines the 
health and morale of students and teachers, disrupting the education 
process. Overcrowded schools prevent both teachers and students from 
reaching their full potential.


                   differences from the sanchez bill

  This legislation builds upon existing law, as well as H.R. 2695, 
legislation proposed by Representative Loretta Sanchez in the House. 
The legislation differs from H.R. 2695 in the following respects:
  (1) It expands the type of school construction for which the bonds 
can be used. In addition to construction to relieve overcrowding in the 
Sanchez bill, under this bill bonds may be used to rehabilitate schools 
over 30 years old, improve the communications infrastructure, make 
repairs following a natural disaster and retrofit to meet potential 
disasters.
  (2) This bill does not include the requirement of the Sanchez bill 
that at least 10 percent of the bond proceeds be raised from the 
private sector. I believe this would be a burdensome hurdle for most 
school districts.
  (3) Under H.R. 2695, bonds could be used only by school districts 
with 35 percent or more of their students eligible for food stamps. 
Under this bill, bonds would be available to any district meeting the 
high growth, aging facilities, telecommunications or disaster criteria.
  (4) Representative Sanchez's bill allows only financial institutions 
to claim the tax benefit. Under this bill, any taxpayer as a bond 
holder could claim the credit.
  I believe these changes strengthen the bill and create more financing 
options for school districts.


                               conclusion

  Our Nation's school districts face huge challenges as we move toward 
the 21st century, with a record 52.2 million children this year and a 
growing school population forecast well into the next century. The 
legislation proposes modest, targeted Federal support for school bonds 
in growth areas, offering important assistance to school districts, 
teachers, parents and students. I ask unanimous consent to place the 
legislation and a legislative summary in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1753

       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 ``Expand and Rebuild America's 
     Schools Act of 1998''.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) Many States and school districts will need to build new 
     schools to accommodate increasing student enrollments; the 
     Department of Education has predicted that the Nation will 
     need 6,000 more schools by the year 2006.
       (2) In response to reduced class mandates enforced by State 
     governments and increased enrollment, many school districts 
     have been forced to utilize temporary classrooms and other 
     structures to accommodate increased school populations, along 
     with resorting to year-round schedules for students.
       (3) Research has proven a direct correlation between the 
     condition of school facilities and student achievement. 
     Recently, researchers found that the test scores of students 
     assigned to schools in poor condition can be expected to fall 
     10.9 percentage points behind the test scores of students in 
     buildings in excellent condition. Similar studies have 
     demonstrated up to a 20 percent improvement in test scores 
     when students were moved from a school with poor facilities 
     to a new facility.

[[Page S1889]]

       (4) 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, and the poorest communities 
     have had the greatest difficulty meeting this need.
       (5) Many local educational agencies have difficulties 
     securing financing for school facility construction and 
     renovation, especially in States that require a \2/3\ 
     majority of voter approval for the passage of local bond 
     initiatives.
       (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 businesses to support local school 
     infrastructure improvement efforts.
       (7) The United States competitive position within the world 
     economy is vulnerable if America's future workforce continues 
     to be educated in schools not equipped for the 21st century. 
     America must do everything in its power to properly educate 
     its people to compete in the global marketplace.

     SEC. 3. PURPOSE.

       The purpose of this Act is to help local educational 
     agencies bring all public school facilities up to an 
     acceptable standard and build the additional classrooms 
     needed to educate the growing number of students who will 
     enroll in the next decade.

     SEC. 4. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION BONDS.

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

     ``SEC. 45D. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a school construction 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.--The amount of the credit 
     determined under this subsection with respect to any school 
     construction bond is the amount equal to the product of--
       ``(1) the credit rate determined by the Secretary under 
     section 1397E(b)(2) for the month in which such bond was 
     issued, multiplied by
       ``(2) the face amount of the bond held by the taxpayer on 
     the credit allowance date.
       ``(c) Limitation Based on Amount of Tax.--The credit 
     allowed under subsection (a) for any taxable year shall not 
     exceed the excess of--
       ``(1) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(2) the sum of the credits allowable under this part 
     (other than under this section and subpart C thereof, 
     relating to refundable credits) and section 1397E.
       ``(d) School Construction Bond.--For purposes of this 
     section--
       ``(1) In general.--The term `school construction 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 school established by an eligible local education 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section, 
     and
       ``(ii) certifies that it has the written approval of the 
     eligible local education agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed the maximum term permitted under section 
     1397E(d)(3).
       ``(3) Qualified school.--
       ``(A) In general.--The term `qualified school' means any 
     public school which is established by and operated under the 
     supervision of an eligible local education agency to provide 
     education or training below the postsecondary level if--
       ``(i) such public school is designed to enhance the 
     academic curriculum, increase graduation and employment 
     rates, and better prepare students for postsecondary 
     education and the workforce,
       ``(ii) students in such public school will be subject to 
     the academic achievement standards and assessments 
     established by the State,
       ``(iii) a program to alleviate overcrowding and to improve 
     students' education has been constructed,
       ``(iv) the average student-teacher ratio for the school 
     district in which such school is located as of the date of 
     the issuance of the bonds is at least 28 to 1, and
       ``(v) at least 1 of the following requirements is met:

       ``(I) The proceeds from the issuance of the bonds will be 
     used for new school construction, the rehabilitation of 
     school facilities which are more than 30 years old as of the 
     date of such issuance, or the provision of advanced or 
     improved communications infrastructure.
       ``(II) There is a reasonable expectation (as of the date of 
     issuance of the bonds) that the student growth rate over the 
     next 5 years for the school district in which such public 
     school is to be located will be at least 10 percent.
       ``(III) Construction or rehabilitation activities are 
     needed as the result of natural disasters or to mitigate the 
     cost of potential disasters.

       ``(B) Eligible local education agency.--The term `eligible 
     local education agency' means any local educational agency as 
     defined in section 14101 of the Elementary and Secondary 
     Education Act of 1965.
       ``(4) Qualified purpose.--
       ``(A) In general.--The term `qualified purpose' means, with 
     respect to any qualified school, constructing or 
     rehabilitating a school facility.
       ``(B) School facility.--The term `school facility' means 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. Such term 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.
       ``(e) Limitation on Amount of Bonds Designated.--
       ``(1) National limitation.--There is a national school 
     construction bond limitation for each calendar year. Such 
     limitation is $1,400,000,000 for 1999 and 2000, and, except 
     for carryovers as provided under the rules applicable under 
     paragraph (2), zero thereafter.
       ``(2) Allocation of limitation.--
       ``(A) State allocation.--The national school construction 
     bond limitation for a calendar year shall be allocated by the 
     Secretary among the States on the combined basis of the 
     following factors:
       ``(i) The respective populations of individuals below the 
     poverty line (as defined by the Office of Management and 
     Budget).
       ``(ii) The respective projected growth rates in the number 
     of students over the next 5 years and 10 years (as determined 
     by the Secretary of Education).
       ``(B) School allocation.--The limitation amount allocated 
     to a State under the subparagraph (A) shall be allocated by 
     the Secretary of Education to qualified schools within such 
     State.
       ``(3) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (d)(1) 
     with respect to any qualified school shall not exceed the 
     limitation amount allocated to such school under paragraph 
     (2)(B) for such calendar year.
       ``(4) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount for any State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (d)(1) with respect to qualified 
     schools within such State,

     the limitation amount for such State for the following 
     calendar year shall be increased by the amount of such 
     excess.
       ``(f) Other Definitions.--The definitions in subsections 
     (d)(6) and (f) of section 1397E shall apply for purposes of 
     this section.
       ``(g) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section.''
       (b) Conforming Amendment.--The table of sections for 
     subpart D of part IV of subchapter A of chapter 1 of such 
     Code is amended by adding at the end the following new item:

``Sec. 45D. Credit to holders of school construction bonds.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after December 31, 1998.
                                                                    ____


 Feinstein Legislation to Provide Tax Credits for School Construction 
                                 Bonds


                          Proposed Legislation

       Provides a tax credit for school construction and 
     rehabilitation bonds. Similar to the ``Qualified Zone Academy 
     Bonds'' created by the 1997 Taxpayer Relief Act, bondholders 
     would receive a tax credit, rather than interest.
       To qualify to use the bonds, schools must meet state 
     academic achievement standards and have an average student-
     teacher ratio of 28 to 1.
       Bonds may be used if school districts meet one of three 
     criteria:
       (1) The school is over 30 years old or the bonds are used 
     to provide advanced or improved telecommunications 
     infrastructure;
       (2) Student growth rate will be at least 10 percent over 
     the next 5 years;
       (3) School construction or rehabilitation is needed to meet 
     natural disaster requirements.
       Bond proceeds could be used for both new construction and 
     rehabilitation of existing school facilities, unlike the QZAB 
     law, which could be used only to rehabilitate existing 
     schools.
       Bonds could be used to rebuild following a natural disaster 
     or mitigate the potential cost of future natural disasters. 
     The school bonds can help communities rebuild following a 
     tornado or earthquake, as well as retrofit buildings to 
     reduce the potentially devastating cost of future disasters.
       Any bond holder is eligible to claim the credit. While only 
     banks could claim the QZAB bond tax credit, the new bond 
     credit would be available to any purchaser, including other 
     businesses or private citizens.

[[Page S1890]]

                          Education Background

       School overcrowding, the challenge for the 21st century: 
     This year, a record 52.2 million children will attend 
     America's schools, rising to more than 54 million by 2007. 
     Secondary school enrollment is expected to grow by 1.7 
     million, or 13%.
       A National Problem: Nearly one-half of all states will 
     experience a 15% growth in the number of public high school 
     graduates by 2007.
       Facilities for Today's Needs: More than \1/3\ of the 
     nation's existing schools are at least 50 years old and need 
     to be repaired or replaced. The GAO reports fewer than half 
     of the public schools have sufficient technology 
     infrastructure, including phone lines, and wiring for 
     networks.
       Addressing a Long Term Need: Unlike the previous ``baby 
     boom,'' school enrollment is not expected to decline after 
     2007. Communities will face a long-term funding challenge for 
     school construction and rehabilitation.
                                 ______