[Congressional Record Volume 145, Number 63 (Tuesday, May 4, 1999)]
[Extensions of Remarks]
[Pages E844-E846]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           H.R. 1660, PUBLIC SCHOOL MODERNIZATION ACT OF 1999

                                 ______
                                 

                         HON. CHARLES B. RANGEL

                              of new york

                    in the house of representatives

                          Tuesday, May 4, 1999

  Mr. RANGEL. Mr. Speaker, today, along with many of my colleagues, I 
am introducing legislation, entitled the Public School Modernization 
Act of 1999, which consists of two education tax incentives that are 
contained in the President's budget recommendations for fiscal year 
2000. I am very pleased that 88 Members have joined me as cosponsors of 
this needed legislation. I cannot imagine a better way to honor our 
teachers on ``Teacher

[[Page E845]]

Appreciation Day'' than to work toward modernized schools, smaller 
classes, and other educational improvements in our public schools.
  I will continue to work with the Administration to introduce the 
President's domestic initiatives that are within the jurisdiction of 
the Ways and Means Committee. I also will continue to urge 
consideration by the Congress of these important proposals.
  The most important challenge facing this country today is the need to 
improve our educational system. Expanding educational opportunities is 
crucial to our country's social and economic well being.
  I have a personal interest in improving the quality of education for 
all students. Through the GI bill, this country made an investment in 
my education that provided me with a needed second chance after the 
Korean War. I believe that we must give all public school children a 
second chance so that they can make a positive contribution to society 
by making the most of their abilities through educational 
opportunities.
  I am very excited that the President emphasize education in his State 
of the Union address and that his budget recommendations contain a 
comprehensive program to improve our public school system. The bill 
that we are introducing today contains two important tax provisions 
that will help modernize our public schools, reduce class sizes, and 
expand education-based training opportunities for students most in 
need.
  I recognize that these tax provisions alone are not the total answer 
to our country's need to improve our educational system. Therefore, I 
also am a strong supporter of the other education improvements included 
in the President's budget.
  Many children today are attending school in trailers or in 
dilapidated school buildings. We cannot expect learning to occur in 
those environments. Other students are forced into huge classes, making 
it difficult for students to learn and difficult for teachers to help 
students on an individual basis. Using tax credits, this bill would 
provide approximately $24 billion in interest-free funds for school 
modernization projects. This bill is a meaningful first step in 
addressing the problem of crowded and dilapidated school facilities.
  Recent events have underscored the need for increased school safety 
measures in many public schools. While these are by no means the only 
answers, reducing class size and providing safe and modern schools will 
help children get off to the right start and will help teachers more 
easily recognize and serve those students who may need special 
attention. In order for our children to learn, they must not be afraid 
to attend school. Safe schools are a necessity--and a priority. In 
addition to smaller classes, this legislation will provide the means 
for school districts to modernize other safety and educational features 
in the public schools.
  We must also do more to provide education and training opportunities 
for students who do not go on to college. We have existing programs, 
like the empowerment zone legislation, that provide targeted incentives 
to encourage economic development in depressed urban and rural areas. 
While these incentives are important, employers in the targeted areas 
assert that they are unable to hire qualified individuals to work in 
the jobs created by the investment programs.
  The bill speaks to this problem by extending and enhancing the 
education zone proposal that was enacted on a limited basis in the 1997 
Taxpayer Relief Act. This program is designed to create working 
partnerships between public and private entities to improve education 
and training opportunities for students in high poverty rural and urban 
areas.
  Some have argued that the Federal government should have no role in 
assisting the public school system at the K through 12 level. I 
disagree strongly. The federal government historically has provided 
financial resources to the public school system. It has done so in part 
by providing tax-exempt bond financing that enables State and local 
governments to fund capital needs through low-interest loans. The bill 
that we are introducing today, in many respects, is very similar to 
tax-exempt bond financing. This bill does not require any additional 
layers of bureaucracy at the Federal or State level. It provides 
special tax benefits to holders of certain State and and local 
education bonds. The procedures used to determine whether bonds are 
eligible for those special benefits are substantially the same as the 
procedures applicable currently in determining whether a State or local 
bond is eligible for tax-exempt bond financing.

  I also want to be very clear that this bill supports our public 
school system. I believe that improving our public school system should 
be our highest priority. Approximately 90 percent of the students 
attending kindergarten through grade 12 attend public schools. If we 
can find the resources to provide additional tax incentives, those 
incentives should be focused on improving the public school system that 
serves such a large segment of our student population. I have and will 
continue to oppose legislation, such as the so-called ``Coverdell'' 
legislation, that diverts scarce resources away from our public school 
system.
  The Republicans are promoting a change in the tax-exempt bond 
arbitrage rules which they say is a meaningful response to the problem 
of dilapidated and crowded school buildings. Under current law, a 
school district issuing construction bonds can invest the bond proceeds 
temporarily in higher-yielding investments and retain the arbitrage 
profits if the bond proceeds are used for school construction within 
two years. The Republican arbitrage proposal would extend the period 
during which those arbitrage profits could be earned from two to four 
years. The Republican proposal does not benefit those districts with 
immediate needs to renovate and construct schools. It benefits only 
districts that can delay completion of school construction for more 
than 2 years. It is inadequate at best. At worst, it may increase costs 
for those districts most in need because more bonds could be issued 
earlier.
  Today's bill includes a provision that would extend the Davis-Bacon 
requirements to construction funded under the new program. This 
provision is consistent with the policy that Federally-subsidized 
construction projects should pay prevailing wage rates. The bill also 
includes provisions designed to ensure that local workers and 
contractors are able to participate in the construction projects.
  Amazingly, while the concept of investing in human capital goes 
unchallenged in debate, elected leaders are still spending more of our 
nation's limited budget resources on back-end, punitive programs like 
law enforcement and prisons, rather than front-end investments like 
education and training that can really pay off in increased workforce 
productivity.
  Unfortunately, these skewed priorities are present at the local 
level, too. New York City spends $84,000 per year to keep a young man 
in Riker's Island Prison, yet only $7,000 each year to educate a child 
in Harlem.
  In addition, improving opportunities in education is a vital link in 
broader U.S. economic policy, including U.S. trade policy. Ensuring 
that our education system is strong, and that our children's education 
prepares them to take advantage of the economic opportunities our 
society has to offer, is essential to ensuring that the benefits of 
trade and trade agreements extend more deeply and fully throughout our 
society.
  We must change our priorities. Let's invest in the future of this 
country through our children. Let's bring the same zeal to encouraging 
and educating our children that we now apply to punishment and 
incarceration.
  The following is a brief description of the provisions contained in 
our bill. They would cost approximately $3.3 billion over the first 5 
years.


                       Education Zone Provisions

  A. Qualified Zone Academy Bonds
  Section 226 of the 1997 Taxpayer Relief Act provides a source of 
capital at no or nominal interest for costs incurred by certain public 
schools in connection with the establishment of special academic 
programs from kindergarten through secondary schools. To be eligible to 
participate in the program, the public school must be located in an 
empowerment zone or enterprise community or at least 35 percent of the 
students at the school must be eligible for free or reduced-cost 
lunches under the Federal school lunch program. In addition the school 
must enter into a partnership with one or more nongovernmental 
entities.
  The provision provides the interest-free capital by permitting the 
schools to issue special bonds called ``Qualified Zone Academy Bonds.'' 
Interest on those bonds will in effect be paid by the Federal 
government through a tax credit to the holder.
  The bill would increase the caps on the amount of bonds that can be 
issued under the program as shown in the following table. The bill 
would also permit the bonds to be used for new construction.

----------------------------------------------------------------------------------------------------------------
                Year                        Current law          Additions under bill      Total issuance cap
----------------------------------------------------------------------------------------------------------------
1998................................  $400 million...........    .....................  $400 million
1999................................  $400 million...........    .....................  $400 million
2000................................    .....................  $1 billion.............  $1.0 billion
2001................................    .....................  $1.4 billion...........  $1.4 billion

[[Page E846]]

 
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  The bill would make several technical modifications to the 1997 
legislation. It would repeal the provision that restricts ownership of 
qualified zone academy bonds to financial institutions, it would change 
the formula used in determining the credit rate, it would provide for 
quarterly allowances of the credit to coincide with estimated tax 
payment dates and permit credit stripping in order to improve the 
marketability of the bonds, it would require a maximum maturity of 15 
years, rather than a maximum maturity determined under a formula, it 
would change the formula for allocating the national limit to make it 
consistent with the formula used in allocating the limit on qualified 
school construction bonds, and it would provide an indefinite carryover 
of any unused credit.


                    B. Specialized Training Centers

  The bill also includes a provision designed to encourage corporate 
contributions to specialized training centers located in empowerment 
zones or enterprise communities. A specialized training center is a 
public school (or special program within a public school) with an 
academic program designed in partnership with the corporation making 
the contribution. There is a limit of $8 million per empowerment zone 
and $2 million per enterprise community on the amount of contributions 
eligible for the new credit. The limit would be allocated among 
contributors by the local official responsible for the economic 
development program in the zone or community.


                  Qualified School Construction Bonds

  The bill would also permit State and local governments to issue 
qualified school construction bonds to fund the construction or 
rehabilitation of public schools. Interest on qualified school 
construction bonds would in effect be paid by the Federal government 
through an annual tax credit. The credit would be provided in the same 
manner as the credit for qualified zone academy bonds.
  Under the bill, a total of $11 billion of qualified school 
construction bonds could be issued in 2000 and in 2001. Half of the 
annual cap would be allocated among the States on the basis of their 
population of low-income children, weighted the State's expenditures 
per pupil for education (the Title I basic grant formula). The other 
half of the annual cap would be allocated among the hundred school 
districts with the highest number of low-income children and that 
allocation would be based on each district's Title I share. Before 
making the allocations described above, $200 million in 2000 and 2001 
would be reserved for allocation by the Secretary of the Interior for 
schools funded by the Bureau of Indian Affairs.
  The following chart shows the aggregate amount of qualified school 
construction bonds and qualified zone academy bonds that could be 
issued in each State under the bill. The total includes amounts 
allocated to large school districts in the State. An additional $750 
million is reserved for allocations to other school districts not in 
the largest 100 districts.

                       [In thousands of dollars]

        State                                       Estimate Allocation
Alabama                                                        $373,179
Alaska                                                           45,552
Arizona                                                         321,189
Arkansas                                                        191,361
California                                                    3,029,203
Colorado                                                        203,299
Connecticut                                                     195,615
Delaware                                                         46,746
District of Columbia                                            113,625
Florida                                                       1,337,671
Georgia                                                         606,081
Hawaii                                                           49,685
Idaho                                                            55,825
Illinois                                                      1,125,357
Indiana                                                         326,773
Iowa                                                            135,205
Kansas                                                          154,208
Kentucky                                                        344,582
Louisiana                                                       596,956
Maine                                                            76,808
Maryland                                                        351,517
Massachusetts                                                   402,027
Michigan                                                      1,001,250
Minnesota                                                       266,123
Mississippi                                                     327,445
Missouri                                                        386,832
Montana                                                          62,924
Nebraska                                                         82,857
Nevada                                                           90,274
New Hampshire                                                    44,910
New Jersey                                                      526,789
New Mexico                                                      185,062
New York                                                      2,750,541
North Carolina                                                  390,043
North Dakota                                                     46,746
Ohio                                                            948,239
Oklahoma                                                        270,223
Oregon                                                          191,113
Pennsylvania                                                  1,007,919
Puerto Rico                                                     636,673
Rhode Island                                                     81,320
South Carolina                                                  261,777
South Dakota                                                     47,922
Tennessee                                                       396,843
Texas                                                         2,149,680
Utah                                                             84,796
Vermont                                                          43,847
Virginia                                                        317,458
Washington                                                      285,098
West Virginia                                                   177,753
Wisconsin                                                       418,781
Wyoming                                                          43,236

                        Davis-Bacon Requirements

  The bill includes a provision that would extend the Davis-Bacon 
prevailing wage requirements to construction funded under the new 
program. In order to ensure the marketability of the tax-subsidized 
financing, the Davis-Bacon requirements would be enforced by the 
Department of Labor and not through disallowance of tax benefits.
  The bill also requires governments participating in the new program 
to give priority in awarding contracts to contractors with local 
workforces and to require a priority for local workers for new hires. 
The bill contains modifications to the Workforce Investment Act to 
ensure the availability of skilled local workers for the construction.

                          ____________________