[Congressional Record Volume 146, Number 137 (Friday, October 27, 2000)]
[House]
[Page H11414]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             USING THE TAX CODE TO BUILD SCHOOLS IN AMERICA

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from California (Mr. Sherman) is recognized for 5 minutes.
  Mr. SHERMAN. Madam Speaker, we have had a number of great fiscal 
debates on this floor. Yesterday we confronted the issue of how to use 
the Tax Code to help build schools in America. The Democrats had one 
approach, the Republicans had another. And the bill which was passed 
yesterday, unfortunately, was a blend of the two.
  The Democrat approach makes an awful lot of sense. It builds on the 
tradition we have in this country that when school districts issue 
school bonds, the Federal Government gives them lower interest rates 
because the interest on those bonds is tax excluded, tax exempt, and 
accordingly those who buy bonds from school districts agree to lend 
that money with a low rate of interest.
  Building on that, the Democrats have suggested that school districts, 
in effect, get zero-interest bonds, the chance to issue bonds where the 
holders of those bonds get no interest at all paid for by the school 
district, but rather they receive a tax credit from the Federal 
Government. So instead of subsidizing the interest cost, the Federal 
Government through the Tax Code would pay the interest costs.
  The effect for school districts is to reduce their borrowing costs by 
one-third. That is to say, instead of repayment costs that might cost a 
school district $100,000 a year, they would be making repayment costs 
of $66,000 a year. That will allow school bonds to be sold throughout 
this country and allow us to build and revitalize schools, and that is 
important for our education.
  What the bill we dealt with yesterday does is instead of providing 
$25 billion of these special tax credit, no-interest, lowest possible 
cost bonds to the school districts, providing $25 billion over a period 
of 2 years, it provides only $15 billion of those bonds over a 3-year 
period. Roughly half of what we Democrats suggested.
  Now, in one way it is a little more than half. We wanted 25, they 
gave us 15. But if we really look at it, it is a little less than half. 
We wanted $12.5 billion a year; they are providing $5 billion a year. 
And what is also bad is that they have weaseled the Davis-Bacon 
language so that not only do school districts get less than half of the 
help they need, but we are going to get substandard schools built at 
substandard wages in inadequate quantity.
  The Republicans, though, did provide another method of helping school 
districts. It was a new idea and an exciting idea. A terrible idea. An 
idea which will cost the Federal Government over $2 billion, but is 
worse than nothing to the school districts. What they are going to do 
is relax the arbitrage rules. What that means is they are going to turn 
to school districts around this country and say, ``We know you are 
going to issue tax exempt bonds, but when you do so, do not use the 
money to build schools right away. We are going to let you play with 
the money for 4 years.''
  So this is a special incentive from the Federal Government to help 
the school districts. We are going to give them a free ticket to Las 
Vegas with the bond proceeds. Take the bond proceeds and go gamble 
them, and that is what Congress wants school districts to do.
  Madam Speaker, did we forget what happened to Orange County, 
California, which went bankrupt just a few years ago? The idea will not 
help build a school on Elm Street, but it will help build skyscrapers 
on Wall Street.
  The idea that we would encourage school districts to take 4 years, 
when they did not build schools and instead played with the money, does 
nothing for education. It will cost the government over $2 billion.
  But I understand where the impetus for this provision comes from, 
because for many years I practiced tax law. I would emerge from the tax 
law library after 12 dreary hours of reading fine print regulations and 
I would say at least my job is exciting compared to those tax lawyers 
who are subspecialists in tax law for tax exempt bonds. That is the 
most boring job I can imagine, and I was a tax nerd for many years. I 
know boring.
  The Bond Council want the excitement of the investment bankers. We 
should not do it. We should build schools now.

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