[Congressional Record (Bound Edition), Volume 145 (1999), Part 6]
[Extensions of Remarks]
[Pages 8382-8384]
[From the U.S. 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 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

[[Page 8383]]

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
----------------------------------------------------------------------------------------------------------------

       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

[[Page 8384]]

     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.

                          ____________________