[Congressional Record (Bound Edition), Volume 146 (2000), Part 17]
[House]
[Page 25511]
[From the U.S. Government Publishing Office, www.gpo.gov]



             USING THE TAX CODE TO BUILD SCHOOLS IN AMERICA

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 19, 1999, the gentleman from California (Mr. Sherman) is 
recognized during morning hour debates for 5 minutes.
  Mr. SHERMAN. Madam Speaker, here we are, a week before the election. 
The President is keeping Congress here in Washington, and I think with 
good reason. One of those reasons is the tax bill which we passed last 
week, a tax bill which should not be signed by the President until it 
is made better, particularly on the issue of school construction.
  Now, I know it sounds odd to think in terms of a tax bill helping 
school construction, but in fact we have a tradition in this country of 
the Federal Government helping school districts build schools through 
the Tax Code. What we do is we provide that the interest paid on school 
bonds is tax exempt, and for this reason investors are willing to buy 
school bonds that pay only 4 or 5 percent interest at a time when they 
could be earning 7 or 8 percent in taxable bonds. We subsidize the 
interest cost to encourage school districts to issue bonds and build 
schools.
  Building on that tradition, we Democrats have suggested that a new 
kind of municipal bond or school bond be issued by school districts in 
which we, the Federal Government, would in effect pay the entire 
interest cost. We would provide a tax credit to those who hold the 
bonds in lieu of them collecting any interest from the school 
districts. We would go from merely subsidizing the interest cost to 
actually paying the interest costs on $25 billion worth of bonds over 
the next 2 years.
  The effect of this would be dramatic for school districts. A school 
district that would otherwise have to pay $100,000 a year in order to 
make payments on school bonds would instead pay $66,000 a year on those 
same bonds, reducing its cost by roughly one-third, allowing it to 
build a new school for only two-thirds of what would otherwise be the 
cost.
  We Democrats have insisted, and the President has insisted, that $25 
billion of these bonds be authorized over the next 2 years. Instead, 
this tax bill provides only half of these very valuable incentives and 
facilitators for school construction. What the bill provides is $15 
billion over 3 years, less than half the $12.5 billion per year that we 
would like to see.
  Moreover, the tax bill that left this House weasels on the Davis-
Bacon language, so that school districts can pay substandard wages to 
build substandard schools in inadequate quantities.
  But our Republican colleagues have done something else that we would 
not do to supposedly help school districts. What they have done is 
something that will cost the Federal Government over $2 billion, but is 
actually worse than nothing for our school districts. They have 
announced to school districts that they should not use school bond 
proceeds to build schools for about 4 years; that, rather, they will be 
allowed to play the market with that money and keep the proceeds.
  This will be tempting to school districts who are told, look, you can 
borrow money at only 5 percent interest, lower than anybody else who is 
playing the market, and then you can play Wall Street with that 
advantage. Is that the way we should help school districts build 
schools? I think not. We should be trying to build a school on Elm 
Street, not a skyscraper on Wall Street.
  We should remember how Orange County, California, went bankrupt, when 
it decided to play the market with funds in the county treasury, and we 
should not tell school districts that our way of helping them is to 
encourage them to use school bond proceeds to play the stock market. We 
should provide more to school districts than a free ticket to Las 
Vegas, and a chance to take the school bond proceeds and bet them on 
the pass line or the do not pass line.
  Where does the impetus for this phenomenally bad idea come from? It 
comes from my friends, the Tax Bond Council.
  Now, I practiced tax law for a dozen or more years, and it was a kind 
of boring job. But when I emerged from reading the regulations in the 
smallest type I had but one solace; at least my job was not as boring 
as the subspecialist tax lawyers who worked with tax exempt school 
bonds. They need some excitement, but not a free trip to Wall Street 
with the tax exempt bond proceeds.

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