H.R. 1660, PUBLIC SCHOOL MODERNIZATION ACT OF 1999 -- HON. CHARLES B. RANGEL (Extensions of Remarks - May 04, 1999)

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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
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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
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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]

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

[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.
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