Order Code RS20171
Updated June 16, 2000
CRS Report for Congress
Received through the CRS Web
School Facilities Infrastructure: Background and
Legislative Proposals in the 106th Congress
Susan Boren
Specialist in Social Legislation
Domestic Social Policy Division
Summary
In the 106th Congress, proposals to provide federal support for elementary and
secondary school construction are under consideration, including tax credits for school
construction bonds. General Accounting Office (GAO) reports have suggested
substantial need ($112 billion) for school renovation, construction and repair and the
Department of Education (ED) has documented (1998) that the average age of a public
school building is 42 years old. Although education infrastructure financing is considered
primarily a state and local responsibility, indirect federal support is provided through the
exclusion of school bond interest income from federal income taxation. In addition,
legislation has provided federal support for school infrastructure, such as the “Ticket to
Work” bill, P.L. 106-170, which extended provisions related to Qualified Zone Academy
Bonds (QZABs) that are used for school infrastructure. The Consolidated
Appropriations Act for FY2000, P.L. 106-113 contained a small schools initiative,
authorizing funding for high school “redesign.” S. 1134, the Affordable Education Act
of 2000, as passed by the Senate (March 2, 2000) and H.R. 7 contained provisions
related to school construction. A Harkin-Bingaman amendment to S. 2, the Educational
Opportunities Act, to reauthorize Title XII of the Elementary and Secondary Education
Act (ESEA), at $1.3 billion was defeated during committee consideration. H.R. 4141,
the Education Opportunities to Protect and Invest in Our Nation’s Students
(OPTIONS) bill was ordered reported (April 13, 2000), but during committee
consideration, school construction amendments failed. This report will be updated
continually to reflect legislative activity.
Background
The federal government’s direct role in financing elementary and secondary school
construction began with Impact Aid laws in the 1950s. There were also some precursors
to the Impact Aid legislation that provided funds indirectly for school construction. Some
Congressional Research Service ˜ The Library of Congress

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of the relief bills during the New Deal expanded definitions1 of relief and public works to
include school construction. However, there has been a gap in federal funding for a formal
program for school construction, other than through the Impact Aid construction program,
which has had a substantial reduction in funding.2 In the 103rd Congress, the Education
Infrastructure Act of 1994, Title XII of the Elementary and Secondary Education Act
(ESEA), was enacted as a federal grant program for school infrastructure. The grant
program under Title XII, ESEA has not been funded.3 One major issue being considered
is whether the federal government should assume greater responsibility for school
construction. The federal government currently provides indirect financial support for
school construction through the exclusion of school bond interest income from income
taxation, at a varying annual cost to the federal government ($3.7 billion in 1996).4 This
resulting federal revenue loss helps to finance a reduction in interest expenses that school
districts have to pay.
GAO Reports
Eight GAO reports have now been issued (three in 1995, three in 1996, one in 1997,
and one in March, 2000) dealing with school facilities. America’s Schools Report
Differing Conditions (GAO, June 1996) surveyed a national sample of 10,000 schools.
School officials were asked to estimate costs to repair or upgrade facilities to a good
overall condition. At a minimum, officials estimated that $11 billion was needed to
comply with federal mandates, with a total estimated need of $112 billion.
The most recent GAO report, School Facilities: Construction Expenditures Have
Grown Significantly in Recent Years (GAO-HEHS-00-41, March, 2000) concludes that
construction expenditures for public elementary and secondary schools (86,000) across the
nation have grown by 39% from FY1990 to FY1997, to about $25 billion in inflation-
adjusted dollars. However, average annual construction expenditures varied widely from
state to state ranging from $934 per pupil in Nevada to $37 per pupil in Connecticut, with
the average at $473. According to GAO, states with the largest per pupil expenditures for
construction (e.g., Nevada), also had high enrollment growth rates, and those with the
lowest per pupil expenditures had relatively low enrollment growth rates. The largest
source of funding for school construction is generally through local bonds. In most states
there is some combination of local and state funding, although 15 states provided little or
no funding for school construction in 1998-1999. GAO indicated the data are incomplete
with regard to funding sources for school construction.
1 An extension of the Lanham Act (P.L. 137 of the 77th Congress) authorized funds for and
included school construction in the definition of “public works” projects.
2 For further information on Impact Aid, see CRS report RL30075, Impact Aid: Overview and
Reauthorization issues, by Richard Apling.
3 The initial funding for the Infrastructure Act, Title XII ESEA for FY1995 ($100 million), was
rescinded with no subsequent funding. The Senate reported Labor, Health and Human Services
Appropriations bill for FY1999 provided $100 million for school construction. However, the
FY1999 Omnibus Appropriations Act (P.L. 105-277) did not contain a final FY1999
appropriation for school construction. There was no funding for Title XII ESEA for FY2000.
4 See Tax Exempt Bond Proposals to Increase Public Elementary and Secondary School
Facilities. Testimony, Senate Finance Committee, March 3, 1999, by Dennis Zimmerman.

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Selected Legislative Proposals
FY2001 Administration Budget: School Construction and Modernization.
Reports on President Clinton’s school construction proposal for FY2001 indicated a
similar plan to FY2000 — i.e., tax credits on bonds for school modernization with an
estimated $24.8 billion in bond authority over 2 years. The Administration estimated that
these tax credits on bonds would cost the U.S. Treasury $3.7 billion over 5 years. This
proposal also includes $1.3 billion in school emergency renovation loans and grants, that
according to White House reports would leverage $7 billion for approximately 6,000
renovation projects in high-poverty, high need school districts. Grants rather than loans
would go to the neediest districts. In addition, President Clinton’s FY2001 budget
proposal would continue to expand tax credits for Qualified Zone Academy Bonds
(QZABs).5
Other School Construction Proposals
It is not possible to list here all of the school construction bills introduced in the 106th
Congress. Included are some selected bills: H.R. 1660 (and other similar amendments by
Representative Rangel) would have expanded tax credits for qualified zone academy
bonds, provided new authority for tax credits on school construction bonds, and would
have included language to permit Davis-Bacon Act prevailing wages for construction.
H.R. 3705 would repair schools in districts with high poverty rates. In response to an
estimated record enrollment in 2007 as ED has indicated, S. 1454 the Public School
Modernization and Overcrowding Relief Act proposed tax credits for bondholders and
resources for local communities to modernize and reduce overcrowding in approximately
6,000 public schools. P.L. 106-113 included $45 million for a small schools initiative
(Title X-A, ESEA) to help “redesign” high schools. The goal is to have not more than 600
students in a learning community, and implies building smaller schools.
The Taxpayer Refund and Relief Act of 1999 (H.R. 2488) with construction
provisions was vetoed. The “Ticket to Work” bill (P.L. 106-170) contained an extension
of authority to issue QZABs with an allocation of $400 million for FY2000. S. 1134,
Affordable Education Act of 2000 (Education Savings Accounts), as passed by the
Senate (March 2, 2000) allows Federal Home Loan Bank guarantees of $500 million
annually for public school construction bonds. S. 1134 relaxes arbitrage rebate6 rules
applicable to school construction bonds. H.R. 7, similar to S. 1134, would also liberalize
tax-exempt financing rules for public school construction. The bill would increase the
maximum annual issuance for school construction bonds for which there would be an
exception from arbitrage rebate rules. In addition, H.R. 7 would extend to 4 years the
5 The Taxpayer Relief Act of 1997 (P.L.105-34) authorized tax credits for a new form of
obligation called “qualified zone academy bonds.” QZABs may be used for schools based in
empowerment zones or enterprise communities, or with 35% of students qualified for free or
reduced price lunches under the federal school lunch program. See CRS Report 97-828, Tax-
Exempt Bond Provisions of the Taxpayer Relief Act of 1997, by Dennis Zimmerman.
6 Arbitrage rebate deals with rules for returning profits earned from construction bonds. See
CRS Report 98-803, Bonds for Public Schools Relaxation of Arbitrage Restrictions in the
Taxpayer Relief Act of 1998, by Dennis Zimmerman.

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period during which proceeds of school construction bonds may be spent without losing
eligibility for an exception to arbitrage rebate rules.7
An amendment by Senator Harkin and Senator Bingaman to S. 2, the Educational
Opportunities Act (S.Rept. 106-261), to fund Title XII, ESEA at $1.3 billion was
defeated during consideration by the Senate Committee on Health, Education, Labor and
Pensions. On May 1 to May 9, 2000 the Senate began floor debate on S. 2, but it has not
yet resumed debate. School construction amendments to H.R. 4141, the Education
OPTIONS bill were offered during consideration by the House Education and Work Force
Committee, but were defeated (including Representative Ford’s amendment to create a $1
billion school construction program). H.R. 4141 was ordered reported on April 13, 2000
and printed May 4, 2000 (H.Rept. 106-608).
7 For further information see H. Rept. 106-546 to accompany H.R.7.

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