*Last updated March 2001

Why Involve the National Government in School Construction and Repair?

The Clinton Administration and many members of Congress acknowledged that local school districts cannot shoulder the burden of school construction and repair alone, even if they are getting some help from their state governments. Until recently, the National government provided virtually no assistance for school facilities. But there is a growing realization that fixing our school buildings is a national issue and demands a nationwide solution. A well-educated workforce is a national resource, especially as the U.S. economy enters the information age.

The Rangel-Johnson Bill

President Clinton -- along with the House sponsors Charles Rangel (D-NY) and Nancy Johnson (R-CT) – did not propose direct grants for school construction and repair. Instead, their proposal (H.R.4094) would allow the National government to pay the interest on school facilities bonds issued by local districts. School districts borrow money for construction costs by selling bonds to private investors. Later, they pay back investors with interest. The Clinton proposal aims to save school districts money because they would only have to pay back the amount they borrowed, not the interest that they accumulate over time. Think of it like a home mortgage: If someone pays the interest on your mortgage, in the long run you pay less for your house. School districts that can’t borrow money on their own could join with other school districts, or have the State borrow money on their behalf, and still take advantage of the program.

The Clinton proposal has three elements:

• School Modernization Bonds: The Rangel-Johnson bill contains tax credits that would pay the interest on $22 billion in school modernization over two years ($11 billion each in 2000 and 2001). Half of the credits – representing the interest on $11 billion in bonds – will be available directly to the 100 school districts that serve the largest number of low-income children. The other half of the interest payments will be distributed to states, which can then decide how they should be distributed among their public school districts.
• Expanded "Rangel Bonds:" During 1998 and 1999, the National government paid the interest on $800 million worth of "Rangel Bonds" which worked a lot like the school modernization bonds described above. These funds were restricted, however, to schools that were located in a Nationally designated "Empowerment Zone" or "Enterprise Community" or have at least 35 percent of students eligible for free or reduced-cost lunches under the National School Lunch Act. In addition, private businesses must commit to contribute property or services equal to at least 10 percent the value of the bonds. The Clinton proposal would expand the Rangel bond program to pay for an additional $2.4 billion in interest on school construction and repair bonds during 2000 and 2001.
• Loans and Grants for Urgent Renovation Projects: The latest version of the Clinton Administration’s proposal, unveiled in January 2000, includes $1.3 billion in no-interest National loans and direct grants for school districts to renovate and make emergency repairs to existing school buildings. The loans and grants would only be available to school districts that are unable to finance repairs on their own. They could not be used for new construction. This provision is not present in the Rangel-Johnson Bill.

On June 27, seven Republicans led by Rep. Wiilliam Goodling (R-PA) introduced an alternative proposal for providing National aid for school modernization (H.R.4766). Under the plan, the National government would devote $1.5 billion for five consecutive years (a total of $7.5 billion) to be distributed among all 50 states according to the number of children living below the poverty line and the state’s share of National Title I dollars. Individual schools would then apply directly to their state government, which could distribute the money as direct grants, loans, or assistance in issuing school repair bonds. The money could not be used for new construction. Unlike the Rangel-Johnson bill, Congress would have to decide each year whether it would fund the program as it puts together its annual budget, leaving the program somewhat vulnerable to political struggles. Still, it appears to be a more workable option than past Republican plans.