$2.4 billion school tech program awaits action from Congress

Poor school districts struggling to find affordable ways to modernize schools and fix crumbling buildings might be eligible for billions of dollars in additional funding, depending on how Congress decides to vote on its remaining appropriations bills after it returns to the lame-duck session in December.

While much of the attention surrounding the federal education budget for fiscal year 2001, which is still before Congress, has focused on an amendment that would mandate the use of internet filters in schools receiving federal money, the education budget also proposes to increase funding for school construction and modernization by billions of dollars.

Included in the appropriations package is a bipartisan school modernization bill introduced by Rep. Nancy Johnson, R-Conn., and Rep. Charles Rangel, D-N.Y., called America’s Better Classrooms Act of 2000 (H.R. 4094).

This bill would commit $24.8 billion in tax credit bonds over the next two years to modernize up to 6,000 schools. Within this $24.8 billion program, $2.4 billion—up from $400 million last year—is reserved for Qualified Zone Academy Bonds, also known as QZABs (pronounced “cue-zabs”).

The Better Classrooms Act also includes a new $1.3 billion school emergency renovation loan and grant for high-need school districts with little or no capacity to fund urgent repairs. The neediest districts would have priority for receiving these funds.

The increase in the QZAB program is significant for school technology, because QZABs provide interest-free loans to low-income schools to pay for renovating school buildings, purchasing equipment (including computers and high-speed networks), developing curriculum, and training school personnel.

The limit set in bonding authority for the QZAB program, which was created in 1997, has always been $400 million per year. The proposal before Congress would expand the program by 600 percent, to $2.4 billion in bond authority over two years, and for the first time would permit QZABs to be used for new construction projects.

Schools receiving QZABs must be located in a federal empowerment zone or enterprise community, or they must have at least 35 percent of their students eligible for free or reduced-price lunches.

QZABs also require schools to team up with the private sector to create partnerships, because to qualify, they must get a business to match at least 10 percent of the bond value.

Schools receiving QZABs are responsible for repaying the principle, while the federal government pays the interest to the bondholder in the form of a tax credit, relieving the community of this expense. Because interest payments can equal up to 50 percent of the cost of a typical loan, states and local communities will save substantially from this program, according to U.S. Secretary of Education Richard W. Riley.

Budget uncertainty

Both Riley and President Clinton have asked Congress to fully fund the school modernization and construction bill, which is co-sponsored by a clear bipartisan majority of 229 House members.

“This school construction proposal is an important piece of the budget. It should have the full support of every member of Congress, including fiscal conservatives, because it would save states and communities billions of dollars in interest costs,” Riley said in a statement Oct. 24.

Days before the election, Congress retreated from an agreement on the education budget, which is included in the Labor, Health and Human Services, and Education appropriations bill (H.R.4577), also referred to as Labor HHS. Clinton blamed the Labor HHS hold-up on Republicans bowing to the demands of special interests.

“Just last Sunday [Oct. 29], we reached bipartisan agreement on an education budget that would have tremendous achievement for our children. But, under orders from their special interests, the Republican leadership cancelled the compromise we had reached,” Clinton said Nov. 2.

The White House accused congressional leaders of backing away from the agreement after special interests objected to an unrelated provision regarding repetitive stress injuries in the workplace.

“The trigger point that collapsed the deal on Labor HHS was ergonomics, not an education issue,” said Dan Lara, a spokesman for the House Education and Workforce Committee. “That was the primary sticking point.”

The Labor HHS bill is one of six remaining bills to be decided for the FY 2001 budget, Lara said. Congress had passed a continuing resolution to return Nov. 15, but because of how the election turned out, Congress won’t resume until Dec. 5.

“There is the possibility that Congress will pass another continuing resolution act, and that could mean [the remaining bills] would be the new Congress’s responsibility,” Lara said. It’s also possible that when the lame-duck session returns, things that were agreed upon before won’t be agreed upon now, he added.

John Emekli, a spokesman for the U.S. Department of Education, said it’s hard to say how Congress will decide, but the administration hopes Congress will listen to the 229 representatives supporting the bill and pass it as is.

“For three years, the president has been trying to get school construction legislation passed,” Emekli said. “This is the closest we’ve come. We have bipartisan support. We have representatives from both sides signed on.”

The interest-free nature of the QZABs is attractive to many schools faced with expensive repairs, renovations, and upgrading costs. In fact, 21 states across the country already use them.

The bonds are “worthwhile if you have renovation projects to do but you don’t have any money to do them,” said Paul LaRocque, business manager of the Keystone Central School District (K-12, enr. 5,380) in Pennsylvania. The program “can save you millions of dollars in interest payments.”

Fred Schmitt, chief financial officer at Norfolk Public Schools (K-12, enr. 33,014) in Virginia, agreed: “Most schools [that] do school construction enter into debt anyway—why not do it interest-free?”

“There’s a lot of flexibility with QZABs,” Emekli said. “If you need to buy computers or make classrooms accessible for technology and bring them up to 21st-century quality,” you can use QZAB funds to do so.

Expanding the program to include new school construction also increases the program’s flexibility.

“There are many school districts that have buildings that are in such disrepair, it’s a waste of money to repair them,” LaRocque said.

Increasing debt load

But some educators say increasing the amount of money available to borrow through QZABs to $2.4 billion still places a burden on truly cash-strapped schools.

Using QZABs “would add that much debt to school districts around the country, and [it] would obligate the federal government to pay the interest on that amount,” LaRocque said. “It’s still not going to solve the problems of very poor districts, because they can’t afford to pay back the principle on the bonds.”

Schmitt acknowledged that school districts without a large tax base to generate revenue might have a hard time repaying the bonds.

“It is debt, and it would depend on the district’s locality whether it’s a good idea or not,” he said, though he added, “It’s still a worthwhile program.”

Teaming up with the private sector, as the QZAB program requires, could create some interesting programs in schools, Schmitt said.

“You derive some benefits with your partnership, you benefit from an interest-free loan, but you still have the responsibility of repaying the debt,” he said.


Qualified Zone Academy Bonds

White House

House Committee on Education and the Workforce

Keystone Central School District

Norfolk Public Schools

eSchool News Staff

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