WASHINGTON UPDATE - Federal funding for school construction: Helping build America’s future.

• By Fritz Edelstein, J.D. Larock
• 07/01/03

By most accounts, the nation’s public schools are in dismal physical shape. The average public school in the United States is 42 years old; in many older cities, particularly on the East Coast, it is not uncommon to find dozens of schools that were built more than 75 years ago. According to some education advocates, fully three-quarters of the nation’s schools are in“ill repair,” and roughly three million children attend public schools that need major repairs or replacement.

At the same time, school buildings are being physically taxed as never before. Because of the so-called“baby boom echo” — the expanding birth rate begun in 1977, when millions of young adults born between 1948 and 1975 began to have children themselves — many schools are bursting at the seams. Increased immigration to the United States during the 1990s and changing migration patterns within the country have exacerbated the problem.

For the past decade, school districts have attempted to deal with this influx of new students largely through stopgap measures, such as adding portable classrooms and converting bathrooms and closets into spaces for learning. But such measures plainly are insufficient. For example, the U.S. Department of Education estimates that after 2010, public school enrollment will continue to rise for the rest of the century. By 2020, about 55 million children will be enrolled in the nation’s public schools; by 2030, that number is expected to rise to 60 million.

Statistics like these make it clear: school districts need help to fix existing schools and build new ones. Nonetheless, at the federal level, such help has been limited. Despite consistent advocacy on the part of some members of congress — and a growing body of evidence that links poor facilities to lower student achievement — many other legislators are philosophically opposed to a substantial federal role in school construction. As a result, there is only a small likelihood that more support for school capital projects will be forthcoming from Washington anytime soon.

The Qualified Zone Academy Bond (QZAB) Program
Currently, the main source of federal support for school modernization is the Qualified Zone Academy Bond (QZAB) program, first approved by Congress in 1997. The QZAB is a financial instrument that helps school districts raise funds for school repair, investment in technology and equipment, curriculum development and teacher training. For schools serving low-income students, QZABs reduce the burden of interest payments on tax-exempt bonds or loans used for capital improvement projects by giving the financial institutions holding the bonds or loans a tax credit in lieu of interest. The school district must still pay back the amount of money it initially borrowed, but not the interest — which is usually about half the cost of renovating a school.

To qualify for a QZAB, a school must be located in a federal Empowerment Zone or Enterprise Community, or have at least 35 percent of its students eligible for free- or reduced-price lunches. In addition, the school must develop a partnership with a private-sector business, which must make a contribution of cash, goods or services worth at least 10 percent of the money borrowed using the QZAB.

After a slow start, the QZAB program quickly picked up steam, and by the program’s third year, Congress expanded it to support up to $400 million in school capital improvement projects in 2000 and 2001. In the waning days of the Clinton administration, the program was extended until the end of FY 2003.

As Congress debated the recent tax relief package that was signed into law by President Bush this past May, a proposal was included in the Senate version of that legislation to extend the program an additional year. However, the provision was dropped in conference committee, meaning that unless further action is taken in other legislation, the QZAB program will expire on September 30, 2003.

The America’s Better Classroom Act of 2003
One piece of legislation that would extend the QZAB program if passed is the “America’s Better Classroom Act of 2003,” which has been introduced as H.R. 930 and H.R. 717 in the House of Representatives and as S. 856 in the Senate. Sen. Jay Rockefeller (D-WV) is the main sponsor of S. 856; Rep. Nancy Johnson (R-CT) introduced H.R. 930, and Rep. Charles Rangel (D-NY) introduced H.R. 717.

In addition to continuing the existing QZAB program — which only supports school modernization projects — the America’s Better Classroom Act would promote the construction of new schools as well, through the same basic financing instrument that essentially frees school districts from bond and loan interest costs. Rep. Johnson’s bill authorizes $23.8 billion in interest-free bonds in calendar years 2004 and 2005, while Rep. Rangel and Sen. Rockefeller set the authorization level at $22 billion in each of those years. Additional funds are available in each bill to provide special funding for tribal school construction and repair.

Under each of the bills, 60 percent of the authorization to states is based on its school-age population. State education agencies (SEAs) would have the authority to allocate a state’s share among the school districts in the state, with no restrictions as to which schools and districts can qualify. The remaining 40 percent of the authorization would be allocated directly to the 125 school districts with the largest number of low-income students as defined by Title I of the Elementary and Secondary Education Act. If passed, the bills would obligate the federal government to pay for up to $6.8 billion in tax credits in lieu of interest through 10 years.

While Rep. Johnson’s bill has garnered some bipartisan cosponsors, none of the versions of the America’s Better Classroom Act seems likely to pass in the 108th Congress. Since they were introduced in early 2003, each bill has been referred to the House Education and the Workforce and Ways and Means committees, with no further action taken. In several previous Congresses, Reps. Johnson and Rangel have cosponsored similar school construction legislation, but the full Congress has never passed their proposals. Indeed, last year a majority of House members signed on to their bipartisan bill, but the legislation did not come to a vote before the House.

Other School Construction Legislation
Two other bills currently before Congress also contain provisions that would extend the QZAB program. However, like the America’s Better Classroom Act, they are considered unlikely to go far. S. 8, the “Education Excellence for All Learners Act of 2003,” and H.R. 936, the “Act to Leave No Child Behind,” were introduced, respectively, by Sen. Tom Daschle (D-SD) and Rep. George Miller (D-CA). Both are omnibus education bills that respond to concerns that the No Child Left Behind Act is not being appropriately funded. Sen. Daschle’s bill would extend the QZAB program through 2008, while Rep. Miller’s bill would provide tax credits for school construction and repair projects similar to those in the America’s Better Classroom Act.

The one sanguine note with respect to school building legislation in Congress concerns charter schools. In his FY 2004 budget proposal, President Bush has requested $100 million to continue the “Credit Enhancement for Charter School Facilities” program, which is aimed at addressing the difficulties charter schools often have in securing appropriate buildings. The program, which was funded at $100 million in FY 2003, provides grants to public and nonprofit entities to leverage funds to help charter schools purchase, build, renovate or lease academic facilities. The House and Senate only recently began consideration of the FY 2004 education appropriations, but it seems likely that this program will make it into the final appropriations package.

Despite the decidedly low level of federal support for public school construction and repair, such projects are actually on the rise. According to recent data from the National Clearinghouse on School Construction, public school districts across the United States will spend an estimated $51 billion to build new schools between 2003 and 2005, and an additional $48 billion to expand and modernize existing K-12 schools. Yet, this activity is probably just a drop in the bucket: education advocates claim upwards of $332 billion is needed just to bring existing schools into good overall condition. Thus, the calls for more federal support for school construction and repair are likely to continue for some time. Whether enough people will heed them, however, remains an open question?

BY FRITZ EDELSTEIN AND J.D. LAROCK. Edelstein is a senior advisor and LaRock is a spokesperson for the U.S. Conference of Mayors. They can be reached at 202/401-3595.