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Available Funding for School Construction: An Update

  • 03/01/10
Recently, three different efforts have been made to improve the availability of funds for school construction and renovation. The first is a notice published by the Internal Revenue Service (IRS) that describes the current funding levels for programs included in the American Recovery and Reinvestment Act (ARRA). Second, are improvements in the bonding authorities provided in ARRA that are proposed in the pending Jobs for Main Street legislation (HR 2847, also known as the Jobs Bill) recently passed the House and soon to be decided by the Senate. And third, there is additional supportive funding language for school construction in the student financial aid legislation (HR 3962) passed by the House and now most likely to be added to the health care reform legislation under Budget Reconciliation.

First, the IRS recently published a notice that provides the maximum face amount of Qualified Zone Academy Bonds (“QZABs”) that may be issued for each State for the calendar year 2010 under § 54E(c)(2) of the Internal Revenue Code. QZABs for calendar years 2009 and 2010 received $1.4B as part of the American Recovery and Reinvestment Act (ARRA).

QZAB means any bond issued as part of an “issue if: (1) 100 percent of the available project proceeds of such issue are to be used for a qualified purpose with respect to a qualified zone academy established by an eligible local education agency; (2) the bond is issued by a State or local government within the jurisdiction of which such academy is located, and (3) the issuer: (A) designates such bond for purposes of this section; (B) certifies that it has written assurances that the private business contribution requirement of § 54E(b) will be met; and, (C) certifies that it has the written approval of the eligible local education agency for such bond issuance.” [Treasury/IRS printed notice]

Also, the Treasury/IRS needs to publish the 2010 allocations for the Qualified School Construction Bond (QSCB) program that is part of the Build America Bonds.

Build America Bonds are being used successfully across the country. A new U.S. Department of the Treasury Report on Build America Bonds underscores the value of the Build America Bond proposed changes for QSCBs and QZABs.
  • 929 separate Build America Bonds have been issued in 47 states totaling $78B.
  • These bonds now constitute more than 20 percent of the municipal bond market.

Second, improvements were included in the Build America Bonds portion of the recently passed and signed Hiring Incentives to Restore Employment Act (HR 2847). The bill amends several parts of the IRS Code of 1986 including incentives to hire employees, including by institutions of higher education, and amendments relating to financing of public works and infrastructure, including QZABs and QSCBs. These improvements will make these school construction bonds more attractive to the bond market and should result in the modernization of more schools in every state by extending interest subsidies as an option under both bond programs.

Third, the Student Aid and Fiscal Responsibility Act [SAFRA Act](HR 3962) has been pending since 2009. Originally the bill included some language and funding for school construction. However, the newest scoring of the cost and savings of this bill by the Congressional Budget Office was changed, which caused the removal of several parts of SAFRA, including construction. SAFRA, now, has been coupled with the amendments to health care reform as part of the Health Care and Education Reconciliation Act of 2010 (HR 4872), which has passed the House. The Senate will vote on the Reconciliation Act before the Congressional recess for Easter and Passover. It is doubtful that there will be any funds for construction included in the bill.

Fritz Edelstein is a principal in the Public Private Action, a consulting group. His work focuses on strategic government and constituent relations; business development strategy; advocacy research and policy analysis; strategic planning and resource development; and advocacy, outreach and public engagement. This work includes producing Fritzwire, the leading education Internet newsletter providing timely information on education and related issues. He can be reached at [email protected].

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