State of the Union 2000


January 5, 2000

"Today too many of our schools are so old they're falling apart, or so over-crowded students are learning in trailers. Last fall, Congress missed the opportunity to change that. This year, with 53 million children in our schools, Congress must not miss that opportunity again."
--President Clinton, State of the Union Address, 1999

President Clinton's FY2001 Budget demonstrates a strong commitment to investing in school construction and modernization. The FY2001 Budget:

  • Renews the President's strong commitment to his school modernization tax credit bond proposal.

The President's School Modernization Bond proposal provides $24.8 billion in tax credit bonds over two years to modernize up to 6,000 schools. This proposal costs $3.7 billion over five years; expands the Qualified Zone Academy Bonds, a proven success; and is fully paid for in the budget.

  • Includes a new $1.3 billion school urgent/emergency renovation loan and grant proposal

This $1.3 billion initiative leverages nearly $7 billion of (approximately 8,300) renovation projects in high-poverty, high-need school districts with little or no capacity to fund urgent repairs. Both loans and grants would be made available, with the smaller grant program directed toward the neediest districts.

Nationally, there is an urgent need for school modernization

  • One-Third of All Schools Need Extensive Repairs. One third of all public schools -- about 25,000 schools -- need extensive repair or replacement. School Facilities: The Condition of America's Schools, GAO Report Number HEHS-95-61, 1995-6.
  • Average School is 42 Years Old. The average public school in America is 42 years old, and school buildings begin rapid deterioration after 40 years. How Old are America's Schools, NCES, 1999.
  • $112 Billion Needed Just for Repairs. $112 billion is needed just to repair the existing schools across the nation. School Facilities: The Condition of America's Schools, GAO Report Number HEHS-95-61, 1995-6.
  • School Enrollment Higher than Ever.. A record 52.7 million children are enrolled in elementary and secondary school today, and this number will climb to 54.3 million by 2008. 2,400 new public schools will be needed by 2003 to accommodate rising enrollments. The Baby Boom Echo: No End in Sight, Department of Education, 1999.

School Modernization Tax Credit Bond Proposal

This new type of bond -- a tax credit bond -- would provide interest-free financing to help state and local governments pay for school construction and renovation to help address issues of aging facilities and overcrowding. Instead of paying the interest and principal on school construction bonds, the issuer would only be responsible for repaying the principal. The federal government would provide tax credits to the bondholders in lieu of interest payments.

The Administration's proposal would support nearly $25 billion in bonds over the next two years to help states and districts build and modernize up to 6,000 public schools. President Clinton's proposal has an estimated cost of $3.7 billion over five years, and is fully paid for in his budget.

School Renovation Loan and Grant Program

The School Renovation program would provide interest free federal loans and grants to needy school districts to fund urgent renovations; approximately 8,300 renovation projects would receive funding over 5 years. The loan program would be targeted to those districts unable to finance the interest cost associated with facilities renovation.

The smaller direct grant program would provide direct funding to the needy school districts unable to finance the capital expenditures associated with school renovation. Renovations funded through loans and grants could include repairs to roofs, climate control systems, or plumbing. Loans and grants could also fund school modernization to improve technology capability, if no other source of funds is available.

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