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H.R. 4094: Tax Credit Bonds for Better Classrooms
A Bipartisan Agreement to Repair, Modernize, and Build Schools

"A modern, well-equipped learning environment is essential for student achievement. With schools falling apart and students falling behind, it's clear that we must make this investment today if we are to turn our schools around."

Representative Nancy Johnson, March 22, 2000

"If we are to continue to prosper economically and as a democracy, America must have an education policy that includes all of our kids. . . With nine out of ten American families sending children to public schools, the focus should be on improving facilities and smaller class sizes for every child."

Representative Charles Rangel, March 22, 2000

Bi-Partisan Compromise Announced

On March 21, 2000, Representatives Nancy Johnson and Charles Rangel announced a bi-partisian compromise between their respective school modernization bills (H.R. 1660 and H.R. 1760). On March 28, 2000, they introduced H.R. 4094 America's Better Classrooms Act which included 115 Democrat and Republican co-sponsors. The very next day, President Clinton committed to signing this legislation if passed by Congress.

This new legislation would provide federal tax credits to pay the interest on $24.8 billion of school modernization bonds. Repairing and reconstructing our nation's public schools is critical to insure that students are taught in safe, healthy, and modern learning environments. In 1995, the GAO released a report which identified a cost of $112 billion to bring our Nation's schools into good, overall condition. In communities throughout the country, children are being asked to learn in schools that are overcrowded, run-down, obsolete, and hazardous to their health. States and school districts could use these 15-year bonds to repair and modernize existing schools as well as build new ones.

Of the $24.8 billion, $400 million will be provided for use by the Bureau of Indian Affairs schools, $2.4 billion would be provided for an expansion of the existing Qualified Zone Academy Bonds program, and the remaining $22 billion would be distributed as follows:

  • 60% ($13.2 billion) would be allocated to states based on enrollment and
  • 40% ($8.8 billion) would be allocated directly to the 125 school districts with the largest number of low-income children.

The Joint Committee on Taxation estimated this proposal would cost $1.76 billion over five years. The bill's innovative financing mechanism is a cost-effective approach that would leverage nearly $25 billion in school repairs and new construction, while avoiding the creation of new federal programs or bureaucracy.

States and School Districts Could Receive Much Needed Financing Assistance

Under this plan, the savings to states and local school districts would be substantial, as the interest paid on a 15-year bond can be as much as half of the total repayment amount. Although states will be required to submit a plan which reflects how the bonding authority will be allocated, all decisions regarding which schools to build or repair would be left to states and local school districts. The federal role is limited to allocating the bonds among states and the 125 school districts and providing tax-credits in lieu of interest payments to bond holders.


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Last Updated -- March 30, 2000 (pjk)