Administration's Proposal

Urgent Need

Legislative Updates and Congressional Action

Qualified Zone Academy Bonds (QZABs)

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A r c h i v e d  I n f o r m a t i o n

Overview of the Administration's
School Modernization Package

The Need for School Renovation and Construction is a National Priority

In 1995 and 1996, the General Accounting Office (GAO) released a series of reports on the condition of American public schools. At that time, $112 billion was needed to bring America's schools into good overall condition. The report identified $36 billion was needed to repair or replace building features such as a roof or plumbing; $11 billion was needed for accessibility and health and safety issues; and, $65 billion was needed for extensive repairs and replacement.[1] In 1999, the National Center for Education Statistics (NCES) released a report that illustrated how America's schools are wearing out. The report highlighted the fact that the average public school in America is 42 years old and emphasized that school buildings begin rapid deterioration after 40 years.[2]

A series of reports on increasing enrollment further highlighted the obstacles that schools were confronting. In its latest report, the U.S. Department of Education highlighted that a record 53.2 million children are enrolled in elementary and secondary schools today. This number will reach 54.2 million by 2009. Further, at least 2,400 new public schools will be needed by 2003 to accommodate rising enrollments and to relieve overcrowding.

The Administration's Dedication to the School Construction Crisis

To provide support to communities that are struggling to address school construction needs, the President's FY2001 school modernization package takes a two-pronged approach. This package includes support for short-term emergency projects through loans and grants as well as a tax credit bond proposal to address long-term needs due to aging facilities and growing enrollments.

  • Includes a new $1.3 billion school urgent/emergency renovation loan and grant proposal
  • This $1.3 billion initiative would leverage over $6.7 billion of renovation projects in high-need school districts with little or no capacity to fund urgent repairs. Over five years, the program would leverage $33.5 billion, enough to help up to 25,000 schools. Both loans and grants would be made available, with the smaller grant program directed toward the neediest districts.

  • 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 (including $2.4 billion for QZABs—see below) over two years to build and modernize up to 6,000 schools. Through this program, the federal government pays the interest on the bonds through a tax credit in-lieu of a cash payment. This proposal costs $2.4 billion over five years and is fully paid for in the President's budget.

  • Expands the successful Qualified Zone Academy Bonds (QZABs).
  • Where the proposed tax credit bond proposal addresses new construction and major renovations, QZABs, created in 1997, were limited to assisting school renovation in high-poverty areas such as Empowerment Zones/Enterprise Communities (EZ/EC) or those schools with 35% of its students eligible for free and reduced priced lunch. $400 million in bonding authority was initially provided in FY1998 and FY1999. Last year, an additional $400 million was provided for FY2000 and FY2001. In this proposal, the President seeks to expand the QZAB program to $2.4 billion in bond authority over 2 years by allowing QZABs to be used for new construction.

Choosing What's Best for Your School District


Permissible Uses



Qualified Zone Academy Bonds

QZAB proceeds may be used for renovating school buildings; purchasing equipment; developing curricula; and training school personnel.

Under current law, the proceeds may not be used for construction. However, the President's proposal would make new construction an allowable activity.

States allocate bonding authority among schools, which must (1) be located in an empowerment zone or enterprise community or (2) have at least 35 percent of their students eligible for free or reduced-cost lunch.

-- Available now.

-- Helps low-income communities meet their most pressing school renovation needs and other necessary activities such as investing in technology and training teachers.

-- Requires public-private partnership.

School Modernization Bonds

Bond proceeds could be used for school construction and extensive repairs.

Half of the bonding authority would be allocated to (1) the 100 districts with the most children living in poverty and (2) states to allocate according to their priorities.

-- Would help districts accommodate rising enrollments by building new schools.

-- Would be available to more communities than QZABs.

School Renovation Loans

School renovation and repair projects including roofs, heating and cooling systems, and plumbing.

Targeted to areas of need.

-- Would help high-need school districts meet urgent renovation needs.

-- Would jump-start renovation quickly.

School Renovation Grants

Same as above.

Targeted to areas of highest need.

-- Same as above.

-- Would not need to be repaid.

1 GAO, "The Condition of America's Schools", GAO Report B-25 February 1995.

2 National Center for Education Statistics, "How Old Are America's Schools?", January 1999.


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Last Updated -- April 3, 2000 (pjk)