To encourage lifelong learning by investing in public schools and improving access to and affordability of higher education and job training.

January 7, 2003

Mr. DASCHLE (for himself, Mr. KENNEDY, Mrs. MURRAY, Ms. MIKULSKI, Mr. DODD, Mr. BREAUX, Mr. JOHNSON, Mr. LEAHY, Mr. ROCKEFELLER, Mr. LEVIN, Mr. DURBIN, Mr. SARBANES, Mrs. CLINTON, Mr. AKAKA, Mr. SCHUMER, Mr. BIDEN, Ms. STABENOW, Mr. CORZINE, Mr. DAYTON, Mr. LAUTENBERG, Mr. REID, and Mr. BAUCUS) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions

To encourage lifelong learning by investing in public schools and improving access to and affordability of higher education and job training.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Educational Excellence for All Learners Act of 2003'.

SEC. 2. TABLE OF CONTENTS.

The table of contents for this Act is as follows:

Sec. 1. Short title.

Sec. 2. Table of contents.

TITLE I--FUNDING EDUCATION REFORM

Sec. 101. Sense of the Senate.

Subtitle A--Elementary and Secondary Education Act of 1965

Sec. 111. Increase in authorization.

Subtitle B--Individuals With Disabilities Education Act

Sec. 121. Helping children succeed by fully funding part B of the Individuals with Disabilities Education Act.

Subtitle C--Educational Equity

Sec. 131. Findings and purposes.

Chapter 1--Educational Opportunity in State Public School Systems

SUBCHAPTER A--ACCESS TO EDUCATIONAL OPPORTUNITY

Sec. 135. State public school systems.

Sec. 136. Fundamentals of educational opportunity.

SUBCHAPTER B--STATE ACCOUNTABILITY

Sec. 141. State accountability plan.

Sec. 142. Consequences of failure to meet requirements.

SUBCHAPTER C--REPORT TO CONGRESS AND THE PUBLIC

Sec. 151. Annual report on State public school systems.

SUBCHAPTER D--REMEDY

Sec. 161. Civil action for enforcement.

Chapter 2--Effects Of Educational Disparities on Economic Growth and National Defense

Sec. 171. Effects on economic growth and productivity.

Sec. 172. Effects on national defense.

Chapter 3--General Provisions

Sec. 181. Definitions.

Sec. 182. Rulemaking.

Sec. 183. Construction.

TITLE II--MODERNIZING SCHOOL FACILITIES

Sec. 201. Short title.

Sec. 202. Expansion of incentives for public schools.

Sec. 203. Application of certain labor standards on construction projects financed under public school modernization program.

Sec. 204. Employment and training activities relating to construction or reconstruction of public school facilities.

Sec. 205. Indian school construction.

TITLE III--MAKING HIGHER EDUCATION MORE ACCESSIBLE

Subtitle A--College Access

Sec. 301. Expansion of gearup and trio.

Sec. 302. Programs for students whose families are engaged in migrant and seasonal farmwork.

Subtitle B--Enhancing Programs for Minority Serving Institutions

Sec. 311. Increasing diversity.

Subtitle C--NTIA Digital Network Technology Program

Sec. 331. Establishment of program.

Sec. 332. Definitions.

Sec. 333. Authorization of appropriations.

Subtitle D--Higher Education and Immigration

Sec. 341. Restoration of State option to determine residency for purposes of higher education benefits.

Sec. 342. Cancellation of removal and adjustment of status of certain alien high school graduates who are long-term residents of the United States.

Sec. 343. Annual report.

TITLE IV--MAKING HIGHER EDUCATION AFFORDABLE

Subtitle A--Pell Grants

Sec. 411. Sense of the Senate.

Sec. 412. Covering Pell Grant shortfall.

Subtitle B--Student Loan Origination Fees

Sec. 421. Phaseout of student loan origination fees.

Subtitle C--Hope Scholarship

Sec. 431. Hope and lifetime learning credits to be refundable.

TITLE I--FUNDING EDUCATION REFORM

SEC. 101. SENSE OF THE SENATE.

(a) FINDINGS- The Senate finds the following:

(1) Congress enacted, with bipartisan support, and the President signed into law the No Child Left Behind Act of 2001, that reauthorized the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.). The new law required States to set high standards for learning and required schools to implement reforms to help improve student achievement. In return, Congress and the President pledged to make sure schools would have resources to carry out the reforms as called for in the new law.

(2) $9,000,000,000 in additional resources are needed to fully fund the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) in fiscal year 2003.

(3) The Administration's budget request for fiscal year 2003 cut funding for programs in the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) by $90,000,000, meaning schools would have fewer resources to implement the new law.

(4) The Administration's budget request for fiscal year 2003 provides insufficient resources to help communities modernize schools and address overcrowding.

(5) Because of declining revenues due to the economic recession and stock market declines, many States are being forced to cut back support for public schools.

(b) SENSE OF THE SENATE- It is the sense of the Senate that--

(1) it is in the best interest of the Nation that all students have access to a high quality elementary and secondary education; and

(2) the No Child Left Behind Act of 2001 should be fully funded.

Subtitle A--Elementary and Secondary Education Act of 1965

SEC. 111. INCREASE IN AUTHORIZATION.

The Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) is amended--

(1) in section 1002--

(A) in subsection (a), by striking paragraphs (3) through (6) and inserting the following:

`(3) $18,500,000,000 for fiscal year 2004;

`(4) $21,612,000,000 for fiscal year 2005;

`(5) $24,724,000,000 for fiscal year 2006;

`(6) $27,837,000,000 for fiscal year 2007;

`(7) $30,949,000,000 for fiscal year 2008;

`(8) $34,061,000,000 for fiscal year 2009;

`(9) $37,173,000,000 for fiscal year 2010;

`(10) $40,286,000,000 for fiscal year 2011;

`(11) $43,398,000,000 for fiscal year 2012; and

`(12) $46,510,000,000 for fiscal year 2013.'; and

(B) in subsection (c), by striking `2002 and such sums as may be necessary for each of the 5 succeeding fiscal years' and inserting `2002, such sums as may be necessary for fiscal year 2003, $500,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year';

(2) in section 1705, by adding at the end the following:

`(g) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to carry out this section $44,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year.';

(3) in section 1803, by striking `2002 and such sums as may be necessary for each of the 5 succeeding fiscal years,' and inserting `2002, such sums as may be necessary for fiscal year 2003, $125,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year,';

(4) by striking section 2103(a) and inserting the following:

`(a) GRANTS TO STATES, LOCAL EDUCATION AGENCIES, AND ELIGIBLE PARTNERSHIPS- There are authorized to be appropriated to carry out this part (other than subpart 5) $3,175,000,000 for fiscal year 2002, such sums as may be necessary for fiscal year 2003, $3,500,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year.';

(5) by striking section 3001(a)(1) and inserting the following:

`(1) IN GENERAL- Subject to subsection (b), there are authorized to be appropriated to carry out this title, except for subpart 4 of part B, $750,000,000 for fiscal year 2002, such sums as may be necessary for fiscal year 2003, $1,200,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year.';

(6) by striking section 4003 and inserting the following:

`SEC. 4003. AUTHORIZATION OF APPROPRIATIONS.

`There are authorized to be appropriated--

`(1) $650,000,000 for fiscal year 2002, such sums as may be necessary for fiscal year 2003, $700,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year, for State grants under subpart 1; and

`(2) such sums as may be necessary for fiscal years 2002 and 2003, $225,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year, for national programs under subpart 2.';

(7) by striking section 4206 and inserting the following:

`SEC. 4206. AUTHORIZATION OF APPROPRIATIONS.

`There are authorized to be appropriated $1,250,000,000 for fiscal year 2002, $1,500,000,000 for fiscal year 2003, $2,000,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year.'; and

(8) in section 6234, by striking `2002 and such sums as may be necessary for each of the 5 succeeding fiscal years,' and inserting `2002, such sums as may be necessary for fiscal year 2003, $300,000,000 for fiscal year 2004, and such sums as may be necessary for each succeeding fiscal year,'.

Subtitle B--Individuals With Disabilities Education Act

SEC. 121. HELPING CHILDREN SUCCEED BY FULLY FUNDING PART B OF THE INDIVIDUALS WITH DISABILITIES EDUCATION ACT.

(a) FINDINGS- Congress makes the following findings:

(1) All children deserve a quality education.

(2) In Pennsylvania Association for Retarded Children v. Commonwealth of Pennsylvania (334 F. Supp. 1247) (E. Dist. Pa. 1971), and Mills v. Board of Education of the District of Columbia (348 F. Supp. 866) (Dist. D.C. 1972), the courts found that children with disabilities are entitled to an equal opportunity to an education under the 14th amendment to the Constitution.

(3) In 1975, Congress passed what is now known as the Individuals with Disabilities Education Act (referred to in this section as `IDEA') (20 U.S.C. 1400 et seq.) to help States provide all children with disabilities a free, appropriate public education in the least restrictive environment. At full funding, Congress contributes 40 percent of the excess cost of educating children with disabilities.

(4) Before 1975, only 1/5 of the children with disabilities received a formal education. At that time, many States had laws that specifically excluded many children with disabilities, including children who were blind, deaf, or emotionally disturbed, from receiving such an education.

(5) IDEA currently serves an estimated 200,000 infants and toddlers, 600,000 preschoolers, and 5,400,000 children 6 to 21 years of age, and their families.

(6) IDEA enables children with disabilities to be educated in their communities, and thus, has assisted in dramatically reducing the number of children with disabilities who must live in State institutions away from their families.

(7) The number of children with disabilities who complete high school has grown significantly since the enactment of IDEA.

(8) The number of children with disabilities who enroll in college as freshmen has more than tripled since the enactment of IDEA.

(9) The overall effectiveness of IDEA depends upon well-trained special education and general education teachers, related services personnel, and other school personnel. Congress recognizes concerns

about the nationwide shortage of personnel serving students with disabilities and the need for improvement in the qualifications of such personnel.

(10) IDEA has raised the Nation's awareness about the abilities and capabilities of children with disabilities.

(11) Improvements to IDEA in the 1997 amendments increased the academic achievement of children with disabilities and helped them to lead productive, independent lives.

(12) Changes made in 1997 also addressed the needs of those children whose behavior impedes learning by implementing behavioral assessments and intervention strategies to ensure that they receive appropriate supports in order to receive a quality education.

(13) IDEA requires a full partnership between parents of children with disabilities and education professionals in the design and implementation of the educational services provided to children with disabilities.

(14) While the Federal Government has more than doubled funding for part B of IDEA since 1995, the Federal Government has never provided more than 16 percent of the maximum State grant allocation for educating children with disabilities.

(15) By fully funding part B of IDEA, Congress will strengthen the ability of States and localities to implement the requirements of IDEA.

(b) FUNDING- Section 611(j) of the Individuals with Disabilities Education Act (20 U.S.C. 1411(j)) is amended to read as follows:

`(j) FUNDING- For the purpose of carrying out this part, other than section 619, there are authorized to be appropriated--

`(1) $11,029,000,000 for fiscal year 2004, and, there are hereby appropriated $2,500,000,000 for fiscal year 2004, which shall become available for obligation on July 1, 2004, and shall remain available through September 30, 2005;

`(2) $13,529,000,000 for fiscal year 2005, and, there are hereby appropriated $5,000,000,000 for fiscal year 2005, which shall become available for obligation on July 1, 2005, and shall remain available through September 30, 2006;

`(3) $16,029,000,000 for fiscal year 2006, and, there are hereby appropriated $7,500,000,000 for fiscal year 2006, which shall become available for obligation on July 1, 2006, and shall remain available through September 30, 2007;

`(4) $18,529,000,000 for fiscal year 2007, and, there are hereby appropriated $10,000,000,000 for fiscal year 2007, which shall become available for obligation on July 1, 2007, and shall remain available through September 30, 2008;

`(5) $21,029,000,000 for fiscal year 2008, and, there are hereby appropriated $12,500,000,000 for fiscal year 2008, which shall become available for obligation on July 1, 2008, and shall remain available through September 30, 2009;

`(6) $23,192,000,000, or the sum of the maximum amounts of grants that all States may receive under subsection (a)(2), whichever is lower, for fiscal year 2009, and there are hereby appropriated $14,663,000,000 for fiscal year 2009, which shall become available for obligation on July 1, 2009, and shall remain available through September 30, 2010, except that if such sum is less than $23,192,000,000, then the amount appropriated under this paragraph shall be reduced by the difference between $23,192,000,000 and such sum;

`(7) $23,845,000,000, or the sum of the maximum amount of grants that all States may receive under subsection (a)(2), whichever is lower, for fiscal year 2010, and there are hereby appropriated $15,317,000,000 for fiscal year 2010, which shall become available for obligation on July 1, 2010, and shall remain available through September 30, 2011, except that if such sum is less than $23,845,000,000, then the amount appropriated under this paragraph shall be reduced by the difference between $23,845,000,000 and such sum;

`(8) $24,483,000,000, or the sum of the maximum amount of grants that all States may receive under subsection (a)(2), whichever is lower, for fiscal year 2011, and there are hereby appropriated $15,955,000,000 for fiscal year 2011, which shall become available for obligation on July 1, 2011, and shall remain available through September 30, 2012, except that if such sum is less than $24,483,000,000, then the amount appropriated under this paragraph shall be reduced by the difference between $24,483,000,000 and such sum;

`(9) $25,125,000,000, or the sum of the maximum amount of grants that all States may receive under subsection (a)(2), whichever is lower, for fiscal year 2012, and there are hereby appropriated $16,596,000,000 for fiscal year 2012, which shall become available for obligation on July 1, 2012, and shall remain available through September 30, 2013, except that if such sum is less than $25,125,000,000, then the amount appropriated under this paragraph shall be reduced by the difference between $25,125,000,000 and such sum;

`(10) $25,758,000,000, or the sum of the maximum amount of grants that all States may receive under subsection (a)(2), whichever is lower, for fiscal year 2013, and there are hereby appropriated $17,229,000,000 for fiscal year 2013, which shall become available for obligation on July 1, 2013, and shall remain available through September 30, 2014, except that if such sum is less than $25,758,000,000, then the amount appropriated under this paragraph shall be reduced by the difference between $25,758,000,000 and such sum; and

`(11) such sums as may be necessary for fiscal year 2014 and each subsequent fiscal year.'.

Subtitle C--Educational Equity

SEC. 131. FINDINGS AND PURPOSES.

(a) FINDINGS- Congress finds the following:

(1) A high-quality, highly competitive education for all students is imperative for the economic growth and productivity of the United States, for its

effective national defense, and to achieve the historical aspiration to be one Nation of equal citizens. It is therefore necessary and proper to overcome the nationwide phenomenon of State public school systems that do not meet the requirements of section 135(a), in which high-quality public schools typically serve high-income communities and poor-quality schools typically serve low-income, urban, rural, and minority communities.

(2) There exists in the States a significant educational opportunity gap for low-income, urban, rural, and minority students characterized by the following:

(A) Continuing disparities within States in students' access to the fundamentals of educational opportunity described in section 136.

(B) Highly differential educational expenditures (adjusted for cost and need) among school districts within States.

(C) Radically differential educational achievement among students in school districts within States as measured by the following:

(i) Achievement in mathematics, reading or language arts, and science on State academic assessments required under section 1111(b)(3) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)) and on the National Assessment of Educational Progress.

(ii) Advanced placement courses taken.

(iii) SAT and ACT test scores.

(iv) Dropout rates and graduation rates.

(v) College-going and college-completion rates.

(vi) Job placement and retention rates and indices of job quality.

(3) As a consequence of this educational opportunity gap, the quality of a child's education depends largely upon where the child's family can afford to live, and the detriments of lower quality education are imposed particularly on--

(A) children from low-income families;

(B) children living in urban and rural areas; and

(C) minority children.

(4) Since 1785, Congress, exercising the power to admit new States under section 3 of article IV of the Constitution (and previously, the Congress of the Confederation of States under the Articles of Confederation), has imposed upon every State, as a fundamental condition of the State's admission, that the State provide for the establishment and maintenance of systems of public schools open to all children in such State.

(5) Over the years since the landmark ruling in Brown v. Board of Education, 347 U.S. 483, 493 (1954), when a unanimous Supreme Court held that `the opportunity of an education..., where the State has undertaken to provide it, is a right which must be made available to all on equal terms', courts in 44 States have heard challenges to the establishment, maintenance, and operation of State public school systems that are separate and not educationally adequate.

(6) In 1970, the Presidential Commission on School Finance found that significant disparities in the distribution of educational resources existed among school districts within States because the States relied too significantly on local district financing for educational revenues, and that reforms in systems of school financing would increase the Nation's ability to serve the educational needs of all children.

(7) In 1999, the National Research Council of the National Academy of Sciences published a report entitled `Making Money Matter, Financing America's Schools', which found that the concept of funding adequacy, which moves beyond the more traditional concepts of finance equity to focus attention

on the sufficiency of funding for desired educational outcomes, is an important step in developing a fair and productive educational system.

(8) In 2001, the Executive Order establishing the President's Commission on Educational Resource Equity declared, `A quality education is essential to the success of every child in the 21st century and to the continued strength and prosperity of our Nation. . . . [L]ong-standing gaps in access to educational resources exist, including disparities based on race and ethnicity.' (Exec. Order No. 13190, 66 Fed. Reg. 5424 (2001)).

(9) According to the Secretary of Education, as stated in a letter (with enclosures) from the Secretary to States dated January 19, 2001--

(A) racial and ethnic minorities continue to suffer from lack of access to educational resources, including `experienced and qualified teachers, adequate facilities, and instructional programs and support, including technology, as well as...the funding necessary to secure these resources'; and

(B) these inadequacies are `particularly acute in high-poverty schools, including urban schools, where many students of color are isolated and where the effect of the resource gaps may be cumulative. In other words, students who need the most may often receive the least, and these students often are students of color.'.

(10) In the amendments made by the No Child Left Behind Act of 2001, Congress--

(A)(i) required each State to establish standards and assessments in mathematics, reading or language arts, and science; and

(ii) required schools to ensure that all students are proficient in mathematics, reading or language arts, and science not later than 12 years after the end of the 2001-2002 school year, and held schools accountable for the students' progress; and

(B) required each State to describe how the State will help local educational agencies and schools to develop the capacity to improve student academic achievement.

(11) The standards and accountability movement will succeed only if, in addition to standards and accountability, all schools have access to the educational resources necessary to enable students to achieve.

(12) Raising standards without ensuring access to educational resources may in fact exacerbate achievement gaps and set children up for failure.

(13) According to the World Economic Forum's Global Competitiveness Report 2001-2002, the United States ranks last among developed countries in the difference in the quality of schools available to rich and poor children.

(14) The persistence of pervasive inadequacies in the quality of education provided by State public school systems effectively deprives millions of children throughout the United States of the opportunity for an education adequate to enable the children to--

(A) acquire the knowledge and skills necessary for responsible citizenship in a diverse democracy, including the ability to participate fully in the political process through informed electoral choice;

(B) meet challenging student academic achievement standards; and

(C) be able to compete and succeed in a global economy.

(15) Each State government has ultimate authority to determine every important aspect and priority of the public school system that provides elementary and secondary education to children in the State, including whether students throughout the State have access to the fundamentals of educational opportunity described in section 136.

(16) Because a well-educated populace is critical to the Nation's political and economic well-being and national security, the Federal Government has a substantial interest in ensuring that States provide a high-quality education by ensuring that all students have access to the fundamentals of educational opportunity described in section 136 to enable the students to succeed academically and in life.

(b) PURPOSES- The purposes of this subtitle are the following:

(1) To further the goals of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) (as amended by the No Child Left Behind Act of 2001), by holding States accountable for providing all students with access to the fundamentals of educational opportunity described in section 136.

(2) To ensure that all students in public elementary schools and secondary schools receive educational opportunities that enable such students to--

(A) acquire the knowledge and skills necessary for responsible citizenship in a diverse democracy, including the ability to participate fully in the political process through informed electoral choice;

(B) meet challenging student academic achievement standards; and

(C) be able to compete and succeed in a global economy.

(3) To end the pervasive pattern of States maintaining public school systems that do not meet the requirements of section 135(a).

CHAPTER 1--EDUCATIONAL OPPORTUNITY IN STATE PUBLIC SCHOOL SYSTEMS

Subchapter A--Access to Educational Opportunity

SEC. 135. STATE PUBLIC SCHOOL SYSTEMS.

(a) REQUIREMENTS- Each State receiving Federal financial assistance for elementary or secondary education shall ensure that the State's public school system provides all students within the State with an education that enables the students to acquire the knowledge and skills necessary for responsible citizenship in a diverse democracy, including the ability to participate fully in the political

process through informed electoral choice, to meet challenging student academic achievement standards, and to be able to compete and succeed in a global economy, through--

(1) the provision of fundamentals of educational opportunity described in section 136, at adequate or ideal levels as defined by the State under section 141(a)(1)(A) to students at each public elementary school and secondary school in the State;

(2) the provision of educational services in school districts that receive funds under part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311 et seq.) that are, taken as a whole, at least comparable to educational services provided in school districts not receiving such funds; and

(3) compliance with any final Federal or State court order in any matter concerning the adequacy or equitableness of the State's public school system.

(b) DETERMINATIONS CONCERNING STATE PUBLIC SCHOOL SYSTEMS- Not later than October 1 of each year, the Secretary shall determine whether each State maintains a public school system that meets the requirements of subsection (a). The Secretary may make a determination that a State public school system does not meet such requirements only after providing notice and an opportunity for a hearing.

(c) PUBLICATION- The Secretary shall publish and make available to the general public (including by means of the Internet) the determinations made under subsection (b).

SEC. 136. FUNDAMENTALS OF EDUCATIONAL OPPORTUNITY.

The fundamentals of educational opportunity are the following:

(1) HIGHLY QUALIFIED TEACHERS, PRINCIPALS, AND ACADEMIC SUPPORT PERSONNEL-

(A) HIGHLY QUALIFIED TEACHERS- Instruction from highly qualified teachers in core academic subjects.

(B) HIGHLY QUALIFIED PRINCIPALS- Leadership, management, and guidance from principals who meet State certification standards.

(C) HIGHLY QUALIFIED ACADEMIC SUPPORT PERSONNEL- Necessary additional academic support in reading or language arts, mathematics, and other core academic subjects from personnel who meet applicable State standards.

(2) RIGOROUS ACADEMIC STANDARDS, CURRICULA, AND METHODS OF INSTRUCTION- Rigorous academic standards, curricula, and methods of instruction, as measured by the extent to which each school district succeeds in providing high-quality academic standards, curricula, and methods of instruction to students in each public elementary school and secondary school within the district.

(3) SMALL CLASS SIZES- Small class sizes, as measured by--

(A) the average class size and the range of class sizes; and

(B) the percentage of classes with 17 or fewer students.

(4) TEXTBOOKS, INSTRUCTIONAL MATERIALS, AND SUPPLIES- Textbooks, instructional materials, and supplies, as measured by--

(A) the average age and quality of textbooks, instructional materials, and supplies used in core academic subjects; and

(B) the percentage of students who begin the school year with school-issued textbooks, instructional materials, and supplies.

(5) LIBRARY RESOURCES- Library resources, as measured by--

(A) the size and qualifications of the library's staff, including whether the library is staffed by a full-time librarian certified under applicable State standards;

(B) the size (relative to the number of students) and quality (including age) of the library's collection of books and periodicals; and

(C) the library's hours of operation.

(6) SCHOOL FACILITIES AND COMPUTER TECHNOLOGY-

(A) QUALITY SCHOOL FACILITIES- Quality school facilities, as measured by--

(i) the physical condition of school buildings and major school building features;

(ii) environmental conditions in school buildings; and

(iii) the quality of instructional space.

(B) COMPUTER TECHNOLOGY- Computer technology, as measured by--

(i) the ratio of computers to students;

(ii) the quality of computers and software available to students;

(iii) Internet access;

(iv) the quality of system maintenance and technical assistance for the computers; and

(v) the number of computer laboratory courses taught by qualified computer instructors.

(7) QUALITY GUIDANCE COUNSELING- Qualified guidance counselors, as measured by the ratio of students to qualified guidance counselors who have been certified under an applicable State or national program.

Subchapter B--State Accountability

SEC. 141. STATE ACCOUNTABILITY PLAN.

(a) GENERAL PLAN-

(1) CONTENTS- Each State receiving Federal financial assistance for elementary and secondary education shall annually submit to the Secretary a plan, developed by the State educational agency, in consultation with local educational agencies, teachers, principals, pupil services personnel, administrators, other staff, and parents, that contains the following:

(A) A description of 2 levels of high access (adequate and ideal) to each of the fundamentals of educational opportunity described in section 136 that measure how well the State, through school districts, public elementary schools, and public secondary schools, is achieving the purposes of this subtitle by providing children with the resources they need to succeed academically and in life.

(B) A description of a third level of access (basic) to each of the fundamentals of educational opportunity described in section 136 that measures how well the State, through school districts, public elementary schools, and public secondary schools, is achieving the purposes of this subtitle by providing children with the resources they need to succeed academically and in life.

(C) A description of the level of access of each school district, public elementary school, and public secondary school in the State to each of the fundamentals of educational opportunity described in section 136, including identification of any such schools that lack high access (as described in subparagraph (A)) to any of the fundamentals.

(D) An estimate of the additional cost, if any, of ensuring that the system meets the requirements of section 135(a).

(E) Information stating the percentage of students in each school district, public elementary school, and public secondary school in the State that are proficient in mathematics, reading or language arts, and science, as measured through assessments administered as described in section 1111(b)(3)(C)(v) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)(C)(v)).

(F) Information stating whether each school district, public elementary school, and public secondary school in the State is making adequate yearly progress, as defined under section 1111(b)(2) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)).

(G)(i) For each school district, public elementary school, and public secondary school in the State, information stating--

(I) the number and percentage of children counted under section 1124(c) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333(c)); and

(II) the number and percentage of students described in section 1111(b)(3)(C)(xiii) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)(C)(xiii)).

(ii) For each such school district, information stating whether the district is an urban, mixed, or rural district (as defined by the National Center for Education Statistics).

(2) LEVELS OF ACCESS- For purposes of the plan submitted under paragraph (1)--

(A) in defining basic, adequate, and ideal levels of access to each of the fundamentals of educational opportunity, each State shall consider, in addition to the factors described in section 136, the access available to students in the highest achieving decile of public elementary schools and secondary schools, the unique needs of low-income, urban and rural, and minority students, and other educationally appropriate factors; and

(B) the levels of access described in subparagraphs (A) and (B) of paragraph (1) shall be aligned with the challenging academic content standards, challenging student academic achievement standards, and high-quality academic assessments required under the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.).

(3) INFORMATION- The State shall annually disseminate to parents, in an understandable and uniform format, the descriptions, estimate, and information described in paragraph (1).

(b) ACCOUNTABILITY AND REMEDIATION-

(1) ACCOUNTABILITY- If the Secretary determines under section 135(b) that a State maintains a public school system that fails to meet the requirements of section 135(a)(1), the plan submitted under subsection (a)(1) shall--

(A) demonstrate that the State has developed and is implementing a single, statewide State accountability system that will be effective in ensuring that the State makes adequate

yearly progress under this subtitle (as defined by the State in a manner that annually reduces the number of public elementary schools and secondary schools in the State without high access (as described in subsection (a)(1)(A)) to each of the fundamentals of educational opportunity described in section 136);

(B) demonstrate, based on the levels of access described in paragraph (1) what constitutes adequate yearly progress of the State under this subtitle toward providing all students with high access to the fundamentals of educational opportunity described in section 136; and

(C) ensure--

(i) the establishment of a timeline for that adequate yearly progress that includes interim yearly goals for the reduction of the number of public elementary schools and secondary schools in the State without high access to each of the fundamentals of educational opportunity described in section 136; and

(ii) that not later than 12 years after the end of the 2001-2002 school year, each public elementary or secondary school in the State shall have high access to each of the fundamentals of educational opportunity described in section 136.

(2) REMEDIATION- If the Secretary determines under section 135(b) that a State maintains a public school system that fails to meet the requirements of section 135(a)(2), not later than 1 year after the Secretary makes the determination, the State shall include in the plan submitted under subsection (a)(1) a strategy to remediate the conditions that caused the Secretary to make such determination, not later than the end of the second school year beginning after submission of the plan.

(c) AMENDMENTS- A State may amend the plan submitted under subsection (a)(1) to improve the plan or to take into account significantly changed circumstances.

(d) DISAPPROVAL- The Secretary may disapprove the plan submitted under subsection (a)(1) (or an amendment to such a plan) if the Secretary determines, after notice and opportunity for hearing, that the plan (or amendment) is inadequate to meet the requirements described in subsections (a) and (b).

(e) WAIVER-

(1) IN GENERAL- A State may request, and the Secretary may grant, a waiver of the requirements of subsections (a) and (b) for 1 year for exceptional circumstances, such as a precipitous decrease in State revenues, or another circumstance that the Secretary determines to be exceptional, that prevents a State from complying with the requirements of subsections (a) and (b).

(2) CONTENTS OF WAIVER REQUEST- A State that requests a waiver under paragraph (1) shall include in the request--

(A) a description of the exceptional circumstance that prevents the State from complying with the requirements of subsections (a) and (b); and

(B) a plan that details the manner in which the State will comply with such requirements by the end of the waiver period.

SEC. 142. CONSEQUENCES OF FAILURE TO MEET REQUIREMENTS.

(a) INTERIM YEARLY GOALS-

(1) IN GENERAL- For a fiscal year and a State described in section 141(b)(1), the Secretary shall withhold from the State 2.75 percent of funds otherwise available to the State for the administration of Federal elementary and secondary education programs, for each covered goal that the Secretary

determines the State is not meeting during that year.

(2) DEFINITION- In this subsection, the term `covered goal', used with respect to a fiscal year, means an interim yearly goal described in section 141(b)(1)(C)(i) that is applicable to that year or a prior fiscal year.

(b) CONSEQUENCES OF NONREMEDIATION- Notwithstanding any other provision of law, if the Secretary determines that a State required to include a strategy under section 141(b)(2) continues to maintain a public school system that does not meet the requirements of section 135(a)(2) at the end of the second school year described in section 141(b)(2), the Secretary shall withhold from the State not more than 33 1/3 percent of funds otherwise available to the State for the administration of Federal elementary and secondary education programs until the Secretary determines that the State maintains a public school system that meets the requirements of section 135(a)(2).

(c) CONSEQUENCES OF NONCOMPLIANCE WITH COURT ORDERS- If the Secretary determines under section 135(b) that a State maintains a public school system that fails to meet the requirements of section 135(a)(3), the Secretary shall withhold from the State not more than 33 1/3 percent of funds otherwise available to the State for the administration of Federal elementary and secondary education programs.

(d) DISPOSITION OF FUNDS WITHHELD-

(1) DETERMINATION- Not later than 1 year after the Secretary withholds funds from a State under this section, the Secretary shall determine whether the State has corrected the condition that led to the withholding.

(2) DISPOSITION-

(A) CORRECTION- If the Secretary determines under paragraph (1), that the State has corrected the condition that led to the withholding, the Secretary shall make the withheld funds available to the State to use for the original purpose of the funds during 1 or more fiscal years specified by the Secretary.

(B) NONCORRECTION- If the Secretary determines under paragraph (1), that the State has not corrected the condition that led to the withholding, the Secretary shall allocate the withheld funds to public school districts, public elementary schools, or public secondary schools

in the State that are most adversely affected by the condition that led to the withholding, to enable the districts or schools to correct the condition during 1 or more fiscal years specified by the Secretary.

(3) AVAILABILITY- Amounts made available or allocated under subparagraph (A) or (B) of paragraph (2) shall remain available during the fiscal years specified by the Secretary under that subparagraph.

Subchapter C--Report to Congress and the Public

SEC. 151. ANNUAL REPORT ON STATE PUBLIC SCHOOL SYSTEMS.

(a) ANNUAL REPORT TO CONGRESS- Not later than October 1 of each year, beginning the year after completion of the first full school year after the date of enactment of this subtitle, the Secretary shall submit to Congress a report that includes a full and complete analysis of the public school system of each State.

(b) CONTENTS OF REPORT- The analysis conducted under subsection (a) shall include the following:

(1) PUBLIC SCHOOL SYSTEM INFORMATION- The following information related to the public school system of each State:

(A) The number of school districts, public elementary schools, public secondary schools, and students in the system.

(B)(i) For each such school district and school--

(I) information stating the number and percentage of children counted under section 1124(c) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333(c)); and

(II) the number and percentage of students, disaggregated by groups described in section 1111(b)(3)(C)(xiii) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)(C)(xiii)).

(ii) For each such district, information stating whether the district is an urban, mixed, or rural district (as defined by the National Center for Education Statistics).

(C) The average per-pupil expenditure (both in actual dollars and adjusted for cost and need) for the State and for each school district in the State.

(D) Each school district's decile ranking as measured by achievement in mathematics, reading or language arts, and science on State academic assessments required under section 1111(b)(3) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)) and on the National Assessment of Educational Progress.

(E) For each school district, public elementary school, and public secondary school--

(i) the level of access (as described in section 141(a)(1)) to each of the fundamentals of educational opportunity described in section 136;

(ii) the percentage of students that are proficient in mathematics, reading or language arts, and science, as measured through assessments administered as described in section 1111(b)(3)(C)(v) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)(C)(v)); and

(iii) whether the school district or school is making adequate yearly progress--

(I) as defined under section 1111(b)(2) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)); and

(II) as defined by the State under section 141(b)(1)(A).

(F) For each State, the number of public elementary schools and secondary schools that lack, and names of each such school that lacks, high access (as described in section 141(a)(1)(A)) to any of the fundamentals of educational opportunity described in section 136.

(G) For the year covered by the report, a summary of any changes in the data required in subparagraphs (A) through (F) for each of the preceding 3 years (which may be based on such data as are available, for the first 3 reports submitted under subsection (a)).

(H) Such other information as the Secretary considers useful and appropriate.

(2) STATE ACTIONS- For each State that the Secretary determines under section 135(b) maintains a public school system that fails to meet the requirements of section 135(a), a detailed description and evaluation of the success of any actions taken by the State, and measures proposed to be taken by the State, to meet the requirements.

(3) STATE PLANS- A copy of each State's most recent plan submitted under section 141(a)(1).

(4) RELATIONSHIP BETWEEN COMPLIANCE AND ACHIEVEMENT- An analysis of the relationship between meeting the requirements of section 135(a) and improving student academic achievement, as measured on State academic assessments required under section 1111(b)(3) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(3)).

(c) SCOPE OF REPORT- The report required under subsection (a) shall cover the school year ending in the calendar year in which the report is required to be submitted.

(d) SUBMISSION OF DATA TO SECRETARY- Each State receiving Federal financial assistance for elementary and secondary education shall submit to the Secretary, at such time and in such manner as the Secretary may reasonably require, such data as the Secretary determines to be necessary to make a determination under section 135(b) and to submit the report under this section. Such data shall include the information used to measure the State's success in providing the fundamentals of educational opportunity described in section 136.

(e) FAILURE TO SUBMIT DATA- If a State fails to submit the data that the Secretary determines to be necessary to make a determination under section 135(b) regarding whether the State maintains a public school system that meets the requirements of section 135(a)--

(1) such State's public school system shall be deemed not to have met the applicable requirements until the State submits such data and the Secretary is able to make such determination under section 135(b); and

(2) the Secretary shall provide, to the extent practicable, the analysis required in subsection (a) for the State based on the best data available to the Secretary.

(f) PUBLICATION- The Secretary shall publish and make available to the general public (including by means of the Internet) the report required under subsection (a).

Subchapter D--Remedy

SEC. 161. CIVIL ACTION FOR ENFORCEMENT.

A student or parent of a student aggrieved by a violation of this subtitle may bring a civil action against the appropriate official in an appropriate Federal district court seeking declaratory or injunctive relief to enforce the

requirements of this subtitle, together with reasonable attorney's fees and the costs of the action.

CHAPTER 2--EFFECTS OF EDUCATIONAL DISPARITIES ON ECONOMIC GROWTH AND NATIONAL DEFENSE

SEC. 171. EFFECTS ON ECONOMIC GROWTH AND PRODUCTIVITY.

(a) STUDY- The Commissioner for Education Statistics, in consultation with the Secretary of Commerce, Secretary of Labor, Secretary of the Treasury, and the National Research Council of the National Academy of Sciences, shall conduct a comprehensive study concerning the effects on economic growth and productivity of ensuring that each State public school system meets the requirements of section 135(a). Such study shall include assessments of--

(1) the economic costs to the Nation resulting from the maintenance by States of public school systems that do not meet the requirements of section 135(a);

(2) the economic gains to be expected from States' compliance with the requirements of section 135(a); and

(3) the costs, if any, of ensuring that each State maintains a public school system that meets the requirements of section 135(a).

(b) REPORT TO CONGRESS- Not later than 1 year after the date of enactment of this subtitle, the Commissioner for Education Statistics shall submit to Congress a final report detailing the results of the study required under subsection (a).

SEC. 172. EFFECTS ON NATIONAL DEFENSE.

(a) STUDY- The Commissioner for Education Statistics, in consultation with the Secretary of Defense, shall conduct a comprehensive study concerning the effects on national defense of ensuring that each State public school system meets the requirements of section 135(a). Such study shall include assessments of--

(1) the detriments to national defense resulting from the maintenance by States of public school systems that do not meet the requirements of section 135(a), including the effects on--

(A) knowledge and skills necessary for the effective functioning of the Armed Forces;

(B) the costs to the Armed Forces of training; and

(C) efficiency resulting from the use of sophisticated equipment and information technology; and

(2) the gains to national defense to be expected from ensuring that each State public school system meets the requirements of section 135(a).

(b) REPORT TO CONGRESS- Not later than 1 year after the date of enactment of this subtitle, the Commissioner for Education Statistics shall submit to Congress a final report detailing the results of the study required under subsection (a).

CHAPTER 3--GENERAL PROVISIONS

SEC. 181. DEFINITIONS.

In this subtitle:

(1) REFERENCED TERMS- The terms `elementary school', `secondary school', `local educational agency', `highly qualified', `core academic subjects', `parent', and `average per-pupil expenditure' have the meanings given those terms in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801).

(2) FEDERAL ELEMENTARY AND SECONDARY EDUCATION PROGRAMS- The term `Federal elementary and secondary education programs' means programs providing Federal financial assistance for elementary or secondary education, other than programs under the following provisions of law:

(A) The Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.).

(B) Title III of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6801 et seq.).

(C) The Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.).

(D) The Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.).

(3) PUBLIC SCHOOL SYSTEM- The term `public school system' means a State's system of public elementary and secondary education.

(4) STATE- The term `State' means each of the several States, the District of Columbia, and the Commonwealth of Puerto Rico.

SEC. 182. RULEMAKING.

The Secretary may prescribe regulations to carry out this subtitle.

SEC. 183. CONSTRUCTION.

Nothing in this subtitle shall be construed to require a jurisdiction to increase its property tax or other tax rates or to redistribute revenues from such taxes.

TITLE II--MODERNIZING SCHOOL FACILITIES

SEC. 201. SHORT TITLE.

This title may be cited as the `America's Better Classrooms Act of 2003'.

SEC. 202. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

(a) IN GENERAL- Chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

`Subchapter Z--Public School Modernization Provisions

`Sec. 1400M. Credit to holders of qualified public school modernization bonds.

`Sec. 1400N. Qualified school construction bonds.

`Sec. 1400O. Qualified zone academy bonds.

`SEC. 1400M. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS.

`(a) ALLOWANCE OF CREDIT- In the case of a taxpayer who holds a qualified public school modernization bond on a credit allowance date of such bond which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond.

`(b) AMOUNT OF CREDIT-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified public school modernization bond is 25 percent of the annual credit determined with respect to such bond.

`(2) ANNUAL CREDIT- The annual credit determined with respect to any qualified public school modernization bond is the product of--

`(A) the applicable credit rate, multiplied by

`(B) the outstanding face amount of the bond.

`(3) APPLICABLE CREDIT RATE- For purposes of paragraph (2), the applicable credit rate with respect to an issue is the rate equal to an average market yield (as of the day before the date of issuance of the issue) on outstanding long-term corporate debt obligations (determined under regulations prescribed by the Secretary).

`(4) SPECIAL RULE FOR ISSUANCE AND REDEMPTION- In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed.

`(c) LIMITATION BASED ON AMOUNT OF TAX-

`(1) IN GENERAL- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

`(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(B) the sum of the credits allowable under part IV of subchapter A (other than subpart C thereof, relating to refundable credits).

`(2) CARRYOVER OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(d) QUALIFIED PUBLIC SCHOOL MODERNIZATION BOND; CREDIT ALLOWANCE DATE- For purposes of this section--

`(1) QUALIFIED PUBLIC SCHOOL MODERNIZATION BOND- The term `qualified public school modernization bond' means--

`(A) a qualified zone academy bond, or

`(B) a qualified school construction bond.

`(2) CREDIT ALLOWANCE DATE- The term `credit allowance date' means--

`(A) March 15,

`(B) June 15,

`(C) September 15, and

`(D) December 15.

Such term includes the last day on which the bond is outstanding.

`(e) OTHER DEFINITIONS- For purposes of this subchapter--

`(1) LOCAL EDUCATIONAL AGENCY- The term `local educational agency' has the meaning given to such term by section 14101 of the Elementary and Secondary Education Act of 1965. Such term includes the local educational agency that serves the District of Columbia but does not include any other State agency.

`(2) BOND- The term `bond' includes any obligation.

`(3) STATE- The term `State' includes the District of Columbia and any possession of the United States.

`(4) PUBLIC SCHOOL FACILITY- The term `public school facility' shall not include--

`(A) any stadium or other facility primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public, or

`(B) any facility which is not owned by a State or local government or any agency or instrumentality of a State or local government.

`(f) CREDIT INCLUDED IN GROSS INCOME- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income.

`(g) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any qualified public school modernization bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.

`(h) CREDITS MAY BE STRIPPED- Under regulations prescribed by the Secretary--

`(1) IN GENERAL- There may be a separation (including at issuance) of the ownership of a qualified public school modernization bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

`(2) CERTAIN RULES TO APPLY- In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified public school modernization bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

`(i) TREATMENT FOR ESTIMATED TAX PURPOSES- Solely for purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a qualified public school modernization bond on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.

`(j) CREDIT MAY BE TRANSFERRED- Nothing in any law or rule of law shall be construed to limit the transferability of the credit allowed by this section through sale and repurchase agreements.

`(k) REPORTING- Issuers of qualified public school modernization bonds shall submit reports similar to the reports required under section 149(e).

`(l) TERMINATION- This section shall not apply to any bond issued after September 30, 2008.

`SEC. 1400N. QUALIFIED SCHOOL CONSTRUCTION BONDS.

`(a) QUALIFIED SCHOOL CONSTRUCTION BOND- For purposes of this subchapter, the term `qualified school construction bond' means any bond issued as part of an issue if--

`(1) 95 percent or more of the proceeds of such issue are to be used for the construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue,

`(2) the bond is issued by a State or local government within the jurisdiction of which such school is located,

`(3) the issuer designates such bond for purposes of this section, and

`(4) the term of each bond which is part of such issue does not exceed 15 years.

`(b) LIMITATION ON AMOUNT OF BONDS DESIGNATED- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) by any issuer shall not exceed the sum of--

`(1) the limitation amount allocated under subsection (d) for such calendar year to such issuer, and

`(2) if such issuer is a large local educational agency (as defined in subsection (e)(4)) or is issuing on behalf of such an agency, the limitation amount allocated under subsection (e) for such calendar year to such agency.

`(c) NATIONAL LIMITATION ON AMOUNT OF BONDS DESIGNATED- There is a national qualified school construction bond limitation for each calendar year. Such limitation is--

`(1) $11,000,000,000 for 2004,

`(2) $11,000,000,000 for 2005, and

`(3) except as provided in subsection (f), zero after 2005.

`(d) 60 PERCENT OF LIMITATION ALLOCATED AMONG STATES-

`(1) IN GENERAL- 60 percent of the limitation applicable under subsection (c) for any calendar year shall be allocated by the Secretary among the States in proportion to the respective numbers of children in each State who have attained age 5 but not age 18 for the most recent fiscal year ending before such calendar year. The limitation amount allocated to a State under the preceding sentence shall be allocated by the State to issuers within such State.

`(2) MINIMUM ALLOCATIONS TO STATES-

`(A) IN GENERAL- The Secretary shall adjust the allocations under this subsection for any calendar year for each State to the extent necessary to ensure that the sum of--

`(i) the amount allocated to such State under this subsection for such year, and

`(ii) the aggregate amounts allocated under subsection (e) to large local educational agencies in such State for such year,

is not less than an amount equal to such State's minimum percentage of the amount to be allocated under paragraph (1) for the calendar year.

`(B) MINIMUM PERCENTAGE- A State's minimum percentage for any calendar year is the minimum percentage described in section 1124(d) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6334(d)) for such State for the most recent fiscal year ending before such calendar year.

`(3) ALLOCATIONS TO CERTAIN POSSESSIONS- The amount to be allocated under paragraph (1) to any possession of the United States

other than Puerto Rico shall be the amount which would have been allocated if all allocations under paragraph (1) were made on the basis of respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). In making other allocations, the amount to be allocated under paragraph (1) shall be reduced by the aggregate amount allocated under this paragraph to possessions of the United States.

`(4) ALLOCATIONS FOR INDIAN SCHOOLS- The provisions of section 1400P shall apply with respect to the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. No funds may be allocated under this section for such schools.

`(e) 40 PERCENT OF LIMITATION ALLOCATED AMONG LARGEST SCHOOL DISTRICTS-

`(1) IN GENERAL- 40 percent of the limitation applicable under subsection (c) for any calendar year shall be allocated under paragraph (2) by the Secretary among local educational agencies which are large local educational agencies for such year.

`(2) ALLOCATION FORMULA- The amount to be allocated under paragraph (1) for any calendar year shall be allocated among large local educational agencies in proportion to the respective amounts each such agency received for Basic Grants under subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for the most recent fiscal year ending before such calendar year.

`(3) ALLOCATION OF UNUSED LIMITATION TO STATE- The amount allocated under this subsection to a large local educational agency for any calendar year may be reallocated by such agency to the State in which such agency is located for such calendar year. Any amount reallocated to a State under the preceding sentence may be allocated as provided in subsection (d)(1).

`(4) LARGE LOCAL EDUCATIONAL AGENCY- For purposes of this section, the term `large local educational agency' means, with respect to a calendar year, any local educational agency if such agency is--

`(A) among the 100 local educational agencies with the largest numbers of children aged 5 through 17 from families living below the poverty level, as determined by the Secretary using the most recent data available from the Department of Commerce that are satisfactory to the Secretary, or

`(B) 1 of not more than 25 local educational agencies (other than those described in subparagraph (A)) that the Secretary of Education determines (based on the most recent data available satisfactory to the Secretary) are in particular need of assistance, based on a low level of resources for school construction, a high level of enrollment growth, or such other factors as the Secretary deems appropriate.

`(f) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(1) the amount allocated under subsection (d) to any State, exceeds

`(2) the amount of bonds issued during such year which are designated under subsection (a) pursuant to such allocation,

the limitation amount under such subsection for such State for the following calendar year shall be increased

by the amount of such excess. A similar rule shall apply to the amounts allocated under subsection (e).

`(g) SPECIAL RULES RELATING TO ARBITRAGE-

`(1) IN GENERAL- A bond shall not be treated as failing to meet the requirement of subsection (a)(1) solely by reason of the fact that the proceeds of the issue of which such bond is a part are invested for a temporary period (but not more than 36 months) until such proceeds are needed for the purpose for which such issue was issued.

`(2) BINDING COMMITMENT REQUIREMENT- Paragraph (1) shall apply to an issue only if, as of the date of issuance, there is a reasonable expectation that--

`(A) at least 10 percent of the proceeds of the issue will be spent within the 6-month period beginning on such date for the purpose for which such issue was issued, and

`(B) the remaining proceeds of the issue will be spent with due diligence for such purpose.

`(3) EARNINGS ON PROCEEDS- Any earnings on proceeds during the temporary period shall be treated as proceeds of the issue for purposes of applying subsection (a)(1) and paragraph (1) of this subsection.

`SEC. 1400O. QUALIFIED ZONE ACADEMY BONDS.

`(a) QUALIFIED ZONE ACADEMY BOND- For purposes of this subchapter--

`(1) IN GENERAL- The term `qualified zone academy bond' means any bond issued as part of an issue if--

`(A) 95 percent or more of the proceeds of such issue are to be used for a qualified purpose with respect to a qualified zone academy established by a local educational agency,

`(B) the bond is issued by a State or local government within the jurisdiction of which such academy is located,

`(C) the issuer--

`(i) designates such bond for purposes of this section,

`(ii) certifies that it has written assurances that the private business contribution requirement of paragraph (2) will be met with respect to such academy, and

`(iii) certifies that it has the written approval of the local educational agency for such bond issuance, and

`(D) the term of each bond which is part of such issue does not exceed 15 years.

Rules similar to the rules of section 1400N(g) shall apply for purposes of paragraph (1).

`(2) PRIVATE BUSINESS CONTRIBUTION REQUIREMENT-

`(A) IN GENERAL- For purposes of paragraph (1), the private business contribution requirement of this paragraph is met with respect to any issue if the local educational agency that established the qualified zone academy has written commitments from private entities to make qualified contributions having a present value (as of the date of issuance of the issue) of not less than 10 percent of the proceeds of the issue.

`(B) QUALIFIED CONTRIBUTIONS- For purposes of subparagraph (A), the term `qualified contribution' means any contribution (of a type and quality acceptable to the local educational agency) of--

`(i) equipment for use in the qualified zone academy (including state-of-the-art technology and vocational equipment),

`(ii) technical assistance in developing curriculum or in training teachers in order to promote appropriate market driven technology in the classroom,

`(iii) services of employees as volunteer mentors,

`(iv) internships, field trips, or other educational opportunities outside the academy for students, or

`(v) any other property or service specified by the local educational agency.

`(3) QUALIFIED ZONE ACADEMY- The term `qualified zone academy' means any public school (or academic program within a public school) which is established by and operated under the supervision of a local educational agency to provide education or training below the postsecondary level if--

`(A) such public school or program (as the case may be) is designed in cooperation with business to enhance the academic curriculum, increase graduation and employment rates, and better prepare students for the rigors of college and the increasingly complex workforce,

`(B) students in such public school or program (as the case may be) will be subject to the same academic standards and assessments as other students educated by the local educational agency,

`(C) the comprehensive education plan of such public school or program is approved by the local educational agency, and

`(D)(i) such public school is located in an empowerment zone or enterprise community (including any such zone or community designated after the date of the enactment of this section), or

`(ii) there is a reasonable expectation (as of the date of issuance of the bonds) that at least 35 percent of the students attending such school or participating in such program (as the case may be) will be eligible for free or reduced-cost lunches under the school lunch program established under the Richard B. Russell National School Lunch Act.

`(4) QUALIFIED PURPOSE- The term `qualified purpose' means, with respect to any qualified zone academy--

`(A) constructing, rehabilitating, or repairing the public school facility in which the academy is established,

`(B) acquiring the land on which such facility is to be constructed with part of the proceeds of such issue,

`(C) providing equipment for use at such academy,

`(D) developing course materials for education to be provided at such academy, and

`(E) training teachers and other school personnel in such academy.

`(b) LIMITATIONS ON AMOUNT OF BONDS DESIGNATED-

`(1) IN GENERAL- There is a national zone academy bond limitation for each calendar year. Such limitation is--

`(A) $400,000,000 for 2003,

`(B) $400,000,000 for 2004,

`(C) $400,000,000 for 2005,

`(D) $400,000,000 for 2006,

`(E) $1,400,000,000 for 2007,

`(F) $1,400,000,000 for 2008, and

`(G) except as provided in paragraph (3), zero after 2008.

`(2) ALLOCATION OF LIMITATION-

`(A) ALLOCATION AMONG STATES-

`(i) 2003, 2004, 2005, AND 2006 LIMITATIONS- The national zone academy bond limitations for calendar years 2003, 2004, 2005, and 2006 shall be allocated by the Secretary among the States on the basis of their respective populations of individuals below the poverty line (as defined by the Office of Management and Budget).

`(ii) LIMITATION AFTER 2006- The national zone academy bond limitation for any calendar year after 2006 shall be allocated by the Secretary among the States in proportion to the respective amounts each such State received for Basic Grants under subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for the most recent fiscal year ending before such calendar year.

`(B) ALLOCATION TO LOCAL EDUCATIONAL AGENCIES- The limitation amount allocated to a State under subparagraph (A) shall be allocated by the State to qualified zone academies within such State.

`(C) DESIGNATION SUBJECT TO LIMITATION AMOUNT- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) with respect to any qualified zone academy shall not exceed the limitation amount allocated to such academy under subparagraph (B) for such calendar year.

`(3) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(A) the limitation amount under this subsection for any State, exceeds

`(B) the amount of bonds issued during such year which are designated under subsection (a) (or the corresponding provisions of prior law) with respect to qualified zone academies within such State,

the limitation amount under this subsection for such State for the following calendar year shall be increased by the amount of such excess.'.

(b) REPORTING- Subsection (d) of section 6049 of the Internal Revenue Code of 1986 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

`(8) REPORTING OF CREDIT ON QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS-

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 1400M(f) and such amounts shall be treated as paid on the credit allowance date (as defined in section 1400M(d)(2)).

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A) of this paragraph, subsection (b)(4) of this section shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i).

`(C) REGULATORY AUTHORITY- The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'.

(c) CONFORMING AMENDMENTS-

(1) Subchapter U of chapter 1 of the Internal Revenue Code of 1986 is amended by striking part IV, by redesignating part V as part IV, and by redesignating section 1397F as section 1397E.

(2) The table of subchapters for chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Subchapter Z. Public school modernization provisions.'

(3) The table of parts of subchapter U of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last 2 items and inserting the following item:

`Part IV. Regulations.'

(d) EFFECTIVE DATES-

(1) IN GENERAL- Except as otherwise provided in this subsection, the amendments made by this section shall apply to obligations issued after December 31, 2002.

(2) REPEAL OF RESTRICTION ON ZONE ACADEMY BOND HOLDERS- In the case of bonds to which section 1397E of the Internal Revenue Code of 1986 (as in effect before the date of the enactment of this Act) applies, the limitation of such section to eligible taxpayers (as defined in subsection (d)(6) of such section) shall not apply after the date of the enactment of this Act.

SEC. 203. APPLICATION OF CERTAIN LABOR STANDARDS ON CONSTRUCTION PROJECTS FINANCED UNDER PUBLIC SCHOOL MODERNIZATION PROGRAM.

Section 439 of the General Education Provisions Act (relating to labor standards) (20 U.S.C. 1232b) is amended--

(1) by inserting `(a)' before `All laborers and mechanics'; and

(2) by adding at the end the following:

`(b)(1) For purposes of this section, the term `applicable program' also includes the qualified zone academy bond provisions enacted by section 226 of the Taxpayer Relief Act of 1997 and the program established by section 202 of the America's Better Classrooms Act of 2003.

`(2) A State or local government participating in a program described in paragraph (1) shall--

`(A) in the awarding of contracts, give priority to contractors with substantial numbers of employees residing in the local education area to be served by the school being constructed; and

`(B) include in the construction contract for such school a requirement that the contractor give priority in hiring new workers to individuals residing in such local education area.

`(3) In the case of a program described in paragraph (1), nothing in this subsection or subsection (a) shall be construed to deny any tax credit allowed under such program. If amounts are required to be withheld from contractors to pay wages to which workers are entitled, such amounts shall be treated as expended for construction purposes in determining whether the requirements of such program are met.'.

SEC. 204. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES.

(a) IN GENERAL- Section 134 of the Workforce Investment Act of 1998 (29 U.S.C. 2864) is amended by adding at the end the following:

`(f) LOCAL EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES-

`(1) IN GENERAL- In order to provide training services related to construction or reconstruction of public school facilities receiving funding assistance under an applicable program, each State shall establish a specialized program of training meeting the following requirements:

`(A) The specialized program provides training for jobs in the construction industry.

`(B) The program provides trained workers for projects for the construction or reconstruction of public school facilities receiving funding assistance under an applicable program.

`(C) The program ensures that skilled workers (residing in the area to be served by the school facilities) will be available for the construction or reconstruction work.

`(2) COORDINATION- The specialized program established under paragraph (1) shall be integrated with other activities under this Act, with the activities carried out under the National Apprenticeship Act of 1937 by the State Apprenticeship Council or through the Bureau of Apprenticeship and Training in the Department of Labor, as appropriate, and with activities carried out under the Carl D. Perkins Vocational and Technical Education Act of 1998. Nothing in this subsection shall be construed to require services duplicative of those referred to in the preceding sentence.

`(3) APPLICABLE PROGRAM- In this subsection, the term `applicable program' has the meaning given the term in section 439(b) of the General Education Provisions Act (relating to labor standards).'.

(b) STATE PLAN- Section 112(b)(17)(A) of the Workforce Investment Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is amended--

(1) in clause (iii), by striking `and' at the end;

(2) by redesignating clause (iv) as clause (v); and

(3) by inserting after clause (iii) the following:

`(iv) how the State will establish and carry out a specialized program of training under section 134(f); and'.

SEC. 205. INDIAN SCHOOL CONSTRUCTION.

(a) DEFINITIONS- In this section:

(1) BUREAU- The term `Bureau' means the Bureau of Indian Affairs of the Department of the Interior.

(2) INDIAN- The term `Indian' means any individual who is a member of a tribe.

(3) SECRETARY- The term `Secretary' means the Secretary of the Interior.

(4) TRIBAL SCHOOL- The term `tribal school' means an elementary school, secondary school, or dormitory that is operated by a tribal organization or the Bureau for the education of Indian children and that receives financial assistance for its operation under an appropriation for the Bureau under section 102, 103(a), or 208 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450f, 450h(a), and 458d) or under the Tribally Controlled Schools Act of 1988 (25 U.S.C. 2501 et seq.) under a contract, a grant, or an agreement, or for a Bureau-operated school.

(5) TRIBE- The term `tribe' has the meaning given the term `Indian tribal government' by section 7701(a)(40) of the Internal Revenue Code of 1986, including the application of section 7871(d) of such Code. Such term includes any consortium of tribes approved by the Secretary.

(b) ISSUANCE OF BONDS-

(1) IN GENERAL- The Secretary shall establish a pilot program under which eligible tribes have the authority to issue qualified tribal school modernization bonds to provide funding for the construction, rehabilitation, or repair of tribal schools, including the advance planning and design thereof.

(2) ELIGIBILITY-

(A) IN GENERAL- To be eligible to issue any qualified tribal school modernization bond

under the program under paragraph (1), a tribe shall--

(i) prepare and submit to the Secretary a plan of construction that meets the requirements of subparagraph (B);

(ii) provide for quarterly and final inspection of the project by the Bureau; and

(iii) pledge that the facilities financed by such bond will be used primarily for elementary and secondary educational purposes for not less than the period such bond remains outstanding.

(B) PLAN OF CONSTRUCTION- A plan of construction meets the requirements of this subparagraph if such plan--

(i) contains a description of the construction to be undertaken with funding provided under a qualified tribal school modernization bond;

(ii) demonstrates that a comprehensive survey has been undertaken concerning the construction needs of the tribal school involved;

(iii) contains assurances that funding under the bond will be used only for the activities described in the plan;

(iv) contains response to the evaluation criteria contained in Instructions and Application for Replacement School Construction, Revision 6, dated February 6, 1999; and

(v) contains any other reasonable and related information determined appropriate by the Secretary.

(C) PRIORITY- In determining whether a tribe is eligible to participate in the program under this subsection, the Secretary shall give priority to tribes that, as demonstrated by the relevant plans of construction, will fund projects--

(i) described in the Education Facilities Replacement Construction Priorities List as of FY 2000 of the Bureau of Indian Affairs (65 Fed. Reg. 4623-4624);

(ii) described in any subsequent priorities list published in the Federal Register; or

(iii) which meet the criteria for ranking schools as described in Instructions and Application for Replacement School Construction, Revision 6, dated February 6, 1999.

(D) ADVANCE PLANNING AND DESIGN FUNDING- A tribe may propose in its plan of construction to receive advance planning and design funding from the tribal school modernization escrow account established under paragraph (6)(B). Before advance planning and design funds are allocated from the escrow account, the tribe shall agree to issue qualified tribal school modernization bonds after the receipt of such funds and agree as a condition of each bond issuance that the tribe will deposit into such account or a fund managed by the trustee as described in paragraph (4)(C) an amount equal to the amount of such funds received from the escrow account.

(3) PERMISSIBLE ACTIVITIES- In addition to the use of funds permitted under paragraph (1), a tribe may use amounts received through the issuance of a qualified tribal school modernization bond to--

(A) enter into and make payments under contracts with licensed and bonded architects, engineers, and construction firms in order to determine the needs of the tribal school and for the design and engineering of the school;

(B) enter into and make payments under contracts with financial advisors, underwriters, attorneys, trustees, and other professionals who would be able to provide assistance to the tribe in issuing bonds; and

(C) carry out other activities determined appropriate by the Secretary.

(4) BOND TRUSTEE-

(A) IN GENERAL- Notwithstanding any other provision of law, any qualified tribal school modernization bond issued by a tribe under this subsection shall be subject to a trust agreement between the tribe and a trustee.

(B) TRUSTEE- Any bank or trust company that meets requirements established by the Secretary may be designated as a trustee under subparagraph (A).

(C) CONTENT OF TRUST AGREEMENT- A trust agreement entered into by a tribe under this paragraph shall specify that the trustee,

with respect to any bond issued under this subsection shall--

(i) act as a repository for the proceeds of the bond;

(ii) make payments to bondholders;

(iii) receive, as a condition to the issuance of such bond, a transfer of funds from the tribal school modernization escrow account established under paragraph (6)(B) or from other funds furnished by or on behalf of the tribe in an amount, which together with interest earnings from the investment of such funds in obligations of or fully guaranteed by the United States or from other investments authorized by paragraph (10), will produce moneys sufficient to timely pay in full the entire principal amount of such bond on the stated maturity date therefore;

(iv) invest the funds received pursuant to clause (iii) as provided by such clause; and

(v) hold and invest the funds in a segregated fund or account under the agreement, which fund or account shall be applied solely to the payment of the costs of items described in paragraph (3).

(D) REQUIREMENTS FOR MAKING DIRECT PAYMENTS-

(i) IN GENERAL- Notwithstanding any other provision of law, the trustee shall make any payment referred to in subparagraph (C)(v) in accordance with requirements that the tribe shall prescribe in the trust agreement entered into under subparagraph (C). Before making a payment to a contractor under subparagraph (C)(v), the trustee shall require an inspection of the project by a local financial institution or an independent inspecting architect or engineer, to ensure the completion of the project.

(ii) CONTRACTS- Each contract referred to in paragraph (3) shall specify, or be renegotiated to specify, that payments under the contract shall be made in accordance with this paragraph.

(5) PAYMENTS OF PRINCIPAL AND INTEREST-

(A) PRINCIPAL- No principal payments on any qualified tribal school modernization bond shall be required until the final, stated maturity of such bond, which stated maturity shall be within 15 years from the date of issuance. Upon the expiration of such period, the entire outstanding principal under the bond shall become due and payable.

(B) INTEREST- In lieu of interest on a qualified tribal school modernization bond there shall be awarded a tax credit under section 1400P of the Internal Revenue Code of 1986.

(6) BOND GUARANTEES-

(A) IN GENERAL- Payment of the principal portion of a qualified tribal school modernization bond issued under this subsection shall be guaranteed solely by amounts deposited with each respective bond trustee as described in paragraph (4)(C)(iii).

(B) ESTABLISHMENT OF ACCOUNT-

(i) IN GENERAL- Notwithstanding any other provision of law, beginning in fiscal year 2003, from amounts made available for school replacement under the construction account of the Bureau, the Secretary is authorized to deposit not more

than $30,000,000 each fiscal year into a tribal school modernization escrow account.

(ii) PAYMENTS- The Secretary shall use any amounts deposited in the escrow account under clauses (i) and (iii) to make payments to trustees appointed and acting pursuant to paragraph (4) or to make payments described in paragraph (2)(D).

(iii) TRANSFERS OF EXCESS PROCEEDS- Excess proceeds held under any trust agreement that are not needed for any of the purposes described in clauses (iii) and (v) of paragraph (4)(C) shall be transferred, from time to time, by the trustee for deposit into the tribal school modernization escrow account.

(7) LIMITATIONS-

(A) OBLIGATION TO REPAY- Notwithstanding any other provision of law, the principal amount on any qualified tribal school modernization bond issued under this subsection shall be repaid only to the extent of any escrowed funds furnished under paragraph (4)(C)(iii). No qualified tribal school modernization bond issued by a tribe shall be an obligation of, nor shall payment of the principal thereof be guaranteed by, the United States.

(B) LAND AND FACILITIES- Any land or facilities purchased or improved with amounts derived from qualified tribal school modernization bonds issued under this subsection shall not be mortgaged or used as collateral for such bonds.

(8) SALE OF BONDS- Qualified tribal school modernization bonds may be sold at a purchase price equal to, in excess of, or at a discount from the par amount thereof.

(9) TREATMENT OF TRUST AGREEMENT EARNINGS- Any amounts earned through the investment of funds under the control of a trustee under any trust agreement described in paragraph (4) shall not be subject to Federal income tax.

(10) INVESTMENT OF SINKING FUNDS- Any sinking fund established for the purpose of the payment of principal on a qualified tribal school modernization bond shall be invested in obligations issued by or guaranteed by the United States or in such other assets as the Secretary of the Treasury may by regulation allow.

(c) EXPANSION OF INCENTIVES FOR TRIBAL SCHOOLS- Chapter 1 of the Internal Revenue Code of 1986 (as amended by section 2) is further amended by adding at the end the following new subchapter:

`Subchapter AA--Tribal School Modernization Provisions

`Sec. 1400P. Credit to holders of qualified tribal school modernization bonds.

`SEC. 1400P. CREDIT TO HOLDERS OF QUALIFIED TRIBAL SCHOOL MODERNIZATION BONDS.

`(a) ALLOWANCE OF CREDIT- In the case of a taxpayer who holds a qualified tribal school modernization bond on a credit allowance date of such bond which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond.

`(b) AMOUNT OF CREDIT-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified tribal school modernization bond is 25 percent of the annual credit determined with respect to such bond.

`(2) ANNUAL CREDIT- The annual credit determined with respect to any qualified tribal school modernization bond is the product of--

`(A) the applicable credit rate, multiplied by

`(B) the outstanding face amount of the bond.

`(3) APPLICABLE CREDIT RATE- For purposes of paragraph (2), the applicable credit rate with respect to an issue is the rate equal to an average market yield (as of the date of sale of the issue) on outstanding long-term corporate obligations (as determined by the Secretary).

`(4) SPECIAL RULE FOR ISSUANCE AND REDEMPTION- In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed.

`(c) LIMITATION BASED ON AMOUNT OF TAX-

`(1) IN GENERAL- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

`(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(B) the sum of the credits allowable under part IV of subchapter A (other than subpart C thereof, relating to refundable credits).

`(2) CARRYOVER OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(d) QUALIFIED TRIBAL SCHOOL MODERNIZATION BOND; OTHER DEFINITIONS- For purposes of this section--

`(1) QUALIFIED TRIBAL SCHOOL MODERNIZATION BOND-

`(A) IN GENERAL- The term `qualified tribal school modernization bond' means, subject to subparagraph (B), any bond issued as part of an issue under section 2(c) of the Indian School Construction Act, as in effect on the date of the enactment of this section, if--

`(i) 95 percent or more of the proceeds of such issue are to be used for the construction, rehabilitation, or repair of a school facility funded by the Bureau of Indian Affairs of the Department of the Interior or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue,

`(ii) the bond is issued by a tribe,

`(iii) the issuer designates such bond for purposes of this section, and

`(iv) the term of each bond which is part of such issue does not exceed 15 years.

`(B) NATIONAL LIMITATION ON AMOUNT OF BONDS DESIGNATED-

`(i) NATIONAL LIMITATION- There is a national qualified tribal school modernization bond limitation for each calendar year. Such limitation is--

`(I) $200,000,000 for 2004,

`(II) $200,000,000 for 2005, and

`(III) zero after 2005.

`(ii) ALLOCATION OF LIMITATION- The national qualified tribal school modernization bond limitation shall be allocated to tribes by the Secretary of the Interior subject to the provisions of section 2 of the Indian School Construction Act, as in effect on the date of the enactment of this section.

`(iii) DESIGNATION SUBJECT TO LIMITATION AMOUNT- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (d)(1) with respect to any tribe shall not exceed the limitation amount allocated to such government under clause (ii) for such calendar year.

`(iv) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(I) the limitation amount under this subparagraph, exceeds

`(II) the amount of qualified tribal school modernization bonds issued during such year,

the limitation amount under this subparagraph for the following calendar year shall be increased by the amount of such excess. The preceding sentence shall not apply if such following calendar year is after 2012.

`(2) CREDIT ALLOWANCE DATE- The term `credit allowance date' means--

`(A) March 15,

`(B) June 15,

`(C) September 15, and

`(D) December 15.

Such term includes the last day on which the bond is outstanding.

`(3) BOND- The term `bond' includes any obligation.

`(4) TRIBE- The term `tribe' has the meaning given the term `Indian tribal government' by section 7701(a)(40), including the application of section 7871(d). Such term includes any consortium of tribes approved by the Secretary of the Interior.

`(e) CREDIT INCLUDED IN GROSS INCOME- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income.

`(f) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any qualified tribal school modernization bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.

`(g) CREDITS MAY BE STRIPPED- Under regulations prescribed by the Secretary--

`(1) IN GENERAL- There may be a separation (including at issuance) of the ownership of a qualified tribal school modernization bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

`(2) CERTAIN RULES TO APPLY- In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified tribal school modernization bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

`(h) TREATMENT FOR ESTIMATED TAX PURPOSES- Solely for purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a qualified tribal school modernization bond on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.

`(i) CREDIT MAY BE TRANSFERRED- Nothing in any law or rule of law shall be construed to limit the transferability of the credit allowed by this section through sale and repurchase agreements.

`(j) CREDIT TREATED AS ALLOWED UNDER PART IV OF SUBCHAPTER A- For purposes of subtitle F, the credit allowed by this section shall be treated as a credit allowable under part IV of subchapter A of this chapter.

`(k) REPORTING- Issuers of qualified tribal school modernization bonds shall submit reports similar to the reports required under section 149(e).'.

(d) ADDITIONAL PROVISIONS-

(1) SOVEREIGN IMMUNITY- This section and the amendments made by this section shall not be construed to impact, limit, or affect the sovereign immunity of the Federal Government or any State or tribal government.

(2) APPLICATION- This section and the amendments made by this section shall take effect on the date of the enactment of this Act with respect to bonds issued after December 31, 2002, regardless of the status of regulations promulgated thereunder.

TITLE III--MAKING HIGHER EDUCATION MORE ACCESSIBLE

Subtitle A--College Access

SEC. 301. EXPANSION OF GEARUP AND TRIO.

The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended--

(1) in section 402A(f), by striking `$700,000,000 for fiscal year 1999, and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `$700,000,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $1,000,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years'; and

(2) by striking section 404H and inserting the following:

`SEC. 404H. AUTHORIZATION OF APPROPRIATIONS.

`There are authorized to be appropriated to carry out this chapter $200,000,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $570,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years.'.

SEC. 302. PROGRAMS FOR STUDENTS WHOSE FAMILIES ARE ENGAGED IN MIGRANT AND SEASONAL FARMWORK.

Section 418A(h) of the Higher Education Act of 1965 (20 U.S.C. 1070d-2(h)) is amended--

(1) in paragraph (1), by striking `$15,000,000 for fiscal year 1999 and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `$15,000,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $29,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years'; and

(2) in paragraph (2), by striking `$5,000,000 for fiscal year 1999 and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `$5,000,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $21,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years'.

Subtitle B--Enhancing Programs for Minority Serving Institutions

SEC. 311. INCREASING DIVERSITY.

The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended--

(1) in section 399(a)--

(A) by striking paragraph (1)(B) and inserting the following:

`(B) There are authorized to be appropriated to carry out section 316, $10,000,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $35,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years.';

(B) by striking paragraph (1)(C) and inserting the following:

`(C) There are authorized to be appropriated to carry out section 317, $5,000,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $13,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years.';

(C) in paragraph (2)--

(i) in subparagraph (A), by striking `and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `such sums as may be necessary for each of fiscal years 2000 through 2003, $412,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years'; and

(ii) in subparagraph (B), by striking `and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `such sums as may be necessary for each of fiscal years 2000 through 2003, $98,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years';

(D) in paragraph (3), by striking `and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `such sums as may be necessary for each of fiscal years 2000 through 2003, $50,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years'; and

(E) in paragraph (5), by striking `and such sums as may be necessary for each of the 4 succeeding fiscal years' and inserting `such sums as may be necessary for each of fiscal years 2000 through 2003, $17,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years'; and

(2) by striking section 518(a) and inserting the following:

`(a) AUTHORIZATIONS- There are authorized to be appropriated to carry out this title $62,500,000 for fiscal year 1999, such sums as may be necessary for each of fiscal years 2000 through 2003, $172,000,000 for fiscal year 2004, and such sums as may be necessary for each of the succeeding fiscal years.'.

Subtitle C--NTIA Digital Network Technology Program

SEC. 331. ESTABLISHMENT OF PROGRAM.

Title I of the National Telecommunications and Information Administration Organization Act (47 U.S.C. 901 et seq.) is amended by adding at the end the following:

`PART D--DIGITAL NETWORK TECHNOLOGY PROGRAM

`SEC. 171. PROGRAM AUTHORIZED.

`The Secretary shall establish, within the NTIA's Technology Opportunities Program a digital network technologies program to strengthen the ability of eligible institutions to provide capacity for instruction in digital network technologies by providing grants to, or executing contracts or cooperative agreements with, those institutions to provide such instruction.

`SEC. 172. ACTIVITIES SUPPORTED.

`An eligible institution shall use a grant, contract, or cooperative agreement awarded under this part--

`(1) to acquire the equipment, instrumentation, networking capability, hardware and software, digital network technology, and infrastructure;

`(2) to develop and provide educational services, including faculty development, to prepare students or faculty seeking a degree or certificate that is approved by the State, or a regional accrediting body recognized by the Secretary of Education;

`(3) to provide teacher education, library and media specialist training, and preschool and teacher aid certification to individuals who seek to acquire or enhance technology skills in order to use technology in the classroom or instructional process;

`(4) to implement a joint project to provide education regarding technology in the classroom with a State or State educational agency, local educational agency, community-based organization, national nonprofit organization, or business, including minority business or a business located in HUB

zones, as defined by the Small Business Administration; or

`(5) to provide professional development to administrators and faculty of eligible institutions with institutional responsibility for technology education.

`SEC. 173. APPLICATION AND REVIEW PROCEDURE.

`(a) IN GENERAL- To be eligible to receive a grant, contract, or cooperative agreement under this part, an eligible institution shall submit an application to the Secretary at such time, in such manner, and accompanied by such information as the Secretary may reasonably require. The Secretary, in consultation with the panel described in subsection (b), shall establish a procedure by which to accept such applications and publish an announcement of such procedure, including a statement regarding the availability of funds, in the Federal Register.

`(b) PEER REVIEW PANEL- The Secretary shall establish a peer review panel to aid the Secretary in establishing the application procedure described in subsection (a) and selecting applicants to receive grants, contracts, and cooperative agreements under section 171. In selecting the members for such panel, the Secretary may consult with appropriate cabinet-level officials, representatives of non-Federal organizations, and representatives of eligible institutions to ensure that the membership of such panel reflects membership of the minority higher education community, including Federal agency personnel and other individuals who are knowledgeable about issues regarding minority education institutions.

`SEC. 174. MATCHING REQUIREMENT.

`The Secretary may not award a grant, contract, or cooperative agreement to an eligible institution under this part unless such institution agrees that, with respect to the costs to be incurred by the institution in carrying out the program for which the grant, contract, or cooperative agreement was awarded, such institution will make available (directly or through donations from public or private entities) non-Federal contributions in an amount equal to 1/4 of the amount of the grant, contract, or cooperative agreement awarded by the Secretary, or $500,000, whichever is the lesser amount. The Secretary shall waive the

matching requirement for any institution or consortium with no endowment, or an endowment that has a current dollar value lower than $50,000,000.

`SEC. 175. LIMITATION.

`An eligible institution that receives a grant, contract, or cooperative agreement under this part that exceeds $2,500,000, shall not be eligible to receive another grant, contract, or cooperative agreement under this part until every other eligible institution has received a grant, contract, or cooperative agreement under this part.

`SEC. 176. ANNUAL REPORT AND EVALUATION.

`(a) ANNUAL REPORT REQUIRED FROM RECIPIENTS- Each institution that receives a grant, contract, or cooperative agreement under this part shall provide an annual report to the Secretary on its use of the grant, contract, or cooperative agreement.

`(b) EVALUATION BY SECRETARY- The Secretary, in consultation with the Secretary of Education, shall--

`(1) review the reports provided under subsection (a) each year;

`(2) evaluate the program authorized by section 171 on the basis of those reports; and

`(3) conduct an evaluation at the end of the third year.

`(c) CONTENTS OF EVALUATION- The Secretary, in the evaluation, shall describe the activities undertaken by those institutions and shall assess the short-range and long-range impact of activities carried out under the grant, contract, or cooperative agreement on the students, faculty, and staff of the institutions.

`(d) REPORT TO CONGRESS- The Secretary shall submit a report to Congress based on the evaluation not later than 1 year after conducting the evaluation. In the report, the Secretary shall include such recommendations, including recommendations concerning the continuing need for Federal support of the program, as may be appropriate.'.

SEC. 332. DEFINITIONS.

Section 102(a) of the National Telecommunications and Information Administration Organization Act (47 U.S.C. 901(a)) is amended by adding at the end the following:

`(6) The term `eligible institution' means an institution that is--

`(A) a part B institution, as defined in section 322(2) of the Higher Education Act of 1965 (20 U.S.C. 1061(2)), an institution identified in subparagraph (A), (B), or (C) of section 326(e)(1) of such Act (20 U.S.C. 1063b(e)(1) (A), (B), or (C)), or a consortium of institutions described in this subparagraph;

`(B) a Hispanic-serving institution, as defined in section 502(a)(5) of the Higher Education Act of 1965 (20 U.S.C. 1101a(a)(5));

`(C) a tribal college or university, as defined in section 316(b)(3) of the Higher Education Act of 1965 (20 U.S.C. 1059c(b)(3));

`(D) an Alaska Native-serving institution under section 317(b) of the Higher Education Act of 1965 (20 U.S.C. 1059d(b));

`(E) a Native Hawaiian-serving institution under section 317(b) of the Higher Education Act of 1965 (20 U.S.C. 1059d(b)); or

`(F) an institution determined by the Secretary, in consultation with the Secretary of Education, to have enrolled a substantial number of minority, low-income students during the previous academic year who received assistance under subpart 1 of part A of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070a et seq.) for that year.'.

SEC. 333. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated to the Secretary of Commerce to carry out part D of title I of the National Telecommunications and Information Administration Organization Act not more than $250,000,000 for the period of fiscal years 2003 through 2007.

Subtitle D--Higher Education and Immigration

SEC. 341. RESTORATION OF STATE OPTION TO DETERMINE RESIDENCY FOR PURPOSES OF HIGHER EDUCATION BENEFITS.

Section 505 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (Division C of Public Law 104-208; 110 Stat. 3009-672; 8 U.S.C. 1623) is repealed.

SEC. 342. CANCELLATION OF REMOVAL AND ADJUSTMENT OF STATUS OF CERTAIN ALIEN HIGH SCHOOL GRADUATES WHO ARE LONG-TERM RESIDENTS OF THE UNITED STATES.

(a) SPECIAL RULE FOR CERTAIN ALIEN HIGH SCHOOL GRADUATES-

(1) IN GENERAL- Except as otherwise provided in paragraph (2), notwithstanding any other provision of law, the Attorney General may cancel the removal of, and adjust to the status of an alien lawfully admitted for permanent residence, an alien who is inadmissible or deportable from the United States, if the alien applies for such cancellation and adjustment of status and demonstrates that--

(A) the alien has attained 12 years of age prior to the date of enactment of this Act;

(B) the alien has not, prior to the date of filing the application for cancellation of removal and adjustment of status under this subsection, attained the age of 21 years;

(C) the alien, prior to the date of filing an application for cancellation of removal and adjustment of status under this subsection, has received a certificate of graduation from a school providing secondary education or the recognized equivalent of such certificate;

(D) has maintained a continuous physical presence in the United States for a period of not less than 5 years immediately preceding the date of enactment of this Act;

(E) the alien is a person of good moral character; and

(F) is not inadmissible under section 212(a)(2) (8 U.S.C. 1182(a)(2)) or 212(a)(3) (8 U.S.C. 1182(a)(3)) or deportable under section 237(a)(2) (8 U.S.C. 1227(a)(2)) or 237(a)(4) (8 U.S.C. 1227(a)(4)) of the Immigration and Nationality Act.

(2) EXCEPTIONS-

(A) REHABILITATION AND HARDSHIP TO CERTAIN ALIENS- Notwithstanding subparagraph (F) of paragraph (1), the Attorney General may cancel the removal of, and adjust to the status of an alien lawfully admitted for permanent residence, an alien (other than an alien convicted of an aggravated felony, as defined in section 101(a)(43) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(43)) or an alien who is inadmissible under section 212(a)(3) (8 U.S.C. 1182(a)(3)) or deportable under section 237(a)(4) (8 U.S.C. 1227(a)(4)) of such Act) who but for that subparagraph would qualify for cancellation of removal and adjustment of status under this section if the alien demonstrates rehabilitation and that the alien's removal will result in exceptional and extremely unusual hardship to the alien or a United States citizen or lawful permanent resident spouse, parent, or child.

(B) ALIENS QUALIFYING BEFORE THE DATE OF ENACTMENT- Notwithstanding paragraph (1), the Attorney General may cancel the removal of, and adjust to the status of an alien lawfully admitted for permanent residence, an alien if--

(i) the alien would have met the requirements of paragraph (1) at any time during the 4-year period immediately preceding the date of enactment of this Act; and

(ii) the alien has graduated from, or is, on the date of filing an application for cancellation of removal under this subsection, enrolled in the United States in an institution of higher education, as defined by section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001).

(3) PROCEDURES-

(A) IN GENERAL- The Attorney General shall by regulation establish a procedure that permits aliens to apply for cancellation of removal and adjustment of status available under this subsection without being placed in removal proceedings, except that, in addition, such cancellation of removal and adjustment of status shall be available in removal proceedings. In the case of an alien in an exclusion or deportation hearing, suspension of deportation on the same grounds as are provided under this subsection for cancellation of removal, together with adjustment of status, shall be available.

(B) TREATMENT PRIOR TO GRADUATION-

(i) IN GENERAL- Notwithstanding any other provision of law, an alien described in clause (ii) may not be removed so long as the alien continues to meet the criteria of that clause.

(ii) COVERED ALIENS- An alien described in this clause is an alien who does not meet the requirements of paragraph (1)(C) but is otherwise able to demonstrate prima facie eligibility for cancellation of removal and adjustment of status under this section and has a reasonable opportunity of meeting all the requirements of cancellation of removal and adjustment of status under this section in the future.

(iii) WORK AUTHORIZATION- The Attorney General shall grant an alien described in clause (ii) authorization to engage in employment in the United States.

(C) EXPEDITED PROCESSING OF APPLICATIONS; PROHIBITION ON FEES- Regulations

promulgated under this paragraph shall provide that applications for cancellation of removal and adjustment of status under this subsection will be considered on an expedited basis and without a requirement for the payment by the applicant of any additional fee for such expedited processing.

(4) CONFIDENTIALITY OF INFORMATION-

(A) PROHIBITION- Neither the Attorney General nor any other official or employee of the Department of Justice may--

(i) use the information furnished by the applicant pursuant to an application filed under this subsection for any purpose other than to make a determination on the application;

(ii) make any publication whereby the information furnished by any particular individual can be identified; or

(iii) permit anyone other than a sworn officer or employee of the Department of Justice or, with respect to an application filed under this subsection with a designated entity, that designated entity, to examine applications filed under this subsection.

(B) PENALTY- Whosoever knowingly uses, publishes, or permits information to be examined in violation of this subsection shall be fined not more than $10,000.

(b) TERMINATION OF PERIOD OF CONTINUOUS PERIOD- For purposes of this section, any period of continuous physical presence in the United States of an alien who applies for cancellation of removal and adjustment of status under subsection (a) shall not terminate when the alien is served a notice to appear under section 239(a) of the Immigration and Nationality Act (8 U.S.C. 1229) or any other document notifying the alien of the initiation of immigration proceedings under that Act.

(c) TREATMENT OF CERTAIN BREAKS IN PRESENCE- An alien shall be considered to have failed to maintain continuous physical presence in the United States under subsection (a)(1)(D) if the alien has departed from the United States for any period in excess of 90 days or for any periods in the aggregate exceeding 180 days, except that an alien may remain eligible for cancellation of removal and adjustment of status under this section notwithstanding a failure to maintain continuous physical presence in the United States if the alien demonstrates that failure is due to exceptional circumstances, as defined by section 240(e)(1) of the Immigration and Nationality Act (8 U.S.C. 1229a(e)(1)), or circumstances described in subparagraphs (A), (B), or (C) of section 244(b)(1) of the Immigration and Nationality Act (8 U.S.C. 1254a(b)(1)).

(d) STATUTORY CONSTRUCTION- Nothing in this section may be construed to apply a numerical limitation on the number of aliens who may be eligible for cancellation of removal under section 240A of the Immigration and Nationality Act (8 U.S.C. 1229b).

(e) REGULATIONS- Not later than 180 days after the date of enactment of this Act, the Attorney General shall publish regulations implementing this section. Such regulations shall be effective immediately on an interim, final basis, but are subject to change and revision after public notice and opportunity for a period for public comment.

SEC. 343. ANNUAL REPORT.

Not later than one year after the date of enactment of this Act, and annually thereafter, the Attorney General shall submit a report to the Committees on the Judiciary of the Senate and the House of Representatives and to the Secretary of Education setting forth--

(1) the number of aliens who applied for cancellation of removal and adjustment of status under section 3;

(2) the number of aliens who were granted cancellation of removal and adjustment of status under section 3;

(3) the number of aliens who applied for cancellation of removal and adjustment of status under section 3 but whose applications were denied and the basis for the denial of each application; and

(4) the number of pending applications for cancellation of removal and adjustment of status under section 3.

TITLE IV--MAKING HIGHER EDUCATION AFFORDABLE

Subtitle A--Pell Grants

SEC. 411. SENSE OF THE SENATE.

(a) FINDINGS- Congress makes the following findings:

(1) Increasing the percentage of individuals who obtain a postsecondary education has become increasingly important, not just to the individual beneficiary, but to the Nation as a whole. The growth and continued expansion of the Nation's economy is heavily dependent on an educated and highly skilled workforce.

(2) The opportunity to gain a postsecondary education also is important to the Nation as a means to help advance the American ideals of progress and equality.

(3) Not all qualified students have the opportunity to earn a college degree because of significant financial barriers. According to Empty Promises, a report of the Advisory Committee on Student Financial Assistance, in 2003, nearly 1/2 of all low- and moderate-income secondary school graduates (more than 400,000 students) will be unable to attend a 4-year college and 170,000 of these students will attend no college at all.

(4) The Federal Government plays an invaluable role in making student financial aid available to ensure that qualified students are able to attend college, regardless of their financial means. Since the inception of the Pell Grant program in 1973, nearly 80,000,000 grants have helped low- and middle-income students go to college, enrich their lives, and become productive members of society.

(5) Nationwide, almost 63 percent of secondary school graduates continue on to higher education immediately after completing secondary school. This degree of college participation would not exist without the Federal investment in student aid, especially the Pell Grant program. More than 4,000,000 low- and middle-income students receive Pell Grants; 95 percent of whom have a family income of not more than $40,000.

(6) In the next 10 years, the number of undergraduate students enrolled in the Nation's colleges and universities will increase by 15 percent to more than 15,000,000 students. Many of these students will be the first in their families to attend college. The continued investment in the Pell Grant program is essential if college is to remain an achievable part of the American dream.

(7) Increasing the maximum Pell Grant to $4,500 would allow approximately 430,000 additional students to benefit from the program.

(8) Increasing the maximum Pell Grant to $4,500 would result in 200,000 new Pell grant recipients.

(9) Pell Grant recipients are more likely to graduate with student loan debt and to amass more debt than other student borrowers. Increasing the

maximum Pell Grant to $4,500 will help remedy this disparity.

(b) SENSE OF THE SENATE- It is the sense of the Senate that--

(1) the maximum Pell Grant should be increased to $4,500 during award year 2003-2004; and

(2) the maximum Pell Grant amount set by Congress should be the amount eligible students receive.

SEC. 412. COVERING PELL GRANT SHORTFALL.

The following sums are appropriated, out of any money in the Treasury not otherwise appropriated for the fiscal year ending September 30, 2003, for an additional amount for `Student Financial Assistance' for carrying out subpart 1 of part A of title IV of the Higher Education Act of 1965, as amended, not more than $3,500,000,000, to remain available through September 30, 2004: Provided, That the Congress designates the entire amount as an emergency requirement pursuant to section 252(e) of the Balanced Budget and Emergency Deficit Control Act of 1985.

Subtitle B--Student Loan Origination Fees

SEC. 421. PHASEOUT OF STUDENT LOAN ORIGINATION FEES.

The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended--

(1) in section 438(c)(2), by striking `is authorized to charge the borrower an origination fee in an amount not to exceed 3.0 percent' and inserting `is authorized to charge the borrower an origination fee during fiscal year 2003 in an amount not to exceed 3.0 percent, during fiscal year 2004 in an amount not to exceed 2.0 percent, and during fiscal year 2005 in amount not to exceed 1.0 percent'; and

(2) by striking section 455(c) and inserting the following:

`(c) LOAN FEE- The Secretary shall charge the borrower of a loan made under this part--

`(1) during fiscal year 2003 an origination fee of 3.0 percent of the principal amount of loan;

`(2) during fiscal year 2004 an origination fee of 2.0 percent of the principal amount of loan; and

`(3) during fiscal year 2005 an origination fee of 1.0 percent of the principal amount of loan.'.

Subtitle C--Hope Scholarship

SEC. 431. HOPE AND LIFETIME LEARNING CREDITS TO BE REFUNDABLE.

(a) CREDIT TO BE REFUNDABLE- Section 25A of the Internal Revenue Code of 1986 (relating to Hope and Lifetime Learning credits) is hereby moved to subpart C of part IV of subchapter A of chapter 1 of such Code (relating to refundable credits) and inserted after section 35.

(b) TECHNICAL AMENDMENTS-

(1) Section 36 of such Code is redesignated as section 37.

(2) Section 25A of such Code (as moved by subsection (a)) is redesignated as section 36.

(3) Paragraph (1) of section 36(a) of such Code (as redesignated by paragraph (2)) is amended by striking `this chapter' and inserting `this subtitle'.

(4) Subparagraph (B) of section 72(t)(7) of such Code is amended by striking `section 25A(g)(2)' and inserting `section 36(g)(2)'.

(5) Subparagraph (A) of section 135(d)(2) of such Code is amended by striking `section 25A' and inserting `section 36'.

(6) Section 221(d) of such Code is amended--

(A) by striking `section 25A(g)(2)' in paragraph (2)(B) and inserting `section 36(g)(2)',

(B) by striking `section 25A(f)(2)' in paragraph (2)(B) and inserting `section 36(f)(2)', and

(C) by striking `section 25A(b)(3)' in paragraph (3) and inserting `section 36(b)(3)'.

(7) Section 222 of such Code is amended--

(A) by striking `section 25A' in subparagraph (A) of subsection (c)(2) and inserting `section 36',

(B) by striking `section 25A(f)' in subsection (d)(1) and inserting `section 36(f)', and

(C) by striking `section 25A(g)(2)' in subsection (d)(1) and inserting `section 36(g)(2)'.

(8) Section 529 of such Code is amended--

(A) by striking `section 25A(g)(2)' in subclause (I) of subsection (c)(3)(B)(v) and inserting `section 36(g)(2)',

(B) by striking `section 25A' in subclause (II) of subsection (c)(3)(B)(v) and inserting `section 36', and

(C) by striking `section 25A(b)(3)' in clause (i) of subsection (e)(3)(B) and inserting `section 36(b)(3)'.

(9) Section 530 of such Code is amended--

(A) by striking `section 25A(g)(2)' in subclause (I) of subsection (d)(2)(C)(i) and inserting `section 36(g)(2)',

(B) by striking `section 25A' in subclause (II) of subsection (d)(2)(C)(i) and inserting `section 36', and

(C) by striking `section 25A(g)(2)' in clause (iii) of subsection (d)(4)(B) and inserting `section 36(g)(2)'.

(10) Subsection (e) of section 6050S of such Code is amended by striking `section 25A' and inserting `section 36'.

(11) Subparagraph (J) of section 6213(g)(2) of such Code is amended by striking `section 25A(g)(1)' and inserting `section 36(g)(1)'.

(12) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period `or from section 36 of such Code'.

(13) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 36 and inserting the following:

`Sec. 36. Hope and Lifetime Learning credits.

`Sec. 37. Overpayments of tax.'.

(14) The table of sections for subpart A of such part IV is amended by striking the item relating to section 25A.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2002.

END