Can one make lasting improvement working solely within the confines of the status quo? That seems to be the question the US Department of Education, particularly EdSec Arne Duncan, is asking as additional details on the American Recovery and Reinvestment Act (ARRA) and our federal education policy come into crisper focus.
Arne Duncan
The Slow March Toward National Standards
For months now, the education chattering class has been talking about the behind-the-scenes efforts by the US Department of Education to craft national education standards. We’ve heard that Achieve was slated to deliver draft math and reading standards to Maryland Avenue by early summer, with plans for a thorough and robust debate leading up the reauthorization of the Elementary and Secondary Education Act.
o elementary, middle, and secondary learning standards. And we need to ensure that if all students are to be held to the same national standard, they all need to have equal access to the same educational resources. That means national standards, if you will, when it comes to early childhood education, high-quality teachers, and other such measures.
We’re Building Schools After All
When we first started off the debate on economic stimulus many months ago, well before ARRA was an acronym that held any real meaning (particularly in the education community), there was an initial thinking that stimulus dollars would be poured into school construction projects. After all, such projects were “shovel ready” (hard to believe how quickly we’ve forgotten that adjective) and they were viewed as the best example of projects that could benefit from the immediate influx of funding, but wouldn’t require continued care and feeding over the years.
May 29, 2009
Dear Chief State School Officers:
I am pleased to inform you about the authorization of Qualified School Construction Bonds (QSCBs) and Build America Bonds (BABs) and the extension of Qualified Zone Academy Bonds (QZABs). The authorizations provide Federal subsidies for public school improvement and modernization activities. TheAmerican Recovery and Reinvestment Act of 2009 (ARRA) makes QSCBs and BABs available for the first time, while extending and expanding the authority for QZABs. QZABs provide funding for school repairs and renovation and certain other activities for eligible schools and may not be used for new construction, while QSCBs and BABs provide funding for new construction as well as renovation.
Charter schools as well as traditional public schools may benefit from all of these types of bonds. I encourage you to consider serving charter schools through these programs.
You may use all three of these types of bonds to modernize buildings and convert obsolete non-school buildings into modern school facilities. I encourage you to design energy-efficient school facilities that meet widely recognized rating systems for green buildings. Please also consider ways these bonds can improve communities in general. For instance, some local educational agencies (LEAs) have designed school facilities in a manner intended to facilitate their serving as centers of their communities that are available for non-school purposes outside of regular school hours. Particularly in a time of economic difficulty, making school facilities go further by designing and providing them for multiple uses makes eminent sense.
The benefit of all of these programs is that they help LEAs save money and make their repair, renovation, or construction dollars go further. Purchasers of QSCBs and QZABs receive a Federal income tax credit. The U.S. Treasury Department establishes State allocation limits and sets a tax-credit rate for the QSCB and QZAB bond programs that, on average
, equals the amount of interest schools would ordinarily pay on debt. With the Federal Government covering most or all of the interest on the bonds, LEAs receive a substantial benefit as interest payments typically equal approximately 50 percent of the economic cost of a bond.
The ARRA makes available, to States and certain large LEAs, $11 billion for 2009 and $11 billion for 2010 in QSCB bonding authority for construction, rehabilitation, or repair of a public school facility and for the acquisition of land on which the school facility is to be constructed with QSCB funds. (An additional $200 million in each of those years goes to the Department of the Interior for assistance to schools operated or supported by the Bureau of Indian Education.) The QSCB bond allocation authority generally goes to States (not necessarily State educational agencies) based on their shares of Title I Basic Grant funds under the Elementary and Secondary Education Act (ESEA). The District of Columbia and possessions of
the United States also receive these allocations. Possessions other than Puerto Rico, however, receive their shares of the QSCB bonding authority based on their share of the population below the poverty line. Forty percent of the national QSCBs bonding authority goes directly to the 100 LEAs with the largest number of school-aged children living below the poverty line. The designated LEAs receive this bond allocation in proportion to their share of ESEA Title I Basic Grant funds. States with LEAs that receive bond allocations directly from the Federal Government receive a reduced direct allocation.
BABs are bonds that can be used to finance a wide range of projects, including construction and modernization of school facilities. The BABs program allows municipal bond issuers in 2009 and 2010 to offer an unlimited amount of taxable debt and to elect either to receive a cash subsidy from the Federal Government or to provide bondholders with a tax credit. Both the payment and the tax credit would be equal to 35 percent of the interest paid on the bonds. BABs can assist public postsecondary institutions in addition to LEAs.
QZABs are another important tool that States and LEAs can use to provide additional resources for improving school facilities and instruction. The ARRA extends QZABs through 2010. As you may know, QZABs were first authorized in 1997 and are bonds the Federal Government subsidizes by allowing bondholders to receive tax credits that are approximately equal to the interest that States and communities would pay holders of taxable bonds. As a result, issuers are generally responsible for repayment of just the principal. QZABs may now be purchased by any individual or private business.
States and LEAs have considerable flexibility in the use of QZABs. They may be used for rehabilitating or repairing school facilities, purchasing equipment, developing curricula, and training school personnel, but not for new construction. To meet QZAB eligibility criteria, a public school must be located in either an Empowerment Zone or an Enterprise Community or have at least 35 percent of its students eligible for free or reduced-price lunch under the Federal lunch program (National School Lunch Act). The school must also have an education program designed in cooperation with business; receive a private contribution (which may be in-kind), the net present value of which is not less than 10 percent of the proceeds of the bond; and have an education plan that is approved by its LEA; and its students must be subject to the same standards and assessments as other students in the LEA.
As the following chart shows, previously authorized QZABs are still available. However, unused funds from the 2007 allocations will expire at the end of this year and, to make use of these allocations, States or municipalities must issue the bonds by December 31, 2009. If a State does not issue the amount of QZABs allocated by the Federal Government between the calendar year the funds are first made available and the date by which they must be issued, the unused QZAB allocation expires and cannot be used.
QZABs Amount |
Calendar year first available |
Bonds must be issued by December 31 of the year |
|
$400 million |
2007 |
2009 |
|
$400 million |
2008 |
2010 |
|
$1.4 billion |
2009 |
2011 |
|
$1.4 billion |
2010 |
2012 |
On April 3, 2009, the Treasury Department issued 2008 and 2009 State allocations of QZABs bonding authority and 2009 allocations of QSCBs bonding authority for the States and the 100 large LEAs. I am enclosing those tables for your information. I am also enclosing a Fact Sheet prepared by our Department on these bond programs.
If you have questions about this information or these programs, please contact Branch 5 of the Internal Revenue Service, Office of Associate Chief Counsel/Financial Institutions and Products, at 202-622-3980 or Jane Hess of the U.S. Department of Education at 202-401-8292. I am confident that these bonds can help your communities meet some of their facility needs.
Sincerely,
/s/
Arne Duncan
2 Attachments Follow
AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
Qualified School Construction Bonds and
Qualified Zone Academy Bonds
The American Recovery and Reinvestment Act of 2009 (ARRA) authorized tax-credit bonds for school construction by expanding Qualified Zone Academy Bonds (QZABs) from $400 million annually to $1.4 billion for each of calendar years 2009 and 2010 and authorizing $11.2 billion in Qualified School Construction Bonds (QSCBs) for the first time. QZABs provide tax credits primarily for school renovation and may not be used for new construction, but QSCBs provide tax credits for new construction as well as renovation.
The U.S. Treasury Department establishes State allocation limits and sets a tax-credit rate for both of these bond programs that, on average, equals the amount of interest schools would ordinarily pay on debt. Since the Federal Government covers most or all of the interest on these bonds, local educational agencies (LEAs) receive a substantial benefit, as interest payments may typically equal up to 50 percent of the economic cost of a bond.
In addition to QZABs and QSCBs, the ARRA contains other provisions regarding tax-exempt debt and tax-credit programs that entities may use to finance construction of school facilities as well as other types of facilities. Build America Bonds (BABs), for example, are taxable bonds that can be used to finance a wide range of projects for governmental purposes. This BABs program allows municipal bond issuers in 2009 and 2010 to offer an unlimited amount of taxable debt and to elect either to receive a cash subsidy from the Federal Government or have it provide bondholders with a tax credit. Either the payment or the tax credit would be equal to 35 percent of the interest paid on the bonds. BABs can assist public postsecondary institutions in addition to LEAs. The Treasury Department’s recent guidance on this new program can be found at http://www.irs.gov/pub/irs-drop/n-09-26.pdf.
The benefit of all of these school construction financing tools is that they can help State and local governments save money and make their repair, renovation, modernization, or construction funds go further.
Basic Facts about Qualified School Construction Bonds
Under this new category of tax-credit bonds, the Treasury Department distributes $11 billion of the bond allocation in both 2009 and 2010 among the States and certain large LEAs. QSCBs are bonds the Federal Government subsidizes by allowing bondholders to receive tax credits that are approximately equal to the interest that States and communities would pay holders of taxable bonds. As a result, issuers are generally responsible for repayment of just the principal. States may directly issue the bonds on behalf of eligible schools or they may suballocate authority to issue the bonds within the State.
- QSCB allocations go to States (not necessarily State educational agencies) based on their share of Title I Basic Grant funds. The District of Columbia and possessions of the United States also receive these allocations. Possessions other than Puerto Rico, however, receive their shares of the QSCB bonding authority based on their share of the population below the poverty line. States with LEAs that receive bond allocations directly from the Federal Government receive a reduced allocation as a result of the allocations described in more detail below.
- 40 percent of the national QSCB bonding authority goes directly to the 100 LEAs with the largest number of school-aged children living below the poverty line.[1] The designated LEAs receive this bond allocation in proportion to their shares of Title I Basic Grant funds. An LEA in this category that receives a direct allocation may reallocate any of its unused QSCB allocations to its State.
- If an allocation to a State is unused for a calendar year, the State may carry it forward to the next calendar year. In other words, States have up until the end of 2010 to use their 2009 allocation and until the end of 2011 to use their 2010 allocation.
- In addition to the amounts described above, the Department of the Interior/Bureau of Indian Affairs receives $200 million annually in QSCB authority for its school facilities in 2009 and 2010. Indian tribal governments are qualified issuers.
QSCBs are less restrictive in their uses than QZABs. For a QSCB bond that is issued by a State or local government where a public school is located, 100 percent of available project proceeds must be used for the construction, rehabilitation, or repair of the public school facility. In addition, a portion of the proceeds of such a bond may be used for the acquisition of land on which a public school facility is to be constructed.
QSCBs may be purchased by any individual or private business, and used to generate a tax credit against the individual’s or entity’s Federal income taxes. The Department of the Treasury recently issued initial guidance for the program, which is posted at: www.irs.gov/pub/irs-drop/n-09-35.pdf, that reports the allocation of the annual bond volume among the States and the 100 largest LEAs.
Basic Facts about Qualified Zone Academy Bonds
QZABs were first authorized in 1997 and are bonds the Federal Government subsidizes by allowing bondholders to receive tax credits that are approximately equal to the interest that States and communities would pay holders of taxable bonds. As a result, issuers are generally responsible for repayment of just the principal. The Treasury Department allocates the authority to issue these bonds to States based on their proportion of the U.S. population living below the poverty line. States may directly issue the bonds on behalf of eligible schools or they may suballocate authority to issue the bonds within the State. These bonds may be used only on behalf of schools or programs that:
- are located in an Empowerment Zone or an Enterprise Community; or
- have a reasonable expectation (as of the date of the bond issuance) that at least 35 percent of their students will be eligible for free or reduced-cost lunches under the National School Lunch Act.
To benefit from a QZAB, an eligible school must also:
- have an education program designed in cooperation with business;
- receive a private contribution (which may be in-kind), the net present value of which is not less than 10 percent of the proceeds of the bond;
- have an education plan that is approved by its LEA; and
- subject its students to the same s
tandards and assessments as other students in the LEA.
QZABs may not be used for new construction but may be used for the following activities:
- renovating and repairing buildings;
- investing in equipment and up-to-date technology;
- developing challenging curricula; and
- training quality teachers.
In past years, QZABs could be purchased only by banks, insurance companies, and other companies engaged in the business of lending money. Effective October 2008, however, QZABs may be purchased by any individual or private business. The Department of the Treasury has issued recent guidance for the extended program available at: http://www.irs.gov/pub/irs-drop/n-09-30.pdf. Existing ED guidance on QZABs is available at: www.ed.gov/programs/
qualifiedzone/faq.html.
TABLES FOR STATE ALLOCATIONS OF QUALIFIED SCHOOL CONSTRUCTION BONDS:
2009 Allocations to States of Volume Cap for
Qualified School Construction Bonds
(Net of Allocations to Large Local Educational Agencies)
|
State/Territory |
Total Allocation by State/Territory |
|
Alabama |
118,776,000 |
|
Alaska |
29,784,000 |
|
Arizona |
186,292,000 |
|
Arkansas |
113,443,000 |
|
California |
773,525,000 |
|
Colorado |
87,147,000 |
|
Connecticut |
105,092,000 |
|
Delaware |
29,784,000 |
|
District of Columbia |
0 |
|
Florida |
106,806,000 |
|
Georgia |
201,062,000 |
|
Hawaii |
0 |
|
Idaho |
37,665,000 |
|
Illinois |
244,435,000 |
|
Indiana |
177,861,000 |
|
Iowa |
64,252,000 |
|
Kansas |
79,589,000 |
|
Kentucky |
135,132,000 |
|
Louisiana |
131,622,000 |
|
Maine |
42,074,000 |
|
Maryland |
50,354,000 |
|
Massachusetts |
144,783,000 |
|
Michigan |
296,860,000 |
|
Minnesota |
75,850,000 |
|
Mississippi |
132,443,000 |
|
Missouri |
141,441,000 |
|
Montana |
31,623,000 |
|
Nebraska |
32,343,000 |
|
Nevada |
6,767,000 |
|
New Hampshire |
29,784,000 |
|
New Jersey |
223,279,000 |
|
New Mexico |
64,602,000 |
|
New York |
192,049,000 |
|
North Carolina |
187,167,000 |
|
North Dakota |
25,740,000 |
|
Ohio |
267,112,000 |
|
Oklahoma |
87,018,000 |
|
Oregon |
112,886,000 |
|
State/Territory |
Total Allocation by State/Territory |
|
Pennsylvania |
315,737,000 |
|
Rhode Island |
22,062,000 |
|
South Carolina |
131,364,000 |
|
South Dakota |
29,784,000 |
|
Tennessee |
121,738,000 |
|
Texas |
538,585,000 |
|
Utah |
50,962,000 |
|
Vermont |
24,845,000 |
|
Virginia |
191,077,000 |
|
Washington |
164,111,000 |
|
West Virginia |
78,219,000 |
|
Wisconsin |
98,589,000 |
|
Wyoming |
24,080,000 |
|
|
|
|
American Samoa |
10,748,000 |
|
Guam |
10,980,000 |
|
Northern Marianas |
10,703,000 |
|
Puerto Rico |
0 |
|
Virgin Islands |
9,974,000 |
|
|
|
|
Total |
6,600,000,000 |
[1] The law also permits the Secretary of Education to select up to 25 additional LEAs to receive allocations from this 40 percent share, based on such factors as a low level of resources for school construction and enrollment growth. For 2009 the Secretary has decided not to select additional LEAs.
Inside the Mind of Arne Duncan
The popular parlor game these days is trying to figure our the inner psyche of our EdSec, Arne Duncan. Anyone who is anyone is trying to read nuanced meanings into everything he says or does. We scour over this internal emails to ED staff, his stump speeches, the groups he speaks to (and those he doesn’t), where is going on his listening tour (and who he will listen to), and just about every stop in between.
Answerin’ to Mr. Miller
Sometimes, what you don’t say can be as important as what you do say. Case in point, EdSec Arne Duncan’s testimony yesterday before the House Education and Labor Committee. Emphasizing current efforts to effectively use American Recovery and Reinvestment Act dollars, Duncan focused on a number of issues in the free-form part of the discussion, including topics such as restraint and student loans.
teaching in these schools. And where appropriate, I want them to create partnerships with charter school operators with a track record of success. I want superintendents to be aggressive in taking the difficult step of shutting down a failing school and replacing it with one they know will work.”
“Our agenda from early childhood through 12th grade is focused on helping states do the right thing. And that’s appropriate because States are responsible for establishing systems of education through the 12th grade. It’s our role to make it a national priority to reform schools and help states and districts do that.”
Who’s Speaking for the States at ED?
In what seems like a little-publicized announcement of a major appointment, EdSec Arne Duncan has selected Thelma Melendez de Santa Ana, superintendent of Pomona (CA) Unified School District to be the U.S. Department of Education’s new assistant secretary for elementary and secondary education. The choice seems to be a solid one for ED, the good doctor is a former bilingual classroom teacher, middle school assistant principal, elementary school principal, and former school district director of instruction of elementary and middle schools. She is also a Broad Superintendents Academy alum.
Measuring Opportunities to Learn
If the white smoke coming out of the U.S. Department is any indication, we have decided that the core tenets of No Child Left Behind will continue to drive policy. In recent months, EdSec Duncan and his team have constructed the four pillars of their education platform, the cornerstones that we can expect to see at the heart of any NCLB reauthorization coming this year or next. For those choosing not to pay attention, those pillars are (according to the folks on Maryland Avenue):
Presidential Commencement in the Desert
In recent weeks, there has been a great deal of discussion and debate about President Obama’s decision to speak at graduation festivities at the University of Notre Dame. But little had been said about yesterday’s presidential commencement address at Arizona State University. Yes, there was some initial discussion about ASU’s decision not to award Obama the traditional honorary degree (apparently, ASU’s policy is that one is recognized for their full lifetime body of work, and the President of the United States still has to prove himself and still has other career chapters ahead of him), but that’s been about it. But few are discussing what’s behind the curtain on last night’s address in Tempe.
na State, you just get the spotlight because you won the White House lottery this year. Next year, such concerns can be raised about future institutions. But when you get the President speaking about hope and opportunity for your graduates, one has to take a close took at those who failed to don the cap and gown, why they weren’t in the stadium last evening, and what that means for ASU, Arizona, and the nation.
These NCLB Colors Don’t Run!
Today, The Washington Post finally opines on the NAEP Long-Term Data released almost two weeks ago. The official stance of DC’s paper of record should come as surprise to few. In fact, WaPo seems to be channeling dear ol’ Eduflack on this, agreeing with my general points from a week ago that the NAEP improvements are significant (particularly with regard to students in the elementary grades), our high school performance is still a national embarrassment, and the persistent achievement gap is something that we all should be concerned with.
Spellings Resurfaces on NAEP
In this morning’s Washington Post, former EdSec Margaret Spellings takes her stab at NAEP analysis. No real surprises here. She points to the effectiveness of No Child Left Behind, citing progress not just for elementary school students but for middle school students as well. She notes that we expected such results, and should embrace the accountability that led to them.
