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Stimulus Package Finances School Modernization

The American Recovery and Reinvestment Act of 2009 creates a new category of tax credit bonds for the construction, rehabilitation, or repair of public school facilities or for the acquisition of land on which a public school facility will be constructed, to be known as Qualified School Construction Bonds. It also increases the Qualifieed Zone Academy Bonds (QZABs) that can be issued.

The amount of Qualified School Construction Bonds that may be issued by state and local governments is limited to $22 billion, $11 billion allocated initially in 2009 and the remainder in 2010. This proposal is estimated to cost $9.877 billion over 10 years. The bill also allows an additional $1.4 billion for QZABs in 2009 and in 2010.

QZABs provide federal tax credits to underwrite interest on school bonds which can be used to renovate and repair schools. The U.S. Treasury allocates the bonding authority to the states based on their school population and the state education agencies assign the bonding authority to school districts in their states. To be eligible, 35 percent of the students to be served must receive free or reduced-cost lunches under the federal school lunch program.

The Act also modifies QZAB rules to allow new construction to qualify for funding. QZABs help school districts with low-income populations save on interest costs associated with public school financing (below the post-secondary level), renovations and repairs, investing in equipment and up-to-date technology, developing challenging curricula, and training quality teachers.

"The average public school building is well past 40 years of age and cannot meet the demands of modern technology," Dale Lestina, president of Organizations Concerned about Rural Education, said. "Of the nation's 80,000 public school buildings, at least one-third need extensive repair or replacement and two-thirds have troublesome environmental conditions such as the presence of asbestos or lead in water and paint. Roofs leak. Ventilation is poor; heating and air conditioning systems don't work. Lighting is inadequate; plumbing is a problem. In short, the condition of these schools make it extremely difficult for teachers to teach and students to learn."