[Pages S2416-S2439]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Ms. MOSELEY-BRAUN (for herself, Mr. Kennedy, Mr. Graham, Mr.
Kerry, Mr. Levin, Mr. Torricelli, Mrs. Murray, Ms. Mikulski,
Mr. Dodd, and Mr. Wellstone):
S. 456. A bill to establish a partnership to rebuild and modernize
America's school facilities; to the Committee on Labor and Human
Resources.

THE PARTNERSHIP TO REBUILD AMERICA'S SCHOOLS ACT OF 1997

Ms. MOSELEY-BRAUN. Mr. President, I send to the desk, and I am
pleased to introduce, along with a number of my colleagues, the
Partnership To Rebuild America's School Act of 1997. This legislation
is designed to address one of the most fundamental problems that we
currently face as a nation with regard to public elementary and
secondary education: many of our schools are literally falling down
around our children. This legislation will help us address this
problem, the crisis of crumbling schools in America.
On Friday, the President officially transmitted this legislation to
the Congress. The bill is the result of months of work by the
Department of Education, the Department of the Treasury, the White
House, my office, and a number of other congressional offices.
At the outset, I commend and thank everyone who has participated in
the development of this legislation for their efforts.
Mr. President, the Partnership To Rebuild America's Schools Act of
1997 will help States and local school districts finance the repair,
renovation, modernization and construction of their schools. States and
school districts will be able to use the Federal funds to assist them
in financing their highest priority projects.
This bill will allow school districts to do more of what they need to
be doing, educating our children for the 21st century.
In America, the rungs on the ladder of opportunity are still crafted
in the classroom. High school graduates earn, on average, 46 percent
more every year than those who do not graduate. College graduates earn
155 percent more every year than those who do not graduate from high
school. Over the course of a lifetime, the most educated Americans will
earn five times as much as the least educated.
Education, however, is not just a matter of individual benefit. It is
a public good as well. It affects and correlates to the status and the
quality of life for our entire community. It correlates to just about
every indicia of economic and social well-being. Educational attainment
can be directly tied to income, health, the likelihood of being on
welfare, the likelihood of being incarcerated, and the likelihood of
voting and participating in our democracy. Education, therefore, has
both national as well as individual implications.
In a recent Wall Street Journal survey of leading U.S. economists, 43
percent of those surveyed said the single most important thing that we
could do to increase our long-term economic growth rate would be to
invest more in education and research and development. Nothing else
even came close to education in the survey. One economist said, ``One
of the few things that economists will agree upon is the fact that
economic growth is very strongly dependent on our own abilities.''
In his State of the Union Address, President Clinton noted that
education is a critical national security issue for our future. I
believe this notion should be at the heart of our debate over
education.
In order to compete with cheap, Third World labor in a global
economy, in an information age, and to maintain the standard of living
to which we have grown accustomed as Americans, we will have to have a
work force that works smarter, that works better, that can hold its own
in this global economy at the high end of the productivity scale.
So education then becomes a matter of national concern and, indeed,
as the President pointed out, a matter of our national security,
because it is directly linked to our ability to be able to maintain the
standard of living that we have come to appreciate as Americans and our
ability to compete in this global marketplace.
We all have a role to play. That is why this legislation starts off
calling itself a partnership, because there must be a partnership
between State, local and National Government to

[[Page S2417]]

meet the challenge that this global economy, and changes in the world,
have given us all to face.
The Partnership To Rebuild America's Schools Act of 1997 will help us
to meet the challenge by investing in education in ways that preserve
the fundamental tenet of local control of education.
By investing in bricks and mortar the Federal Government can
contribute to a more balanced partnership among all levels of
Government and in the private sector to rebuild and modernize our
schools so they can serve all of our children in the 21st century. This
legislation strikes that balance. This legislation does preserve local
control, but, much to the point, it says that we at the national level
have an obligation to participate in addressing those needs that can be
most appropriately addressed at the national level; and that is
rebuilding our crumbling schools.
The bill uses 5 billion Federal dollars to leverage an additional $15
billion worth of State, local and private resources. Half of the money
will be apportioned to States using the existing Title I basic grants
formula. The remainder will flow directly to the 100 school districts
in the country with the largest numbers of children living below the
poverty level.

Of the amount available for direct assistance to these impoverished
communities, the Department of Education will apportion 70 percent by
formula and will make the remaining 30 percent available on a
competitive basis.
In addition, the bill will allocate 2 percent of the funds to the
Secretary of the Interior for administration to Indian schools and to
the Secretary of Education for the outlying territories.
Under both the State and local programs, States and school districts
would have an enormous amount of flexibility in the use of these
Federal funds to help finance school improvement projects. They could
use the funds to subsidize State or local bond issues, certificates of
participation, purchase or lease agreements, or other financial
transactions used to finance school improvements.
In addition, the States would be allowed to capitalize on entities
similar to the State infrastructure banks which are currently used by a
number of States to help finance highway improvement projects. These
infrastructure banks could be used to leverage additional resources.
This program is designed to stimulate new construction and
renovation, and there are specific provisions in the bill to ensure
that Federal funds are not used simply to finance school improvements
that would have occurred anyway. The bill is designed to fill a real
need that exists at both the State and local levels for school
financing assistance, not to supplement districts that would have
otherwise been able to finance their projects.
It is carefully crafted to minimize administrative costs at the
Federal level and to maximize local control over decisions that must be
made with regard to school improvements.
States and districts will be required to submit applications to the
Secretary of Education describing their needs and the process that will
be used to award the Federal funds. Once these applications are
approved, grantees will immediately receive the full share of the $5
billion.
In addition, other than following certain criteria, States and local
districts will be free to finance their top-priority projects. The
Federal Government will not be in the business of dictating priorities
and needs to State and local school districts who know their schools
best.
This bill helps address a need that has completely overwhelmed States
and local school districts. The magnitude of the school facilities
problem is so great today that many districts cannot maintain the kind
of educational environment necessary to teach all of our children the
kind of skills they will need to compete in the 21st century, global
economy.
The U.S. General Accounting Office, which at my request conducted an
intensive 2-year study of the condition of America's schools, recently
concluded that 14 million children attend schools in need of major
renovations or outright replacement, and 7 million children attend
schools with life-threatening safety code violations. They found that
it will cost $112 billion to essentially bring schools up to code, not
to equip them with new computers and cosmetic improvements, but just to
address the toll that decades of deferred maintenance have taken on our
Nation's school facilities.
That $112 billion price tag, as enormous as it may sound, does not
include the cost of wiring schools for modern technology. One of the
greatest barriers to the incorporation of modern computers into the
classroom is the physical condition of many school buildings. You
cannot very well use a computer if you do not have the electrical
system to plug it into the wall. Too many schools across the country do
not have the physical capacity to provide our youngsters with the
instruments they will need in order to be educated for this information
age.
According to the General Accounting Office, almost half of all
schools lack enough electrical power for the full-scale use of
computers, 60 percent of them lack enough conduits in the walls
to connect classroom computers to a network, and more than 60 percent
lack enough phone lines for instructional use.

For this generation, computers really are the functional equivalent
of books. My son sometimes is amazed that computers were not around
when I was in school. The fact of the matter is, though, that many of
our schools were built before the advent of these technologies, and
they have not been upgraded so that modern teaching tools can be used
in the classroom. Our youngsters need modern technology if they are to
be prepared for this information age and for this global economy.
That $112 billion price tag also does not include the cost of
expanding capacity to accommodate soaring enrollments. According to the
U.S. Department of Education, just to keep up with growing enrollment,
we will need to build 6,000 new schools over the next 10 years.
Teachers and parents know full well that these conditions directly
affect the ability of children to learn. Recent research, however, has
lent scientific proof to that intuitive knowledge. Two separate studies
found a 10 to 11 percent achievement gap between students in good
school buildings and those in poor school buildings after controlling
for all other factors.
Other studies have found that when buildings are in poor condition,
students are more likely to misbehave. That should come as no surprise
to parents. Three leading researchers in this area recently concluded,
``Based on our research, there is no doubt that building condition
affects academic performance.''
Mr. President, this legislation is in the interest, I believe, of not
just the children of America who have to go to these school buildings,
many of which are dilapidated and rundown and neglected, but it is also
in the interest of communities that will need the help to finance
school repairs, and it is in the interest of our Nation that will need
to have an educated work force.
Mr. President, the current system of school finance, which relies
primarily on local property taxes, is not flexible enough to meet the
enormous needs of our Nation's schools. This country, I believe, needs
a new approach to solve the problem of crumbling schools, a partnership
among all levels of government and the private sector that preserves
local control of education, but creates some balance, and infuses,
frankly, a little more reason into our school finance system that does
not now adequately serve the schools, the children, the country, or the
local property taxpayers.
The Department of Education has looked closely at a number of
communities around the country and assessed the effect that this
legislation would have on their ability to finance their construction
needs. The Department looked at, for example, Los Angeles. Most of the
school buildings there are more than 40 years old and are not wired for
technology. Mr. President, 245 schools need roof replacements, and 50
of them need new boilers. According to the Department, this legislation
could accelerate many long overdue projects and facilitate the passage
of bond referenda at the local level.
The Department also looked at the State of Maine, which has many 100-
year-old buildings and one-room

[[Page S2418]]

schoolhouses. According to the Department, most districts in that State
cannot cover the total cost of bonds issued to finance repair and
modernization projects. Again, this legislation would allow needed
projects to go forward.
The Department also looked at a school district in southern Florida
suffering from severe overcrowding. Mr. President, 34,000 students in
that district do not have permanent desks. There are 10,000 new
students added to the system each year. The district would have to
build a new school every month to keep up with this demand. According
to the Department this legislation will help this district move away
from the use of portable classrooms, which do not provide as conducive
a learning environment as real schools.
My own State of Illinois would benefit greatly from this legislation.
As the GAO reported last week, my State has unfortunately one of the
most inequitable school finance systems in the Nation. With a low State
contribution to school resources, and with a poor State effort to
target funds to the neediest districts, local property taxpayers in
Illinois are saddled with almost 60 percent of the costs of educating
their children. It is no wonder, then, that the State board of
education estimates that Illinois' construction needs are $13 billion.
Too many of Illinois' school districts have a difficult time even
providing textbooks and pencils, let alone major capital improvements.
This legislation would free up local resources in Illinois for
education by providing Federal support for the construction,
rehabilitation and renovation of the school buildings.
I urge all my colleagues to take a close look at the needs of the
schools in their States and consider joining us in cosponsoring this
legislation. This initiative is not about partisan politics. In fact, I
think most Americans would agree wholeheartedly with the President when
he said that partisan politics should stop at the schoolhouse door.
This is something that transcends partisan differences and goes to the
heart of our ability to provide for our children's well-being and their
needs going into the 21st century.
Congress has a unique opportunity to take a fundamentally new
approach to improving the quality of elementary and secondary
education. This bill represents a chance to improve our system of
school finance and help prepare our children for the 21st century. I
believe this will be welcomed by taxpayers at the local level,
particularly those who, at this point, are unfairly burdened with the
costs of trying to keep up a school system that deserves the support of
all levels of government in our country.
Mr. President, I have several documents from the Department of
Education that I would like to have printed in the Record. I have the
letter of transmittal from the Secretary of Education to the President
of the Senate, a fact sheet regarding the correlation between building
conditions and student achievement, and seven case studies assessing
the impact this legislation would have on communities across America. I
ask unanimous consent that these materials, as well as the text of the
bill itself, be printed at this point in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 456

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That this
Act may be cited as the ``Partnership to Rebuild America's
Schools Act of 1997.''

TITLE I--SCHOOL CONSTRUCTION ASSISTANCE PROGRAM

TABLE OF CONTENTS

SEC. 101. The table of contents for this Act is as follows:

TITLE I--SCHOOL CONSTRUCTION ASSISTANCE PROGRAM

Sec. 101. Table of contents.

Part 1--Program Authorized

Sec. 102. Findings and purpose.
Sec. 103. Definitions.
Sec. 104. Funds appropriated.
Sec. 105. Allocation of funds.

Part 2--Grants to States

Sec. 111. Allocation of funds.
Sec. 112. Eligible State agency.
Sec. 113. Allowable uses of funds.
Sec. 114. Eligible construction projects; period for initiation.
Sec. 115. Selection of localities and projects.
Sec. 116. State applications.
Sec. 117. Amount of Federal subsidy.
Sec. 118. Separate funds or accounts; prudent investment.
Sec. 119. State reports.

Part 3--Direct Grants to Local Educational Agencies

Sec. 121. Eligible local educational agencies.
Sec. 122. Grantees.
Sec. 123. Allowable uses of funds.
Sec. 124. Eligible construction projects; redistribution.
Sec. 125. Local applications.
Sec. 126. Formula grants.
Sec. 127. Competitive grants.
Sec. 128. Amount of Federal subsidy.
Sec. 129. Separate funds or accounts; prudent investment.
Sec. 130. Local reports.

TITLE II--GENERAL PROVISIONS

Sec. 201. Technical employees.
Sec. 202. Wage rates.
Sec. 203. No liability of Federal Government.
Sec. 204. Consultation with Secretary of the Treasury.

Part 1--Program Authorized

findings and purpose

Sec. 102. (a) Findings.--The Congress finds as follows:
(1) According to the General Accounting Office, one-third
of all elementary and secondary schools in the United States,
serving 14,000,000 students, need extensive repair or
renovation.
(2) School infrastructure problems exist across the
country, but are most severe in central cities and in schools
with high proportions of poor and minority children.
(3) Many States and school districts will need to build new
schools in order to accommodate increasing student
enrollments; the Department of Education has predicted that
the Nation will need 6,000 more schools by the year 2006.
(4) Many schools do not have the physical infrastructure to
take advantage of computers and other technology needed to
meet the challenges of the next century.
(5) While school construction and maintenance are primarily
a State and local concern, States and communities have not,
on their own, met the increasing burden of
providing acceptable school facilities for all students,
and the poorest communities have had the greatest
difficulty meeting this need.
(6) The Federal Government, by providing interest subsidies
and similar types of support, can lower the costs of State
and local school infrastructure investment, creating an
incentive for States and localities to increase their own
infrastructure improvement efforts and helping ensure that
all students are able to attend schools that are equipped for
the 21st century.
(b) Purpose.--The purpose of this Act is to provide Federal
interest subsidies, or similar assistance, to States and
localities to help them bring all public school facilities up
to an acceptable standard and build the additional public
schools needed to educate the additional numbers of students
who will enroll in the next decade.

definitions

Sec. 103. Except as otherwise provided, as used in this
Act, the following terms have the following meanings:
(1) Charter school.--The term ``charter school'' has the
meaning given that term in section 10306(1) of the Elementary
and Secondary Education Act of 1965 (20 U.S.C. 8066(1)).
(2) Community school.--The term ``community school'' means
a school, or part of a school, that serves as a center for
after-school and summer programs and the delivery of
education, tutoring, cultural, and recreational services, and
as a safe haven for all members of the community by--
(A) collaborating with other public and private nonprofit
agencies (including libraries and other educational, human-
service, cultural, and recreational entities) and private
businesses in the provision of services;
(B) providing services such as literacy and reading
programs; senior citizen programs; children's day-care
services; nutrition services; services for individuals with
disabilities; employment counseling, training, and placement;
and other educational, health, cultural, and recreational
services; and
(C) providing those services outside the normal school day
and school year, such as through safe and drug-free safe
havens for learning.
(3)(A) Construction.--The term ``construction' means----
(i) the preparation of drawings and specifications for
school facilities;
(ii) erecting, building, acquiring, remodeling, renovating,
improving, repairing, or extending school facilities;
(iii) demolition, in preparation for rebuilding school
facilities; and
(iv) the inspection and supervision of the construction of
school facilities.
(B) The term ``construction'' does not include the
acquisition of any interest in real property.
(4) Local educational agency.--The term ``local educational
agency'' has the meaning given that term in section 14101(18)
(A) and (B) of the Elementary and Secondary Education Act of
1965 (20 U.S.C. 8801(18) (A) and (B)).
(5) School facility.--(A) The term ``school facility''
means--
(i) a public structure suitable for use as a classroom,
laboratory, library, media center, or related facility, whose
primary purpose is the instruction of public elementary or
secondary students; and

[[Page S2419]]

(ii) initial equipment, machinery, and utilities necessary
or appropriate for school purposes.
(B) The term ``school facility'' does not include an
athletic stadium, or any other structure or facility intended
primarily for athletic exhibitions, contests, games, or
events for which admission is charged to the general public.
(6) Secretary.--The term ``Secretary'' means the Secretary
of Education.
(7) State.--The term ``State'' means each of the 50 States
and the Commonwealth of Puerto Rico.
(8) State educational agency.--The term ``State educational
agency'' has the meaning given that term in section 14101(28)
of the Elementary and Secondary Education Act of 1965 (20
U.S.C. 8801(28)).

funds appropriated

Sec. 104. There are appropriated $5,000,000,000 for the
purpose of carrying out this Act, which shall be available
for obligation by the Secretary of Education from October 1,
1997 until September 30, 2001.

allocation of funds

Sec. 105. (a) Reservation for the Secretary of the Interior
and the Outlying Areas.--(1) The Secretary shall reserve up
to two percent of the funds appropriated by section 104 to--
(A) provide assistance to the Secretary of the Interior,
which the Secretary of the Interior shall use for the school
construction priorities described in section 1125(c) of the
Education Amendment of 1978 (25 U.S.C. 2005(c)); and
(B) make grants to America Samoa, Guam, the Virgin Islands,
and the Commonwealth of the Northern Mariana Islands, in
accordance with their respective needs, as determined by the
Secretary.
(2) Grants provided under paragraph (1)(B) shall be used
for activities that the Secretary determines best meet the
school infrastructure needs of the areas identified in that
paragraph, subject to the terms and conditions, consistent
with the purpose of this Act, that the Secretary may
establish.
(b) Allocation of Remaining Funds.--Of the remaining funds
appropriated by section 104--
(1) 50 percent shall be used for formula grants to States
under section 111;
(2) 35 percent shall be used for direct formula grants to
local educational agencies under section 126; and
(3) 15 percent shall be used for competitive grants to
local educational agencies under section 127.

Part 2--Grants to States

allocation of funds

Sec. 111. (A) Formula Grants to States.--Subject to
subsection (b), the Secretary shall allocate the funds
available under section 105(b)(1) among the States in
proportion to the relative amounts each State would have
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 if the
Secretary had disregarded the numbers of children counted
under that subpart who were enrolled in schools of local
educational agencies that are eligible to receive direct
grants under section 126 of this Act.
(b) Adjustments to Allocations.--The Secretary shall adjust
the allocations under subsection (a), as necessary, to ensure
that, of the total amount allocated to State under subsection
(a) and to local educational agencies under section 126, the
percentage allocated to a State under this section and to
localities in the State under section 126 is at least the
minimum percentage for the State described in section 1124(d)
of the Elementary and Secondary Education Act of 1965 (20
U.S.C. 6334(d)) for the previous fiscal year.
(c) Reallocations.--If a State does not apply for its
allocation, applies for less than its full allocation, or
fails to submit an approvable application, the Secretary may
reallocate all or a portion of the State's allocation, as the
case may be, to the remaining States in the same proportions
as the original allocations were made to those States under
subsections (a) and (b).

eligible state agency

Sec. 112. The Secretary shall award each State's grant to
the State agency, such as a State educational agency, a State
school construction agency, or a State bond bank, that the
Governor, with the agreement of the chief State school
officer, designates as best able to administer the grant.

allowable uses of funds

Sec. 113. Each State shall use its grant under this part
only for one or more of the following activities to subsidize
the cost of eligible school construction projects described
in section 114:
(1) Providing a portion of the interest cost (or of another
financing cost approved by the Secretary) on bonds,
certificates of participation, purchase or lease
arrangements, or other forms of indebtedness issued or
entered into by a State or its instrumentality for the
purpose of financing eligible projects.
(2) State-level expenditures approved by the Secretary for
credit enhancement for the debt or financing instruments
described in paragraph (1).
(3) Making subgrants, or making loans through a State
revolving fund, to local educational agencies or (with the
agreement of the affected local educational agency) to other
qualified public agencies to subsidize--
(A) the interest cost (or another financing cost approved
by the Secretary) of bonds, certificates of participation,
purchase or lease arrangements, or other forms of
indebtedness issued or entered into by a local educational
agency or other agency or unit of local government for the
purpose of financing eligible projects; or
(B) local expenditures approved by the Secretary for credit
enhancement for the debt or financing instruments described
in subparagraph (A).
(4) Other State and local expenditures approved by the
Secretary that leverage funds for additional school
construction.

eligible construction projects; period for initiation

Sec. 114 (a) Eligible Projects.--States and their
subgrantees may use funds under this part, in accordance with
section 113, to subsidize the cost of--
(1) construction of elementary and secondary school
facilities in order to ensure the health and safety of all
students, which may include the removal of environmental
hazards; improvements in air quality, plumbing, lighting,
heating and air conditioning, electrical systems, or basic
school infrastructure; and building improvements that
increase school safety;
(2) construction activities needed to meet the requirements
of section 504 of the Rehabilitation Act of 1973 (29 U.S.C.
794) or of the Americans with Disabilities Act of 1990 (42
U.S.C. 12101 et seq.);
(3) construction activities that increase the energy
efficiency of school facilities;
(4) construction that facilitates the use of modern
educational technologies;
(5) construction of new school facilities that are needed
to accommodate growth in school enrollments; or
(6) construction projects needed to facilitate the
establishment of charter schools and community schools.
(b) Period for Initiation of Project.--(1) Each State shall
use its grant under this part only to subsidize construction
projects described in subsection (a) that the State or its
localities have chosen to initiate, through the vote of a
school board, passage of a bond issue, or similar public
decision, made between July 11, 1996 and September 30, 2001.
(2) If a State determines, after September 30, 2001, that
an eligible project for which it has obligated funds under
this part will not be carried out, the State may use those
funds (or any available portion of those funds) for other
eligible projects selected in accordance with this part.
(c) Reallocation.--If the Secretary determines, by a date
before September 30, 2001 selected by the Secretary, that a
State is not making satisfactory progress in carrying out its
plan for the use of the funds allocated to it under this
part, the Secretary may reallocate all or part of those
funds, including any interest earned by the State on those
funds, to one or more other States that are making
satisfactory progress.

selection of localities and projects

Sec. 115. (a) Priorities.--In determining which localities
and activities to support with grant funds, each State shall
give the highest priority to--
(1) localities with the greatest needs, as demonstrated by
inadequate educational facilities, coupled with a low level
of resources available to meet school construction needs; and
(2) localities that will achieve the greatest leveraging
effect on school construction from assistance under this
part.
(b) Additional Criteria.--In addition to the priorities
required by subsection (a), each State shall consider each of
the following in determining the use of its grant funds under
this part:
(1) The condition of the school facilities in different
communities in the State.
(2) The energy efficiency and the effect on the environment
of projects proposed by communities, and the extent to which
these projects use cost-efficient architectural design.
(3) The commitment of communities to finance school
construction and renovation projects with assistance from the
State's grant, as demonstrated by their incurring
indebtedness or by similar public or private commitments for
the purposes described in section 114(a).
(4) The ability of communities to repay bonds or other
forms of indebtedness supported with grant funds.
(5) The particular needs, if any, of rural communities in
the State for assistance under this Act.
(6) The receipt by local educational agencies in the State
of grants under part 3, except that a local educational
agency is not ineligible for a subgrant under this part
solely because it receives such a grant.

state applications

Sec. 116. (a) Application Required.--A State that wishes to
receive a grant under this part shall submit an application
to the Secretary, in the manner the Secretary may require,
not later than two years after the date of enactment of this
Act.
(b) Development of Application.--(1) The State agency
designated under section 112 shall develop the State's
application under this part only after broadly consulting
with the State board of education, and representatives of
local school boards, school administrators, the business
community, parents, and teachers in the State about the best
means of carrying out this part.
(2) If the State educational agency is not the State agency
designated under section

[[Page S2420]]

112, the designated agency shall consult with the State
educational agency and obtain its approval before submitting
the State's application.
(c) State Survey.--(1) Before submitting the State's
application, the State agency designated under section 112,
with the involvement of local school officials and experts in
building construction and management, shall survey the need
throughout the State (including in localities receiving
grants under part 3) for construction and renovation of
school facilities, including, at a minimum--
(A) the overall condition of school facilities in the
State, including health and safety problems;
(B) the capacity of the schools in the State to house
projected enrollments; and
(C) the extent to which the schools in the State offer the
physical infrastructure needed to provide a high-quality
education to all students.
(2) A State need not conduct a new survey under paragraph
(1) if it has previously completed a survey that meets the
requirements of that paragraph and that the Secretary finds
is sufficiently recent for the purpose of carrying out this
part.
(d) Application Contents.--Each State application under
this part shall include--
(1) an identification of the State agency designated by the
Governor under section 112 to receive the State's grant under
this party;
(2) a summary of the results of the State's survey of its
school facility needs, as described in subsection (c);
(3) a description of how the State will implement its
program under this part;
(4) a description of how the State will allocate its grant
funds, including a description of how the State will
implement the priorities and criteria described in section
115;
(5)(A) a description of the mechanisms that will be used to
finance construction projects supported by grant funds; and
(B) a statement of how the State will determine the amount
of the Federal subsidy to be applied, in accordance with
section 117(a), to each local project that the State will
support;
(6) a description of how the State will ensure that the
requirements of this part are met by subgrantees under this
part;
(7) a description of the steps the State will take to
ensure that local educational agencies will adequately
maintain the facilities that are constructed or improved with
funds under this part;
(8) an assurance that the State will use its grant only to
supplement the funds that the State, and the localities
receiving subgrants, would spend on school construction
and renovation in the absence of a grant under this part,
and not to supplant those funds;
(9) an assurance that, during the four-year period
beginning with the year the State receives its grant, the
combined expenditures for school construction by the State
and the localities that benefit from the State's program
under this part (which at the State's option, may include
private contributions) will be at least 125 percent of those
combined expenditures for that purpose for the four preceding
years; and
(10) other information and assurances that the Secretary
may require.
(e) Waiver of Requirement to Increase Expenditures.--The
Secretary may waive or modify the requirement of subsection
(d)(9) for a particular State if the State demonstrates to
the Secretary's satisfaction that that requirement is unduly
burdensome because the State or its localities have incurred
a particularly high level of school construction expenditures
during the previous four years.

AMOUNT OF FEDERAL SUBSIDY

Sec. 117. (a) Projects Funded with Subgrants.--For each
construction project assisted by a State through a subgrant
to a locality, the State shall determine the amount of the
Federal subsidy under this part, taking into account the
number or percentage of children from low-income families
residing in the locality, subject to the following limits:
(1) If the locality will use the subgrant to help meet the
cost of repaying bonds issued for a school construction
project, the Federal subsidy shall be not more than one-half
of the total interest cost of those bonds, determined in
accordance with paragraph (4).
(2) If the bonds to be subsidized are general obligation
bonds issued to finance more than one type of activity
(including school construction), the Federal subsidy shall be
not more than one-half of the interest cost for that portion
of the bonds that will be used for school construction
purposes, determined in accordance with paragraph (4).
(3) If the locality elects to use its subgrant for an
allowable activity not described in paragraph (1) or (2),
such as for certificates of participation, purchase or lease
arrangements, reduction of the amount of principal to be
borrowed, or credit enhancements for individual construction
projects, the Federal subsidy shall be not more than one-half
of the interest cost, as determined by the State in
accordance with paragraph (4), that would have been incurred
if bonds had been used to finance the project.
(4) the interest cost referred to in paragraphs (1), (2),
and (3) shall be--
(A) calculated on the basis of net present value; and
(B) determined in accordance with an amortization schedule
and any other criteria and conditions the Secretary considers
necessary, including provisions to ensure comparable
treatment of different financing mechanisms.
(b) State-Funded Projects.--For a construction project
under this part funded directly by the State through the use
of State-issued bonds or other financial instruments, the
Secretary shall determine the Federal subsidy in accordance
with subsection (a).
(c) Non-Federal Share.--A State, and localities in the
State receiving subgrants under this part, may use any non-
Federal funds, including State, local, and private-sector
funds, for the financing costs that are not covered by the
Federal subsidy under subsection (a).

SEPARATE FUNDS OR ACCOUNTS; PRUDENT INVESTMENT

Sec. 118. (a) Separate Funds or Accounts Required.--Each
State that receives a grant, and each recipient of a subgrant
under this part, shall deposit the grant or subgrant proceeds
in a separate fund or account, from which it shall make bond
repayments and pay other expenses allowable under this part.
(b) Prudent Investment Required.--Each State that receives
a grant, and each recipient of a subgrant under this part,
shall--
(1) invest the grant or subgrant in a fiscally prudent
manner, in order to generate amounts needed to make
repayments on bonds and other forms of indebtedness described
in section 113; and
(2) Notwithstanding section 6503 of title 31, United States
Code or any other law, use the proceeds of that investment to
carry out this part.

state reports

Sec. 119. (a) Reports Required.--(1) Each State receiving a
grant under this part shall report to the Secretary on its
activities under this part, in the form and manner the
Secretary may prescribe.
(2) If the State educational agency is not the State agency
designated under section 112, the State's report shall
include the approval of the State educational agency or its
comments on the report.
(b) Contents.--Each report shall--
(1) describe the State's implementation of this part,
including how the State has met the requirements of this
part;
(2) identify the specific school facilities constructed,
renovated, or modernized with support from the grant, and the
mechanisms used to finance those activities;
(3) identify the level of Federal subsidy provided to each
construction project carried out with support from the
State's grant; and
(4) include any other information the Secretary may
require.
(c) Frequency.--(1) Each State shall submit its first
report under this section not later than 24 months after it
receives its grant under this part.
(2) Each State shall submit an annual report for each of
the three years after submitting its first report, and
subsequently shall submit periodic reports as long as the
State or localities in the State are using grant funds.

Part 3--Direct Grants to Local Educational Agencies

eligible local educational agencies

Sec. 121. (a) Eligible Agencies.--Except as provided in
subsection (b), the local educational agencies that are
eligible to receive formula grants under section 126 and
competitive grants under section 127 from the Secretary are
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.
(b) Certain Jurisdictions Ineligible.--For the purpose of
this part, the local educational agencies for Hawaii and the
Commonwealth of Puerto Rico are not eligible local
educational agencies.

grantees

Sec. 122. For each local educational agency described in
section 121(a) for which an approvable application is
submitted, the Secretary shall make any grant under this part
to the local educational agency or to another public agency,
on behalf of the local educational agency, if the Secretary
determines, on the basis of the local educational agency's
recommendation, that the other agency is better able to carry
out activities under this part.

allowable uses of funds

Sec. 123. Each grantee under this part shall use its grant
only for one or more of the following activities to reduce
the cost of financing eligible school construction projects
described in section 124:
(1) Providing a portion of the interest cost (or of any
other financing cost approved by the Secretary) on bonds,
certificates of participation, purchase or lease
arrangements, or other forms of indebtedness issued or
entered into by a local educational agency or other unit or
agency of local government for the purpose of financing
eligible school construction projects.
(2) Local expenditures approved by the Secretary for credit
enhancement for the debt or financing instruments described
in paragraph (1).
(3) Other local expenditures approved by the Secretary that
leverage funds for additional school construction.

eligible construction projects; redistribution

Sec. 124. (a) Eligible Projects.--A grantee under this part
may use its grant, in accordance with section 123, to
subsidize the cost of the activities described in section
114(a) for projects that the local educational agency has
chosen to initiate, through the

[[Page S2421]]

vote of the school board, passage of a bond issue, or similar
public decision, made between July 11, 1996 and September
30, 2001.
(b) Redistribution.--If the Secretary determines, by a date
before September 30, 2001 selected by the Secretary, that a
local educational agency is not making satisfactory progress
in carrying out its plan for the use of funds awarded to it
under this part, the Secretary may redistribute all or part
of those funds, and any interest earned by that agency on
those funds, to one or more other local educational agencies
that are making satisfactory progress.

local applications

Sec. 125. (a) Application Required.--A local educational
agency, or an alternative agency described in section 122
(both referred to in this part as the ``local agency''), that
wishes to receive a grant under this part shall submit an
application to the Secretary, in the manner the Secretary may
require, not later than two years after the date of enactment
of this Act.
(b) Development of Application.--(1) The local agency shall
develop the local application under this part only after
broadly consulting with parents, administrators, teachers,
the business community, and other members of the local
community about the best means of carrying out this part.
(2) If the local educational agency is not the applicant,
the applicant shall consult with the local educational
agency, and shall obtain its approval before submitting its
application to the Secretary.
(c) Local Survey.--(1) Before submitting its application,
the local agency, with the involvement of local school
officials and experts in building construction and
management, shall survey the local need for construction and
renovation of school facilities, including, at a minimum--
(A) the overall condition of school facilities in the local
educational agency, including health and safety problems;
(B) the capacity of the local educational agency's schools
to house projected enrollments; and
(C) the extent to which the local educational agency's
schools offer the physical infrastructure needed to provide a
high-quality education to all students.
(2) A local educational agency need not conduct a new
survey under paragraph (1) if it has previously completed a
survey that meets the requirements of that paragraph and that
the Secretary finds is sufficiently recent for the purpose of
carrying out this part.
(d) Application Contents.--Each local application under
this part shall include--
(1) an identification of the local agency to receive the
grant under this part;
(2) a summary of the results of the survey of school
facility needs, as described in subsection (c);
(3) a description of how the local agency will implement
its program under this part;
(4) a description of the criteria the local agency has used
to determine which construction projects to support with
grant funds;
(5) a description of the construction projects that will be
supported with grant funds;
(6) a description of the mechanisms that will be used to
finance construction projects supported by grant funds;
(7) a requested level of Federal subsidy, with a
justification for that level, for each construction project
to be supported by the grant, in accordance with section
128(a), including the financial and demographic information
the Secretary may require;
(8) a description of the steps the agency will take to
ensure that facilities constructed or improved with funds
under this part will be adequately maintained;
(9) an assurance that the agency will use its grant only to
supplement the funds that the locality would spend on school
construction and renovation in the absence of a grant under
this part, and not to supplant those funds;
(10) an assurance that, during the four-year period
beginning with the year the local educational agency receives
its grant, its expenditures for school construction (which,
at that agency's option, may include private contributions)
will be at least 125 percent of its expenditures for that
purpose for the four preceding years; and
(11) other information and assurances that the Secretary
may require.
(e) Waiver of Requirement To Increase Expenditures.--The
Secretary may waive or modify the requirement of subsection
(d)(10) for a local educational agency that demonstrates to
the Secretary's satisfaction that that requirement is unduly
burdensome because that agency has incurred a particularly
high level of school construction expenditures during the
previous four years.

formula grants

Sec. 126. (a) Allocations.--The Secretary shall allocate
the funds available under section 105(b)(2) to the local
educational agencies identified under section 121(a) on the
basis of their relative allocations under section 1124 of the
Elementary and Secondary Education Act of 1965 (20 U.S.C.
6333) in the most recent year for which that information is
available to the Secretary.
(b) Reallocations.--If a local educational agency does not
apply for its allocation, applies for less than its full
allocation, or fails to submit an approvable application, the
Secretary may reallocate all or a portion of its allocation,
as the case may be, to the remaining local educational
agencies in the same proportions as the original allocations
were made to those agencies under subsection (a).

competitive grants

Sec. 127. (a) Grants Authorized.--The Secretary shall use
funds available under section 105(b)(3) to make additional
grants, on a competitive basis, to recipients of formula
grants under section 126.
(b) Additional Application Materials.--Any eligible
applicant under section 126 that wishes to receive additional
funds under this section shall include in its application
under section 125 the following additional information:
(1) The amount of funds requested under this section, in
accordance with ranges or limits that the Secretary may
establish based on factors such as relative size of the
eligible applicants.
(2) A description of the additional construction activities
that the applicant would carry out with those funds.
(3) Information on the current financial effort the
applicant is making for elementary and secondary education,
including support from private sources, relative to its
resources.
(4) Information on the extent to which the applicant will
increase its own (or other public or private) spending for
school construction in the year in which it receives a grant
under this section, above the average annual amount for
construction activity during the preceding four years.
(5) A description of the energy efficiency and the effect
on the environment of the projects that the applicant will
undertake, both with its grant under this section and its
grant under section 126, and of the extent to which those
projects will use cost-efficient architectural design.
(6) Other information that the Secretary may require.
(c) Selection of Grantees.--The Secretary shall select
grantees under this section on the basis of criteria,
consistent with the purpose of this Act, that the Secretary
may establish, which shall include--
(1) the relative need of applicants, as demonstrated by
inadequate educational facilities and a low level of
resources to meet their school construction needs;
(2) the commitment of applicants to meet their school
construction needs and the leveraging effect that assistance
under this part would have, as demonstrated by the additional
resources that they will provide, from non-Federal sources,
to meet those needs, in accordance with subsection (b)(4).

amount of federal subsidy

Sec. 128. (a) Amount of Federal Subsidy.--For each
construction project assisted under this part, the Secretary
shall determine the amount of the Federal subsidy in
accordance with section 117(a).
(b) Non-Federal Share.--A grantee under this part may use
any non-Federal funds, including State, local, and private-
sector funds, for the financing costs that are not covered by
the Federal subsidy under subsection (a).

separate funds or accounts; prudent investment

Sec. 129. (a) Separate Funds or Accounts Required.--Each
grantee under this part shall deposit the grant proceeds in a
separate fund or account, from which it shall make bond
repayments and pay other expenses allowable under this part.
(b) Prudent Investment Required.--Each granteee under this
part shall--
(1) invest the grant funds in a fiscally prudent manner, in
order to generate amounts needed to make repayments on bonds
and other forms of indebtedness; and
(2) notwithstanding section 6503 of title 31, United States
Code or any other law, use the proceeds of that investment to
carry out this part.

local reports

Sec. 130. (a) Reports Required.--(1) Each grantee under
this part shall report to the Secretary on its activities
under this part, in the form and manner the Secretary may
prescribe.
(2) If the local educational agency is not the grantee
under this part, the grantee's report shall include the
approval of the local educational agency or its comments on
the report.
(b) Contents.--Each report shall--
(1) describe the grantee's implementation of this part,
including how it has met the requirements of this part;
(2) identify the specific school facilities constructed,
renovated, or modernized with support from the grant, and the
mechanisms used to finance those activities; and
(3) other information the Secretary may require.
(c) Frequency.--(1) Each grantee shall submit its first
report under this section not later than 24 months after it
receives its grant under this part.
(2) Each grantee shall submit an annual report for each of
the three years after submitting its first report, and
subsequently shall submit periodic reports as long as it is
using grant funds.

TITLE II--GENERAL PROVISIONS

technical employees

Sec. 201. For the purpose of carrying out this Act, the
Secretary, without regard to the provisions of title 5,
United States Code, governing appointments in the competitive
service, may appoint not more than 10 technical employees who
may be paid without regard to the provisions of chapter 51
and subchapter IV of chapter 5 of that title relating

[[Page S2422]]

to classification and General Schedule pay rates.

wage rates

Sec. 202. (a) Prevailing Wage.--The Secretary shall ensure
that all laborers and mechanics employed by contractors and
subcontractors on any project assisted under this Act are
paid wages at rates not less than those prevailing as
determined by the Secretary of Labor in accordance with the
Act of March 3, 1931, as amended (40 U.S.C. 276a et seq.).
The Secretary of Labor has, with respect to this section, the
authority and functions established in Reorganization Plan
Numbered 14 of 1950 (effective May 24, 1950, 64 Stat.
1267) and section 2 of the Act of June 13, 1934 (40 U.S.C.
276c).
(b) Waiver for Volunteers.--Section 7305 of the Federal
Acquisition Streamlining Act of 1994 (40 U.S.C. 276d-3) is
amended--
(1) in paragraph (5), by striking out the ``and'' at the
end thereof'
(2) in paragraph (6), by striking out the period at the end
thereof and inserting a semi-colon and ``and''; and
(3) by adding at the end thereof the following new
paragraph:
``(7) The Partnership Rehabilitate America's Schools Act of
1997.''.

NO LIABILITY OF FEDERAL GOVERNMENT

Sec. 203. (a) No Federal Liability.--Any financial
instruments, including but not limited to contracts, bonds,
bills, notes, certificates of participation, or purchase or
lease arrangements, issued by States, localities or
instrumentalities thereof in connection with any assistance
provided by the Secretary under this Act are obligations of
such States, localities or instrumentalities and not
obligations of the United States and are not guaranteed by
the full faith and credit of the United States.
(b) Notice Requirement.--Documents relating to any
financial instruments, including but not limited to
contracts, bonds, bills, notes, offering statements,
certificates of participation, or purchase or lease
arrangements, issued by States, localities or
instrumentalities thereof in connection with any assistance
provided under this Act, shall include a prominent statement
providing notice that the financial instruments are not
obligations of the United States and are not guaranteed by
the full faith and credit of the United States.

Consultation with Secretary of the Treasury

Sec. 204. The Secretary shall consult with the Secretary of
the Treasury in carrying out this Act.
____

U.S. Department of Education,

The Secretary

March 13, 1997.
Hon. Albert Gore, Jr.,
President of the Senate, Washington, DC.
Dear Mr. President: Enclosed for consideration of the
Congress is the Partnership to Rebuild America's Schools Act
of 1997, a bill that would provide a one-time Federal
stimulus to help States and localities bring all public
school facilities up to acceptable standards and build the
additional schools needed to serve increasing enrollments.
Also enclosed is a section-by-section analysis summarizing
the contents of the bill. I am sending an identical letter to
the Speaker of the House.
Mr. President, a number of factors have led the
Administration to conclude that the Federal Government must
assist the States and localities in providing the school
facilities that our children will need if they are to achieve
to challenging educational standards. First of all, recent
General Accounting Office reports have documented the
deplorable condition of too many of the Nation's schools.
According to the GAO, one-third of all schools, serving more
than 14 million students, need extensive repair or renovation
of one or more buildings. Students are attending schools that
have antiquated heating, plumbing, and electrical systems and
even fail to meet local health and safety codes. Some schools
do not provide full access to individuals with disabilities,
and many do not have the infrastructure needed to adopt new
educational technologies. All of these problems are most
prevalent in urban districts.
In addition to making repairs and renovations to their
existing schools, many districts will have to build new
schools in order to accommodate increasing enrollments. In
fact, the Department has projected that States and localities
will need to build 6,000 more schools in order to serve an
additional 2.9 million students who will enroll in the next
decade. This need will put further pressure on already
strained school budgets.
Clearly, school construction is, and will remain, primarily
a State and local responsibility, and the vast majority of
facilities needs will have to be met with non-Federal
resources. Unfortunately, however, for a variety of reasons
State and local governments have not been making substantial
progress even in clearing the existing backlog of
construction needs. The Federal Government can play a crucial
role in addressing this problem by providing limited
resources, on a one-time basis, in a manner that spurs
States, communities, and even the private sector to bear the
burden and provide adequate school facilities for all
children. That is the purpose of the enclosed legislation.
In order to have maximum impact, our bill would leverage
State, local, and private support for school construction,
rather than paying for 100 percent of the cost of
construction projects. The proposal would provide interest
subsidies for school construction bonds, or other financing
mechanisms, to States and major urban school districts.
States would, in turn, pass these subsidies along to
localities, use them to reduce the servicing costs of State
bonds or other financing vehicles, use them to capitalize
State revolving funds for school construction, or use them
for other, similar purposes. The maximum amount of Federal
subsidy would be the equivalent of 50 percent of the interest
cost on bonds. Through this mechanism, every dollar of
Federal money would be matched by a minimum of three dollars
of State, local, or private money.
The Federal Government would not determine the specific
construction projects that would be funded. Rather, States
and localities would use the Federal subsidy for the costs of
construction projects that reflect their highest needs, such
as addressing health and safety problems or problems with air
quality, plumbing, heating, and lighting; removal of
architectural barriers in order to ensure access for
individuals with disabilities; projects to increase energy
efficiency; construction to facilitate the use of modern
educational technologies; and new construction needed to
accommodate increased enrollments. While the State and local
recipients would have the flexibility to determine which of
these types of construction activities are their highest
priority, they would have to base their use of the Federal
funds on a thorough survey of State or local school
construction needs and use the funds in a manner consistent
with several other general criteria such as, at the State
level, awarding the subsidy to communities with the greatest
construction needs and the least ability to meet those needs
with their own resources.
Under the program, the Department would allocate one-half
of a $5 billion mandatory appropriation to States using the
existing ``Title I'' basic grants formula. The remainder
would flow directly to the 100 districts that enroll the
greatest numbers of children living in poverty; those urban
districts, according to the GAO data, have far and away the
greatest school construction needs. Of the amount available
for direct assistance to urban districts, the Department
would allocate seventy percent by formula, again on a Title I
basis, and make the remainder available competitively to
districts that have particularly severe needs and are willing
to provide the most support for infrastructure improvements
from non-Federal resources.
Under both the State and local programs, a critical
objective would be to spur additional construction paid for
with non-Federal dollars. For this reason, the bill would
prohibit recipients from using the Federal funds to supplant
State and local support for school construction. In addition,
each State or locality receiving assistance would have to
assure the Department that it will increase, over a four-year
period, the amount of school construction paid for with non-
Federal funds compared to the level expended during the
preceding four-year period. These provisions would ensure
that a one-time Federal stimulus has an impact far beyond the
immediate benefit attributable to the Federal expenditures.
Administration of the program would be kept simple. The
Department would make a single award to each State and
locality receiving direct assistance. We would allow the
recipients to invest the Federal funds in a prudent manner,
and use the returns from that investment to meet bond
payments and other costs. All of the mandatory appropriation
would become available in fiscal year 1998, and all the
payments would be made within a four-year period.
To summarize, our bill reflects the following principles:
(1) The Federal Government should make available a one-time
$5 billion mandatory appropriation to address the major
national problem of inadequate school infrastructure; (2) The
Federal funds will have their greatest impact if they are
used to leverage additional State, local, and private effort
rather than for direct support for the entire cost of
construction projects; (3) Because the largest cities have
the most school construction needs, and often the fewest
resources for meeting those needs, they should receive a
major share of the funding; and (4) States and localities
should have the flexibility to use the Federal subsidy to
carry out the construction projects they deem most important,
but they should do so only after completing a careful survey
of their construction needs. Further, both the States and the
Federal Government should direct the subsidy to the most
needy communities.
I urge the Congress to take prompt and favorable action on
this proposal. Its enactment would spur States and
communities nationwide to bring their school facilities up to
the standard our children need and deserve.
The Office of Management and Budget advises that there is
no objection to the submission of this proposal to the
Congress and that its adoption would be in accord with the
program of the President.
Yours sincerely,
Richard W. Riley.
____

Impact of Inadequate School Facilities on Student Learning

A number of studies have shown that many school systems,
particularly those in urban and high-poverty areas, are
plagued by decaying buildings that threaten the health,
safety, and learning opportunities of students. Good
facilities appear to be an important precondition for student
learning, provided that other conditions are present that

[[Page S2423]]

support a strong academic program in the school. A growing
body of research has linked student achievement and behavior
to the physical building conditions and overcrowding.

Physical Building conditions

Decaying environmental conditions such as peeling paint,
crumbling plaster, nonfunctioning toilets, poor lighting,
inadequate ventilation, and inoperative heating and cooling
systems can affect the learning as well as the health and the
morale of staff and students.

Impact on student achievement

A study of the District of Columbia school system found,
after controlling for other variables such as a student's
socioeconomic status, that students' standardized achievement
scores were lower in schools with poor building conditions.
Students in school buildings in poor condition had
achievement that was 6% below schools in fair condition and
11% below schools in excellent condition. (Edwards, 1991)
Cash (1993) examined the relationship between building
condition and student achievement in small, rural Virginia
high schools. Student scores on achievement tests, adjusted
for socioeconomic status, was found to be up to 5 percentile
points lower in buildings with lower quality ratings.
Achievement also appeared to be more directly related to
cosmetic factors than to structural ones. Poorer achievement
was associated with specific building condition factors such
as substandard science facilities, air conditioning, locker
conditions, classroom furniture, more graffiti, and noisy
external environments.
Similarly, Hines' (1996) study of large, urban high schools
in Virginia also found a relationship between building
condition and student achievement. Indeed, Hines found that
student achievement was as much as 11 percentile points lower
in substandard buildings as compared to above-standard
buildings.
A study of North Dakota high schools, a state selected in
part because of its relatively homogeneous, rural population,
also found a positive relationship between school condition
(as measured by principals' survey responses) and both
student achievement and student behavior. (Earthman, 1995)
McGuffey (1982) concluded that heating and air conditioning
systems appeared to be very important, along with special
instructional facilities (i.e., science laboratories or
equipment) and color and interior painting, in contributing
to student achievement. Proper building maintenance was also
found to be related to better attitudes and fewer
disciplinary problems in one cited study.
Research indicates that the quality of air inside public
school facilities may significantly affect students' ability
to concentrate. The evidence suggests that youth, especially
those under ten years of age, are more vulnerable than adults
to the types of contaminants (asbestos, radon, and
formaldehyde) found in some school facilities (Andrews and
Neuroth, 1988).

Impact on teaching

Lowe (1988) interviewed State Teachers of the Year to
determine which aspects of the physical environment affected
their teaching the most, and these teachers pointed to the
availability and quality of classroom equipment and
furnishings, as well as ambient features such as climate
control and acoustics as the most important environmental
factors. In particular, the teachers emphasized that the
ability to control classroom temperature is crucial to the
effective performance of both students and teachers.
A study of working conditions in urban schools concluded
that ``physical conditions have direct positive and negative
effects on teacher morale, sense of personal safety, feelings
of effectiveness in the classroom, and on the general
learning environment.'' Building renovations in one district
led teachers to feel ``a renewed sense of hope, of
commitment, a belief that the district cared about what went
on in that building.'' In dilapidated buildings in another
district, the atmosphere was punctuated more by despair and
frustration, with teachers reporting that leaking roofs,
burned out lights, and broken toilets were the typical
backdrop for teaching and learning.'' (Corcoran et al., 1988)
Corcoran et al. (1988) also found that ``where the problems
with working conditions are serious enough to impinge on the
work of teachers, they result in higher absenteeism, reduced
levels of effort, lower effectiveness in the classroom low
morale, and reduced job satisfaction. Where working
conditions are good, they result in enthusiasm, high morale,
cooperation, and acceptance of responsibility.''
A Carnegie Foundation (1988) report on urban schools
concluded that ``the tacit message of the physical
indignities in many urban schools is not lost on students. It
bespeaks neglect, and students' conduct seems simply an
extension of the physical environment that surrounds them.''
Similarly, Poplin and Weeres (1992) reported that, based on
an intensive study of teachers, administrators, and students
in four schools, ``the depressed physical environment of many
schools . . . is believed to reflect society's lack of
priority for these children and their education.''

Overcrowding

Overcrowded schools are a serious problem in many school
systems, particularly in the inner cities, where space for
new construction is at a premium and funding for such
construction is limited. As a result, students find
themselves trying to learn while jammed into spaces never
intended as classrooms, such as libraries, gymnasiums,
laboratories, lunchrooms, and even closets. Although research
on the relationship between overcrowding and student learning
has been limited, there is some evidence, particularly in
high-poverty schools, that overcrowding can have an adverse
impact on learning.
A study of overcrowded schools in New York City found that
students in such schools scored significantly lower on both
mathematics and reading exams than did similar students in
underutilized schools. In addition, when asked, students and
teachers in overcrowded schools agreed that overcrowding
negatively affected both classroom activities and
instructional techniques. (Rivera-Batiz and Marti, 1995)
Corcoran et al. (1988) found that overcrowding and heavy
teacher workloads created stressful working conditions for
teachers and led to higher teacher absenteeism.
Crowded classroom conditions not only make it difficult for
students to concentrate on their lessons, but inevitably
limit the amount of time teachers can spend on innovative
teaching methods such as cooperative learning and group work
or, indeed on teaching anything beyond the barest minimum of
required material. In addition, because teachers must
constantly struggle simply to maintain order in an
overcrowded classroom, the likelihood increases that they
will suffer from burnout earlier than might otherwise be the
case.
____

Case Studies

broward county/ft. lauderdale

The problem

Broward County is located in Southern Florida and is the
fifth largest school district in the nation. Its schools
suffer from severe overcrowding: 34,000 students without
permanent desks; approximately 10,000 new students added to
the school system each year; and in the past nine years,
Broward has built 36 new schools and rebuilt 23 schools, and
continues to have a difficult time meeting its demand.
Broward would have to build a new school every month to
meet this demand adequately. Citing the approximately 2,000
portable classrooms in the county, the budget director for
the county public schools described Broward as ``the portable
capital of the world.'' One high school has 46 portable
classrooms in use during this school year alone.

Needs and available resources

A recent needs analysis estimated Broward's capital
construction needs at $2.4 billion, $200 million of which is
needed for technology improvements alone. The last bond
approved for school construction was for $317 million in
1987. Mobilizing local support for new tax or bond referenda
has been difficult. In fact, in September, 1995, a tax
referendum to increase the sales tax by one penny to raise $1
billion for school construction was defeated.

Potential impact of the Partnership to Rebuild America's Schools Act

Under the President's legislative proposal, approximately
$16.4 million would be allocated to the county school
district. Broward could use these funds to subsidize interest
costs for a local bond to cover a substantial part of its
school construction costs. This funding could support nearly
$70 million in leveraged funds to assist in rebuilding a
number of local schools.
These new funds would be used primarily to ease
overcrowding in schools by funding new schools as well as
renovations and additions to existing schools that would
expand seating capacity. Broward also wants to reduce its
reliance on portable classrooms due to the fact that--with a
life expectancy of approximately 20 years--portables are not
a good long-term investment compared to a traditional school
structure. In addition, portables cannot be wired for
technology the same way as a traditional classroom.

LOS ANGELES UNIFIED SCHOOL DISTRICT

I. The problem/current needs

The Los Angeles Unified School District is one of the
largest institutions of any kind in the nation with an
enrollment of 670,000 students. The prevalence of aging
school facilities in Los Angeles poses a number of expensive
problems for the district, which estimates its current
deferred maintenance costs at more than $600 million. A
majority of Los Angeles school buildings are more than 40
years old. As a result, most schools are not wired for
technology, and most are not equipped with modern security
systems, telecommunications systems, or air conditioning.
Many facilities face similar repair needs--roof replacement
is needed for 245 schools, repainting at more than 600
schools, boiler replacement at more than 50 schools, and
playground re-pavement at almost 400 schools.
A rebounding economy and an influx of immigrants is driving
steady growth in the Los Angeles schools. The number of
students grew by 18,000 this year, and school officials
predict enrollment will grow another 15,000 next year.
A State of California mandate to lower class size in the
earliest grades consumed the limited number of vacant
classrooms that existed. The need for more classrooms is
illustrated by the fact that the district transports about
12,000 students a day to more distant schools because of
overcrowding in their area school.

[[Page S2424]]

II. Needs versus available resources

The State of California school construction program uses
two mechanisms to provide funds to local districts for new
construction and modernization. In the more common approach,
the state pays one-half of the ``allowable'' costs as defined
by the state. Otherwise, the state pays the full bill, but in
a very limited number of projects. Additionally, the state
offers a small deferred maintenance program in which it
provides matching funds of up to one-half of 1 percent of the
district's general funds. In recent years, the Los Angeles
district has been eligible for about $17 million through this
program, but the state has not fully funded it in recent
budgets.
District officials in Los Angeles report that a significant
impediment to raising funds for construction is the
requirement imposed by the state Constitution, which requires
a two-third majority vote for the passage of school bonds
financed by property tax increases. The last time the Los
Angeles Unified School District passed a bond measure was
1971. (This vote came shortly after the Sylmar earthquake
closed many schools and raised serious safety questions about
others. The measure received 66.5 percent of the vote, but
under state law, this bond required only a majority vote
because it pertained to buildings deemed structurally
unsafe.)

III. The impact of the President's initiative

A $2.4 billion school bond measure on the ballot in
November 1996 for school construction and modernization
received 65.5 percent of the vote, just missing the two-
thirds majority needed for passage. In December 1996, the
board of Education voted to put another $2.4 billion bond
measure on the ballot in April 1997. The President's
initiative could accelerate the development of the long
overdue projects that would be financed by this bond.

THE STATE OF MAINE

1. The problem/current needs

Maine is struggling to cope with two major factors related
to school facilities--booming economy driving explosive
growth in the southern part of the state, and the continued
use of one-room schools and other antiquated buildings--some
dating 100 years--throughout the state.
The Bowdoin Community School offers an instructive example.
The dozen portable classrooms now in use exceed the number of
permanent classrooms inside the main structure. A proposed
expansion of the school has been shelved since 1987 because
of insufficient state funding to support the project.

II. Needs versus available resources

Support from the state of Maine for local school
construction projects is restricted to debt service
subsidies, and the level of available support is extremely
limited. In fiscal 1998, school districts requested such
subsidies for 83 projects. However, the $65.8 million
authorized by the state is expected to be consumed by the
four projects given the highest priority.
Schools districts in Maine are generally successful in
getting voter approval for bond measures, but most districts
in the state cannot cover the total cost of the bond. The
lack of support from the state for debt service is cited as
the leading reason why school districts fall short in raising
financing, leading to the deferment of these sorely needed
projects.

III. The potential impact of the Presidential Initiative

The executive director of the Maine Municipal Bond Bank
noted that the President's school construction initiative
could help Maine schools in two ways. The state could choose
to use its allocation all at once to supplement its debt
service subsidy program, or it could use that money to
establish a revolving loan fund that would commit its
revenues to debt service subsidies.

the state of maryland

I. The problem/current needs

There are two primary problems facing Maryland school
facilities: aging structures and rising enrollments.
A review of the list of Capital Improvement requests to the
state for the coming year reveals the extent of aging school
facilities. Requests are filled with descriptions of items in
need of repair or replacement, such as roofs as much as 44
years old, HVAC systems that are 25 years old or more,
boilers and chillers that date to the 1950s, and windows and
doors in use since the 1960s.
Over the last decade, enrollment in Maryland schools has
grown by approximately 150,000 students. State officials
expect enrollment to continue climbing by another 30,000 or
so annually over the next five to ten years. Overall, local
districts requested approximately $310 million for 459
construction and renovation projects for FY 1998. While a
district might request more than one project for a school,
these figures suggest that districts are seeking assistance
with construction and renovation projects that could affect a
third of the state's 1,280 schools.

II. Needs versus available resources

The Maryland State Public School Construction Program is
designed to help local districts with costs related to
planning and funding of school construction and renovation
projects.
Early in the program, the state covered 100 percent of
eligible costs for approved projects. However, since the mid-
1980s, the state use a sliding scale based on need to
determine how much assistance a district receives.
Since the program's inception,the amount of funds requested
each year by local districts has exceeded program
allocations. For example, in FY 73, the program funded 72
percent of district requests--the highest proportion in the
program's history. In FY 89, the state supported an all-time
low of 24 percent of requests. In the current fiscal year,
the state funded 51 percent of requests, totaling $274
million.

III. The potential impact of the Presidential initiative

State officials see three possibilities for the use of
federal funds from the proposed School Construction
Initiative.
First, the funds could subsidize additional state general
obligation bonds. Therefore, the amount of assistance going
to local districts with eligible costs would increase, and
more projects would be funded. The federal funds could be
targeted at poorer districts with larger projects that have
been delayed due to fiscal constraints. It should be noted
that an increase in the state funds for the Public School
Construction Program might lead more districts to seek state
assistance for additional projects. At this time, there are
projects for which local districts do not submit requests
because the district senses these projects will be deferred
due to state fiscal constraints.
A second option would allow the state to use a portion of
the funds to subsidize a combination of additional state
bonds and country general obligation bonds. Finally, the
state could use all the federal funds to subsidize additional
county general obligation bonds.

new york city school district

I. The problem/current needs

New York is experiencing enrollment growth of 20,000 to
23,000 students a year. In addition, more than half of the
over 1,000 school buildings are 50 years old or more. The
district must upgrade these facilities and accommodate its
burgeoning student population.
There are limits to the amount of money the district can
raise through general obligation bonds, and this mechanism is
not sufficient to meet the district's needs. There is a state
constitutional limit on the amount of debt the district can
issue (as a percentage of total assessed property value), and
the district is running up against this limit.
The fiscal year 1997 capital expenditures budget for the
Board of Education is just over $1 billion, out of a total
city capital budget of just over $4 billion. A proposed 10-
year capital plan has just been put forth for $12.6 billion,
which includes an amount contingent on receipt of federal
funds. One of the main emphasis of this plan is to address
the district's overcrowding, using strategies such as new
construction, other ways of handling seating capacity, and
converting some schools to a year-round schedule, which could
increase seating capacity by 25 to 33 percent.

II. The potential impact of the Presidential initiative

New York expects that it could leverage federal funds to
address several needs. Among the most dire needs is for
additional seats for children. The districts proposed 10-year
plan was increased by about $700 million to address seating
capacity needs. The district envisions six different avenues
for the use of this money to increase seating capacity:
Leasing new facilities, transportables, modular construction,
rehabilitation of existing facilities to increase size, new
construction, and converting schools to a year-round schedule
(which necessitates putting in air-conditioning.)

Philadelphia School District

The problem/current needs

The Philadelphia story has two strands. First, the district
estimates that it will need about two-thirds of a billion
dollars to bring its 257 existing building sites up to
standard. This includes major renovations, repairs,
improvements, and technology needs (schools need to be wired
for computers, but 60 of Philadelphia's schools are over 70
years old.)
Second, to accommodate expected population growth,
approximately one-quarter of a billion dollars in additional
funding may be necessary. In the past five years, the public
school population has grown 9.2 percent, and in the past
seven years it has grown 12.6 percent. The district expects
this growth to continue by 1.4 percent the next year and by
2.5 percent the following year. In one area, the district
deals with overcrowding through a combination of classrooms
under stairwells, walling off the ends of hallways to create
classrooms, and portables.

II. Needs versus available resources.

The district knows that its capital needs in the next 5 to
10 years seriously exceed its current budgeted capital
capacity. A Long Range Facilities Plan is being developed,
and it is expected that the total need will ultimately be
between $1-$1.4 billion.

III. The potential impact of the Presidential Initiative

The district says that federal funds could be extremely
helpful by supporting preventive maintenance projects. With
shrinking operation budgets, it is preventive maintenance
that gets cut from the budget. These projects include minor
roof and gutter repair, HVAC system cleaning, and yearly
boiler maintenance. These activities get pushed aside for
emergency projects and educational needs. Yet today's
preventive maintenance

[[Page S2425]]

project is tomorrow's capital project. Roofs, boilers, and
heating systems wear out years before their time because
preventive maintenance funds are scarce. The failure of these
systems also causes additional capital damage, such as water
and pipe damage. Much of this could be avoided and long-term
capital budget could be brought down with additional
resources for preventive maintenance.

Santa Ana Unified School District

I. The problem/current needs

Santa Ana is an extremely densely populated area. In its 24
square miles, there are 350,000 resident, and 52,000
students. There is a school approximately every two blocks.
The primary problem in the district is school overcrowding,
the result of a lack of construction funding during a period
of raid enrollment growth. The district has grown from 31
thousand student in 1980 to 52,000 students in 1996.
The school district has converted 22 of 31 elementary
schools and four of seven intermediate schools to multi-
track, year-round schedules. Although other school districts
in California and around the country use year-round
schooling, it is unusual to have such a high percentage of
schools on this tract. The district has 534 portable
classrooms on existing sites, which is the equivalent of 24
free standing elementary schools. Santa Ana estimates that it
now spends $1 million to lease portable classrooms.
A secondary, but also severe problem is maintaining ill-
equipped and deteriorating facilities. The district prepared
a state-mandated five-year plan to deferred maintenance
needs, which is updated annually--the currently version
projects a $15 million need.

II. Needs versus available resources

Santa Ana Unified has a need for three elementary schools
plus a new high school. Enrollment growth has averaged over
1300 students annually since 1980. The need is accentuated by
the fact that the State School Building Program is, ``broke''
and it is not clear when there will be another bond measure.

III. The potential impact of the President's initiative

President Clinton's initiative would potentially provide
major benefits to the Santa Ana Community. The district needs
adequate classrooms equipped with up-to-date education
technology will be available to educate the rapidly growing
student population. If the district received an estimated six
million dollars from the federal government, it could
leverage those funds to pay for additional elementary
schools.

Ms. MOSELEY-BRAUN. I would also like to call to my colleagues'
attention the reports and the work done by the General Accounting
Office recently, both with regard to the condition of America's
schools, State efforts to address the issue of crumbling schools, and
the most recent GAO report on school finance generally. These reports
speak to the ability or the efforts taken by State and local
governments to address the disparities between wealthy and poor and
middle-class school districts.
The fact of the matter is that this disparity, this gap in school
funding, does not serve our national interest, does not serve the
interest of taxpayers, and does not serve the interest of our children.
I believe we have an obligation to put aside the old debates of
whether or not school funding should happen here or happen there, and
we should look at developing a partnership in which everybody plays a
part, in which all levels of government collaborate, in which
communities, parents, property taxpayers, and income taxpayers
cooperate to prepare our people for the 21st century and the challenges
they face.
Mr. KENNEDY. Mr. President, I give my strong support to President
Clinton's Partnership to Rebuild America's Schools Act of 1997,
introduced today by Senator Moseley-Braun.
The Nation's schools are facing enormous problems of physical decay.
Fourteen million children in one-third of the schools are learning in
substandard school buildings. Half the schools have at least one
unsatisfactory environmental condition.
Massachusetts is no exception. Forty-one percent of Massachusetts
schools report that at least one building needs extensive repair or
should be replaced; 75 percent report serious problems in buildings,
such as plumbing or heating defects; 80 percent have at least one
unsatisfactory environmental factor.
It is difficult to teach or learn in dilapidated classrooms. Student
enrollments are at an alltime high and are continuing to rise. We
cannot tolerate a situation in which facilities deteriorate while
enrollments escalate.
GAO estimates that schools need $112 billion just to repair their
facilities. Obviously, the Federal Government cannot meet all of these
needs. The Partnership to Rebuild America's Schools Act encourages
State, local, and private support by providing interest subsidies for
school construction bonds. The Federal Government will pay up to 50
percent of interest on bonds used to finance school repair, renovation,
modernization, and construction.
Half of the $5 billion in Federal funds earmarked for this program
over the next four years will be allocated to States using the existing
title I formula. States and localities will distribute these funds to
communities with the greatest construction needs and the least ability
to meet their needs with their own resources. Massachusetts would
receive $48 million for grants to local communities.
The remaining Federal funds will be distributed by the U.S.
Department of Education among the 100 school districts that enroll the
greatest number of students living in poverty. Thirty percent of this
funding will be allocated competitively to school districts that have
particularly severe needs and obtain the most support for their
construction projects from non-Federal sources. Under this part of the
bill, Massachusetts would receive an estimated $25 million.
I hope that the Partnership To Rebuild America's Schools Act will
receive the bipartisan support it deserves, so that it can be in place
for the beginning of the next academic year. Investing in education is
investing in a stronger America here at home and around the world. I
look forward to working with my colleagues on both sides of the aisle
to enact this important measure.
______

By Mr. CAMPBELL:
S. 457. A bill to amend section 490 of the Foreign Assistance Act of
1961 to provide alternative certification procedures for assistance for
major drug producing countries and major drug transit countries; to the
Committee on Foreign Relations.

THE MEXICO PROBATIONARY CERTIFICATION ACT

Mr. CAMPBELL. Mr. President, this month Congress has been considering
the important issue of whether to uphold or overturn the President's
certification of Mexico as fully cooperating with the United States to
fight drug trafficking. I am concerned that without congressional
action, the Senate must choose between two less than ideal options:
First, to support the President's certification of Mexico and continue
business as usual, thereby downplaying serious deficiencies in Mexico's
efforts; or second, to decertify Mexico, with or without a waiver,
which might destabilize an important country along our southern border.
Under current law, notice provided to the target country is often too
late and not specific enough to fix the problems. Moreover, access to
more timely and specific information would assist Congress in
exercising its legislative and oversight responsibilities.
Therefore, today I propose a bill to provide an alternative approach.
This legislation would provide the administration a new option to
certify countries such as Mexico on probationary status for 7 months,
which extends from March 1 through September 30, the end of the fiscal
year. However, during this time period, the country on probationary
certification is expected to comply with certain conditions stipulated
by the President. If these conditions are not met at the end of this 7-
month period, the United States will act firmly, such as by cutting off
aid.
This alternative would put countries on notice that the United States
has serious concerns about their lack of cooperation. But, it would
provide a fair period of time during which those countries could
address U.S. concerns.
This constructive notice period would be less disruptive to our
bilateral relations. We saw last week some of the damage which could
occur in our relationship with Mexico after the House voted to
decertify Mexico within 90 days if certain criteria are not met. News
reports quoted Mexico's President, Ernesto Zedillo, as stating: ``This
is where we draw the line. Our sovereignty and dignity as a nation are
not negotiable.''
My bill also provides better notice to Congress. Under this
alternative, Congress would be informed about those specific concerns
which the President identified regarding a country's lack of
cooperation. Congress also would be

[[Page S2426]]

able to track that country's progress during the 7-month probationary
period and, of course, maintain its prerogative to pass legislation as
it deems necessary. I believe this would help avoid the contentious
battle in which the Congress and the administration currently are
engaged this month over Mexico.
It is no surprise that many Senators feel strongly about decertifying
Mexico. Reports indicate that as much as 70 percent of the cocaine
entering the United States comes through Mexico; up to 30 percent of
the heroin used in the United States comes through Mexico; and 80
percent of imported marijuana comes through Mexico.

Recent developments in that country have exacerbated what is already
a serious flow of illegal drugs into the United States. For example,
according to a news report in the March 2 San Diego Union Tribune,
Mexican authorities are now preventing our DEA agents and law
enforcement officers from carrying their weapons into Mexico. In
response, the DEA reportedly pulled its agents out of cross-training
and intelligence-gathering projects in Mexico along the border. Agents
and officers now fear they will become targets for gangs and drug
traffickers, especially if Mexico's certification is revoked. This is
intolerable.
Further motivating the push to decertify Mexico is the recent arrest
of Mexico's drug czar, Gen. Jesus Gutierrez Rebollo, on allegations he
was being paid to protect one of Mexico's top drug lords. The general
is reported to have extensive drug ties, dating back to at least 1993,
at the same time he was supposed to be fighting drug use and trade in
his country.
Any information that the general may have possessed has been
compromised. Nor is he alone in being corrupt. According to a Los
Angeles Times report on March 3, court documents from two drug gang
assassins indicate that approximately 90 percent of the law enforcement
officers in Tijuana and the State of Baja California in Mexico are
corrupt.
These developments raise serious concerns among DEA agents, who
cannot adequately do their job if they do not receive the help of their
Mexican counterparts. During his testimony before the House
Subcommittee on National Security on February 27, 1997, Thomas
Constantine, the Administrator of the DEA, called fighting drug
trafficking without assistance from other countries nearly impossible.
In light of these disturbing developments, I wrote to the President
last Friday expressing my concern with his certification of Mexico. I
also urged the administration to take all necessary steps to ensure
Mexico does its fair share in controlling the flow of illicit drugs
across its border into the United States.
Decertifying Mexico will not make this process any easier. Yet, we
cannot risk the implication that we condone Mexico's failed drug policy
by fully certifying Mexico without certain conditions. Certification of
Mexico in light of the compelling facts of that country's involvement
in drug trafficking also makes a mockery of the certification
provisions of the Foreign Assistance Act.
In light of these facts, I am concerned that the President has
certified Mexico as fully cooperating with the United States. However,
I am also concerned that decertifying Mexico could destabilize a
country important to us and cause a potential crisis on our southern
border. Unfortunately, that is the choice the administration has under
existing law.
Therefore, the bill I introduce today would amend the existing law to
avoid this type of problem in the future. The current certification
process is set forth in section 490 of the Foreign Assistance Act of
1961. It requires the President to submit to Congress by March 1 of
each year a list of major illicit drug producing and transiting
countries which he certifies are fully cooperating with the United
States. This bill offers a good middleground--I urge support.
Under existing law, the President has three options: One, certify a
country which has cooperated fully with U.S. anti-drug efforts or has
taken adequate steps on its own to comply with the 1988 U.N. anti- drug
trafficking convention. Two, decertify a country for not fully
cooperating. Or three, decertify a country but provide a waiver because
it is in the national interests of the United States to continue to
provide aid.

Under this law, when a country is decertified, at least 50 percent of
U.S. bilateral foreign aid is suspended in the current fiscal year. In
fact, that county may lose more than 50 percent of its current funding
if the State Department has not yet released the aid. Unless the
country is recertified, all U.S. aid is suspended in subsequent fiscal
years. And, the United States is required to vote against loans in the
multilateral development banks, such as the World Bank and the Inter-
American Development Bank.
Congress has 30 days from receipt of the President's certification to
enact a joint resolution disapproving the President's action. If
Congress passes such a resolution, the President can veto it and
require a two-thirds majority vote in Congress to override the veto.
Congress also has its prerogative to pass a resolution with other
timeframes, which would be subject to a Presidential veto. We saw this
last week when the House passed a resolution to decertify Mexico within
90 days if certain criteria are not met.
On February 28, 1997, the President submitted his annual list to
Congress. This report indicated that 23 countries, including Mexico,
are certified as fully cooperating; three countries were determined not
to be fully cooperating, but were deemed in the national interest--
Belize, Lebanon, and Pakistan--and six countries were decertified
(Afghanistan, Burma, Colombia, Iran, Nigeria, and Syria.
The impact of this process on Mexico could be dramatic. If Congress
were to pass a resolution of disapproval within the 30-day review
period and the President does not exercise his waiver authority, the
impact would include: Suspension of at least 50 percent of United
States assistance for the current fiscal year; total suspension of aid
in the next fiscal year, unless Mexico were recertified; and the United
State would vote against loans to Mexico in the multilateral
development banks. Mexico receives $17 million in bilateral aid from
the United States and, according to the Export-Import Bank, 56
applications from Mexico could be affected which total $3.24 billion.
The alternative that I am proposing today provides a middle ground
because it revisits the certification issue more often during the
course of the year. The President also is given more flexibility in
labelling countries more accurately.
I'm also concerned that under existing law, we are giving a free ride
to countries which are decertified but then are granted a waiver and
continue to receive aid because it is deemed in the national interest
of the United States. These waivers, in essence, allow the provision of
aid year after year to countries not fully cooperating with the United
States. What incentive do these countries have to improve their
cooperation?
My legislation builds on the existing carrot and stick approach in
the certification process. This type of approach has been successful
with other problems in the past, and I think it would go a long way to
avoid similar controversies in the future like the one we have seen
surrounding the Mexico certification this month.
Under my bill, the carrot is certification, although for a finite
period of time of 7 months. During this probationary period, all U.S.
aid continues to flow and the United States remains supportive in
international development banks. The President also stipulates which
specific conditions must be met by that country to improve its
cooperation with the United States and to continue receiving U.S. aid.
Not only is sufficient notice provided to the country, but to the
Congress as well.
The stick is a penalty similar to that under existing law. If after 7
months the country does not comply with the stipulations made by the
President to improve its cooperation with the United States, 100
percent of U.S. bilateral aid is cut off. The United States also would
vote against aid in the multilateral development banks if the country
does not comply with U.S. stipulations, as provided for under current
law. These penalties would remain in effect until the President
notifies Congress that the country has complied with the stipulations
made in the President's original probationary certification.

[[Page S2427]]

In my opinion, this alternative approach would force fuller
compliance by countries and, in future cases similar to Mexico, help
avoid a potential crisis in those countries.
We need to send a very strong message to our neighbors in Mexico and
similarly situated countries when we do not believe that they are fully
cooperating with United States efforts to combat drug trafficking. But,
to risk a crisis along our own border is asking for greater trouble.
I believe that a compromise solution, as outlined in my proposal, is
the most reasonable way to address similar circumstances in the future,
and I urge my colleagues to support this bill.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 457

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

SECTION 1. ALTERNATIVE CERTIFICATION PROCEDURES FOR
ASSISTANCE FOR MAJOR DRUG PRODUCING AND DRUG
TRANSIT COUNTRIES.

(a) In General.--Section 490 of the Foreign Assistance Act
of 1990 (22 U.S.C. 2291j) is amended by adding at the end the
following:
``(i) Alternative Certification Procedures.--
``(1) In general.--In lieu of submitting a certification
with respect to a country under subsection (b), the President
may submit the certification described in paragraph (2). The
President shall submit the certification under such paragraph
at the time of the submission of the report required by
section 489(a).
``(2) Certification.--A certification with respect to a
country under this paragraph is a certification specifying--
``(A) that the withholding of assistance from the country
under subsection (a)(1) and the opposition to assistance to
the country under subsection (a)(2) in the fiscal year
concerned is not in the national interests of the United
States; and
``(B) the conditions which must be met in order to
terminate the applicability of paragraph (4) to the country.
``(3) Effect of certification in fiscal year of
certification.--If the President submits a certification with
respect to a country under paragraph (1) for a fiscal year--
``(A) the assistance otherwise withheld from the country
pursuant to subsection (a)(1) may be obligated and expended
in that fiscal year; and
``(B) the requirement of subsection (a)(2) to vote against
multilateral development bank assistance to the country shall
not apply to the country in that fiscal year.
``(4) Effect of certification in later fiscal years.--
``(A) In general.--Subparagraph (B) shall apply to a
country covered by a certification submitted under this
subsection during the period beginning on October 1 of the
year in which the President submits the certification and
ending on the date on which the President notifies Congress
that the conditions specified with respect to the country
under paragraph (2)(B) have been met.
``(B) Prohibition on Assistance.--
``(i) Bilateral assistance.--During the applicability of
this subparagraph to a country, no United States assistance
allocated for the country in the report required by section
653 may be obligated or expended for the country.
``(ii) Multilateral assistance.--During the applicability
of this subparagraph to a country, the Secretary of the
Treasury shall instruct the United States Executive Director
of each multilateral development bank to vote against any
loan or other utilization of the funds of such institution to
or by the country.
``(5) Definition.--For purposes of this subsection, the
term `multilateral development bank' shall have the meaning
given the term in subsection (a)(2).''.
(b) Conforming Amendments.--Subsection (a) of such section
is amended by striking ``subsection (b)'' each place it
appears and inserting ``subsections (b) and (i)''.
______

By Mr. FAIRCLOTH (for himself, Mr. Kyl, Mr. Warner, Mr. Lugar,
Mr. Shelby, Mr. Inhofe, Mr. Bennett, Mr. Craig, Mr. Enzi and
Mr. Hagel):
S. 458. A bill to provide for State housing occupancy standards, and
for other purposes; to the Committee on Banking, Housing, and Urban
Affairs.

THE HOUSING PROTECTION ACT

Mr. FAIRCLOTH. Mr. President, I am pleased to introduce today a bill
to protect housing. This bill will ensure that all residents have a
peaceful, well-maintained, and managed community with the services they
deserve.
The Housing Protection Act prohibits the Department of Housing and
Urban Development [HUD] from establishing a national occupancy standard
and transfers the authority to set those standards to the States. In
the absence of a State standard, a two-person-per-bedroom standard
would be presumed reasonable.
In 1995, Senator Kyl and I introduced this same piece of legislation,
after HUD's General Counsel Nelson Diaz issued a memorandum which, in
effect, attempted to supplant the reasonable two-person-per-bedroom
standard with conditions which could have forced housing owners to
accept six, seven, even eight people in a two-bedroom apartment. The
House of Representatives passed it as part of its public housing reform
bill, but the bill failed to pass out of conference last year.
Too often apartments are crowded with excessive numbers of people.
When this happens, apartment complexes experience excessive noise,
lower levels of safety and most often deterioration of the units.
Building codes are in place for a reason. They are designed to
determine the maximum amount of people who may safely exit a building
during a fire or other emergency. Occupancy standards, on-the-other-
hand, determine how many residents can be accommodated and for whom
they can properly provide services on the premises.
The purpose of occupancy standards is to provide decent, safe,
comfortable housing and a peaceful living environment for all
residents. They also help maintain properties in excellent condition.
While housing providers set their own occupancy standards, such private
standards are in effect limited by state-set laws or policies which
establish the minimum occupancy levels at which housing providers
achieve safe harbor from charges of familial discrimination.
This bill is widely supported by housing industry associations such
as the National Association of Homebuilders and the National Apartment
Association, among others. Many of our colleagues have joined us in
support of this bill, and I urge others to consider cosponsoring it.
Mr. KYL. Mr. President, I am pleased to introduce the State Housing
Protection Act. I thank Senator Faircloth for his leadership on this
issue and joining in sponsoring this bill. This bill prohibits the
Department of Housing and Urban Development [HUD] from enforcing a
complaint of discrimination on the basis of a housing provider's
occupancy standard, and thereby, transfers from HUD to the States the
authority to set occupancy standards.
Mr. President, in July 1995, HUD General Counsel Diaz issued a
memorandum which, in effect, tried to supplant the traditional two-per-
bedroom occupancy standard, and could have forced housing owners to
accept six, seven, eight, or even nine people in a two-bedroom
apartment. HUD should not be establishing national occupancy standards.
In 1995, Senator Faircloth and I blocked HUD from imposing national
occupancy standards until it completed an official rule. Soon
thereafter, along with Representative McCollum, we introduced our bill
to permanently transfer authority back to the States. The House passed
it as part of its public housing reform bill, but it died in the
conference committee late last year.
By pursuing a policy that encourages overcrowding, thereby
depreciating housing stock that is scarce to begin with, HUD is poorly
serving lower income families and defeating its own charter. Our bill
will help correct the problem. It is supported by the Council for
Affordable and Rural Housing, the Council of Larger Public Housing
Authorities, the Multi Housing Institute, the National Apartment
Association, the National Assisted Housing Management Association, the
National Association of Home Builders, the National Association of
Housing and Redevelopment Officials, the National Leased Housing
Association, the National Multi Housing Council, and the Public Housing
Authorities Directors Association.
Several States have an occupancy standard; the one in my own home
State of Arizona has worked well. The intrusion of a Federal
bureaucracy often does more harm than good. That is why Senator
Faircloth and I have reintroduced this bill. I urge my colleagues to
join us and cosponsor it.
______

[[Page S2428]]

By Mr. CAMPBELL (for himself, Mr. McCain, Mr. Domenici, Mr.
Murkowski, and Mr. Inouye):
S. 459. A bill to amend the Native American Programs Act of 1974 to
extend certain authorizations, and for other purposes; to the Committee
on Indian Affairs.

THE NATIVE AMERICAN PROGRAMS ACT OF 1974 REAUTHORIZATION ACT OF 1997

Mr. CAMPBELL. Mr. President, I am pleased to introduce a bill to
extend the authorization for certain programs under the Native American
Programs Act of 1974. This bill is critical to continue the
availability of a modest amount of grant funds used by native
communities nationwide to foster economic growth, develop tools for
good governance methods, and promote social welfare.
The authorization for most of these programs has expired and though
the administration has requested funding for fiscal year 1998 at fiscal
year 1997 levels, it has not introduced legislation to reauthorize the
act. The legislation I am introducing today would do just that.
These programs are administered through the Administration for Native
Americans [ANA] located within the Department of Health and Human
Services. By awarding annual grants on a competitive basis, the Native
American Programs Act promotes self-sufficiency and self-determination
by encouraging tribes, villages, and other native communities to
develop and plan local strategies in economic and social development.
The program is designed to build greater capacity at the tribal level
for better governance, more vibrant and diversified economies, and
social development.
The ANA Program has proven successful for native communities since
its inception and has generated widespread support by America's native
communities. The centerpiece of the program are grants made under the
Social and Economic Development Strategies (SEDS) Program; grants to
tribes enhance tribal environmental regulatory capabilities; and grants
made to preserve and rehabilitate native languages.
This legislation will simply extend for 4 years until fiscal year
2000 the authorization for these modestly funded yet very successful
programs to strengthen and rebuild tribal communities around the United
States.
I urge my colleagues to join with me in enacting this reauthorization
so that these proven tools for development can again be made available
to native peoples around the Nation. I ask unanimous consent that a
section-by-section summary and the bill language be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

BILL LANGUAGE

SECTION 1. AUTHORIZATION OF CERTAIN APPROPRIATIONS UNDER THE
NATIVE AMERICAN PROGRAMS ACT OF 1974.

Section 816.--Section 816 of the Native American Programs
Act of 1974 (42 U.S.C. 2992d) is amended--

(1) in subsection (a), by striking ``for fiscal years 1992,
1993, 1994, and 1995.'' and inserting ``for each of fiscal
years 1997, 1998, 1999, and 2000'';
(2) in subsection (c), by striking ``for each of the fiscal
years 1992, 1993, 1994, 1995, and 1996,'' and inserting ``for
each of fiscal years 1997, 1998, 1999, and 2000,''; and
(3) in subsection (e), by striking ``$2,000,000 for fiscal
year 1993 and such sums as may be necessary for fiscal years
1994, 1995, 1996, and 1997.'' and inserting ``such sums as
may be necessary for fiscal years 1997, 1998, 1999, and
2000.''
____

Section-by-Section Analysis

The purpose of this bill is to amend the 1974 Native
American Programs Act, P.L. 93-644 (42 U.S.C. 2991 et seq.)
to extend to fiscal year 2000 the authorization of
appropriations for three grant programs administered by the
Administration for Native Americans (ANA) in the Department
of Health and Human Services (HHS).
Section 1. Authorization of Certain Appropriations Under
the Native American Programs Act of 1974.
Section 816.--

(a) this subsection provides for a four year extension to
fiscal year 2000 of the present authority to appropriate such
sums as may be necessary to carry out the general grant
provisions of the Native American Programs Act of 1974 (42
U.S.C. 2992d). The bill would continue the current ``such
sums as may be necessary'' language contained in current law.
(c) this subsection provides for a four year extension to
fiscal year 2000 of the present authority to appropriate
funds for the purpose of carrying out the provisions related
to grants for tribal regulation of environmental quality (42
U.S.C. Sec. 2991b(d). The bill would continue the current
authorized level of $8 million for such grants.
(e) this subsection provides for a four year extension to
fiscal year 2000 of the present authority to appropriate such
sums as may be necessary for the purpose of carrying out the
provisions related to grants for the preservation of Native
languages (42 U.S.C. Sec. 2991b-3). The bill would strike the
current authorized appropriaitons level of $2 million for
Native language grants and instead would substitute ``such
sums as may be necessary''.
Mr. DOMENICI. Mr. President, I am pleased to join my colleagues
Senators Campbell, McCain, and Murkowski in sponsoring this act to
extend the authorization of several important programs for American
Indians. The U.S. Department of Health and Human Services [HHS]
administers these programs through the Administration for Native
Americans [ANA]. Over the past 5 years, funding has ranged from $34.5
million to $38.6 million. In fiscal year 1997, the funding was $34.9
million.
Our bill will reauthorize important programs to promote economic
development, strengthen tribal governments, and provide for the better
coordination of social programs available to tribes. The ANA funding
policy is to assist Indian Tribes and Native American organizations to
plan and implement their own long-term strategies for social and
economic development. The aim is to increase local productivity and
reduce dependence on government social services.
Competitive grants are the means for distributing these vital funds.
In New Mexico, the Pueblos of Laguna ($382,000), Picuris ($167,000),
Pojoaque ($120,000), Sandia ($133,890), Tesuque ($125,000), San Juan
($232,000), Santa Ana ($112,000), and Santo Domingo ($110,464) all
received grants from fiscal year 1996 funds. New Mexico Tribes and
Pueblos have participated in ANA grant activity for about three
decades.
The Social and Economic Development Strategies [SEDS] program fosters
the development of stable, diversified local economies. SEDS grant
funds are used to develop the physical, commercial, industrial and/or
agricultural components necessary for a functioning local economy.
Social infrastructure includes the maintenance of a tribe's cultural
integrity. Pojoaque Pueblo's Cultural Center is the beneficiary of an
ANA grant.
Other ANA grants are used to establish or expand business activity or
to stabilize and diversify a tribe's economic base. Micro enterprises
and other private sector development are encouraged.
Mr. President, I thank Chairman Campbell of the Senate Committee on
Indian Affairs for his good work to extend the authorization for these
valuable resources to improve tribal opportunities for self-
sufficiency. I urge my colleagues to support the reauthorization of
these Administration for Native Americans Programs.
Mr. INOUYE. Mr. President, I rise today to cosponsor a measure to
reauthorize the Native American Programs Act of 1974. The purpose of
this bill is to amend the Native American Programs Act to extend the
authorization of appropriations for programs administered by the
administration for Native Americans within the Department of Health and
Human Services to fiscal year 2000.
In 1974, the Native American Programs Act was enacted by the Congress
to assist tribes and other Native American entities with developing
social, economic, and governance strategies in order to become viable
and economically self-sufficient communities.
In the decades since its enactment, hundreds of tribes, reservation
communities, and native organizations have benefited from the programs
funded under this act. In fiscal year 1994 alone, the administration
for Native Americans provided 215 grants for governance, social, and
economic development projects, several dozen grants to assist with
tribal recognition efforts, 26 grants for projects to assist tribes in
their capacity to meet environmental requirements, 18 grants to support
projects assisting the survival and preservation of Native American
languages, and funds to support the Native Hawaiian revolving loan
fund.

[[Page S2429]]

These projects have served to improve the quality of living for
thousands of Native American families and communities.
Over 2 years ago, on March 7, 1995, Senators McCain, Campbell and I
introduced S. 510, a bill which reauthorized programs under the Native
American Programs Act. On May 11, 1996 this body passed S. 510, as
amended in committee, by unanimous consent, but the bill was
subsequently not acted upon by the House prior to the adjournment of
the 104th Congress.
The bill being introduced today is substantially similar to S. 510,
as introduced in the last Congress. I am pleased that once again, the
chairman, as his predecessor did, is willing to consider the inclusion
of provisions that would reauthorize for a period of 1 year, the Native
Hawaiian revolving loan fund.
Mr. President, the programs authorized in this measure are critical
to fostering Native American social and economic self-sufficiency--a
goal shared by this Congress as we move toward greater fiscal
responsibility.
I urge my colleagues to act favorably and expeditiously on this
measure.
______

By Mr. BOND (for himself, Ms. Snowe, Mr. Nickles, Mr. Burns, Mr.
Warner, Mr. Faircloth, Mr. Murkowski, Mr. Inhofe, Mr. Enzi, Mr.
Hutchinson, Mr. Mack, Ms. Mikulski and Mr. Grams):
S. 460. A bill to amend the Internal Revenue Code of 1986 to increase
the deduction for health insurance costs of self-employed individuals,
to provide clarification for the deductibility of expenses incurred by
a taxpayer in connection with the business use of the home, to clarify
the standards used for determining that certain individuals are not
employees, and for other purposes; to the Committee on Finance.

THE HOME-BASED BUSINESS FAIRNESS ACT OF 1997

Mr. BOND. Mr. President, home-based businesses are a significant and
often overlooked part of this country's economy. Some people may be
surprised to learn that over 9 million men and women in this country
now operate home-based businesses, and over 14 million individuals earn
income through home-based businesses. Even more impressive is the fact
that a majority of these enterprises are owned by women, and the Small
Business Administration estimates that women in this country are
starting over 300,000 new home-based businesses each year.

There are a number of reasons for the explosive growth of home-based
businesses. Recent innovations in computer and communication technology
have made the virtual office a reality and allow many Americans to
compete in marketplaces that a few years ago required huge investments
in equipment and personnel. In addition, many men and women in this
country turn to home-based business in an effort to spend more time
with their children. By working at home, these families can bring in
two incomes, while avoiding the added time and expense of day-care and
commuting. Corporate down-sizing, too, contributes to the growth in
this sector as many skilled individuals convert their knowledge and
experience from corporate life into successful enterprises operated
from their homes.
The rewards of owning a home-based business are also numerous. The
added independence and self-reliance of having your own business
provides not only economic rewards but also personal satisfaction. You
are the boss: you set your own hours, develop your own business plans,
and choose your customers and clients. In many ways, home-based
businesses provide the greatest avenue for the entrepreneurial spirit,
which has long been the driving force behind the success of this
country.
But with these rewards comes a number of obstacles, not the least of
which are regulations and burdens imposed by the Federal Government. In
fact, the tax laws, and in particular the IRS, are frequently cited as
the most significant problems for home-based businesses today. Changes
in tax policy must be considered by this Congress to ensure that our
laws do not stall the growth and development of this successful sector
of our economy.
Mr. President, in answer to this call for help, I am introducing
today the Home-Based Business Fairness Act of 1997. This legislation is
the product of extensive input from actual home-based business owners
and the efforts of my colleagues Senators Olympia Snowe and Don
Nickles. The bill is designed to address three tax issues that
currently pose significant problems for home-based businesses.

deductibility of health-insurance costs for the self-employed

First, the bill addresses the deductibility of health-insurance costs
for the self-employed. During the 104th Congress, we made significant
progress in this area. First, we made the deduction permanent after
years of uncertainty. Then, last summer, we passed legislation that
will increase the deduction for these health-care costs to 80 percent
incrementally by 2006. While I fully supported that increase, the self-
employed cannot wait 10 years for partial deductibility when their
large corporate competitors can fully deduct such costs today.
With the self-employed able to deduct only 40 percent of their
health-insurance costs today, it comes as no surprise that nearly a
quarter of the self-employed, many of whom operate home-based
businesses, do not have health insurance. In fact, 4 million households
in this country headed by a self-employed individual do not have health
insurance.
In order to make it easier for home-based business owners and their
families to have health insurance, we must level this playing field. My
bill will increase the deductibility of health insurance for the self-
employed to 100 percent beginning this year. A full deduction will make
health insurance more affordable to home-based business owners and help
them and their families get the health insurance coverage that they
need and deserve.

home-office deduction

Second, the Home-Based Business Fairness Act will restore the home-
office deduction and further level the playing field for home-based
businesses. After the Supreme Court's 1993 Soliman decision, the only
home-based businesses that can deduct the costs associated with their
home office are those that see their clients in the home and that
generate their income within the home office. That narrow
interpretation of the law denies the home-office deduction to service
providers like construction contractors, landscaping professionals, and
sales representatives, who must by necessity perform their services
outside of the home.

It is patently unfair to prevent these individuals from deducting
their utility costs, property taxes, and other expenses related to the
home office, when they could do so if they rented an office separate
from the home. I thank my colleague from Utah, Senator Hatch, for his
willingness to allow us to work together on this issue. My bill
incorporates the legislation that Senator Hatch introduced earlier this
month and will permit a home office to include one where the individual
performs his essential administrative and management activities such a
billing and record keeping. In order to qualify for the deduction, the
bill requires that the business owner perform these activities on a
regular, on-going, and nonincidental basis and have no other office in
which to perform them.
The restoration of the home-office deduction for home-based
businesses not only puts them on an equal footing with their larger
competitors, but also frees important capital that can be used to
expand the business. For too long home-based businesses have lived with
the fear of an IRS audit fueled by the Soliman decision. It is time to
eliminate this obstacle to the continued success of these important
entrepreneurs.

Clarification of Independent-Contractor Status

The final element of the Home-Based Business Fairness Act is relief
for entrepreneurs seeking to be treated as independent contractors and
for businesses needing to hire independent contractors. As the chairman
of the Small Business Committee, I have heard from countless small
business owners who are caught in the environment of fear and confusion
that now surrounds the classification of workers. This situation is
stifling the entrepreneurial spirit of many small business owners who
find that they do not have the flexibility to conduct their businesses
in a manner that makes the best economic

[[Page S2430]]

sense and that serves their personal and family goals.
Mr. President, the root of this problem is found in the IRS' test for
determining whether a worker is an independent contractor or an
employee. Over the past three decades, the IRS has relied on a 20-
factor test based on the common law to make this determination. On
first blush, a 20-factor test sounds like a reasonable approach: if a
taxpayer demonstrates a majority of the factors, he or she is an
independent contractor. Not surprisingly, the IRS' test is not that
simple. It is a complex set of extremely subjective criteria with no
clear weight assigned to any of the factors. As a result, a small
business taxpayer is not able to predict which of the 20 factors will
be most important to a particular IRS agent, and finding a certain
number of these factors in any given case does not guarantee the
outcome.
To make matters worse, the IRS' determination inevitably occurs 2 or
3 years after the parties have determined in good faith that they have
an independent-contractor relationship. And the consequences can be
devastating. The business recipient of the services is forced to
reclassify the independent contractor as an employee and must pay the
payroll taxes the IRS says should have been collected in the prior
years. Interest and penalties are also added on. The result for many
small businesses is a tax bill that bankrupts the company. And that's
not the end of the story. The IRS then goes after the service provider,
who is now classified as an employee, and disallows a portion of his
business expenses--again resulting in additional taxes, interest, and
penalties.
Mr. President, all of us in this body recognize that the IRS is
charged with the duty of collecting Federal revenues and enforcing the
tax laws. The problem in this case is that the IRS is using a procedure
that is patently unfair and is doing so on an increasingly frequent
basis. Between 1988 and 1994, the IRS' use of the 20-factor test
resulted in some 11,000 audits, 483,000 worker reclassifications, and
$751 million in back taxes and penalties. These facts make me wonder
whether the IRS is using this test as a de facto source of enhanced
revenue collection when the classification decision does not alter the
aggregate tax liability to the Federal Government at all.
For its part, the IRS has just released its revised worker
classification training manual. In the Commissioner's accompanying
memo, she describes the manual as an ``attempt to identify, simplify,
and clarify the relevant facts that should be evaluated in order to
accurately determine worker classification. . . .'' There can be no
more compelling reason for immediate action on this issue. The revised
manual is over 150 pages--even longer than the original draft. If it
takes this many pages to teach revenue agents how to simplify and
clarify this small business tax issue, I think we can be fairly sure
how simple and clear it is going to seem to the taxpayer who tries to
figure it out on his own.

The Home-Based Business Fairness Act removes the need for so many
pages of instruction on the 20-factor test by establishing a clear safe
harbor based on objective criteria. Under these criteria, if there is a
written agreement between the parties, and if an individual
demonstrates economic independence and independence with respect to the
workplace, he will be treated as an independent contractor rather than
an employee. And the service recipient will not be treated as an
employer. In addition, individuals who perform services through their
own corporations will also qualify for the safe harbor as long as there
is a written agreement and the individuals provide for their own
benefits.
The safe harbor is simple, straightforward, and final. To take
advantage of it, payments above $600 per year to an individual service
provider must be reported to the IRS, just as is required under current
law. This will help ensure that taxes properly due to the Treasury will
continue to be collected.
Mr. President, the IRS contends that there are millions of
independent contractors who should be classified as employees, which
costs the Federal Government billions of dollars a year. This assertion
is plainly incorrect. Classification of a worker has no cost to the
Government. What costs the Government are taxpayers who do not pay
their taxes. My bill has two requirements that I believe will improve
compliance among independent contractors using the safe harbor. First,
there must be a written agreement between the parties--this will help
the independent contractor know from the beginning that he is
responsible for his own tax payments. Second, the safe harbor will not
apply if the service recipient does not comply with the reporting
requirements and issue 1099's to individuals who perform services.
My bill also provides relief for businesses and independent
contractors when the IRS determines that a worker was misclassified.
Under the bill, if the business and the independent contractor have a
written agreement, if the applicable reporting requirements were met,
and if there was a reasonable basis for the parties to believe that the
worker is an independent contractor, then any IRS reclassification
upheld in court will only apply prospectively. This provision gives
important peace of mind to small businesses that act in good faith by
removing the unpredictable threat of retroactive reclassification and
substantial interest and penalties.
A final provision of this legislation, Mr. President, is the repeal
of section 1706 of the 1986 Tax Reform Act. This provision effectively
barred an entire group of independent contractors from the protection
available in section 530 of the Revenue Act of 1978. When section 1706
was enacted, its proponents argued that technical service workers--such
as engineers, designers, and computer programmers--were less compliant
in paying their taxes. Later examination of this issue by the Treasury
Department found that technical service workers are in fact more likely
to pay their taxes than most other types of independent contractors.
This revelation underscores the need to repeal section 1706 and level
the playing field for individuals in these professions. In the 104th
Congress, proposals to repeal section 1706 enjoyed wide bi-partisan
support, and it is my hope that the 105th Congress will finally act on
this proposal to restore equality for these professionals.
Mr. President, the importance of adding clarity to the independent-
contractor situation is underscored by the fact that the 2,000
delegates to the 1995 White House Conference on Small Business voted to
designate it as their top priority. At that conference, IRS
Commissioner Richardson noted that either classification--independent
contractor or employee--can be a valid and appropriate business choice
as long as the individual pays his taxes. This conclusion was later
affirmed in the IRS' new worker classification training manual. It is
time that the law reflect this conclusion and allow small businesses to
hire employees or independent contractors as their business needs
demand, without the fear and uncertainty that now prevails.
The Home-Based Business Fairness Act is a common-sense measure that
will provide tax fairness for the increasing number of individuals who
operate their businesses from home and contribute so significantly to
the strength of our economy. These business owners have waited far too
long. I urge the members of the Finance Committee to work with Senator
Nickles and to report out a bill that provides these three much needed
changes in the tax law so that we do not keep them waiting any longer.
Mr. President, I ask unanimous consent that additional material be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 460

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 ``Home-Based Business Fairness
Act of 1997''.

SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED
INDIVIDUALS INCREASED.

(a) In General.--Section 162(l)(1) of the Internal Revenue
Code of 1986 (relating to special rules for health insurance
costs of self-employed individuals) is amended to read as
follows:
``(1) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to the amount paid during

[[Page S2431]]

the taxable year for insurance which constitutes medical care
for the taxpayer, the taxpayer's spouse, and dependents.''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1996.

SEC. 3. CLARIFICATION OF DEFINITION OF PRINCIPAL PLACE OF
BUSINESS.

(a) In General.--Subsection (f) of section 280A of the
Internal Revenue Code of 1986 (relating to definitions and
special rules) is amended by redesignating paragraphs (2),
(3), and (4) as paragraphs (3), (4), and (5), respectively,
and by inserting after paragraph (1) the following new
paragraph:
``(2) Principal place of business.--For purposes of
subsection (c), a home office shall in any case qualify as
the principal place of business if--
``(A) the office is the location where the taxpayer's
essential administrative or management activities are
conducted on a regular and systematic (and not incidental)
basis by the taxpayer, and
``(B) the office is necessary because the taxpayer has no
other location for the performance of the essential
administrative or management activities of the business.''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1996.

SEC. 4. SAFE HARBOR FOR DETERMINING THAT CERTAIN INDIVIDUALS
ARE NOT EMPLOYEES.

(a) In General.--Chapter 25 of the Internal Revenue Code of
1986 (relating to general provisions relating to employment
taxes) is amended by adding after section 3510 the following
new section:

``SEC. 3511. SAFE HARBOR FOR DETERMINING THAT CERTAIN
INDIVIDUALS ARE NOT EMPLOYEES.

``(a) Safe Harbor.--
``(1) In general.--For purposes of this title, if the
requirements of subsections (b), (c), and (d), or the
requirements of subsections (d) and (e), are met with respect
to any service performed by any individual, then with respect
to such service--
``(A) the service provider shall not be treated as an
employee,
``(B) the service recipient shall not be treated as an
employer,
``(C) the payor shall not be treated as an employer, and
``(D) compensation paid or received for such service shall
not be treated as paid or received with respect to
employment.
``(2) Availability of safe harbor not to limit application
of other laws.--Nothing in this section shall be construed--
``(A) as limiting the ability of a service provider,
service recipient, or payor to apply other applicable
provisions of this title, section 530 of the Revenue Act of
1978, or the common law in determining whether an individual
is not an employee, or
``(B) as a prerequisite for the application of any
provision of law described in subparagraph (A).
``(b) Service Provider Requirements With Regard to the
Service Recipient.--For purposes of subsection (a), the
requirements of this subsection are met if the service
provider, in connection with performing the service--
``(1) has the ability to realize a profit or loss,
``(2) incurs unreimbursed expenses which are ordinary and
necessary to the service provider's industry and which
represent an amount at least equal to 2 percent of the
service provider's adjusted gross income attributable to
services performed pursuant to 1 or more contracts described
in subsection (d), and
``(3) agrees to perform services for a particular amount of
time or to complete a specific result or task.
``(c) Additional Service Provider Requirements With Regard
to Others.--For the purposes of subsection (a), the
requirements of this subsection are met if the service
provider--
``(1) has a principal place of business,
``(2) does not primarily provide the service at a single
service recipient's facilities,
``(3) pays a fair market rent for use of the service
recipient's facilities, or
``(4) operates primarily with equipment not supplied by the
service recipient.
``(d) Written Document Requirements.--For purposes of
subsection (a), the requirements of this subsection are met
if the services performed by the service provider are
performed pursuant to a written contract between such service
provider and the service recipient, or the payor, and such
contract provides that the service provider will not be
treated as an employee with respect to such services for
Federal tax purposes.
``(e) Business Structure and Benefits Requirement.--For
purposes of subsection (a), the requirements of this
subsection are met if the service provider--
``(1) conducts business as a properly constituted
corporation or limited liability company under applicable
State laws, and
``(2) does not receive from the service recipient or payor
benefits that are provided to employees of the service
recipient.
``(f) Special Rules.--For purposes of this section--
``(1) Failure to meet reporting requirements.--If for any
taxable year any service recipient or payor fails to meet the
applicable reporting requirements of section 6041(a) or
6041A(a) with respect to a service provider, then, unless the
failure is due to reasonable cause and not willful neglect,
the safe harbor provided by this section for determining
whether individuals are not employees shall not apply to such
service recipient or payor with respect to that service
provider.
``(2) Burden of proof.--For purposes of subsection (a),
if--
``(A) a service provider, service recipient, or payor
establishes a prima facie case that it was reasonable not to
treat a service provider as an employee for purposes of this
section, and
``(B) the service provider, service recipient, or payor has
fully cooperated with reasonable requests from the Secretary
or his delegate,

then the burden of proof with respect to such treatment shall
be on the Secretary.
``(3) Related entities.--If the service provider is
performing services through an entity owned in whole or in
part by such service provider, the references to `service
provider' in subsections (b) through (e) may include such
entity, provided that the written contract referred to in
subsection (d) is with such entity.
``(g) Determinations by the Secretary.--For purposes of
this title--
``(1) In general.--
``(A) Determinations with respect to a service recipient or
a payor.--A determination by the Secretary that a service
recipient or a payor should have treated a service provider
as an employee shall be effective no earlier than the notice
date if--
``(i) the service recipient or the payor entered into a
written contract satisfying the requirements of subsection
(d),
``(ii) the service recipient or the payor satisfied the
applicable reporting requirements of section 6041(a) or
6041A(a) for all taxable years covered by the agreement
described in clause (i), and
``(iii) the service recipient or the payor demonstrates a
reasonable basis for determining that the service provider is
not an employee and that such determination was made in good
faith.
``(B) Determinations with respect to a service provider.--A
determination by the Secretary that a service provider should
have been treated as an employee shall be effective no
earlier than the notice date if--
``(i) the service provider entered into a contract
satisfying the requirements of subsection (d),
``(ii) the service provider satisfied the applicable
reporting requirements of sections 6012(a) and 6017 for all
taxable years covered by the agreement described in clause
(i), and
``(iii) the service provider demonstrates a reasonable
basis for determining that the service provider is not an
employee and that such determination was made in good faith.
``(C) Reasonable cause exception.--The requirements of
subparagraph (A)(ii) or (B)(ii) shall be treated as being met
if the failure to satisfy the applicable reporting
requirements is due to reasonable cause and not willful
neglect.
``(2) Construction.--Nothing in this subsection shall be
construed as limiting any provision of law that provides an
opportunity for administrative or judicial review of a
determination by the Secretary.
``(3) Notice date.--For purposes of this subsection, the
notice date is the 30th day after the earlier of--
``(A) the date on which the first letter of proposed
deficiency that allows the service provider, the service
recipient, or the payor an opportunity for administrative
review in the Internal Revenue Service Office of Appeals is
sent, or
``(B) the date on which the deficiency notice under section
6212 is sent.
``(h) Definitions.--For the purposes of this section--
``(1) Service provider.--The term `service provider' means
any individual who performs a service for another person.
``(2) Service recipient.--Except as provided in paragraph
(4), the term `service recipient' means the person for whom
the service provider performs such service.
``(3) Payor.--Except as provided in paragraph (4), the term
`payor' means the person who pays the service provider for
the performance of such service in the event that the service
recipient does not pay the service provider.
``(4) Exceptions.--The terms `service recipient' and
`payor' do not include any entity in which the service
provider owns in excess of 5 percent of--
``(A) in the case of a corporation, the total combined
voting power of stock in the corporation, or
``(B) in the case of an entity other than a corporation,
the profits or beneficial interests in the entity.
``(5) In connection with performing the service.--The term
`in connection with performing the service' means in
connection or related to the operation of the service
provider's trade or business.
``(6) Principal place of business.--For purposes of
subsection (c), a home office shall in any case qualify as
the principal place of business if--
``(A) the office is the location where the service
provider's essential administrative or management activities
are conducted on a regular and systematic (and not
incidental) basis by the service provider, and
``(B) the office is necessary because the service provider
has no other location for the performance of the essential
administrative or management activities of the business.
``(7) Fair market rent.--The term `fair market rent' means
a periodic, fixed minimum rental fee which is based on the
fair rental value of the facilities and is established
pursuant to a written agreement with

[[Page S2432]]

terms similar to those offered to unrelated persons for
facilities of similar type and quality.''
(b) Clarification of Rules Regarding Evidence of Control.--
For purposes of determining whether an individual is an
employee under the Internal Revenue Code of 1986 (26 U.S.C. 1
et seq.), compliance with statutory or regulatory standards
shall not be treated as evidence of control.
(c) Repeal of Section 530(d) of the Revenue Act of 1978.--
Section 530(d) of the Revenue Act of 1978 (as added by
section 1706 of the Tax Reform Act of 1986) is repealed.
(d) Clerical Amendment.--The table of sections for chapter
25 of such Code is amended by adding at the end the following
new item:

``Sec. 3511. Safe harbor for determining that certain individuals are
not employees.''

(e) Effective Dates.--
(1) In general.--The amendments made by, and the provisions
of, this section shall apply to services performed after the
date of enactment of this Act.
(2) Determinations by secretary.--Section 3511(g) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to determinations after the date of enactment of
this Act.
(3) Section 530(d).--The amendment made by subsection (c)
shall apply to periods ending after the date of enactment of
this Act.
____

Home-Based Business Fairness Act of 1977--Description of Provisions

Short Title

Under Section 1 of the bill, the name of the legislation is
``Home-Based Business Fairness Act of 1997.''

Increase in the Deduction for Health Insurance Costs of Self-Employed
Individuals

Section 2 of the bill amends section 162(l)(1) of the
Internal Revenue Code of 1986 to increase the deduction for
health insurance costs for self-employed individuals to 100
percent beginning on January 1, 1997. Currently the limit on
deductibility of health insurance costs for these individuals
is 40 percent, and it is scheduled to rise to 80 percent by
2006, under the provisions in the Health Insurance
Portability and Accountability Act of 1996, which was signed
into law in August 1996. The bill is designed to place self-
employed individuals on an equal footing with large
businesses which can currently deduct 100% of the health
insurance costs of all of their employees.

Restoration of the Home-Office Deduction

Section 3 of the bill clarifies the definition of
``principal place of business,'' which relates to the home-
office deduction under section 280A of the Internal Revenue
Code. The bill permits a home office to include an office
where a taxpayer performs his or her essential administrative
or management activities such as billing and recordkeeping.
In order to qualify for the new definition, the taxpayer must
perform these activities on a regular, on-going, and non-
incidental basis in the home office and have no other
location at which to perform these business activities. This
section of the bill will be effective on January 1, 1997.
The bill is designed to address the ambiguities resulting
from the Supreme Court's 1993 decision, Commissioner v.
Soliman. That case has been interpreted to require two new
tests for the home-office deduction: (1) the customers of a
home business must physically visit the home office, and (2)
the taxpayer's business income must be generated within the
home office itself--not from transactions that occur outside
of the home office. The bill is intended to permit taxpayers
who perform their services outside the home but use their
home office for essential billing and recordkeeping to
qualify for the home-office deduction.

Safe Harbor for Independent Contractors

Section 4 of the bill addresses the worker-classification
issue (e.g., whether a worker is an employee or an
independent contractor) by creating a new section 3511 of the
Internal Revenue Code. The new section will provide a general
safe harbor and protection against retroactive
reclassification of an independent contractor in certain
circumstances. The bill is designed to provide certainty for
businesses that enter into independent-contractor
relationships and minimize the risk of huge tax bills for
back taxes, interest, and penalties if a worker is
misclassified.

General safe harbor

Under the general safe harbor, if either of two tests is
met, an individual will be treated as an independent
contractor and the service recipient will not be treated as
an employer. The first test requires that the independent
contractor demonstrate economic independence and workplace
independence and have a written contract with the service
recipient.
Economic independence exists if all of the following apply:
the independent contractor has the ability to realize a
profit or loss, he or she incurs unreimbursed expenses that
are consistent with industry practice and that equal at least
2 percent of the independent contractor's adjusted gross
income from the performance of services during the taxable
year, and the independent contractor agrees to perform
services for a particular amount of time or to complete a
specific result or task.
Workplace independence exists if one of the following
applies: the independent contractor has a principal place of
business (the definition of which includes the provisions of
section 3 of the bill, which address the Soliman decision);
he or she performs services at more than one service
recipient's facilities; he or she pays a fair-market rent for
the use of the service recipient's facilities, or the
independent contractor uses his or her own equipment.
The written contract between the independent contractor and
the service recipient must provide that the independent
contractor will not be treated as an employee.
Under the second alternative test, an individual will be
treated as an independent contractor if he or she conducts
business through a corporation or a limited liability company
and the independent contractor does not receive benefits from
the service recipient--instead the independent contractor
would be responsible for his or her own benefits. The
independent contractor must also have a written contract with
the service provider stating that the independent contractor
will not be treated as an employee.
The general safe-harbor provisions also apply to three-
party situations in which the independent contractor is paid
by a third party, such as a payroll company, rather than
directly by the service recipient. The general safe harbor,
however, will not apply to a service recipient or a third-
party payor if they do not comply with the existing reporting
requirements and file 1099s for individuals who work as
independent contractors. A limited exception is provided for
cases in which the failure to file a 1099 is due to
reasonable cause and not willful neglect.
The bill also provides additional relief for cases in which
a worker is treated as an independent contractor under the
general safe harbor and the IRS later contends that the safe
harbor does not apply. In that case, the burden falls on the
IRS, rather than the taxpayer, to prove that the safe harbor
does not apply. To qualify for this relief the taxpayer must
demonstrate a credible argument that it was reasonable to
treat the service provider as an independent contractor, and
the taxpayer must fully cooperate with reasonable requests
from the IRS.
In the event that the general safe harbor does not apply,
the bill makes clear that the independent contractor or
service recipient can still rely on the 20-factor common law
test or other provisions of the Internal Revenue Code
applicable in determining whether an individual is an
employee or an independent contractor. In addition, the bill
does not limit any relief that a taxpayer may be entitled to
under Section 530 of the Revenue Act of 1978. The bill also
makes clear that the general safe harbor will not be
construed as a prerequisite for these other provisions of the
law concerning worker classification.

Protection against retroactive reclassification

The bill also provides protection against retroactive
reclassification by the IRS of an independent contractor as
an employee. For many service recipients who make a good
faith effort to classify the worker correctly, this event can
result in extensive liability for back employment taxes,
interest, and penalties.
Under the bill, if the IRS notifies a service recipient
that an independent contractor should have been classified as
an employee, the IRS' determination can become effective only
30 days after the date that the IRS sends the notification.
To qualify for this provision, the service recipient must
show that: There was a written agreement between the parties;
the service recipient satisfied the applicable reporting
requirements for all taxable years covered by the contract;
and there was a reasonable basis for determining that the
independent contractor was not an employee and the service
provider made the determination in good faith. The bill
provides similar protection for independent contractors who
are notified by the IRS that they should have been treated as
an employee.
The protection against retroactive reclassification is
intended to remove some of the uncertainty for taxpayers who
must use the IRS's 20-factor common law test. While the bill
would prevent the IRS from forcing a service recipient to
treat an independent contractor as an employee for past
years, the bill makes clear that a service recipient or an
independent contractor can still challenge the IRS's
prospective reclassification of an independent contractor
through administrative or judicial proceedings.

Additional independent contractor provisions

Section 4 of the bill contains two additional provisions
designed to assist independent contractors. The first
clarifies that an individual's compliance with a statutory or
regulatory requirement will not be treated as evidence of
control. The 20-factor common law test focuses in part on the
business' control over a worker. When the business can direct
how, when and where a worker performs a task; such control
usually indicates that the worker is an employee rather than
an independent contractor. Certain statutory and regulatory
requirements, which a business and/or a worker must follow,
have been interpreted by the IRS as demonstrating evidence of
this type of control when the majority of other factors would
lead to the conclusion that a worker is an independent
contractor. The bill clarifies that compliance with statutory
or regulatory requirements should not be a factor in
determining whether an individual is an independent
contractor.
Second, the bill would repeal section 530(d) of the Revenue
Act of 1978, which was added

[[Page S2433]]

by section 1706 of the Tax Reform Act of 1986. This provision
precludes technical service providers (e.g., engineers,
designers, drafters, computer programmers, systems analysts,
and other similarly qualified individuals) who work through a
third party, such as a placement broker, from applying the
safe harbor under section 530. The bill is designed to level
the playing field for individuals in these professions.

Effective dates

In general, the independent-contractor provisions of the
bill, including the general safe harbor, will be effective
for service performed after the date of enactment of the
bill. The protection against retroactive reclassification
will be effective for IRS determinations after the date of
enactment, and the repeal of section 530(d) will be effective
for periods ending after the date of enactment of the bill.

Mr. NICKLES. Mr. President, I am pleased to join my friend and
colleague from Missouri, Senator Bond, in the introduction of the Home-
Based Business Fairness Act. I compliment Senator Bond for his
leadership on these issues and all matters affecting small business as
chairman of the Senate Committee on Small Business.
The small, independent business is the engine which drives
innovation, job creation, and increased economic activity in this
country. I am proud to live in a country where any person can use
talent, intelligence, and hard work to start a business. I believe
these businesses are the foundation of our free enterprise economy, and
the very essence of capitalism.
There are 5 million independent contractors in America according to
the Small Business Administration, and almost one-third of all
companies use independent contractors to some degree. Further, the SBA
estimates that more than 14 million individuals earn some income from
home-based businesses, and some 300,000 women start home-based
businesses every year.
Unfortunately, Mr. President, the Internal Revenue Code does not
always treat small businesses fairly, and it often acts to limit and
repress the entrepreneurial spirit. The legislation we are introducing
today is intended to address some of the Tax Code's inequities and
remove the roadblocks to the creation of new small businesses.
A perfect example of the Tax Code's bias against small business is
the treatment of health insurance expenses. Corporations can currently
deduct 100 percent of the health insurance costs of their employees. As
recently as 2 years ago, self-employed individuals were only allowed to
deduct 25 percent of their health insurance costs. Fortunately, the
Health Insurance Portability and Accountability Act of 1996 increased
this limit to 40 percent this year, with a scheduled increase to 80
percent by 2006. However, the bias against small business continues.
Our legislation increases the deduction for health insurance cost for
self-employed individuals to 100 percent beginning on January 1, 1997.
For some small business taxpayers, the enemy has not been the IRS or
the Congress, but the judiciary. A 1993 Supreme Court decision,
Commissioner versus Soliman has been interpreted to require two new
tests for the home-office deduction: First, the customers of a home
business must physically visit the home office, and second, the
taxpayer's business income must be generated within the home office
itself--not from transactions that occur outside of the home office.
This interpretation has effectively prevented millions of taxpayers
from deducting valid, reasonable, and necessary business expenses. The
Home-Based Business Fairness Act will permit taxpayers who perform
their services outside the home but use their home office for essential
billing and recordkeeping to qualify for the home-office deduction,
provided they perform these activities on a regular, ongoing, and
nonincidental basis in the home office and have no other location at
which to perform these business activities. This section of the bill
will be effective on January 1, 1997.
Finally, Mr. President, our legislation addresses a major, continuing
problem for the small business community. The problem is worker
classification--independent contractor or employee. In a perfect world,
this issue should be irrelevant. The relationship between a worker and
a business would be strictly based on their individual needs, and the
Government's only interest would be to collect the same amount of taxes
regardless of the relationship.
Unfortunately, however, this is not a perfect world. The complexity
of the Tax Code and Congress' failure to provide adequate guidance to
small businesses and their workers has resulted in a confusing mess.
Left to their own devices, the Internal Revenue Service has adopted an
aggressive, proemployee agenda.
For the last 20 years, the classification of workers as contractors
or employees has been controlled by a 20-factor common law test which
attempts to define a business' control over a worker. This common law
test is the bane of employers and workers across the country. The
General Accounting Office has called the common law test unclear
and subject to conflicting interpretations. Even the Treasury
Department has testified that:

Applying the common law test in employment tax issues does
not yield clear, consistent, or even satisfactory answers,
and reasonable persons may differ as to the correct
classification.

Beyond the 20-factor test, some businesses may avail themselves of a
safe harbor enacted in 1978. The section 530 safe harbor prohibits the
IRS from reclassifying workers as employees if the business had a
reasonable basis for treatment of the workers as independent
contractors, or if a past IRS audit did not dispute the workers'
classification.
Our bill creates a new worker classification safe harbor and provides
limited relief from retroactive worker reclassification, two changes
which will resolve many of the problems small businesses face with the
IRS. Our bill does not repeal the 20-factor common law test, it does
not repeal the section 530 safe harbor, and it does not affect other
special worker classification situations such as statutory employees or
direct sellers. Put simply, our bill will benefit those businesses and
contractors who have not resolved their status with the IRS, while
preserving current law for those who are satisfied with it.
To summarize briefly, our legislation protects businesses and
contractors who meet one of two tests. The first test measures a
worker's economic risk and workplace independence, and requires the two
parties to have a written contract and comply with all tax reporting
requirements. Under the second test, a worker who conducts business
through a corporation or a limited liability company, does not receive
benefits from the service recipient, and has a written contract will be
treated as an independent contractor.
Our bill also protects businesses from retroactive reclassification
of workers and the associated liability for back taxes, interest, and
penalties, provided the business had a written contract with the
workers, complied with all tax reporting requirements, and had a
reasonable basis to treat the workers as contractors. Finally, our
legislation repeals section 1706 of the Tax Reform Act of 1986 which
precludes third-party technical service workers from the section 530
safe harbor, and it clarifies that compliance with a statutory or
regulatory requirements will not be treated as evidence of control for
the purpose of worker classification.
Mr. President, the Tax Code reforms included in the Home-Based
Business Fairness Act are commonsense solutions to the real problems
faced by small businesses. With this bill, Senator Bond and I have
tried to address those problems which we believe are most critical to
the creation of new small businesses, new jobs, and new economic
growth. I encourage my colleagues to give this legislation their
thoughtful consideration and join us in this initiative.
Mr. ENZI. Mr. President, I rise in strong support of The Home-Based
Business Fairness Act of 1997, introduced today by the chairman of the
Small Business Committee, Senator Bond. I know that Senator Bond,
Senator Nickles and Senator Snowe have worked hard to draft this bill
and I am proud to be an original cosponsor. It addresses three concerns
that have weighed heavily on the small business community for years:
First health insurance fairness; second the home-office deduction; and
third the status of independent contractors. I hope the Senate and the
House will move quickly to pass this legislation.
It is a good bill because it responds directly to what small
businesses have been asking us to do. It will help create

[[Page S2434]]

jobs that will put people on welfare back to work. This is an issue
that policymakers have been concentrating on since last year's welfare
debate--the President has proposed a Welfare to Work Program while
Congress is looking at the best ways to stimulate the economy and
create jobs. Toward that effort, it is impossible to overlook the
importance of small business. Small businesses create nearly 100
percent of this country's new jobs and employ over 65 percent of
Americans working in the private sector. And I guarantee it would be
small businesses that hire the majority of today's welfare recipients
if Government would make it affordable to do so.
Small business is more than the backbone of this country. Small
business is the engine of the American Dream. But it needs a system
that empowers people, not government. This bill would help people by
removing just a couple of the obstacles in the way of that Dream.
When I was elected to the Senate last November, my first choice of
committee assignments was the Small Business Committee. My wife, Diana,
and I were small businessowners and we have experienced--at one time or
another--nearly all of the obstacles that can stand in the way of a
successful small business. At this time last year, in fact, my wife and
I were balancing our books and paying our taxes--hoping to find that
the books still balanced after paying the taxes! So I know what small
businessowners are going through. Very recently, I have been there.
There is a lot of talk in this legislative body about improving the
environment for small business. In fact, I doubt that any Member would
stand up and say he or she does not support small business. We hold
hearings and listen to testimony, we provide for White House
conferences on small business, we receive stacks of polling data and we
create commission after commission to tell us what needs to be done. In
the end, we find out what I think we already know--the problem is
taxes. Too many and too much.
This bill is a small step in the Tax Code, but a giant step for
sensibility. It recognizes some of the revolutionary changes in
American business. The advent of personal computers, high speed modems,
cell phones, pagers, and fax machines that have enabled Americans to
work via audio and video conferencing, from satellite offices, and by
telecommuting. Our tax laws have not kept up with the sea of change in
American business.

One example of this change is the increasing number of women in our
Nation's work force. According to the Bureau of Labor Statistics, 76
percent of mothers with school-age children now work. Among two-parent
households, 63 percent report that both parents must work outside the
home--in many cases, one works to pay the bills, while the other works
to pay the taxes. And of these women entering the work force, 1 in 20
are starting their own businesses and many are home based and that
number is rising rapidly. In fact, women start new businesses at twice
the rate of men--and with a very good success rate. But the Tax Code
needs improvement. It discourages self-employment and home-based
business through discrimination and complexity. This bill would change
that.
The Home-Based Business Fairness Act would finally put an end to our
regressive, two-tiered system that makes self-employed people pay more
for their health insurance. It is time to give small business
competitive parity with big business. All the technical assistance and
loan guarantees in the world cannot overcome unfair tax treatment and
disproportionately burdensome regulations. Last year, Congress
recognized the inequality by voting to phase in an 80-percent
deductibility for health insurance costs. That's a good start. But if
we know the tax treatment is not fair, then shouldn't we make it right?
America's small businesses need fair and equal treatment.
This legislation would also add fairness for people who work in their
homes. Our current outdated Tax Code discriminates against home-based
people by restricting their ability to deduct office expenses. The
message is, if you can't afford a real office, then you can't deduct
your expenses. In this way, we increase the hurdles for entrepreneurs
who want to earn a living, but can't afford to rent separate office
space. This part of the legislation will benefit thousands of home-
based women and men. It is very important and deserves a thoughtful
consideration by the Senate.
Another puzzling antibusiness setup that this bill would simplify is
the definition of independent contractor. American entrepreneurs--and
especially home-based business owners--need a simpler test. I have
always believed we could make things a lot easier if we just followed
the payroll taxes. Who pays them? Is there a written contract? It does
not have to be ``rocket science.'' This legislation would simplify the
test so that everyone can understand it--not just the tax attorneys at
the Internal Revenue Service.
On that subject, in Wyoming recently, the IRS has taken after the
last bastion of budding entrepreneurs, our paper boys. Once again, the
thirsty IRS auditors are devising ways to haunt working people--
presumed guilty until proven innocent. When did the IRS decide to pick
on the hard-earned wages of independent paperboys and girls? They are
not now, and never have been, salaried newspaper employees. They are
just kids who want to earn some money by working before or after
school.
I think we should call this part of the bill, The Paperboy Protection
Act. The last bastion for new entrepreneurs needs our help. The small
business owners of tomorrow are counting on us to pass this
legislation. I thank my colleagues on the Small Business Committee, and
the assistant majority leader, for their hard work on the bill. I urge
other Senators to support it.
______

By Mrs. HUTCHISON (for herself, Mr. Inhofe, and Mr. Helms):
S. 461. A bill to amend the Occupational Safety and Health Act of
1970 and the National Labor Relations Act to modify certain provisions,
to transfer certain occupational safety and health functions to the
Secretary of Labor, and for other purposes; to the Committee on Labor
and Human Resources.

THE OCCUPATIONAL SAFETY AND HEALTH REFORM ACT OF 1997

Mrs. HUTCHISON. Mr. President, I rise today to introduce, along with
my colleagues, Mr. Inhofe and Mr. Helms, the Occupational Safety and
Health Reform Act of 1997. This legislation will transform OSHA from an
agency that generates fines and paperwork to one that plays a more
constructive role in improving worker safety.
Mr. President, the Occupational Safety and Health Act was enacted in
1970. It may not surprise my colleagues that since that time, the
incidence of work-related injuries and illnesses has steadily declined.
But it may surprise them to learn that in the 25 years prior to
enactment of OSHA, workplace injuries declined almost twice as fast as
they have since the enactment of OSHA. The reduction of workplace
injuries, which had been occurring before OSHA was created, has
actually slowed since the agency was created.
One may reasonably ask, why is that the case? Mr. President, I have
talked to hundreds of business people throughout my State of Texas and
throughout the Nation. Time and again, I have heard stories of
burdensome and complex OSHA requirements and of arbitrary and unfair
inspections and fines.
The vast majority of other employers in this country desire and
strive to see to it that their employees have a safe place to work.
Indeed, it is in their own best interest to do so. Injuries are costly:
They interrupt production schedules, cause a loss of productivity and
increase the burgeoning expense of workers' compensation, not to
mention the impact on overall employee morale and productivity.
Many of the employers I speak with would like to work with, rather
than against OSHA, but fear that if they take any affirmative steps to
improve and review the safety of their workplace, it will only serve to
attract aggressive OSHA inspectors. Thus, rather than helping to raise
the safety level of American workers, the Occupational Safety and
Health Act actually discourages employers in many cases from
aggressively working to improve workplace health and safety.
Remarkably, OSHA's response to the growing call for reform of its
enforcement tactics has been to seek to expand its territory. Most
recently,

[[Page S2435]]

OSHA has worked on establishing new and enormously costly standards on
ergonomics and even on the prevention of nighttime crime at retail
stores.

Mr. President, when Congress established OSHA, it did so with the
intent that the agency, employers, and employees would all work toward
the common purpose of creating safer and healthier workplace
environments. Unfortunately, the culture of OSHA has evolved into one
of regulatory excess, punitive enforcement, and standard setting based
on arbitrariness rather than sound cost/benefit analysis. Things have
gotten so bad that OSHA inspectors have even testified that they have
been required to meet monthly quotas for citations and fines.
The bill I am introducing today will restore OSHA to its intended
mission by requiring the agency to take a commonsense approach to
establishing safety standards and by encouraging cooperation and
voluntary improvement rather than confrontation. In brief, the bill:
Requires that OSHA, prior to setting a new standard, establish that a
worksite safety hazard exists and consider whether it can economically
be corrected using feasible technology;
It provides safety consultation and assistance to small businesses to
encourage OSHA compliance;
It gives employers an opportunity to correct problems identified by
employees before a formal OSHA complaint is filed, and protects
employees who raise safety concerns to their employers;
It stops the practice of citing contractors for the violations of
subcontractors whose employees are not under the contractor's control;
It limits employers' liability for the unsafe conduct of employees
who have been properly trained and equipped by their employer;
It requires that fines for violations be proportional to their actual
impact on employee safety; and
It will end the de facto practice of establishing quotas for
enforcement activities.
Mr. President, I realize that there are employers out there who may
not care about the safety of their employees. To them, I say, beware.
Under this bill, OSHA will be freed to concentrate its resources and
enforcement efforts on those employers who willfully disregard
workplace safety.
But to the other 99 percent of the honest, hardworking business
people in America who want to do right by their employees, I say: We
have heard your call for action, and help is on the way. I urge them
and I urge my colleagues to support this important legislation.
Mr. President, I ask unanimous consent that the text of my bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 461

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

SECTION 1. SHORT TITLE; REFERENCE.

(a) Short Title.--This Act may be cited as the
``Occupational Safety and Health Reform Act of 1997''.
(b) Reference.--Whenever in this Act an amendment or repeal
is expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the
Occupational Safety and Health Act of 1970 (29 U.S.C. 651 et
seq.).

SEC. 2. USE OF OSHA IN PRIVATE LITIGATION.

Section 4(b)(4) (29 U.S.C. 653(b)(4)) is amended by adding
at the end the following: ``An allegation of a violation, a
finding of a violation, or an abatement of an alleged
violation, under this Act or the standards promulgated under
this Act shall not be admissible as evidence in any civil
action or used to increase the amount of payments received
under any workmen's compensation law for any work-related
injury.''.

SEC. 3. DUTIES OF EMPLOYERS AND EMPLOYEES.

Section 5 (29 U.S.C. 654) is amended by adding at the end
the following:
``(c) On multiemployer work sites, an employer may not be
cited for a violation of this section if the employer--
``(1) has no employees exposed to the violation; and
``(2) has not created the condition that caused the
violation or assumed responsibility for ensuring compliance
by other employers on the work site.''.

SEC. 4. STANDARD SETTING.

(a) Standards.--Section 6(b)(5) (29 U.S.C. 655(b)(5)) is
amended to read as follows:
``(5) The development of a standard under this section
shall be based on the latest scientific data in the field and
on research demonstrations, experiments, and other
information that may be appropriate. In establishing the
standard, the Secretary shall consider, and make findings
based on, the following factors:
``(A) The standard shall be needed to address a significant
risk of material impairment to workers and shall
substantially reduce that risk.
``(B) The standard shall be technologically and
economically feasible.
``(C) There shall be a reasonable relationship between the
costs and benefits of the standard.
``(D) The standard shall provide protection to workers in
the most cost-effective manner and minimize employment loss
due to the standard in the affected industries and sectors of
industries.
``(E) The standard shall set forth objective criteria and
the performance desired.''.
(b) Variances.--Section 6(d) (29 U.S.C. 655(d)) is amended
by adding at the end the following: ``No citation shall be
issued for a violation of an occupational safety and health
standard that is the subject of a good faith application for
a variance during the period the application is pending
before the Secretary.''.
(c) Standard Priorities.--The second sentence of section
6(g) (29 U.S.C. 655(g)) is amended to read as follows: ``In
determining the priority for establishing standards with
regard to toxic materials or the physical agents of toxic
materials, the Secretary shall consider the number of workers
exposed to the substance, the nature and severity of
potential impairment, and the likelihood of the impairment
based on information obtained by the Secretary from the
Environmental Protection Agency, the Department of Health and
Human Services, and other appropriate sources.''.
(d) Regulatory Flexibility Analysis.--Section 6 (29 U.S.C.
655) is amended by adding at the end the following:
``(h) In promulgating an occupational safety and health
standard under subsection (b), the Secretary shall perform a
regulatory flexibility analysis described in sections 603 and
604 of title 5, United States Code.
``(i) In promulgating any occupational safety and health
standard under subsection (b), the Secretary shall minimize
the time, effort, and costs involved in the retention,
reporting, notification, or disclosure of information to the
Secretary, to third parties, or to the public. Compliance
with the requirement of this subsection may be considered in
a review of a petition filed under subsection (f).''.

SEC. 5. INSPECTIONS.

(a) Authority of Secretary.--Section 8(a) (29 U.S.C.
657(a)) is amended by striking paragraph (2) and inserting
the following:
``(2) to inspect and investigate during regular working
hours and at other reasonable times, and within reasonable
limits and in a reasonable manner, any such place of
employment and all pertinent conditions, structures,
machines, apparatus, devices, equipment, and materials in
such place of employment.

In conducting inspections and investigations under paragraph
(2), the Secretary may question any such employer, owner,
operator, agent or employee. An interview of an employee by
the Secretary may only be in private with the consent of the
employee.''.
(b) Recordkeeping.--
(1) General maintenance.--The first sentence of section
8(c)(1) (29 U.S.C. 657(c)(1)) is amended to read as follows:
``Each employer shall make, keep and preserve, and make
available, upon reasonable request and within reasonable
limits, to the Secretary or the Secretary of Health and Human
Services, such records regarding the activities of the
employer relating to this Act as the Secretary, in
cooperation with the Secretary of Health and Human Services,
may prescribe by regulation as necessary or appropriate for
the enforcement of this Act or for developing information
regarding the causes and prevention of occupational accidents
and illnesses.''.
(2) Records or reports on injuries.--Section 8(c) (29
U.S.C. 657(c)) is amended by adding at the end the following:
``(4) In prescribing regulations under this subsection, the
Secretary may not require employers to maintain records of,
or to make reports on, injuries that do not involve lost work
time or that involve employees of other employers.
``(5) In prescribing regulations requiring employers to
report work-related deaths and multiple hospitalizations, the
Secretary shall include provisions that provide an employer
at least 24 hours in which to make the report.''.
(c) Inspections Based on Employee Complaints.--Section 8(f)
(29 U.S.C. 657(f)) is amended to read as follows:
``(f)(1)(A) An employee or representative of an employee
who believes that a violation of a safety or health standard
promulgated under this Act exists in the place of employment
of the employee that threatens physical harm, or that an
imminent danger exists in the place of the employment of the
employee, may request an inspection by providing notice to
the Secretary or an authorized representative of the
Secretary of the violation or danger.
``(B) The notice under subparagraph (A) shall be reduced to
writing, shall set forth with reasonable particularity the
grounds for the notice, and shall state that the alleged
violation or danger described in this subparagraph has been
brought to the attention of the employer and the employer has
refused to take any action to correct the alleged violation
or danger.

[[Page S2436]]

``(C)(i) The notice under subparagraph (A) shall be signed
by the employee or representative of the employee and a copy
of the notice shall be provided to the employer or the agent
of the employer no later than the time of arrival of an
occupational safety and health agency inspector to conduct
the inspection.
``(ii) Upon the request of the employee providing the
notice under subparagraph (A), the name of the employee and
the names of individual employees referred to in the notice
shall not appear in the copy or on any record published,
released, or made available pursuant to subsection (i),
except that the name of the employee and the names of
individual employees shall not be privileged from discovery
in a contested case.
``(D) The Secretary may not make an inspection under this
subsection except upon request by an employee or a
representative of an employee.
``(E) If upon receipt of the notice under subparagraph (A),
the Secretary determines that the employee or the
representative of the employee has brought the alleged
violation or danger to the attention of the employer and the
employer has refused to take corrective action, and that
there are reasonable grounds to believe the alleged violation
or danger still exists, the Secretary shall make a special
inspection in accordance with this subsection not later than
30 days after the receipt of the notice under subparagraph
(A). The special inspection shall be conducted for the
limited purpose of determining whether the alleged violation
or danger exists.
``(2) If the Secretary determines either before, or as a
result of, an inspection that there are not reasonable
grounds to believe a violation or danger described in
paragraph (1)(A) exists, the Secretary shall notify the
complaining employee or the representative of the employee of
the determination and, upon request by the employee or the
representative of the employee, shall provide a written
statement of the reasons for the determination.''.
(d) Training and Enforcement.--Section 8 (29 U.S.C. 657) is
amended--
(1) by redesignating subsection (g) as subsection (j); and
(2) by inserting after subsection (f) the following:
``(g) Inspections conducted under this section shall be
conducted by at least 1 person who has training in, and is
knowledgeable of, the industry or types of hazards being
inspected.
``(h)(1) Except as provided in paragraph (2), the Secretary
shall not conduct routine inspections of, or enforce any
standard, rule, regulation, or order under this Act with
respect to--
``(A) an employer who is engaged in a farming operation
that does not maintain a temporary labor camp and employs 50
or fewer employees; or
``(B) an employer of not more than 50 employees if the
employer is included within a category of employers having an
occupational injury or a lost workday case rate (determined
under the Standard Industrial Classification Code for which
such data are published) that is less than the national
average rate as most recently published by the Secretary
acting through the Bureau of Labor Statistics under section
24.
``(2) In the case of an employer described in subparagraph
(B) of paragraph (1), such paragraph shall not be construed
to prohibit the Secretary, with respect to the employer,
from--
``(A) providing under this Act consultations, technical
assistance, and educational and training services;
``(B) conducting under this Act surveys and studies;
``(C) conducting inspections or investigations in response
to employee complaints, issuing citations for violations of
this Act found during an inspection, and assessing a penalty
for the violations that are not corrected within a reasonable
abatement period;
``(D) taking any action authorized by this Act with respect
to imminent dangers;
``(E) taking any action authorized by this Act with respect
to a report of an employment accident that is fatal to at
least 1 employee or that results in hospitalization of at
least 3 employees and taking any action pursuant to an
investigation of such report; and
``(F) taking any action authorized by this Act with respect
to a complaint of discrimination against employees for
exercising their rights under this Act.
``(i) Any records or other information created by or for an
employer for the purpose of conducting safety and health
inspections, audits, or reviews not required by this Act
shall not be required to be disclosed by the employer or the
agent of the employer in any inspection, investigation, or
enforcement proceeding conducted pursuant to this Act.''.

SEC. 6. VOLUNTARY COMPLIANCE.

(a) Program.--The Occupational Safety and Health Act of
1970 (21 U.S.C. 651 et seq.) is amended by inserting after
section 8 the following:

``SEC. 8A. VOLUNTARY COMPLIANCE.

``(a) In General.--The Secretary shall by regulation
establish a program to encourage voluntary employer and
employee efforts to provide safe and healthful working
conditions.
``(b) Exemption.--In establishing a program under
subsection (a), the Secretary shall, in accordance with
subsection (c), provide an exemption from all safety and
health inspections and investigations with respect to a place
of employment maintained by the employer participating in the
program, except that this subsection shall not apply to
inspections and investigations conducted for the purpose of--
``(1) determining the cause of a workplace accident that
resulted in the death of 1 or more employees or the
hospitalization of 3 or more employees; or
``(2) responding to a request for an inspection pursuant to
section (8)(f)(1).
``(c) Requirements for Exemption.--In order to qualify for
the exemption provided under subsection (b), an employer
shall provide to the Secretary evidence that--
``(1) the place of employment of the employer or conditions
of employment have, during the preceding year, been reviewed
or inspected under--
``(A) a consultation program provided by any State agency
relating to occupational safety and health;
``(B) a certification or consultation program provided by
an insurance carrier or other private business entity
pursuant to a State program, law, or regulation; or
``(C) a workplace consultation program provided by any
other person certified by the Secretary for purposes of
providing workplace consultations; or
``(2) the place of employment has an exemplary safety
record and the employer maintains a safety and health program
for the workplace that--
``(A) includes--
``(i) procedures for assessing hazards to the employees of
the employer that are inherent to the operations or business
of the employer;
``(ii) procedures for correcting or controlling the hazards
in a timely manner based on the severity of the hazard; and
``(iii) employee participation in the program including, at
a minimum--

``(I) regular consultation between the employer and the
nonsupervisory employees of the employer regarding safety and
health issues; and
``(II) the opportunity for the nonsupervisory employees of
the employer to make recommendations regarding hazards in the
workplace and to receive responses or to implement
improvements in response to the recommendations; and

``(B) that requires that participating nonsupervisory
employees of the employer have training or expertise on
safety and health issues consistent with the responsibilities
of the employees.

A program under subparagraph (A) or (B) of paragraph (1)
shall include methods that ensure that serious hazards
identified in the consultation are corrected within an
appropriate time.
``(d) Certification.--The Secretary may require that an
employer in order to claim the exemption under subsection (b)
provides certification to the Secretary, and notice to the
employees of the employer, of the eligibility of the employer
for an exemption.''.
(b) Definition.--Section 3 (29 U.S.C. 652) is amended by
adding at the end the following:
``(15) The term `exemplary safety record' means that an
employer has had, in the most recent annual reporting of the
employer required by the Occupational Safety and Health
Administration, no employee death caused by occupational
injury and fewer lost workdays due to occupational injury and
illness than the average for the industry of which the
employer is a part.''.

SEC. 7. EMPLOYER DEFENSES.

Section 9 (29 U.S.C. 658) is amended by adding at the end
the following:
``(d) No citation may be issued under subsection (a) to an
employer unless the employer knew or with the exercise of
reasonable diligence would have known of the presence of an
alleged violation. No citation shall be issued under
subsection (a) to an employer for an alleged violation of
section 5, any standard, rule, or order promulgated pursuant
to section 6, any other regulation promulgated under this
Act, or any other occupational safety and health standard, if
the employer demonstrates that--
``(1) employees of the employer have been provided with the
proper training and equipment to prevent such a violation;
``(2) work rules designed to prevent such a violation have
been established and adequately communicated to employees by
the employer; and
``(3) the failure of employees to observe work rules led to
the violation.
``(e) A citation issued under subsection (a) to an employer
that violates the requirements of any standard, rule, or
order promulgated pursuant to section 6 or any other
regulation promulgated under this Act shall be vacated if the
employer demonstrates that employees of the employer were
protected by alternative methods that were equally or more
protective of the safety and health of the employees than the
methods required by the standard, rule, order, or regulation
in the factual circumstances underlying the citation.
``(f) Subsections (d) and (e) shall not be construed to
eliminate or modify other defenses that may exist to any
citation.''.

SEC. 8. THE OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION.

(a) Procedure for Enforcement.--
(1) Notification.--The first sentence of section 10(b) (29
U.S.C. 659(b)) is amended to read as follows: ``If the
Secretary has reason to believe an employer has failed to
correct a violation, for which a citation has been issued,
within the period permitted for the correction of the
violation, the Secretary

[[Page S2437]]

shall notify the employer by certified mail of such failure
and of the penalty proposed to be assessed under section 17
by reason of such failure, and that the employer has 15
working days after the receipt of such a notification to
notify the Secretary that the employer desires to contest the
notification of the Secretary or the proposed assessment of
penalty. The period for the correction of the violation
described in the first sentence shall not begin to run until
the time for contestation has expired or the entry of a final
order by the Commission in a contested case initiated by the
employer in good faith and not solely for delay or avoidance
of penalties.''.
(2) Burden of proof.--Section 10 (29 U.S.C. 659) is amended
by adding at the end the following:
``(d) In all hearings before the Commission relating to a
contested citation, there shall be no presumption of a
violation of standard, or an existence of a hazard, under
this Act. In such cases, the Secretary shall have the burden
of proving by a preponderance of the evidence--
``(1) the existence of a violation;
``(2) that the violation for which the citation was issued
constitutes a realistic hazard to the safety and health of
the affected employees;
``(3) that there is a likelihood that the hazard will
result in employee injury;
``(4) that the employer knew or with the exercise of
reasonable diligence should have known of the hazard and
violation; and
``(5) that a technically and economically feasible method
of compliance exists.''.
(b) Judicial Review.--Section 11(a) (29 U.S.C. 660(a)) is
amended by inserting after ``conclusive.'' at the end of the
sixth sentence the following: ``The court shall make its own
determination as to questions of law, including the
reasonable interpretation of standards promulgated under this
Act, and shall not accord deference to either the Commission
or the Secretary.''.

SEC. 9. DISCRIMINATION.

(a) Complaint.--Section 11(c)(2) (29 U.S.C. 660(c)(2)) is
amended to read as follows:
``(2)(A)(i) Any employee who believes that such employee
has been discharged or otherwise discriminated against by the
employer of the employee in violation of this subsection may,
within 30 days after such violation occurs, file a complaint
with the Secretary alleging the discrimination.
``(ii) A complaint may not be filed under clause (i) after
the expiration of the 30-day period described in such clause.
``(B)(i) Upon receipt of a complaint under subparagraph (A)
and as the Secretary considers appropriate, the Secretary
shall conduct an investigation.
``(ii) If upon such investigation, the Secretary determines
that the provisions of this subsection have been violated,
the Secretary shall attempt to eliminate the alleged
violation by informal methods.
``(iii) Nothing stated or done, during the use of the
informal methods applied under clause (ii) may be made public
by the Secretary or used as evidence in any subsequent
proceeding.
``(iv) The Secretary shall make a determination concerning
the complaint as soon as possible and, in any event, not
later than 90 days after the date of the filing of the
complaint.
``(C) If the Secretary is unable to resolve the alleged
violation through informal methods, the Secretary shall
notify the parties in writing that conciliation efforts have
failed.
``(D)(i) Not later than 90 days after the date on which the
Secretary notifies the parties under subparagraph (C) in
writing that conciliation efforts have failed, the Secretary
may bring an action in any appropriate United States district
court against an employer described in subparagraph (A).
``(ii) The employer against whom an action under clause (i)
is brought may demand that the issue of discrimination be
determined by jury trial.
``(E) Upon a showing of discrimination in an action brought
under subparagraph (D)(i), the Secretary may seek, and the
court may award, any and all of the following types of
relief:
``(i) An injunction to enjoin a continued violation of this
subsection.
``(ii) Reinstatement of the employee to the same or
equivalent position.
``(iii) Reinstatement of full benefits and seniority
rights.
``(iv) Compensation for lost wages and benefits.
``(F) This subsection shall be the exclusive means of
securing a remedy for any aggrieved employee.''.
(b) Access to Records.--Section 11(c)(3) (29 U.S.C.
660(c)(3)) is amended to read as follows:
``(3) Any records of the Secretary, including the files of
the Secretary, relating to investigations and enforcement
proceedings pursuant to this subsection shall not be subject
to inspection and examination by the public while such
inspections and proceedings are pending in the United States
district court.''.

SEC. 10. INJUNCTION AGAINST IMMINENT DANGER.

Section 13 (29 U.S.C. 662) is amended--
(1) by striking subsection (c);
(2) by redesignating subsections (a) and (b) as subsections
(b) and (c), respectively; and
(3) by inserting before subsection (b) (as so redesignated
by paragraph (2)) the following:
``(a)(1)(A)(i) If the Secretary determines, on the basis of
an inspection or investigation under this section, that a
condition or practice in a place of employment is such that
an imminent danger to safety or health exists that could
reasonably be expected to cause death or serious physical
harm or permanent impairment of the health or functional
capacity of employees if not corrected immediately or before
the imminence of such danger can be eliminated through the
enforcement procedures otherwise provided by this Act, the
Secretary--
``(I) may inform the employer, and provide notice, by
posting at the place of employment, to the affected employees
of the danger; and
``(II) shall request the employer that the condition or
practice be corrected immediately or that the affected
employees be immediately removed from exposure to such
danger.
``(ii) A notice under clause (i) shall be removed by the
Secretary from the place of employment not later than 72
hours after the notice was first posted unless a court in a
proceeding under subsection (c) requires that the notice be
maintained.
``(B) The Secretary shall not prevent the continued
activity of the employees of the employer whose presence in
the place of employment is necessary--
``(i) to avoid, correct, or remove the imminent danger;
``(ii) to maintain the capacity of a continuous process
operation to resume the normal operations of the employer
without a cessation of the operations; or
``(iii) to permit the cessation of the operations of the
employer to be accomplished in a safe and orderly manner,
where the cessation of the operations is necessary.
``(2) No employer shall discharge, or in any manner
discriminate against any employee, because the employee has
refused to perform a duty that has been identified as the
source of an imminent danger by a notice posted pursuant
to paragraph (1).''.

SEC. 11. SMALL BUSINESS ASSISTANCE AND TRAINING.

Section 16 (29 U.S.C. 665) is amended--
(1) by inserting ``(a)'' after ``16.''; and
(2) by adding at the end the following:
``(b) The Secretary shall publish and make available to
employers a model injury prevention program that if completed
by the employer shall be deemed to meet the requirement for
an exemption under section 8A or a reduction in penalty under
section 17(a)(3)(B).
``(c) The Secretary shall establish and implement a program
to provide technical assistance and consultative services for
employers and employees, either directly or by grant or
contract, concerning work site safety and health and
compliance with this Act. The assistance shall be targeted at
small employers and the most hazardous industries.
``(d) Consultative services shall be provided to employers
through cooperative agreements between the States and the
Occupational Safety and Health Administration. The
consultative services provided under a cooperative agreement
under this subsection shall be the same type of services
described in part 1908 of title 39 of the Code of Federal
Regulations.
``(e) Not less than one-fourth of the annual appropriation
made to the Secretary to carry out this Act shall be expended
for the activities described in this section.''.

SEC. 12. PENALTIES.

(a) In General.--Section 17 (29 U.S.C. 666) is amended--
(1) by striking subsections (a), (b), (c), (f), (i), (j),
and (k);
(2) by redesignating subsections (d), (e), (g), (h), and
(l) as subsections (b), (c), (d), (e), and (f), respectively;
and
(3) by inserting after ``17.'' the following:
``(a)(1) Any employer who violates the requirements of
section 5, any standard, rule, or order promulgated pursuant
to section 6, or any other regulation promulgated under this
Act may be assessed a civil penalty of not more than $7,000.
The Commission shall have authority to assess all civil
penalties provided for in this section, giving due
consideration to the appropriateness of the penalty with
respect to--
``(A) the size of the employer;
``(B) the number of employees exposed to a violation;
``(C) the likely severity of any injuries directly
resulting from the violation;
``(D) the probability that the violation could result in
injury or illness;
``(E) the good faith of the employer in correcting the
violation after the violation has been identified;
``(F) the extent to which employee misconduct was
responsible for the violation; and
``(G) the effect of the penalty on the ability of the
employee to stay in business.
``(2) In assessing penalties for violations under this
section, the Commission shall have authority to determine
whether violations should be classified as willful, repeated,
serious, other than serious, or de minimus. Regardless of the
classification of a violation, there shall be only 1 penalty
assessed for each violation. The Commission may not enhance
the penalty based on the number of employees exposed to the
violation or the number of instances of the same violation.
``(3)(A) A penalty assessed under paragraph (1) shall be
reduced by 25 percent in any case in which the employer--
``(i) maintains a written safety and health program for the
work site where the violation, for which the penalty was
assessed, occurred; or

[[Page S2438]]

``(ii) shows that the work site where the violation, for
which the penalty was assessed, occurred has an exemplary
safety record.
``(B) If the employer maintains a program described in
subparagraph (A)(i) and has the record described in
subparagraph (A)(ii), the penalty shall be reduced by 50
percent.
``(4) No penalty shall be assessed against an employer for
a violation other than a violation previously cited by the
Secretary, a violation that creates an imminent danger, a
violation that has caused death, or a willful violation that
has caused serious injury to an employee, unless the
Secretary provides--
``(A) the employer with a written notification of the
violation; and
``(B) the employer a reasonable time (but not less than 10
days after the receipt by the employer of the written
notification) to correct the violation.''.
(b) Criminal Penalties.--Section 17(c) (29 U.S.C. 666(c))
(as so redesignated by subsection (a)) is amended by adding
at the end the following: ``No employer shall be subject to
any State or Federal criminal prosecution arising out of a
workplace accident other than under this subsection.''.

SEC. 13. TRANSFER OF CERTAIN OCCUPATIONAL SAFETY AND HEALTH
FUNCTIONS.

(a) Transfer of Functions; Repeal.--
(1) National institute of occupational safety and health.--
The functions and authorities provided to the National
Institute of Occupational Safety and Health under section 22
of the Occupational Safety and Health Act of 1970 (29 U.S.C.
671) are transferred to the Secretary of Labor.
(2) Secretary of health and human services.--The
responsibilities and authorities of the Secretary of Health
and Human Services under sections 20, 21, and 22 of the
Occupational Safety and Health Act of 1970 (29 U.S.C. 669,
670, and 671) are transferred to the Secretary of Labor.
(3) Repeal.--Section 22 (29 U.S.C. 671) is repealed.
(b) Additional Functions.--In carrying out the functions
transferred under subsection (a), the Secretary of Labor
shall take such actions as are necessary to avoid duplication
of programs and to maximize training, education, and research
under the Occupational Safety and Health Act of 1970 (29
U.S.C. 671 et seq.).
(c) References.--
(1) In general.--Each reference in any other Federal law,
Executive order, rule, regulation, or delegation of
authority, or any document of or relating to--
(A) the head of the transferred office, or the Secretary of
Health and Human Services, with regard to functions
transferred under subsection (a), shall be deemed to refer to
the Secretary of Labor; and
(B) a transferred office with regard to functions
transferred under subsection (a), shall be deemed to refer to
the Department of Labor.
(2) Definition.--For the purpose of this subsection, the
term ``office'' includes any office, administration, agency,
institute, unit, organizational entity, or component thereof.
(d) Conforming Amendments.--Not later than 180 days after
the effective date of this Act, if the Secretary of Labor
determines (after consultation with the appropriate
committees of Congress and the Director of the Office of
Management and Budget) that technical and conforming
amendments to Federal statutes are necessary to carry out the
changes made by this section, the Secretary of Labor shall
prepare and submit to Congress recommended legislation
containing the amendments.

SEC. 14. ECONOMIC IMPACT ANALYSIS.

The Secretary of Labor shall conduct a continuing
comprehensive analysis of the costs and benefits of each
standard in effect under section 6 of the Occupational Safety
and Health Act of 1970 (29 U.S.C. 655). The Secretary shall
report the results of the analysis to Congress upon the
expiration of the 2-year period beginning on the date of
enactment of this Act and every 2 years thereafter.

SEC. 15. LABOR RELATIONS.

(a) Definitions.--Paragraph (5) of section 2 of the
National Labor Relations Act (29 U.S.C. 152(5)) is amended by
adding at the end the following: ``The term does not include
a safety committee that is comprised of an employer and the
employees of the employer and that is jointly established by
the employer and the employees of the employer, or by the
employer and a labor organization representing the employees
of the employer, to carry out efforts to reduce injuries and
disease arising out of employment.''.
(b) Unfair Labor Practices.--Section 8(a)(2) of the
National Labor Relations Act (29 U.S.C. 158(a)(2)) is amended
by inserting before the semicolon at the end the following:
``: Provided further, That it shall not constitute an unfair
practice under this paragraph for an employer and the
employees of the employer, or for an employer and a labor
organization representing the employees of the employer, to
jointly establish a safety committee in which the employer
and the employees of the employer carry out efforts to reduce
injuries and disease arising out of employment''.
______

By Mr. MACK (for himself, Mr. D'Amato, Mr. Bond, Mr. Faircloth
and Mr. Grams):

S. 462. A bill to reform and consolidate the public and assisted
housing programs of the United States, and to redirect primary
responsibility for these programs from the Federal Government to States
and localities, and for other purposes; to the Committee on Banking,
Housing, and Urban Affairs.

THE PUBLIC HOUSING REFORM AND RESPONSIBILITY ACT OF 1997

Mr. MACK. Mr. President, I am today introducing, along with Senators
D'Amato, Bond, Faircloth, and Grams, the Public Housing Reform and
Responsibility Act of 1997. This bill is similar to public and assisted
housing reform legislation, S. 1260, that was introduced in the 104th
Congress and passed unanimously by the Senate.
The Public Housing Reform and Responsibility Act of 1997 addresses a
public housing system fraught with counterproductive rules and
regulations that make it impossible for even the best run public
housing authorities [PHA's] to operate effectively and efficiently. It
will help to make public housing a platform from which residents can
achieve the goal of economic independence and self-sufficiency. In
addition, it promotes increased residential choice and mobility by
increasing opportunities for residents to use tenant-based assistance.
Most public housing today serves only the poorest of the poor--on
average those with incomes at 17 percent of area median. The gap
between tenant rent contributions and the cost of operating public
housing is growing wider than the ability of Federal housing subsidy
funds to close it. PHA's are denied the flexibility necessary to
maintain the existing supply of public housing in decent and safe
condition, and in some cases are even constrained from demolishing
vacant or nonviable public housing developments.
Just as these rules have made it difficult for housing authorities to
provide and maintain decent and safe housing or to meet basic operating
costs, these rules have been even worse for tenants. They have
destroyed the ability of families to move up and out of public housing
and become economically self-sufficient. Public housing rent rules, in
particular, create strong economic disincentives for residents to work
or seek higher paying jobs.
The following reforms contained in the Public Housing Reform and
Responsibility Act represent significant improvements in current public
and assisted housing policies.
First, the bill consolidates a multitude of programs into two
flexible block grants to expand the eligible uses of funds and allow
more creative and efficient use of resources. The bill also repeals a
number of current programs that are obsolete, unused, or unfunded.
Second, it institutes permanent rent reforms such as ceiling rents,
earned income adjustments, and minimum rents that provide PHA's with
the tools to develop rental policies that encourage and reward work and
further the goal of creating mixed-income communities. The bill also
removes the floor on rents that may be charged under the Brooke
amendment, while assuring that poor families will not pay more than 30
percent of their income for rent.
Third, the bill requires tough, swift action against PHA's with
severe management deficiencies and provides HUD or court-appointed
receivers with the necessary tools and powers to deal with troubled
agencies and protect public housing residents.
Fourth, it requires intervention with respect to severely distressed
public housing developments that trap residents in deplorable living
conditions and are costly to operate or maintain. It provides residents
with alternative housing using vouchers or other available housing.
Fifth, the bill permanently repeals the one-for-one replacement
requirement and streamlines the demolition and disposition process to
permit PHA's to demolish or sell vacant or obsolete public housing.
Sixth, it gives PHA's broad flexibility to develop or participate
with other providers of affordable housing in the development of mixed-
income, mixed finance developments.
Seventh, it repeals Federal preferences that have had the unintended
consequence of concentrating the poorest of the poor in public housing
developments and allows PHA's to operate according to locally
established preferences consistent with local housing

[[Page S2439]]

needs. The bill still maintains the requirement that most housing
assistance be targeted to very low-income households.
Eighth, the Public Housing Reform and Responsibility Act calls on
PHA's to increase coordination with State and local welfare agencies to
ensure that welfare recipients living in public housing will have the
full opportunity to move from welfare to work.
Ninth, the bill provides residents with an active voice in developing
the local PHA plans that will govern the operations and management of
housing and for direct participation on housing authority boards of
directors. It also authorizes funds for resident organizations to
develop resident management and empowerment activities.
Finally, it merges the Section 8 voucher and certificate programs
into a single, choice-based program designed to operate more
effectively in the private marketplace. It repeals requirements that
are administratively burdensome to landlords, such as take-one, take-
all, endless lease and 90-day termination notice requirements. These
reforms will make participation in the section 8 tenant-based program
more attractive to private landlords and increase housing choices for
lower income families.
The reforms contained in this legislation will significantly improve
the nation's public housing and tenant-based rental assistance program
and the lives of those who reside in Federally assisted housing. The
funding flexibility, substantial deregulation of the day-to-day
operations and policies of public authorities, encouragement of mixed-
finance developments, policies to deal with distressed and troubled
public housing, and rent reforms will change the face of public housing
for PHA's, residents, and local communities.
Reform of the public housing system has been and should remain a
bipartisan effort. I look forward to working with all of my colleagues
toward early passage of this legislation.
Mr. President, I ask unanimous consent that additional material be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

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