To establish State revolving funds for school construction.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``State Revolving Funds for Schools 
Act''.

SEC. 2. STATE REVOLVING FUND PILOT PROGRAM.

    (a) Establishment.--
            (1) Cooperative agreements.--Subject to the provisions of 
        this section, the Secretary of Education may enter into 
        cooperative agreements with States for the establishment of 
        State revolving funds and multistate revolving funds for making 
        loans to local political subdivisions or local educational 
        agencies for building or repairing elementary or secondary 
        schools which provide free public education.
            (2) Interstate compacts.--2 or more States may enter into a 
        cooperative agreement under paragraph (1) with the Secretary 
        for the establishment of a multistate revolving fund, to enter 
        into an interstate compact establishing such fund in accordance 
        with this section.
    (b) Funding.--The Secretary shall make grants to State revolving 
funds and multistate revolving funds in a State in a cooperative 
agreement under subsection (a)(1) to provide initial capital for loans 
provided under this section to local political subdivisions or local 
educational agencies. Each fund shall apply repayments of principal and 
interest on loans to the making of additional loans. The Secretary 
shall take final action on an application for a grant under this 
subsection within 90 days of the date of the submittal of such 
application.
    (c) Revolving Fund Requirements.--In order to establish a revolving 
fund under this section, each State establishing the fund shall--
            (1) meet the matching requirement described in subsection 
        (d);
            (2) identify an operating entity of the State as recipient 
        of the grant if the entity has the capacity to manage loan 
        funds;
            (3) allow such funds to be used as reserve for debt issued 
        by the State so long as proceeds are deposited in the fund for 
        loan purposes;
            (4) ensure that investment income generated by funds 
        contributed to an account of the fund will be--
                    (A) credited to the account;
                    (B) available for use in providing loans to 
                projects eligible for assistance from the account; and
                    (C) invested in United States Treasury securities, 
                bank deposits, or such other financing instruments as 
                the Secretary may approve to earn interest to enhance 
                the leveraging of projects assisted by the fund;
            (5) ensure that any loan from the fund will bear interest 
        at or below the lowest interest rates being offered for bonds 
        the income from which is exempt from Federal taxation, as 
        determined by the State;
            (6) ensure that repayment of any loan from the fund will 
        commence not later than 1 year after the project has been 
        completed;
            (7) ensure that the term for repaying any loan will not 
        exceed the projected useful life of the project that is the 
        subject of the loan; and
            (8) require the fund to make an annual report to the 
        Secretary on its status and make such other reports as the 
        Secretary may require by guidelines.
    (d) Matching Requirement.--In order to meet the matching 
requirement, each State establishing a revolving fund shall--
            (1) contribute, at a minimum, in each account of the fund 
        from non-Federal sources an amount equal to 25 percent of the 
        amount of each capitalization grant made to the State and 
        contributed to the fund under subsection (b); or
            (2) require for any project financed from the fund that the 
        local political subdivision or educational agency contribute at 
        least 20 percent of the cost of such project from non-Federal 
        sources.
    (e) Forms of Assistance From Revolving Funds.--
            (1) In general.--A revolving fund established under this 
        section may make loans to a local educational agency in an 
        amount equal to all or part of the cost of carrying out a 
        project eligible for assistance under this section. In the case 
        of a project which meets the requirement of subsection (d)(2), 
        a revolving fund established under this section may make loans 
        to a local educational agency in an amount equal to up to 80 
        percent of the cost of carrying out a project eligible for 
        assistance under this section.
            (2) Applications for loans.--An application to a revolving 
        fund by a local educational agency for a loan shall include--
                    (A) in the case of a renovation project, a 
                description of each architectural, civil, structural, 
                mechanical, or electrical deficiency to be corrected 
                with funds under a loan and the priorities to be 
                applied;
                    (B) a description of the criteria used by the 
                applicant to determine the type of corrective action 
                necessary for the renovation of a facility;
                    (C) a description of improvements to be made and a 
                cost estimate for the improvements; and
                    (D) such other information as the revolving fund 
                may require.
        A revolving fund shall take final action on a completed 
        application submitted to it within 90 days after the date of 
        its submittal.
            (3) Criteria for loans.--In considering applications for a 
        loan, a revolving fund shall consider--
                    (A) the extent to which the local educational 
                agency involved lacks the fiscal capacity, including 
                the ability to raise funds through the full use of such 
                agency's bonding capacity and otherwise, to undertake 
                the project for which the loan would be used without 
                the loan;
                    (B) the threat that the condition of the physical 
                plant in the project poses to the safety and well-being 
                of students;
                    (C) the demonstrated need for the construction, 
                reconstruction, or renovation based on the condition of 
                the facility in the project; and
                    (D) the age of such facility.
    (f) Qualifying Projects.--A project is eligible for a loan from a 
revolving fund if it is a project that consists of--
            (1) the construction of new elementary or secondary schools 
        to meet the needs imposed by enrollment growth;
            (2) the repair or upgrading of classrooms or structures 
        related to academic learning, including the repair of leaking 
        roofs, crumbling walls, inadequate plumbing, poor ventilation 
        equipment, and inadequate heating or light equipment;
            (3) an activity to increase physical safety at the 
        educational facility involved;
            (4) an activity to enhance the educational facility 
        involved to provide access for students, teachers, and other 
        individuals with disabilities;
            (5) an activity to address environmental hazards at the 
        educational facility involved, such as poor ventilation, indoor 
        air quality, or lighting;
            (6) the provision of basic infrastructure that facilitates 
        educational technology, such as communications outlets, 
        electrical systems, power outlets, or a communication closet;
            (7) work that will bring an educational facility into 
        conformity with the requirements of--
                    (A) environmental protection or health and safety 
                programs mandated by Federal, State, or local law if 
                such requirements were not in effect when the facility 
                was initially constructed; and
                    (B) hazardous waste disposal, treatment, and 
                storage requirements mandated by the Resource 
                Conservation and Recovery Act of 1976 or similar State 
                laws; and
            (8) work to detect, remove, or otherwise contain asbestos 
        hazards in educational facilities.
    (g) Loan Forgiveness.--A State may forgive all or part of any loan 
described in this section if the total projected principal and interest 
repayments for all loans granted by the State and not forgiven under 
this subsection equal or exceed the combined total of all Federal 
capitalization grants provided to the State and any matching funds 
described in subsection (d)(1) provided by the State.
    (h) Supplementation.--Any loan made by a revolving fund shall be 
used to supplement and not supplant other Federal, State, and local 
funds available.
    (i) Limitation on Repayments.--Notwithstanding any other provision 
of law, the repayment of a loan from a revolving fund under this 
section may not be credited toward the non-Federal share of the cost of 
any project.
    (j) Secretarial Requirements.--In administering this section, the 
Secretary shall specify procedures and guidelines for establishing, 
operating, and providing assistance from a revolving fund.
    (k) United States Not Obligated.--The contribution of Federal funds 
into a revolving fund established under this section shall not be 
construed as a commitment, guarantee, or obligation on the part of the 
United States to any third party, nor shall any third party have any 
right against the United States for payment solely by virtue of the 
contribution. Any security or debt financing instrument issued by the 
revolving fund shall expressly state that the security or instrument 
does not constitute a commitment, guarantee, or obligation of the 
United States.
    (l) Management of Federal Funds.--Sections 3335 and 6503 of title 
31, United States Code, shall not apply to funds contributed under this 
section.
    (m) Program Administration.--For each of fiscal years 2002 through 
2006, a State may expend an amount not to exceed 2 percent of the 
Federal funds contributed to a revolving fund established by the State 
under this section to pay the reasonable costs of administering the 
fund.
    (n) Secretarial Review.--The Secretary shall review the financial 
condition of each revolving fund established under this section 
biennially and transmit to Congress a report on the results of such 
review not later than 90 days after the completion of the review.
    (o) Authorization of Appropriations.--For grants to States for the 
initial capitalization of revolving funds there are authorized to be 
appropriated $1,000,000,000 for fiscal year 2002 and for each of the 4 
succeeding fiscal years.

SEC. 3. DEFINITIONS.

    The terms used in this Act shall have the meaning given such terms 
in section 14101 of the Elementary and Secondary Education Act of 1965 
(20 U.S.C. 8801).

Summary: State Revolving Funds for Schools Act - Establishes a pilot program of State revolving funds for school construction. Authorizes the Secretary of Education to enter into cooperative agreements with States for the establishment of State revolving funds and multistate revolving funds for making loans to local political subdivisions or local educational agencies for building or repairing public elementary or secondary schools.