Honorable Edward R. Richardson
            Superintendent of Education 
            State Department of Education
            Gordon Persons Office Building
            50 North Ripley Street
            Montgomery, Alabama 36130

Dear Superintendent Richardson:

I am pleased to inform you about the extension of Qualified Zone Academy            Bonds (QZABs) through 2003 and to remind you that the 1999 and 2000            allocations for QZABs will expire at the end of this year. QZABs are            an important tool states and local educational agencies (LEAs) can use            to provide additional resources for improving school facilities and            instruction.

As you know, QZABs are bonds the Federal Government subsidizes by allowing            bondholders to receive tax credits that are approximately equal to the            interest that states and communities would pay holders of taxable bonds.            As a result, issuers are generally responsible for repayment of just            the principal. QZABs were first authorized under Section 226 of the            Taxpayer's Relief Act of 1997 (Section 1397E of the Internal Revenue            Code).

States and LEAs have considerable flexibility in the use of QZABs.            They may be used for rehabilitating or repairing school facilities,            purchasing equipment, developing curricula, and training school personnel,            but not for new construction. QZABs can help schools save up to 50 percent            of the cost of financing allowable activities. In addition, there is            no requirement for state educational agencies to apply to the Federal            Government to use QZABs.

Congress adopted President Bush's proposal to extend the QZAB authority            through 2003 as part of the Job Creation and Worker Assistance Act of            2002 (Public Law 107-147). This legislation continues the QZAB program            at its prior bond allocation level of $400 million a year.

As the following chart shows, QZABs are currently available. However,            unused funds from the 1999 and 2000 allocations are set to expire at            the end of this year, and to make use of these allocations, bonds must            be issued by December 31, 2002. If a state does not issue the amount            of QZABs allocated by the Federal Government between the calendar year            the funds are first made available and the date by which they must be            issued, the unused QZAB allocation expires and cannot be used. The 1998            QZAB allocation has already expired.

|Amount       | Calendar year 
              first available | Bonds must be issued by December                31 of the year
|------------ | -------------------------------------------- | --------------------------------------------------------------
|$400 million | 1999                                         | 2002                                                          
|$400 million | 2000                                         | 2002                                                          
|$400 million | 2001                                         | 2003                                                          
|$400 million | 2002                                         | 2004                                                          
|$400 million | 2003                                         | 2005                                                          

For your information, I have enclosed a table showing            the state allocations of QZABs for the years 1999-2002. The allocations            represent the maximum amount of QZABs that may be issued within a state            beginning in a given calendar year. The Internal Revenue Service has            published these allocations in Rev. Proc. 2002-25. The state allocations            for 2003 will be announced in December of this year.

If you have questions, please contact either Bruce Davie of the U.S.            Treasury Department (202- 622-2976 or Bruce.Davie@do.treas.gov)            or Jim Houser of the U.S. Department of Education (202-401-0307 or Jim.Houser@ed.gov).            I understand that your school districts have needs that can be met by            this simple-to-use program and thank you for working with them to ensure            that no child is left behind.

Sincerely,

/s/

Rod Paige

Enclosure

|Last Modified: 09/15/2004
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