H. R. 2646—3
expenses for any taxable year, such excess distribu-
tions shall be allocated first to contributions and
earnings not described in clause (i).’’.
(4) CONFORMING
AMENDMENTS.—Subsections (b)(1) and
(d)(2) of section 530 are each amended by striking ‘‘higher’’
each place it appears in the text and heading thereof.
(b) MAXIMUM ANNUAL CONTRIBUTIONS.—
(1) IN
GENERAL.—Section 530(b)(1)(A)(iii) (defining edu-
cation individual retirement account) is amended by striking
‘‘$500’’ and inserting ‘‘the contribution limit for such taxable
year’’.
(2) CONTRIBUTION LIMIT.—Section 530(b) (relating to defini-
tions and special rules), as amended by subsection (a)(2), is
amended by adding at the end the following new paragraph:
‘‘(5) CONTRIBUTION
LIMIT.—The term ‘contribution limit’
means $500 ($2,000 in the case of any taxable year beginning
after December 31, 1998, and ending before January 1, 2003).’’.
(3) CONFORMING
AMENDMENT.—Section 4973(e)(1)(A) is
amended by striking ‘‘$500’’ and inserting ‘‘the contribution
limit (as defined in section 530(b)(5)) for such taxable year’’.
(c) WAIVER OF AGE LIMITATIONS FOR CHILDREN WITH SPECIAL
NEEDS.—Section 530(b)(1) (defining education individual retirement
account) is amended by adding at the end the following flush
sentence:
‘‘The age limitations in the preceding sentence shall not apply
to any designated beneficiary with special needs (as determined
under regulations prescribed by the Secretary).’’.
(d) CORPORATIONS PERMITTED TO CONTRIBUTE TO ACCOUNTS.—
Section 530(c)(1) (relating to reduction in permitted contributions
based on adjusted gross income) is amended by striking ‘‘The maxi-
mum amount which a contributor’’ and inserting ‘‘In the case of
a contributor who is an individual, the maximum amount the
contributor’’.
(e) TECHNICAL CORRECTIONS.—
(1) Section 530(b)(1) is amended by inserting ‘‘an individual
who is’’ before ‘‘the designated beneficiary’’ in the material
preceding subparagraph (A).
(2)(A) Section 530(b)(1)(E) is amended to read as follows:
‘‘(E) Except as provided in subsection (d)(7), any bal-
ance to the credit of the designated beneficiary on the
date on which the beneficiary attains age 30 shall be
distributed within 30 days after such date to the beneficiary
or, if the beneficiary dies before attaining age 30, shall
be distributed within 30 days after the date of death of
such beneficiary.’’.
(B) Section 530(d)(7) is amended by inserting at the end
the following new sentence: ‘‘In applying the preceding sen-
tence, members of the family of the designated beneficiary
shall be treated in the same manner as the spouse under
such paragraph (8).’’.
(C) Section 530(d) is amended by adding at the end the
following new paragraph:
‘‘(8) DEEMED
DISTRIBUTION
ON
REQUIRED
DISTRIBUTION
DATE.—In any case in which a distribution is required under
subsection (b)(1)(E), any balance to the credit of a designated
beneficiary as of the close of the 30-day period referred to
H. R. 2646—4
in such subsection for making such distribution shall be deemed
distributed at the close of such period.’’.
(3)(A) Section 530(d)(1) is amended by striking ‘‘section
72(b)’’ and inserting ‘‘section 72’’.
(B) Section 72(e) is amended by inserting after paragraph
(8) the following new paragraph:
‘‘(9) EXTENSION OF PARAGRAPH (2)(B) TO QUALIFIED STATE
TUITION PROGRAMS AND EDUCATIONAL INDIVIDUAL RETIREMENT
ACCOUNTS.—Notwithstanding any other provision of this sub-
section, paragraph (2)(B) shall apply to amounts received under
a qualified State tuition program (as defined in section 529(b))
or under an education individual retirement account (as defined
in section 530(b)). The rule of paragraph (8)(B) shall apply
for purposes of this paragraph.’’.
(4) Section 135(d)(2) is amended to read as follows:
‘‘(2) COORDINATION WITH OTHER HIGHER EDUCATION BENE-
FITS.—The amount of the qualified higher education expenses
otherwise taken into account under subsection (a) with respect
to the education of an individual shall be reduced (before the
application of subsection (b)) by—
‘‘(A) the amount of such expenses which are taken
into account in determining the credit allowable to the
taxpayer or any other person under section 25A with
respect to such expenses; and
‘‘(B) the amount of such expenses which are taken
into account in determining the exclusion under section
530(d)(2).’’.
(5) Section 530(d)(2) is amended by adding at the end
the following new subparagraph:
‘‘(D) DISALLOWANCE OF EXCLUDED AMOUNTS AS CREDIT
OR DEDUCTION.—No deduction or credit shall be allowed
to the taxpayer under any other section of this chapter
for any qualified education expenses to the extent taken
into account in determining the amount of the exclusion
under this paragraph.’’.
(6) Section 530(d)(4)(B) is amended by striking ‘‘or’’ at
the end of clause (ii), by striking the period at the end of
clause (iii) and inserting ‘‘; or’’, and by adding at the end
the following new clause:
‘‘(iv) an amount which is includible in gross income
solely because the taxpayer elected under paragraph
(2)(C) to waive the application of paragraph (2) for
the taxable year.’’.
(7) So much of section 530(d)(4)(C) as precedes clause (ii)
thereof is amended to read as follows:
‘‘(C) CONTRIBUTIONS RETURNED BEFORE DUE DATE OF
RETURN.—Subparagraph (A) shall not apply to the distribu-
tion of any contribution made during a taxable year on
behalf of the designated beneficiary if—
‘‘(i) such distribution is made on or before the
day prescribed by law (including extensions of time)
for filing the beneficiary’s return of tax for the taxable
year or, if the beneficiary is not required to file such
a return, the 15th day of the 4th month of the taxable
year following the taxable year; and’’.
(8) Section 135(c)(2)(C) is amended—
H. R. 2646—5
(A) by inserting ‘‘AND EDUCATION INDIVIDUAL RETIRE-
MENT ACCOUNTS’’ in the heading after ‘‘PROGRAM’’; and
(B) by striking ‘‘section 529(c)(3)(A)’’ and inserting
‘‘section 72’’.
(9) Section 4973(e)(1) is amended to read as follows:
‘‘(1) IN GENERAL.—In the case of education individual retire-
ment accounts maintained for the benefit of any one beneficiary,
the term ‘excess contributions’ means the sum of—
‘‘(A) the amount by which the amount contributed for
the taxable year to such accounts exceeds $500 (or, if
less, the sum of the maximum amounts permitted to be
contributed under section 530(c) by the contributors to
such accounts for such year);
‘‘(B) if any amount is contributed during such year
to a qualified State tuition program for the benefit of
such beneficiary, any amount contributed to such accounts
for such taxable year; and
‘‘(C) the amount determined under this subsection for
the preceding taxable year, reduced by the sum of—
‘‘(i) the distributions out of the accounts for the
taxable year which are included in gross income; and
‘‘(ii) the excess (if any) of the maximum amount
which may be contributed to the accounts for the tax-
able year over the amount contributed to the accounts
for the taxable year.’’.
(10)(A) Paragraph (5) of section 530(d) is amended by strik-
ing the first sentence and inserting the following new sentence:
‘‘Paragraph (1) shall not apply to any amount paid or distrib-
uted from an education individual retirement account to the
extent that the amount received is paid, not later than the
60th day after the date of such payment or distribution, into
another education individual retirement account for the benefit
of the same beneficiary or a member of the family (within
the meaning of section 529(e)(2) of such beneficiary who has
not attained age 30 as of such date.’’.
(B) Paragraph (6) of section 530(d) is amended by inserting
before the period ‘‘and has not attained age 30 as of the date
of such change’’.
(f ) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 1998.
(2) TECHNICAL CORRECTIONS.—The amendments made by
subsection (e) shall take effect as if included in the amendments
made by section 213 of the Taxpayer Relief Act of 1997.
SEC. 102. EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBU-
TIONS FROM QUALIFIED STATE TUITION PROGRAMS.
(a) IN GENERAL.—Section 529(c)(3)(B) (relating to distributions)
is amended to read as follows:
‘‘(B) DISTRIBUTIONS FOR QUALIFIED HIGHER EDUCATION
EXPENSES.—
‘‘(i) IN GENERAL.—No amount shall be includible
in gross income under subparagraph (A) if the qualified
higher education expenses of the designated beneficiary
during the taxable year are not less than the aggregate
distributions during the taxable year.
H. R. 2646—6
‘‘(ii) DISTRIBUTIONS
IN
EXCESS
OF
EXPENSES.—If
such aggregate distributions exceed such expenses dur-
ing the taxable year, the amount otherwise includible
in gross income under subparagraph (A) shall be
reduced by the amount which bears the same ratio
to the amount so includible (without regard to this
subparagraph) as such expenses bear to such aggregate
distributions.
‘‘(iii) ELECTION TO WAIVE EXCLUSION.—A taxpayer
may elect to waive the application of this subparagraph
for any taxable year.
‘‘(iv) IN-KIND
DISTRIBUTIONS.—Any benefit fur-
nished to a designated beneficiary under a qualified
State tuition program shall be treated as a distribution
to the beneficiary for purposes of this paragraph.
‘‘(v) DISALLOWANCE
OF
EXCLUDED
AMOUNTS
AS
CREDIT OR DEDUCTION.—No deduction or credit shall
be allowed to the taxpayer under any other section
of this chapter for any qualified higher education
expenses to the extent taken into account in determin-
ing the amount of the exclusion under this paragraph.’’.
(b) DEFINITION OF QUALIFIED HIGHER EDUCATION EXPENSES.—
Section 529(e)(3)(A) (defining qualified higher education expenses)
is amended to read as follows:
‘‘(A) IN GENERAL.—The term ‘qualified higher education
expenses’ means expenses for tuition, fees, academic tutor-
ing, special needs services, books, supplies, computer equip-
ment (including related software and services), and other
equipment which are incurred in connection with the enroll-
ment or attendance of the designated beneficiary at an
eligible educational institution.’’.
(c) 
COORDINATION
WITH
EDUCATION
CREDITS.—Section
25A(e)(2) (relating to coordination with exclusions) is amended—
(1) by inserting ‘‘a qualified State tuition program or’’ before
‘‘an education individual retirement account’’; and
(2) by striking ‘‘section 530(d)(2)’’ and inserting ‘‘section
529(c)(3)(B) or 530(d)(2)’’.
(d) ELIGIBLE
EDUCATIONAL
INSTITUTIONS
PERMITTED
TO
MAINTAIN QUALIFIED TUITION PROGRAMS.—
(1) IN GENERAL.—Section 529(b)(1) (defining qualified State
tuition program) is amended by inserting ‘‘or, in the case of
taxable years beginning after December 31, 2005, by one or
more eligible educational institutions’’ after ‘‘maintained by
a State or agency or instrumentality thereof ’’.
(2) PRIVATE QUALIFIED TUITION PROGRAMS LIMITED TO BENE-
FIT
PLANS.—Section 529(b)(1) is amended by adding at the
end the following flush sentence:
‘‘Clause (ii) of subparagraph (A) shall only apply to a program
established and maintained by a State or agency or instrumen-
tality thereof.’’.
(3) LIMITATION ON CONTRIBUTIONS TO PRIVATE QUALIFIED
TUITION PROGRAMS.—Section 529(b) is amended by adding at
the end the following new paragraph:
‘‘(8) LIMITATION ON CONTRIBUTIONS TO PRIVATE QUALIFIED
TUITION PROGRAMS.—In the case of a program not established
and maintained by a State or agency or instrumentality thereof,
such program shall not be treated as a qualified tuition program
H. R. 2646—7
unless it limits the annual contribution to the program on
behalf of a designated beneficiary to an amount equal to the
lesser of—
‘‘(A) $5,000; or
‘‘(B) the excess of—
‘‘(i) $50,000, over
‘‘(ii) the aggregate amount contributed to such
program on behalf of such beneficiary for all prior
taxable years.’’.
(4) TAX ON EXCESS CONTRIBUTIONS.—
(A) IN
GENERAL.—Section 4973(a) (relating to tax
imposed) is amended by striking ‘‘or’’ at the end of para-
graph (3), inserting ‘‘or’’ at the end of paragraph (4), and
inserting after paragraph (4) the following new paragraph:
‘‘(5) a private qualified tuition program (as defined in sub-
section (g)),’’.
(B) EXCESS CONTRIBUTIONS DEFINED.—Section 4973 is
amended by adding at the end the following new subsection:
‘‘(g) EXCESS CONTRIBUTIONS
TO PRIVATE QUALIFIED TUITION
PROGRAM.—For purposes of this section—
‘‘(1) IN GENERAL.—In the case of private qualified tuition
programs, the term ‘excess contributions’ means, with respect
to any one beneficiary—
‘‘(A) the amount by which the amounts contributed
for the taxable year to such programs exceed the lesser
of—
‘‘(i) $5,000; or
‘‘(ii) the excess of—
‘‘(I) $50,000, over
‘‘(II) the aggregate amount contributed to all
private qualified tuition programs on behalf of such
beneficiary for all prior taxable years; and
‘‘(B) the amount determined under this subsection for
the preceding taxable year, reduced by the sum of—
‘‘(i) the distributions out of such programs for the
taxable year which are included in gross income; and
‘‘(ii) the excess (if any) of the maximum amount
which may be contributed to such programs for the
taxable year over the amount contributed to such
programs for the taxable year.
‘‘(2) SPECIAL
RULE
IF
CONTRIBUTIONS
MADE
TO
A
STATE
TUITION PROGRAM OR AN EDUCATION INDIVIDUAL RETIREMENT
ACCOUNT.—Notwithstanding paragraph (1), with respect to any
one beneficiary, the amount contributed to a private qualified
tuition program for any taxable year shall be treated as excess
contributions if any amount is contributed during such year
for the benefit of such beneficiary to—
‘‘(A) a qualified tuition program (as defined in section
529) that is established and maintained by a State or
any agency or instrumentality thereof; or
‘‘(B) an education individual retirement account (as
defined in section 530).
‘‘(3) SPECIAL RULES.—The contributions described in sub-
section (e)(2) shall not be taken into account.
‘‘(4) PRIVATE
QUALIFIED
TUITION
PROGRAM.—The term
‘private qualified tuition program’ means a qualified tuition
H. R. 2646—8
program (as defined in section 529) not established and main-
tained by a State or any agency or instrumentality thereof.’’.
(5) TECHNICAL AMENDMENTS.—
(A) The text of sections 72(e)(9), 529, 530(b)(2)(B), and
4973(e)(1)(B) are amended by striking ‘‘qualified State tui-
tion program’’ each place it appears and inserting ‘‘qualified
tuition program’’.
(B)(i) The heading of section 529 is amended to read
as follows:
‘‘SEC. 529. QUALIFIED TUITION PROGRAMS.’’.
(ii) The item relating to section 529 in the table of
sections for part VIII of subchapter F of chapter 1 is
amended by striking ‘‘State’’.
(e) TECHNICAL CORRECTIONS.—
(1) Section 135(c)(3) is amended to read as follows:
‘‘(3) 
ELIGIBLE
EDUCATIONAL
INSTITUTION.—The 
term
‘eligible educational institution’ has the meaning given such
term by section 529(e)(5).’’.
(2) Section 529(c)(3)(A) is amended by striking ‘‘section
72(b)’’ and inserting ‘‘section 72’’.
(3) Section 529(e)(2) is amended to read as follows:
‘‘(2) MEMBER OF FAMILY.—The term ‘member of the family’
means, with respect to any designated beneficiary—
‘‘(A) the spouse of such beneficiary;
‘‘(B) an individual who bears a relationship to such
beneficiary which is described in paragraphs (1) through
(8) of section 152(a); and
‘‘(C) the spouse of any individual described in subpara-
graph (B).’’.
(f ) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as provided in paragraphs (2)
and (3), the amendments made by this section shall apply
to taxable years beginning after December 31, 1998.
(2) ELIGIBLE
EDUCATIONAL
INSTITUTIONS
PERMITTED
TO
MAINTAIN
QUALIFIED
TUITION
PROGRAMS.—The amendments
made by subsection (d) shall apply to taxable years beginning
after December 31, 2005.
(3) TECHNICAL CORRECTIONS.—The amendments made by
subsection (e) shall take effect as if included in the amendments
made by section 211 of the Taxpayer Relief Act of 1997.
SEC. 103. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED
EDUCATIONAL ASSISTANCE.
Section 127(d) (relating to termination of exclusion for
educational assistance programs) is amended by striking ‘‘May 31,
2000’’ and inserting ‘‘December 31, 2002’’.
SEC. 104. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION
FOR 
GOVERNMENTAL 
BONDS 
USED 
TO 
FINANCE
EDUCATION FACILITIES.
(a) IN GENERAL.—Section 148(f )(4)(D)(vii) (relating to increase
in exception for bonds financing public school capital expenditures)
is amended by striking ‘‘$5,000,000’’ the second place it appears
and inserting ‘‘$10,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to obligations issued after December 31, 1998.
H. R. 2646—9
SEC. 105. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE
NATIONAL HEALTH CORPS SCHOLARSHIP PROGRAM AND
THE F. EDWARD HEBERT ARMED FORCES HEALTH
PROFESSIONS SCHOLARSHIP AND FINANCIAL ASSIST-
ANCE PROGRAM.
(a) IN GENERAL.—Section 117(c) (relating to the exclusion from
gross income amounts received as a qualified scholarship) is
amended—
(1) by striking ‘‘Subsections (a)’’ and inserting the following:
‘‘(1) IN GENERAL.—Except as provided in paragraph (2),
subsections (a)’’; and
(2) by adding at the end the following new paragraph:
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not apply to any
amount received by an individual under—
‘‘(A) the National Health Corps Scholarship Program
under section 338A(g)(1)(A) of the Public Health Service
Act; or
‘‘(B) the Armed Forces Health Professions Scholarship
and Financial Assistance Program under subchapter I of
chapter 105 of title 10, United States Code.’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to amounts received in taxable years beginning
after December 31, 1993.
Subtitle B—Revenue
SEC. 111. OVERRULING OF SCHMIDT BAKING COMPANY CASE.
(a) IN GENERAL.—Section 404(a) (relating to general rule) is
amended by adding at the end the following new paragraph:
‘‘(11) DETERMINATIONS RELATING TO DEFERRED COMPENSA-
TION.—For purposes of determining under this section—
‘‘(A) whether compensation of an employee is deferred
compensation; and
‘‘(B) when deferred compensation is paid,
no amount shall be treated as received by the employee, or
paid, until it is actually received by the employee.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by subsection (a)
shall apply to taxable years ending after December 31, 2001.
(2) PHASE-IN OF INCREASE.—In the case of the first taxable
year of the taxpayer ending after December 31, 2001, only
60 percent of the amount of the increase in tax resulting
from the amendment made by subsection (a) shall be taken
into account for purposes of sections 6654 and 6655 of the
Internal Revenue Code of 1986 (relating to failure to pay esti-
mated income tax).
(3) CHANGE IN METHOD OF ACCOUNTING.—In the case of
any taxpayer required by this section to change its method
of accounting for its first taxable year ending after December
31, 2001—
(A) such change shall be treated as initiated by the
taxpayer;
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury; and
(C) the net amount of the adjustments required to
be taken into account by the taxpayer under section 481
H. R. 2646—10
of the Internal Revenue Code of 1986 shall be taken into
account in such first taxable year.
Subtitle C—Identification of Limited Tax
Benefits Subject To Line Item Veto
SEC. 121. IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO
LINE ITEM VETO.
Section 1021(a)(3) of the Congressional Budget and Impound-
ment Control Act of 1974 shall only apply to section 104(a) (relating
to additional increase in arbitrage rebate exception for govern-
mental bonds used to finance education facilities).
TITLE II—MEASURES TO ENCOURAGE
RESULTS IN TEACHING
SEC. 201. STATE INCENTIVES FOR TEACHER TESTING AND MERIT PAY.
(a) SHORT TITLE.—This section may be cited as the ‘‘Measures
to Encourage Results in Teaching Act of 1998’’.
(b) FINDINGS.—Congress makes the following findings:
(1) All students deserve to be taught by well-educated,
competent, and qualified teachers.
(2) More than ever before, education has and will continue
to become the ticket not only to economic success but to basic
survival. Students will not succeed in meeting the demands
of a knowledge-based, 21st century society and economy if
the students do not encounter more challenging work in school.
For future generations to have the opportunities to achieve
success the future generations will need to have an education
and a teacher workforce second to none.
(3) No other intervention can make the difference that
a knowledgeable, skillful teacher can make in the learning
process. At the same time, nothing can fully compensate for
weak teaching that, despite good intentions, can result from
a teacher’s lack of opportunity to acquire the knowledge and
skill needed to help students master the curriculum.
(4) The Federal Government established the Dwight D.
Eisenhower Professional Development Program in 1985 to
ensure that teachers and other educational staff have access
to sustained and high-quality professional development. This
ongoing development must include the ability to demonstrate
and judge the performance of teachers and other instructional
staff.
(5) States should evaluate their teachers on the basis of
demonstrated ability, including tests of subject matter knowl-
edge, teaching knowledge, and teaching skill. States should
develop a test for their teachers and other instructional staff
with respect to the subjects taught by the teachers and staff,
and should administer the test every 3 to 5 years.
(6) Evaluating and rewarding teachers with a compensation
system that supports teachers who become increasingly expert
in a subject area, are proficient in meeting the needs of students
and schools, and demonstrate high levels of performance meas-
ured against professional teaching standards, will encourage
H. R. 2646—11
teachers to continue to learn needed skills and broaden teach-
ers’ expertise, thereby enhancing education for all students.
(c) PURPOSES.—The purposes of this section are as follows:
(1) To provide incentives for States to establish and admin-
ister periodic teacher testing and merit pay programs for
elementary school and secondary school teachers.
(2) To encourage States to establish merit pay programs
that have a significant impact on teacher salary scales.
(3) To encourage programs that recognize and reward the
best teachers, and encourage those teachers that need to do
better.
(d) STATE INCENTIVES FOR TEACHER TESTING AND MERIT PAY.—
(1) AMENDMENTS.—Title II of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 6601 et seq.) is
amended—
(A) by redesignating part D as part F;
(B) by redesignating sections 2401 and 2402 as sections
2601 and 2602, respectively; and
(C) by inserting after part C the following:
‘‘PART D—STATE INCENTIVES FOR TEACHER
TESTING AND MERIT PAY
‘‘SEC. 2401. STATE INCENTIVES FOR TEACHER TESTING AND MERIT
PAY.
‘‘(a) STATE AWARDS.—Notwithstanding any other provision of
this title, from funds described in subsection (b) that are made
available for a fiscal year, the Secretary shall make an award
to each State that—
‘‘(1) administers a test to each elementary school and
secondary school teacher in the State, with respect to the
subjects taught by the teacher, every 3 to 5 years; and
‘‘(2) has an elementary school and secondary school teacher
compensation system that is based on merit.
‘‘(b) AVAILABLE FUNDING.—The amount of funds referred to
in subsection (a) that are available to carry out this section for
a fiscal year is 50 percent of the amount of funds appropriated
to carry out this title that are in excess of the amount so appro-
priated for fiscal year 1999, except that no funds shall be available
to carry out this section for any fiscal year for which—
‘‘(1) the amount appropriated to carry out this title exceeds
$600,000,000; or
‘‘(2) each of the several States is eligible to receive an
award under this section.
‘‘(c) AWARD AMOUNT.—A State shall receive an award under
this section in an amount that bears the same relation to the
total amount available for awards under this section for a fiscal
year as the number of States that are eligible to receive such
an award for the fiscal year bears to the total number of all
States so eligible for the fiscal year.
‘‘(d) USE OF FUNDS.—Funds provided under this section may
be used by States to carry out the activities described in section
2207.
‘‘(e) DEFINITION OF STATE.—For the purpose of this section,
the term ‘State’ means each of the 50 States and the District
of Columbia.’’.
H. R. 2646—12
(2) EFFECTIVE DATE.—The amendments made by paragraph
(1) shall take effect on October 2, 1999.
(e) TEACHER TESTING AND MERIT PAY.—
(1) IN GENERAL.—Notwithstanding any other provision of
law, a State may use Federal education funds—
(A) to carry out a test of each elementary school or
secondary school teacher in the State with respect to the
subjects taught by the teacher; or
(B) to establish a merit pay program for the teachers.
(2) DEFINITIONS.—In this subsection, the terms ‘‘elementary
school’’ and ‘‘secondary school’’ have the meanings given the
terms in section 14101 of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 8801).
TITLE III—EQUAL EDUCATIONAL
OPPORTUNITY
SEC. 301. EQUAL EDUCATIONAL OPPORTUNITY.
Subsection (b) of section 6301 of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 7351) is amended—
(1) in paragraph (7), by striking ‘‘and’’ after the semicolon;
(2) in paragraph (8), by striking the period and inserting
‘‘; and’’; and
(3) by adding at the end the following:
‘‘(9) education reform projects that provide same gender
schools and classrooms, as long as comparable educational
opportunities are offered for students of both sexes.’’.
TITLE IV—SENSE OF THE CONGRESS
SEC. 401. FINDINGS.
Congress makes the following findings:
(1) The people of the United States know that effective
teaching takes place when the people of the United States
begin: (A) helping children master basic academics; (B) engag-
ing and involving parents; (C) creating safe and orderly class-
rooms; and (D) getting dollars to the classroom.
(2) Our Nation’s children deserve an educational system
which will provide opportunities to excel.
(3) States and localities must spend a significant amount
of Federal education tax dollars applying for and administering
Federal education dollars.
(4) Several States have reported that although the States
receive less than 10 percent of their education funding from
the Federal Government, more than 50 percent of their paper-
work is associated with those Federal dollars.
(5) While it is unknown exactly what percentage of Federal
education dollars reaches the classroom, a recent audit of New
York City public schools found that only 43 percent of their
local education budget reaches the classroom; further, it is
thought that only 85 percent of funds administered by the
Department of Education for elementary and secondary edu-
cation reach the school district level; and even if 65 percent
of Federal education funds reach the classroom, it still means
H. R. 2646—13
that billions of dollars are not directly spent on children in
the classroom.
(6) American students are not performing up to their full
academic potential, despite the more than 760 Federal edu-
cation programs, which span 39 Federal agencies at the price
of nearly $100,000,000,000 annually.
(7) According to the Digest of Education Statistics, in 1993
only $141,598,786,000 out of $265,285,370,000 spent on
elementary and secondary education was spent on instruction.
(8) According to the National Center for Education Statis-
tics, in 1994 only 52 percent of staff employed in public
elementary and secondary school systems were teachers.
(9) Too much of our Federal education funding is spent
on bureaucracy, and too little is spent on our Nation’s youth.
(10) Getting 95 percent of Department of Education
elementary and secondary education funds to the classroom
could provide approximately $2,094 in additional funding per
classroom across the United States.
(11) More education funding should be put in the hands
of someone in a child’s classroom who knows the child’s name.
(12) President Clinton has stated: ‘‘We cannot ask the
American people to spend more on education until we do a
better job with the money we’ve got now.’’.
(13) President Clinton and Vice President Gore agree that
the reinventing of public education will not begin in Washington
but in communities across the United States and that the
people of the United States must ask fundamental questions
about how our Nation’s public school systems’ dollars are spent.
(14) President Clinton and Vice President Gore agree that
in an age of tight budgets, our Nation should be spending
public funds on teachers and children, not on unnecessary
overhead and bloated bureaucracy.
SEC. 402. SENSE OF THE CONGRESS.
It is the sense of the Congress that the Department of Edu-
cation, States, and local educational agencies should work together
to ensure that not less than 95 percent of all funds appropriated
for the purpose of carrying out elementary and secondary education
programs administered by the Department of Education is spent
for our Nation’s children in their classrooms.
TITLE V—READING EXCELLENCE
SEC. 501. SHORT TITLE.
This title may be cited as the ‘‘Reading Excellence Act’’.
Subtitle A—Reading Grants
SEC. 511. AMENDMENT TO THE ELEMENTARY AND SECONDARY
EDUCATION ACT OF 1965 FOR READING GRANTS.
Title II of the Elementary and Secondary Education Act of
1965 (20 U.S.C. 6601 et seq.) is amended further by inserting
after part D (as inserted by section 201(d)(1)(C) of this Act) the
following:
H. R. 2646—14
‘‘PART E—READING GRANTS
‘‘SEC. 2501. PURPOSE.
‘‘The purposes of this part are as follows:
‘‘(1) To teach every child to read in their early childhood
years—
‘‘(A) as soon as they are ready to read; or
‘‘(B) as soon as possible once they enter school, but
not later than third grade.
‘‘(2) To improve the reading skills of students, and the
in-service instructional practices for teachers who teach read-
ing, through the use of findings from reliable, replicable
research on reading, including phonics.
‘‘(3) To expand the number of high-quality family literacy
programs.
‘‘(4) To reduce the number of children who are inappropri-
ately referred to special education due to reading difficulties.
‘‘SEC. 2502. DEFINITIONS.
‘‘For purposes of this part:
‘‘(1) ELIGIBLE PROFESSIONAL DEVELOPMENT PROVIDER.—The
term ‘eligible professional development provider’ means a
provider of professional development in reading instruction to
teachers that is based on reliable, replicable research on
reading.
‘‘(2) ELIGIBLE RESEARCH INSTITUTION.—The term ‘eligible
research institution’ means an institution of higher education
at which reliable, replicable research on reading has been con-
ducted.
‘‘(3) FAMILY LITERACY SERVICES.—The term ‘family literacy
services’ means services provided to participants on a voluntary
basis that are of sufficient intensity in terms of hours, and
of sufficient duration, to make sustainable changes in a family
(such as eliminating or reducing welfare dependency) and that
integrate all of the following activities:
‘‘(A) Interactive literacy activities between parents and
their children.
‘‘(B) Equipping parents to partner with their children
in learning.
‘‘(C) Parent literacy training, including training that
contributes to economic self-sufficiency.
‘‘(D) Appropriate instruction for children of parents
receiving parent literacy services.
‘‘(4) READING.—The term ‘reading ’ means the process of
comprehending the meaning of written text by depending on—
‘‘(A) the ability to use phonics skills, that is, knowledge
of letters and sounds, to decode printed words quickly
and effortlessly, both silently and aloud;
‘‘(B) the ability to use previously learned strategies
for reading comprehension; and
‘‘(C) the ability to think critically about the meaning,
message, and aesthetic value of the text.
‘‘(5) READING
READINESS.—The term ‘reading readiness’
means activities that—
‘‘(A) provide experience and opportunity for language
development;
‘‘(B) create appreciation of the written word;
H. R. 2646—15
‘‘(C) develop an awareness of printed language, the
alphabet, and phonemic awareness; and
‘‘(D) develop an understanding that spoken and written
language is made up of phonemes, syllables, and words.
‘‘(6) RELIABLE, REPLICABLE RESEARCH.—The term ‘reliable,
replicable research’ means objective, valid, scientific studies
that—
‘‘(A) include rigorously defined samples of subjects that
are sufficiently large and representative to support the
general conclusions drawn;
‘‘(B) rely on measurements that meet established
standards of reliability and validity;
‘‘(C) test competing theories, where multiple theories
exist;
‘‘(D) are subjected to peer review before their results
are published; and
‘‘(E) discover effective strategies for improving reading
skills.
‘‘SEC. 2503. GRANTS TO READING AND LITERACY PARTNERSHIPS.
‘‘(a) PROGRAM AUTHORIZED.—The Secretary may make grants
on a competitive basis to reading and literacy partnerships for
the purpose of permitting such partnerships to make subgrants
under sections 2504 and 2505.
‘‘(b) READING AND LITERACY PARTNERSHIPS.—
‘‘(1) COMPOSITION.—
‘‘(A) REQUIRED PARTICIPANTS.—In order to receive a
grant under this section, a State shall establish a reading
and literacy partnership consisting of at least the following
participants:
‘‘(i) The Governor of the State.
‘‘(ii) The chief State school officer.
‘‘(iii) The chairman and the ranking member of
each committee of the State legislature that is respon-
sible for education policy.
‘‘(iv) A representative, selected jointly by the
Governor and the chief State school officer, of at least
one local educational agency that has at least one
school that is identified for school improvement under
section 1116(c) in the geographic area served by the
agency.
‘‘(v) A representative, selected jointly by the
Governor and the chief State school officer, of a commu-
nity-based organization working with children to
improve their reading skills, particularly a community-
based organization using volunteers.
‘‘(B) OPTIONAL PARTICIPANTS.—A reading and literacy
partnership may include additional participants, who shall
be selected jointly by the Governor and the chief State
school officer, which may include—
‘‘(i) State directors of appropriate Federal or State
programs with a strong reading component;
‘‘(ii) a parent of a public or private school student
or a parent who educates their child or children in
their home;
‘‘(iii) a teacher who teaches reading; or
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‘‘(D) Appropriate instruction for children of parents
receiving parent literacy services.’’.
SEC. 523. EVALUATION.
Section 1209 of the Elementary and Secondary Education Act
of 1965 (20 U.S.C. 6369) is amended—
(1) in paragraph (1), by striking ‘‘and’’ at the end;
(2) in paragraph (2), by striking the period at the end
and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(3) to provide States and eligible entities receiving a
subgrant under this part, directly or through a grant or contract
with an organization with experience in the development and
operation of successful family literacy services, technical assist-
ance to ensure local evaluations undertaken under section
1205(10) provide accurate information on the effectiveness of
programs assisted under this part.’’.
SEC. 524. INDICATORS OF PROGRAM QUALITY.
(a) IN GENERAL.—The Elementary and Secondary Education
Act of 1965 (20 U.S.C. 6301 et seq.) is amended—
(1) by redesignating section 1210 as section 1212; and
(2) by inserting after section 1209 the following:
‘‘SEC. 1210. INDICATORS OF PROGRAM QUALITY.
‘‘Each State receiving funds under this part shall develop, based
on the best available research and evaluation data, indicators of
program quality for programs assisted under this part. Such indica-
tors shall be used to monitor, evaluate, and improve such programs
within the State. Such indicators shall include the following:
‘‘(1) With respect to eligible participants in a program
who are adults—
‘‘(A) achievement in the areas of reading, writing,
English 
language 
acquisition, 
problem 
solving, 
and
numeracy;
‘‘(B) receipt of a secondary school diploma or its recog-
nized equivalent;
‘‘(C) entry into a postsecondary school, a job retraining
program, or employment or career advancement, including
the military; and
‘‘(D) such other indicators as the State may develop.
‘‘(2) With respect to eligible participants in a program
who are children—
‘‘(A) improvement in ability to read on grade level
or reading readiness;
‘‘(B) school attendance;
‘‘(C) grade retention and promotion; and
‘‘(D) such other indicators as the State may develop.’’.
(b) 
STATE
LEVEL
ACTIVITIES.—Section 
1203(a) 
of 
the
Elementary and Secondary Education Act of 1965 (20 U.S.C.
6363(a)) is amended—
(1) in paragraph (1), by striking ‘‘and’’ at the end;
(2) in paragraph (2), by striking the period at the end
and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(3) carrying out section 1210.’’.