Subtitle C—Child Care Construc-
tion and Renovation Incentive 
Grants 
SEC. 241. SHORT TITLE. 
This subtitle may be cited as the ‘‘Child Care Con-
struction and Renovation Incentive Grants Act’’. 
SEC. 242. USE OF COMMUNITY DEVELOPMENT BLOCK 
GRANTS TO ESTABLISH CHILD CARE FACILI-
TIES. 
Section 105(a) of the Housing and Community De-
velopment Act of 1974 (42 U.S.C. 5305(a)) is amended—
(1) in paragraph (22), by striking ‘‘and’’ at the 
end; 
(2) in paragraph (23), by striking the period at 
the end and inserting a semicolon; 
(3) in paragraph (25), by striking the period at 
the end and inserting ‘‘; and’’; and 
(4) by adding at the end the following: 
‘‘(26) the construction and renovation of child 
care facilities.’’. 
SEC. 243. INSURANCE FOR MORTGAGES ON NEW AND RE-
HABILITATED CHILD CARE FACILITIES. 
Title II of the National Housing Act (12 U.S.C. 1707 
et seq.) is amended by adding at the end the following:
‘‘SEC. 257. MORTGAGE INSURANCE FOR CHILD CARE FA-
CILITIES. 
‘‘(a) DEFINITIONS.—In this section: 
‘‘(1) CHILD CARE FACILITY.—The term ‘child 
care facility’— 
‘‘(A) means a public or private facility 
that—
‘‘(i) has as its purpose the care and 
development of— 
‘‘(I) children who are less than 
16 years of age; or 
‘‘(II) school-age children and 
youth during non-school hours; and 
‘‘(ii) is operated in accordance with all 
applicable State and local laws and regula-
tions; and 
‘‘(B) does not include any facility for 
school-age children that is primarily for use 
during normal school hours. 
‘‘(2) EQUIPMENT.—The term ‘equipment’ in-
cludes— 
‘‘(A) machinery, utilities, and built-in 
equipment, and any necessary enclosure or 
structure to house them; and 
‘‘(B) any other items necessary for the 
functioning of a particular facility as a child
care facility, including necessary furniture, 
books, and curricular and program materials. 
‘‘(3) FIRST MORTGAGE.—The term ‘first mort-
gage’— 
‘‘(A) means such classes of first liens as 
are commonly given to secure advances (includ-
ing advances during construction) on, or the 
unpaid purchase price of, real estate under the 
laws of the State in which the real estate is lo-
cated, together with the credit instrument or in-
struments (if any) secured thereby; and 
‘‘(B) includes any mortgage in the form of 
1 or more trust mortgages or mortgage inden-
tures or deeds of trust, securing notes, bonds, 
or other credit instruments, that, by the same 
instrument or by a separate instrument, creates 
a security interest in initial equipment, whether 
or not attached to the realty. 
‘‘(4) MORTGAGE.—The term ‘mortgage’ means 
a first mortgage on real estate in fee simple, or on 
the interest of either the lessor or lessee thereof 
under a lease having a period of not less than 7 
years to run beyond the maturity date of the mort-
gage.
‘‘(5) MORTGAGOR.—The term ‘mortgagor’ has 
the meaning given the term in section 207(a). 
‘‘(b) INSURANCE OF MORTGAGES.—In order to facili-
tate the establishment and rehabilitation of child care fa-
cilities, the Secretary may—
‘‘(1) insure a mortgage that is secured by a 
property or project that is—
‘‘(A) a new child care facility, including a 
new addition to an existing child care facility 
(regardless of whether the existing facility is 
being rehabilitated); or 
‘‘(B) a substantially rehabilitated child 
care facility, including equipment to be used in 
the operation of the facility; and 
‘‘(2) make a commitment to insure any mort-
gage described in paragraph (1) before the date of 
execution or disbursement of the mortgage. 
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) ELIGIBLE CHILD CARE FACILITIES.—Each 
mortgage insured under this section shall be secured 
by a child care facility that the Secretary deter-
mines, during the 12-month period preceding the 
date on which the commitment to insure the mort-
gage is issued under this section, complies or will be 
in compliance within 12 months, with any laws,
standards, and requirements applicable to child care 
facilities under the laws of the State, municipality, 
or other unit of general local government in which 
the facility is or is to be located. 
‘‘(2) APPROVED MORTGAGOR.—
‘‘(A) IN
GENERAL.—Each mortgage in-
sured under this section shall be executed by a 
mortgagor approved by the Secretary. 
‘‘(B) REGULATION.—The Secretary may—
‘‘(i) require an approved mortgagor 
who executes a mortgage under subpara-
graph (A) to be regulated with respect to 
charges and methods of financing and, if 
the mortgagor is a corporate entity, with 
respect to capital structure and rate of re-
turn; and 
‘‘(ii) as an aid to the regulation of any 
mortgagor under clause (i), make such 
contracts with and acquire for not more 
than $100 such stock or interest in such 
mortgagor as the Secretary considers to be 
necessary. 
‘‘(C) STOCK OR INTEREST.—Any stock or 
interest purchased under subparagraph (B)(ii) 
shall be—
‘‘(i) paid for out of the General Insur-
ance Fund; and 
‘‘(ii) redeemed by the mortgagor at 
par upon the termination of all obligations 
of the Secretary under the insurance. 
‘‘(3) PRINCIPAL OBLIGATION.—Each mortgage 
insured under this section shall involve a principal 
obligation in an amount not to exceed 90 percent of 
the estimated value of the property or project, or 95 
percent of the estimated value of the property or 
project in the case of a mortgagor that is a private 
nonprofit corporation or association (as defined pur-
suant to section 221(d)(3)), including—
‘‘(A) equipment to be used in the operation 
of the facility when the proposed improvements 
are completed and the equipment is installed; or 
‘‘(B) a solar energy system (as defined in 
subparagraph (3) of the last paragraph of sec-
tion 2(a)) or residential energy conservation 
measures (as defined in subparagraphs (A) 
through (G) and (I) of section 210(11) of the 
National Energy Conservation Policy Act), in 
cases in which the Secretary determines that 
such measures are in addition to those required
sections to section 207 shall be construed, for pur-
poses of mortgage insurance under this section, to 
refer to this section. 
‘‘(d) MORTGAGE INSURANCE
FOR FIRE SAFETY 
EQUIPMENT LOANS.—
‘‘(1) AUTHORITY.—The Secretary may, upon 
such terms and conditions as the Secretary may pre-
scribe, make commitments to insure and insure 
loans made by financial institutions or other ap-
proved mortgagees to child care facilities to provide 
for the purchase and installation of fire safety equip-
ment necessary for compliance with the 1967 edition 
of the Life Safety Code of the National Fire Protec-
tion Association (or any subsequent edition specified 
by the Secretary of Health and Human Services). 
‘‘(2) LOAN REQUIREMENTS.—To be eligible for 
insurance under this subsection a loan shall— 
‘‘(A) not exceed the estimate by the Sec-
retary of the reasonable cost of the equipment 
fully installed; 
‘‘(B) bear interest at such rate as may be 
agreed upon by the mortgagor and the mort-
gagee; 
‘‘(C) have a maturity date satisfactory to 
the Secretary;
‘‘(D) be made by a financial institution or 
other mortgagee approved by the Secretary as 
eligible for insurance under section 2 or a mort-
gagee approved under section 203(b)(1); 
‘‘(E) comply with other such terms, condi-
tions, and restrictions as the Secretary may 
prescribe; and 
‘‘(F) be made with respect to a child care 
facility that the Secretary determines, during 
the 12-month period preceding the date on 
which the commitment to insure the mortgage 
is issued under this subsection, complies or will 
be in compliance within 12 months, with any 
laws, standards, and requirements applicable to 
child care facilities under the laws of the State, 
municipality, or other unit of general local gov-
ernment in which the facility is or is to be lo-
cated. 
‘‘(3) INSURANCE REQUIREMENTS.—
‘‘(A) SECTION
2.—Subsections (c), (d), 
and (h) of section 2 shall apply to any loan in-
sured under this subsection, except that all ref-
erences in such subsections to ‘this section’ or 
‘this title’ shall be construed, for purposes of 
this subsection, to refer to this subsection.
‘‘(B) SECTION 220.—Paragraphs (5), (6), 
(7), (9), and (10) of section 220(h) shall apply 
to any loan insured under this subsection, ex-
cept that all references in such paragraphs to 
home improvement loans shall be construed, for 
purposes of this subsection, to refer to loans 
under this subsection. 
‘‘(e) SCHEDULES AND DEADLINES.—The Secretary 
shall establish schedules and deadlines for the processing 
and approval (or provision of notice of disapproval) of ap-
plications for mortgage insurance under this section. 
‘‘(f) LIMITATION ON INSURANCE AUTHORITY.—
‘‘(1) TERMINATION.—No mortgage may be in-
sured under this section or section 223(h) after Sep-
tember 30, 2007, except pursuant to a commitment 
to insure issued on or before such date. 
‘‘(2) AGGREGATE PRINCIPAL AMOUNT LIMITA-
TION.—
‘‘(A) IN GENERAL.—The aggregate prin-
cipal amount of mortgages for which the Sec-
retary enters into commitments to insure under 
this section or section 223(h) on or before the 
date described in paragraph (1) may not exceed 
$2,000,000,000.
‘‘(B) REPORT.—If, on the date described 
in paragraph (1), the aggregate insurance au-
thority provided under this paragraph has not 
been fully used, the Secretary of the Treasury 
shall submit to Congress a report evaluating the 
need for continued mortgage insurance under 
this section. 
‘‘(g) NONDISCRIMINATION REQUIREMENT.—
‘‘(1) IN GENERAL.—A child care facility receiv-
ing assistance under this title may not discriminate 
on the basis of race, color, or national origin (to the 
extent provided in title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d et seq.)), religion (subject to 
subparagraph (B)), national origin, sex (to the ex-
tent provided in title IX of the Education Amend-
ments of 1972 (20 U.S.C. 1681 et seq.)), or dis-
ability (to the extent provided in section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794)), under 
any program or activity receiving Federal financial 
assistance under this title. 
‘‘(2) FACILITIES
OF
RELIGIOUS
ORGANIZA-
TIONS.—The prohibition with respect to religion 
under paragraph (1) shall not apply to a child care 
facility that is controlled by, or that is closely identi-
fied with, the tenets of a particular religious organi-
zation, if the application of this paragraph would not 
be consistent with the religious tenets of such orga-
nization. 
‘‘(h) LIABILITY INSURANCE.—A child care provider 
operating a child care facility assisted under this section 
or section 223(h) shall obtain and maintain liability insur-
ance in such amounts and subject to such requirements 
as the Secretary considers to be appropriate. 
‘‘(i) SMALL PURPOSE LOANS.—
‘‘(1) IN GENERAL.—To the extent that amounts 
are made available pursuant to subsection (l), the 
Secretary shall make loans, directly or indirectly, to 
providers of child care facilities for reconstruction or 
renovation of such facilities, in accordance with this 
subsection. 
‘‘(2) REQUIREMENTS.—A loan under this sub-
section—
‘‘(A) may be made only for a child care fa-
cility that is financially and operationally viable, 
as determined under standards established by 
the Secretary; 
‘‘(B) may not have a term to maturity ex-
ceeding 7 years; 
‘‘(C) shall bear interest at a rate estab-
lished by the Secretary; and
‘‘(D) shall be subject to such other terms 
and conditions as the Secretary may establish 
by regulation. 
‘‘(3) AGGREGATE LOAN AMOUNT.—The aggre-
gate amount of loans under this subsection to a sin-
gle provider may not exceed $30,000. 
‘‘(j) NOTIFICATION.—The Secretary shall take such 
actions as may be necessary to publicize the availability 
of the programs for mortgage insurance under this section 
and section 223(h), and the loan program under sub-
section (i) of this section, in a manner that ensures that 
information concerning such programs will be available to 
child care providers throughout the United States. 
‘‘(k) REGULATIONS.—The Secretary shall—
‘‘(1) issue any regulations necessary to carry 
out this section; and 
‘‘(2) in carrying out paragraph (1), consult with 
the Secretary of Health and Human Services with 
respect to any aspects of the regulations regarding 
child care facilities. 
‘‘(l) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to carry out this section 
$30,000,000 for fiscal year 2004, to remain available until 
expended, of which not more than 10 percent may be used 
for loans under subsection (i).’’.
SEC. 244. INSURANCE FOR MORTGAGES FOR ACQUISITION 
OR REFINANCING DEBT OF EXISTING CHILD 
CARE FACILITIES. 
(a) IN GENERAL.—Section 223 of the National 
Housing Act (12 U.S.C. 1715n) is amended by adding at 
the end the following: 
‘‘(h) MORTGAGE INSURANCE FOR PURCHASE OR RE-
FINANCING OF EXISTING CHILD CARE FACILITIES.—
‘‘(1) DEFINITIONS.—In this subsection, the 
terms that are defined in section 257(a) have the 
same meanings as in that section. 
‘‘(2) AUTHORITY.—Notwithstanding any other 
provision of this Act, the Secretary may insure 
under any section of this title a mortgage executed 
in connection with— 
‘‘(A) the purchase or refinancing of an ex-
isting child care facility; 
‘‘(B) the purchase of a structure to serve 
as a child care facility; or 
‘‘(C) the refinancing of existing debt of an 
existing child care facility. 
‘‘(3) PURCHASE OF EXISTING FACILITIES AND 
STRUCTURES.—In the case of the purchase under 
this subsection of an existing child care facility or 
purchase of an existing structure to serve as such a 
facility, the Secretary shall prescribe any terms and
conditions that the Secretary considers necessary to 
ensure that—
‘‘(A) the facility or structure purchased 
continues to be used as a child care facility; and 
‘‘(B) the facility complies with any laws, 
standards, and requirements applicable to child 
care facilities under the laws of the State, mu-
nicipality, or other unit of general local govern-
ment in which the facility is or is to be located. 
‘‘(4) REFINANCING OF EXISTING FACILITIES.—
In the case of refinancing of an existing child care 
facility, the Secretary shall prescribe any terms and 
conditions that the Secretary considers necessary to 
ensure that—
‘‘(A) the refinancing is used to lower the 
monthly debt service costs (taking into account 
any fees or charges connected with such refi-
nancing) of the existing facility; 
‘‘(B) the proceeds of any refinancing will 
be employed only to retire the existing indebted-
ness and pay the necessary cost of refinancing 
on the existing facility; 
‘‘(C) the existing facility is economically 
viable; and
‘‘(D) the facility receives a certification of 
compliance under section 258(c). 
‘‘(5) LIMITATION ON INSURANCE AUTHORITY.—
The authority of the Secretary to enter into commit-
ments to insure mortgages under this subsection is 
subject to section 257(f).’’. 
SEC. 245. STUDY OF AVAILABILITY OF SECONDARY MAR-
KETS FOR MORTGAGES ON CHILD CARE FA-
CILITIES. 
(a) STUDY.—The Secretary of the Treasury shall 
conduct a study of the secondary mortgage markets to de-
termine—
(1) whether such a market exists for purchase 
of mortgages eligible for insurance under sections 
223(h) and 257 of the National Housing Act (as 
added by this Act); 
(2) whether such a market would affect the 
availability of credit available for development of 
child care facilities or would lower development costs 
of such facilities; and 
(3) the extent to which such a market or other 
activities to provide credit enhancement for loans for 
child care facilities is needed to meet the demand for 
such facilities.
(b) REPORT.—Not later than 2 years after the date 
of enactment of this Act, the Secretary of the Treasury 
shall submit to Congress a report regarding the results 
of the study conducted under this section. 
SEC. 
246. 
TECHNICAL 
AND 
FINANCIAL 
ASSISTANCE 
GRANTS. 
(a) DEFINITIONS.—In this section: 
(1) CHILD CARE FACILITY.—The term ‘‘child 
care facility’’ has the meaning given that term in 
section 257(a) of the National Housing Act, as 
added by section 243. 
(2) ELIGIBLE INTERMEDIARY.—The term ‘‘eli-
gible intermediary’’ means a private, nonprofit inter-
mediary organization that has demonstrated experi-
ence in—
(A) financing the construction and renova-
tion of physical facilities; 
(B) providing technical and financial as-
sistance to child care providers or other similar 
entities; 
(C) working with small businesses; and 
(D) securing private sources for capital fi-
nancing; and 
(3) ELIGIBLE RECIPIENT.—The term ‘‘eligible 
recipient’’ means any—
(A) existing or start-up center-based or 
home-based child care provider; and 
(B) organization in the process of estab-
lishing a center-based or home-based child care 
program or otherwise seeking to provide child 
care services. 
(4) EQUIPMENT.—The term ‘‘equipment’’ has 
the meaning given that term in section 257(a) of the 
National Housing Act, as added by section 243. 
(b) GRANT AUTHORITY.—The Secretary of Housing 
and Urban Development, in consultation with the Sec-
retary of Health and Human Services, may award grants 
on a competitive basis in accordance with this section to 
eligible intermediaries for use in accordance with sub-
sections (e) and (f). 
(c) APPLICATIONS.—To be eligible to receive a grant 
under this section an eligible intermediary shall submit to 
the Secretary an application, in such form and containing 
such information as the Secretary may require. 
(d) PRIORITY.—In awarding grants under this sec-
tion the Secretary shall give a priority to applicants under 
subsection (c) that serve low-income or rural areas. 
(e) USE OF FUNDS.—
(1) REVOLVING
LOAN
FUND.—Each eligible 
intermediary that receives a grant under this section
shall deposit the grant amount into a child care re-
volving loan fund established by the eligible inter-
mediary. 
(2) PAYMENTS FROM FUND.—Subject to sub-
section (f), from amounts deposited into the revolv-
ing loan fund under paragraph (1), each eligible 
intermediary shall provide technical and financial as-
sistance (in the form of loans, grants, investments, 
guarantees, interest subsidies, and other appropriate 
forms of assistance) to eligible recipients for the ac-
quisition or improvement of child care facilities or 
equipment. 
(3) LOAN REPAYMENTS AND INVESTMENT PRO-
CEEDS.—Any amount received by an eligible inter-
mediary from an eligible recipient in the form of a 
loan repayment or investment proceeds shall be de-
posited into the child care revolving fund of the eligi-
ble intermediary for redistribution to other eligible 
recipients in accordance with this section. 
(f) ALLOCATION OF FUNDS.—Of the amounts dis-
tributed from the revolving loan fund of an eligible inter-
mediary under subsection (e)(2) in each fiscal year—
(1) not less than 50 percent shall be used for 
the renovation or construction of child care facilities 
or the acquisition of equipment by eligible recipients,
except that the amount made available to any eligi-
ble recipient under this paragraph may not exceed 
40 percent of the total costs incurred by the eligible 
recipient in connection with such renovation, con-
struction, or acquisition; and 
(2) the amount remaining after distribution 
under paragraph (1), shall be used to provide direct 
assistance to eligible recipients in obtaining public or 
private financing for the renovation or construction 
of child care facilities and the acquisition of equip-
ment, including developing and implementing financ-
ing resources, options, and plans for those recipi-
ents. 
(g) DAVIS BACON ACT.—Subchapter IV of chapter 
31 of title 40, United States Code (popularly known as 
the Davis-Bacon Act) shall apply to actions taken under 
this Act. 
(h) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to carry out this section 
$10,000,000 for each of fiscal years 2004 through 2008.
Subtitle D—Business Child Care 
Incentive Grant Program 
SEC. 251. BUSINESS CHILD CARE INCENTIVE GRANT PRO-
GRAM. 
(a) ESTABLISHMENT.—The Secretary of Health and 
Human Services (referred to in this section as the ‘‘Sec-
retary’’) shall establish a program to award grants to 
States, on a competitive basis, to assist States in providing 
funds to encourage the establishment and operation of em-
ployer operated child care programs. 
(b) APPLICATION.—To be eligible to receive a grant 
under this section, a State shall prepare and submit to 
the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may re-
quire, including an assurance that the funds required 
under subsection (e) will be provided. 
(c) AMOUNT OF GRANT.—The Secretary shall deter-
mine the amount of a grant to a State under this section 
based on the population of children less than 5 years of 
age in the State as compared to the population of all 
States receiving grants under this section. 
(d) USE OF FUNDS.—
(1) IN GENERAL.—A State shall use amounts 
provided under a grant awarded under this section 
to provide assistance to businesses located in the
State to enable the businesses to establish and oper-
ate child care programs. Such assistance may in-
clude—
(A) technical assistance in the establish-
ment of a child care program; 
(B) assistance for the startup costs related 
to a child care program; 
(C) assistance for the training of child care 
providers; 
(D) scholarships for low-income wage earn-
ers; 
(E) the provision of services to care for 
sick children or to provide care to school aged 
children; 
(F) the entering into of contracts with 
local resource and referral or local health de-
partments; 
(G) assistance for care for children with 
disabilities; or 
(H) assistance for any other activity deter-
mined appropriate by the State. 
(2) APPLICATION.—To be eligible to receive as-
sistance from a State under this section, a business 
shall prepare and submit to the State an application
at such time, in such manner, and containing such 
information as the State may require. 
(3) PREFERENCE.—
(A) IN GENERAL.—In providing assistance 
under this section, a State shall give priority to 
applicants that desire to form a consortium to 
provide child care in a geographic area within 
the State where such care is not generally avail-
able or accessible.
(B) CONSORTIUM.—For purposes of sub-
paragraph (A), a consortium shall be made up 
of 2 or more entities that may include busi-
nesses, nonprofit agencies or organizations, 
local governments, or other appropriate entities. 
(4) LIMITATION.—With respect to grant funds 
received under this section, a State may not provide 
in excess of $100,000 in assistance from such funds 
to any single applicant. 
(e) MATCHING REQUIREMENT.—To be eligible to re-
ceive a grant under this section a State shall provide as-
surances to the Secretary that, with respect to the costs 
to be incurred by an entity receiving assistance in carrying 
out activities under this section, the entity will make avail-
able (directly or through donations from public or private
entities) non-Federal contributions to such costs in an 
amount equal to—
(1) for the first fiscal year in which the entity 
receives such assistance, not less than 50 percent of 
such costs ($1 for each $1 of assistance provided to 
the entity under the grant); 
(2) for the second fiscal year in which the enti-
ty receives such assistance, not less than 662⁄3 per-
cent of such costs ($2 for each $1 of assistance pro-
vided to the entity under the grant); and 
(3) for the third fiscal year in which the entity 
receives such assistance, not less than 75 percent of 
such costs ($3 for each $1 of assistance provided to 
the entity under the grant). 
(f) REQUIREMENTS OF PROVIDERS.—To be eligible 
to receive assistance under a grant awarded under this 
section a child care provider shall comply with all applica-
ble State and local licensing and regulatory requirements 
and all applicable health and safety standards in effect 
in the State. 
(g) ADMINISTRATION.—
(1) STATE
RESPONSIBILITY.—A State shall 
have responsibility for administering a grant award-
ed for the State under this section and for moni-
toring entities that receive assistance under such 
grant. 
(2) AUDITS.—A State shall require each entity 
receiving assistance under the grant awarded under 
this section to conduct an annual audit with respect 
to the activities of the entity. Such audits shall be 
submitted to the State. 
(3) MISUSE OF FUNDS.—
(A) REPAYMENT.—If the State determines, 
through an audit or otherwise, that an entity 
receiving assistance under a grant awarded 
under this section has misused the assistance, 
the State shall notify the Secretary of the mis-
use. The Secretary, upon such a notification, 
may seek from such an entity the repayment of 
an amount equal to the amount of any such 
misused assistance plus interest. 
(B) APPEALS
PROCESS.—The Secretary 
shall by regulation provide for an appeals proc-
ess with respect to repayments under this para-
graph. 
(h) REPORTING REQUIREMENTS.—
(1) 2-YEAR STUDY.—
(A) IN GENERAL.—Not later than 2 years 
after the date on which the Secretary first
awards grants under this section, the Secretary 
shall conduct a study to determine—
(i) the capacity of entities to meet the 
child care needs of communities within 
States; 
(ii) the kinds of partnerships that are 
being formed with respect to child care at 
the local level to carry out programs fund-
ed under this section; and 
(iii) who is using the programs funded 
under this section and the income levels of 
such individuals. 
(B) REPORT.—Not later than 28 months 
after the date on which the Secretary first 
awards grants under this section, the Secretary 
shall prepare and submit to the appropriate 
committees of Congress a report on the results 
of the study conducted in accordance with sub-
paragraph (A). 
(2) 4-YEAR STUDY.—
(A) IN GENERAL.—Not later than 4 years 
after the date on which the Secretary first 
awards grants under this section, the Secretary 
shall conduct a study to determine the number 
of child care facilities funded through entities
that received assistance through a grant award-
ed under this section that remain in operation 
and the extent to which such facilities are meet-
ing the child care needs of the individuals 
served by such facilities. 
(B) REPORT.—Not later than 52 months 
after the date on which the Secretary first 
awards grants under this section, the Secretary 
shall prepare and submit to the appropriate 
committees of Congress a report on the results 
of the study conducted in accordance with sub-
paragraph (A). 
(i) DEFINITION.—In this section, the term ‘‘busi-
ness’’ means an employer who employed an average of at 
least 2 employees on business days during the preceding 
calendar year. 
(j) AUTHORIZATION OF APPROPRIATIONS.—
(1) IN GENERAL.—There is authorized to be 
appropriated to carry out this section, $60,000,000 
for the period of fiscal years 2004 through 2006. 
(2) EVALUATIONS
AND
ADMINISTRATION.—
With respect to the total amount appropriated for 
such period in accordance with this subsection, not 
more than $5,000,000 of that amount may be used 
for expenditures related to conducting evaluations
required under, and the administration of, this sec-
tion. 
(k) TERMINATION OF PROGRAM.—The program es-
tablished under subsection (a) shall terminate on Sep-
tember 30, 2007. 
TITLE 
III—PRE-SCHOOL, 
IN-
SCHOOL, AND AFTERSCHOOL 
ASSISTANCE 
Subtitle A—Universal 
Prekindergarten Act 
SEC. 301. SHORT TITLE. 
This subtitle may be cited as the ‘‘Universal Pre-
kindergarten Act’’. 
SEC. 302. FINDINGS AND PURPOSE. 
(a) FINDINGS.—The Congress finds the following: 
(1) High-quality prekindergarten programs help 
children to succeed academically. Children who at-
tended a high-quality prekindergarten program have 
higher academic achievement, lower rates of grade 
retention, are less likely to be placed in special edu-
cation, and graduate from high school at higher 
rates than those who did not. 
(2) Early childhood education can reduce juve-
nile delinquency rates. A 15-year study following 
989 low-income children who attended high-quality,
comprehensive prekindergarten found that they were 
33 percent less likely to be arrested, and 42 percent 
less likely to be arrested for a violent crime, than 
children in the control group. 
(3) There is currently a drastic shortage of af-
fordable, quality early education programs that are 
accessible for working families. 
(4) Full-day, full-calendar-year universal pre-
kindergarten programs would ensure all children 3, 
4, and 5 years old have access to school readiness 
programs and quality child care. 
(5) Research shows that investing in quality 
prekindergarten programs will provide savings in the 
form of reduced need for remedial education, de-
creased crime rates, lower school dropout rates, and 
decreased welfare dependence. 
(b) PURPOSE.—The purpose of this subtitle is to en-
sure that all children 3, 4, and 5 years old have access 
to a high-quality full-day, full-calendar-year prekinder-
garten program by providing grants to States to assist in 
developing a universal prekindergarten program that is 
voluntary and free-of-charge.
SEC. 303. PREKINDERGARTEN GRANT PROGRAM AUTHOR-
IZATION. 
The Secretary of Health and Human Services, in con-
sultation with the Secretary of Education, shall provide 
grants to an agency designated by each State (hereafter 
in this subtitle referred to as the ‘‘designated State agen-
cy’’) for the development of high-quality full-day, full-cal-
endar-year universal prekindergarten programs for all 
children 3, 4, and 5 years old in the State. 
SEC. 304. STATE REQUIREMENTS. 
(a) STATE MATCHING FUNDS.—Federal funds made 
available to a designated State agency under this subtitle 
shall be matched at least 20 percent by State funds. 
(b) STATE APPLICATION.—To be eligible to receive 
funds under this subtitle, a designated State agency shall 
submit an application at such time, in such manner, and 
containing such information as the Secretary of Health 
and Human Services may require. The application shall 
include the following: 
(1) How the designated State agency, in over-
seeing the State’s universal prekindergarten pro-
gram, will coordinate with other State agencies re-
sponsible for early childhood education and health 
programs.
(2) A State plan to establish and implement a 
statewide universal prekindergarten program, in ac-
cordance with subsection (c). 
(c) STATE PLAN.—The State plan required under 
subsection (b)(2) shall include each of the following: 
(1) A description of the universal prekinder-
garten program that will be established and how it 
will support children’s cognitive, social, emotional, 
and physical development. 
(2) A statement of the goals for universal pre-
kindergarten programs and how program outcomes 
will be measured. 
(3) A description of—
(A) how funding will be distributed to eli-
gible prekindergarten program providers based 
on the need for early childhood education in 
each geographical area served by such pro-
viders; and 
(B) how the designated State agency will 
involve representatives of early childhood pro-
gram providers (including child care providers, 
Head Start programs, and State and local 
agencies) that sponsor programs addressing 
children 3, 4, and 5 years old.
(4) A description of how the designated State 
agency will coordinate with existing State-funded 
prekindergarten programs, federally funded pro-
grams (such as Head Start programs), public school 
programs, and child care providers. 
(5) A description of how an eligible prekinder-
garten program provider may apply to the des-
ignated State agency for funding under this Act. 
(6) A plan to address the shortages of qualified 
early childhood education teachers, including how to 
increase such teachers’ compensation to be com-
parable to that of public school teachers. 
(7) How the designated State agency will pro-
vide ongoing professional development opportunities 
to help increase the number of teachers in early 
childhood programs who meet the State’s education 
or credential requirements for prekindergarten 
teachers. 
(8) A plan to address how the universal pre-
kindergarten program will meet the needs of chil-
dren with disabilities, limited English proficiency, 
and other special needs. 
(9) A plan to provide transportation to children 
to and from the universal prekindergarten program.
(10) A description of how the State will provide 
the 20 percent match of Federal funds. 
(d) ADMINISTRATION.—A designated State agency 
may not use more than 5 percent of a grant under this 
subtitle for costs associated with State administration of 
the program under this subtitle. 
SEC. 305. LOCAL REQUIREMENTS. 
(a) IN GENERAL.—An eligible prekindergarten pro-
gram provider receiving funding under this subtitle 
shall—
(1) maintain a maximum class size of 20 chil-
dren; 
(2) maintain a ratio of not more than 10 chil-
dren for each member of the teaching staff; 
(3)(A) ensure that all prekindergarten teachers 
meet the requirements for teachers at a State-fund-
ed prekindergarten program under an applicable 
State law; and 
(B) document that the State is demonstrating 
significant progress in assisting prekindergarten 
teachers on working toward a bachelor of arts de-
gree with training in early childhood development or 
early childhood education;
(4)(A) be accredited by a national organization 
with demonstrated experience in accrediting pre-
kindergarten programs; or 
(B) provide assurances that it shall obtain such 
accreditation not later than 3 years after first re-
ceiving funding under this subtitle; and 
(5) meet applicable State and local child care li-
censing health and safety standards. 
(b) LOCAL APPLICATION.—Eligible prekindergarten 
program providers desiring to receive funding under this 
subtitle shall submit an application to the designated 
State agency overseeing funds under this subtitle con-
taining the following: 
(1) A description of the prekindergarten pro-
gram. 
(2) A statement of the demonstrated need for 
a program, or an enhanced or expanded program, in 
the area served by the eligible prekindergarten pro-
gram provider. 
(3) A description of the age-appropriate and de-
velopmentally appropriate educational curriculum to 
be provided that will help children be ready for 
school and assist them in the transition to kinder-
garten.
(4) A description of how the eligible prekinder-
garten program provider will collaborate with exist-
ing community-based child care providers and Head 
Start programs. 
(5) A description of how students and families 
will be assisted in obtaining supportive services 
available in their communities. 
(6) A plan to promote parental involvement in 
the prekindergarten program. 
(7) A description of how teachers will receive 
ongoing professional development in early childhood 
development and education. 
(8) An assurance that prekindergarten pro-
grams receiving funds under this subtitle provide the 
data required in section 7(c). 
SEC. 306. PROFESSIONAL DEVELOPMENT SET-ASIDE. 
(a) IN GENERAL.—A designated State agency may 
set aside up to 5 percent of a grant under this subtitle 
for ongoing professional development activities for teach-
ers and staff at prekindergarten programs that wish to 
participate in the universal prekindergarten grant pro-
gram under this subtitle. A designated State agency using 
the set-aside for professional development must include in 
its application the following:
(1) A description of how the designated State 
agency will ensure that eligible prekindergarten pro-
gram providers in a range of settings (including 
child care providers, Head Start programs, and 
schools) will participate in the professional develop-
ment programs. 
(2) An assurance that, in developing its applica-
tion and in carrying out its program, the profes-
sional development provider has consulted, and will 
consult, with relevant agencies, early childhood orga-
nizations, early childhood education experts, and 
early childhood program providers. 
(3) A description of how the designated State 
agency will ensure that the professional development 
is ongoing and accessible to educators in all geo-
graphic areas of the State, including by the use of 
advanced educational technologies. 
(4) A description of how the designated State 
agency will ensure that such set-aside funds will be 
used to pay the cost of additional education and 
training. 
(5) A description of how the designated State 
agency will work with other agencies and institutions 
of higher education to provide scholarships and 
other financial assistance to prekindergarten staff.
(6) A description of how the State educational 
agency will provide a financial incentive, such as a 
financial stipend or a bonus, to educators who par-
ticipate in and complete such professional develop-
ment. 
(7) A description of how the professional devel-
opment activities will be carried out, including the 
following: 
(A) How programs and educators will be 
selected to participate. 
(B) How professional development pro-
viders will be selected, based on demonstrated 
experience in providing research-based profes-
sional development to early childhood educators. 
(C) The types of research-based profes-
sional development activities that will be carried 
out in all domains of children’s physical, cog-
nitive, social, and emotional development and 
on early childhood pedagogy. 
(D) How the program will train early 
childhood educators to meet the diverse edu-
cational needs of children in the community, es-
pecially children who have limited English pro-
ficiency, disabilities, and other special needs.