under this part solely because it receives such a
grant.
SEC. 116. STATE APPLICATIONS.
(a) APPLICATION REQUIRED.—A State that wishes
to receive a grant under this part shall submit an applica-
tion to the Secretary, in the manner the Secretary may
require, not later than two years after the date of enact-
ment 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 con-
sulting with the State board of education, and representa-
tives 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 112, the designated agen-
cy shall consult with the State educational agency and ob-
tain its approval before submitting the State’s application.
(c) STATE SURVEY.—(1) Before submitting the
State’s application, the State agency designated under sec-
tion 112, with the involvement of local school officials and
experts in building construction and management, shall
survey the needs throughout the State (including in local-
ities 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 applica-
tion under this part shall include—
(1) an identification of the State agency des-
ignated by the Governor under section 112 to receive
the State’s grant under this part;
(2) a summary of the results of the State’s sur-
vey of its school facility needs, as described in sub-
section (c);
(3) a description of how the State will imple-
ment 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 de-
scribed 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 sub-
grantees under this part;
(7) a description of the steps the State will take
to ensure that local educational agencies will ade-
quately 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 pe-
riod beginning with the year the State receives its
grant, the combined expenditures for school con-
struction 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 contribu-
tions) 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 EX-
PENDITURES.—The Secretary may waive or modify the re-
quirement 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.
SEC. 117. AMOUNT OF FEDERAL SUBSIDY.
(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 fol-
lowing limits:
(1) If the locality will use the subgrant to help
meet the costs 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 para-
graph (4).
(2) If the bonds to be subsidized are general ob-
ligation bonds issued to finance more than one type
of activity (including school construction), the Fed-
eral 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, pur-
chase or lease arrangements, reduction of the
amount of principal to be borrowed, or credit en-
hancements for individual construction projects, the
Federal subsidy shall be not more than one-half of
the interest cost, as determined by the State in ac-
cordance 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 am-
ortization schedule and any other criteria and
conditions the Secretary considers necessary, in-
cluding provisions to ensure comparable treat-
ment 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).
SEC. 118. SEPARATE FUNDS OR ACCOUNTS; PRUDENT IN-
VESTMENT.
(a) SEPARATE FUNDS OR ACCOUNTS REQUIRED.—
Each State that receives a grant, and each recipient of
(1) describe the State’s implementation of this
part, including how the State has met the require-
ments of this part;
(2) identify the specific school facilities con-
structed, renovated, or modernized with support
from the grant, and the mechanisms used to finance
those activities;
(3) identify the level of Federal subsidy pro-
vided 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
SEC. 121. ELIGIBLE LOCAL EDUCATIONAL AGENCIES.
(a) ELIGIBLE AGENCIES.—Except as provided in
subsection (b), the local educational agencies that are eli-
gible to receive formula grants under section 126 and com-
petitive grants under section 127 from the Secretary are
the 100 local educational agencies with the largest num-
bers 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 Ha-
waii and the Commonwealth of Puerto Rico are not eligi-
ble local educational agencies.
SEC. 122. GRANTEES.
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 de-
termines, on the basis of the local educational agency’s
recommendation, that the other agency is better able to
carry out activities under this part.
SEC. 123. ALLOWABLE USES OF FUNDS.
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 de-
scribed in section 124:
(1) Providing a portion of the interest cost (or
of any other financing cost approved by the Sec-
retary) on bonds, certificates of participation, pur-
chase or lease arrangements, or other forms of in-
debtedness issued or entered into by a local edu-
cational agency or other unit or agency of local gov-
ernment for the purpose of financing eligible school
construction projects.
(2) Local expenditures approved by the Sec-
retary for credit enhancement for the debt or financ-
ing instruments described in paragraph (1).
(3) Other local expenditures approved by the
Secretary that leverage funds for additional school
construction.
SEC. 124. ELIGIBLE CONSTRUCTION PROJECTS; REDIS-
TRIBUTION.
(a) ELIGIBLE PROJECTS.—A grantee under this part
may use its grant, in accordance with section 123, to sub-
sidize the cost of the activities described in section 114(a)
for projects that the local educational agency has chosen
to initiate, through the vote of the school board, passage
of a bond issue, or similar public decision, made between
July 11, 1999, and September 30, 2004.
(b) REDISTRIBUTION.—If the Secretary determines,
by a date before September 30, 2004, selected by the Sec-
retary, that a local educational agency is not making satis-
factory 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 satisfac-
tory progress.
SEC. 125. LOCAL APPLICATIONS.
(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 appli-
cant, 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 appli-
cation, 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 agen-
cy’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 stu-
dents.
(2) A local educational agency need not conduct a
new survey under paragraph (1) if it has previously com-
pleted a survey that meets the requirements of that para-
graph and that the Secretary finds is sufficiently recent
for the purpose of carrying out this part.
(d) APPLICATION CONTENTS.—Each local applica-
tion under this part shall include—
(1) an identification of the local agency to re-
ceive 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 de-
mographic 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 main-
tained;
(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 in-
clude private contributions) will be at least 125 per-
cent 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 EX-
PENDITURES.—The Secretary may waive or modify the re-
quirement 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 con-
struction expenditures during the previous four years.
SEC. 126. FORMULA GRANTS.
(a) ALLOCATIONS.—The Secretary shall allocate the
funds available under section 105(b)(2) to the local edu-
cational 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 infor-
mation 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 applica-
tion, the Secretary may reallocate all or a portion of its
allocation, as the case may be, to the remaining local edu-
cational agencies in the same proportions as the original
allocations were made to those agencies under subsection
(a).
SEC. 127. COMPETITIVE GRANTS.
(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 el-
igible applicant under section 126 that wishes to receive
additional funds under this section shall include in its ap-
plication under section 125 the following additional infor-
mation:
(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 rel-
ative 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 sec-
ondary education, including support from private
sources, relative to its resources.
(4) Information on the extent to which the ap-
plicant will increase its own (or other public or pri-
vate) 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 dem-
onstrated by inadequate educational facilities and a
low level of resources to meet their school construc-
tion needs;
(2) the commitment of applicants to meet their
school construction needs and the leveraging effect
that assistance under this part would have, as dem-
onstrated by the additional resources that they will
provide, from non-Federal sources, to meet those
needs, in accordance with subsection (b)(4).
SEC. 128. AMOUNT OF FEDERAL SUBSIDY.
(a) AMOUNT OF FEDERAL SUBSIDY.—For each con-
struction project assisted under this part, the Secretary
shall determine the amount of the Federal subsidy in ac-
cordance 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).
SEC. 129. SEPARATE FUNDS OR ACCOUNTS; PRUDENT IN-
VESTMENT.
(a) SEPARATE FUNDS OR ACCOUNTS REQUIRED.—
Each grantee under this part shall deposit the grant pro-
ceeds 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
grantee 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 in-
debtedness; and
(2) Notwithstanding section 6503 of title 31,
United States Code or any other law, use the pro-
ceeds of that investment to carry out this part.
SEC. 130. LOCAL REPORTS.
(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 ap-
proval 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 con-
structed, renovated, or modernized with support
from the grant, and the mechanisms used to finance
those activities; and
(3) other information the Secretary may re-
quire.
(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
SEC. 201. TECHNICAL EMPLOYEES.
For the purpose of carrying out this Act, the Sec-
retary, 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 chap-
ter 51 and subchapter IV of chapter 5 of that title relating
to classification and General Schedule pay rates.
SEC. 202. WAGE RATES.
(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 Reorga-
nization 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 to Rehabilitate America’s
Schools Act of 1999.’’.
SEC. 203. NO LIABILITY OF FEDERAL GOVERNMENT.
(a) NO FEDERAL LIABILITY.—Any financial instru-
ments, including but not limited to contracts, bonds, bills,
notes, certificates of participation, or purchase or lease ar-
rangements, issued by States, localities or instrumental-
ities 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, certifi-
cates 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.
SEC. 204. CONSULTATION WITH SECRETARY OF THE TREAS-
URY.
The Secretary shall consult with the Secretary of the
Treasury in carrying out this Act.
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