Education Modernization Fund Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Education Modernization Fund Act''.

SEC. 2. EDUCATION MODERNIZATION LOANS AND FUND.

    (a) Loans.--
            (1) In general.--The Secretary of Education (referred to in 
        this subsection as the ``Secretary'') shall make loans to 
        States for the purpose of constructing and modernizing 
        elementary schools and secondary schools.
            (2) Terms.--The Secretary shall make low interest, long-
        term loans, as determined by the Secretary, under paragraph 
        (1). The Secretary shall determine the eligibility requirements 
        for, and the terms of, any loan made under paragraph (1).
            (3) Allocation of funds.--The Secretary shall determine a 
        formula for allocating the funds made available under 
        subsection (b)(4) to States for loans under paragraph (1). The 
        Secretary shall ensure that the formula provides for the 
        allocation of funds for such loans to each eligible State. In 
        determining the formula, the Secretary shall take into 
        consideration the need for financial assistance of States with 
        significant increases in populations of elementary school and 
        secondary school students.
            (4) 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).
    (b) Fund.--
            (1) Establishment.--There is established in the Treasury of 
        the United States a trust fund, to be known as the ``Education 
        Modernization Fund'', consisting of the amounts transferred to 
        or deposited in the Trust Fund under paragraph (2) and any 
        interest earned on investment of the amounts in the Trust Fund 
        under paragraph (3).
            (2) Transfers and deposits.--
                    (A) Transfer.--The Secretary of the Treasury shall 
                transfer to the Trust Fund an amount equal to 
                $5,000,000,000 from the modernization fund described in 
                section 5302 of title 31, United States Code.
                    (B) Deposits.--There shall be deposited in the 
                Trust Fund all amounts received by the Secretary of 
                Education incident to loan operations under subsection 
                (a), including all collections of principal and 
                interest.
            (3) Investment of trust fund.--
                    (A) In general.--The Secretary of the Treasury 
                shall invest the portion of the Trust Fund that is not, 
                in the Secretary's judgment, required to meet current 
                withdrawals.
                    (B) Obligations.--Such investments may be made only 
                in interest-bearing obligations of the United States or 
                in obligations guaranteed as to both principal and 
                interest by the United States. For such purpose, such 
                obligations may be acquired--
                            (i) on original issue at the issue price; 
                        or
                            (ii) by purchase of outstanding obligations 
                        at the market price.
                    (C) Purposes for obligations of the united 
                states.--The purposes for which obligations of the 
                United States may be issued under chapter 31 of title 
                31, United States Code, are extended to authorize the 
                issuance at par of special obligations exclusively to 
                the Trust Fund.
                    (D) Interest.--Such special obligations shall bear 
                interest at a rate equal to the average rate of 
                interest, computed as to the end of the calendar month 
                next preceding the date of such issue, borne by all 
                marketable interest-bearing obligations of the United 
                States then forming a part of the Public Debt, except 
                that where such average rate is not a multiple of \1/8\ 
                of 1 percent, the rate of interest of such special 
                obligations shall be the multiple of \1/8\ of 1 percent 
                next lower than such average rate.
                    (E) Determination.--Such special obligations shall 
                be issued only if the Secretary of the Treasury 
                determines that the purchase of other interest-bearing 
                obligations of the United States, or of obligations 
                guaranteed as to both principal and interest by the 
                United States on original issue or at the market price, 
                is not in the public interest.
                    (F) Sale of obligation.--Any obligation acquired by 
                the Trust Fund (except special obligations issued 
                exclusively to the Trust Fund) may be sold by the 
                Secretary of the Treasury at the market price, and such 
                special obligations may be redeemed at par plus accrued 
                interest.
                    (G) Credits to trust fund.--The interest on, and 
                the proceeds from the sale or redemption of, any 
                obligations held in the Trust Fund shall be credited to 
                and form a part of the Trust Fund.
            (4) Expenditures from trust fund.--Amounts in the Trust 
        Fund shall be available to the Secretary of Education for 
        making expenditures to carry out subsection (a).

Summary: Education Modernization Fund Act - Directs the Secretary of Education to make low-interest, long-term loans to States for constructing and modernizing elementary and secondary schools. 
Requires the Secretary of Education to determine a formula for allocating such loans to eligible States, taking into consideration the needs of States with significant increases in school student populations. 
Establishes the Education Modernization Fund (EMF) in the Treasury to provide funds for such loans. 
Directs the Secretary of the Treasury to:  (1) transfer to the EMF a specified amount from the Treasury's Exchange Stabilization Fund; and (2) invest, in a specified manner, the portion of the EMF that is not required to meet current withdrawals. 
Directs the Secretary of Education to deposit in the EMF all amounts received by incident to such loan operations, including all collections of principal and interest.