THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY NATIONAL ECONOMIC ADVISOR, DR. LAURA TYSON AND
DEPUTY ASSISTANT TO THE PRESIDENT FOR ECONOMIC POLICY GENE SPERLING
The Briefing Room
12:50 P.M. EDT
MR. MCCURRY: Good afternoon. Welcome to the White House. In a very short while, as you know, the President will unveil a school construction initiative that is a very exciting proposal that we're putting forward. You all know that the President has been working almost constantly to do things to improve the quality of education and the environment for education in America's public schools. You've heard him talk about issues ranging from school uniforms to truancy to curfews to getting gangs out of our schools to making sure that our schools are weapons free. But a lot of that won't matter much unless the physical infrastructure of the school campus is conducive to a learning environment.
The President, partly in response to a recent General Accounting Office report that documented the need for further investment in school construction, today will put forth an initiative that is quite exciting. It is the result of a lot of hard work by the National Economic Council. And I'm delighted that various members of the administration are here, but chief and foremost, the President's National Economic Advisor, Dr. Laura Tyson, who will tell you about the proposal, how it works. I think you've had a chance now to look through some of the materials we've made available, but Dr. Tyson will be happy to take questions and walk you through the proposal the President will make shortly.
Laura. Thank you.
DR. TYSON: Thank you. Well, as you all know, expanding and improving lifetime educational opportunities for all Americans are key components of the President's economic growth strategy. Today he is going to announce yet another instrument in his campaign to provide world-class educational opportunities for all Americans.
This is an initiative that focuses on the rebuilding and improvement of the nation's K through 12 public schools. As Mike mentioned, there's compelling evidence of the need for such an initiative. We have recent GAO studies indicating that a third -- a third -- of the nation's schools, serving 14 million students, are in need of extensive repair or replacement to provide good conditions for learning.
We have evidence that about half of the nation's public schools do not have the adequate fiscal infrastructure to support the use of computer technology -- technology which has been demonstrated to aid in the learning efficacy of the classroom. And we have evidence that many parts of the nation are in need simply of additional classroom space because we have a projected enrollment increase nationwide of 11 percent between now and 2005.
Now, to help address these pressing needs, the President's announcing a $5-billion program. The program will reduce the interest costs of new school construction and renovation projects by up to 50 percent. The program will span a four-year period, and it has several features.
First of all, you have to start with the information that school construction is typically funded through tax-exempt bonds that currently carry interest rates of about six percent. The new initiative would provide an interest subsidy of as much as 50 percent. That would mean, for example, instead of paying an interest rate of six percent, an interest rate would be effectively reduced to three percent over the life of the project. And we would propose a sliding scale so that communities most in need would be eligible for the full 50 percent interest rate subsidy, while communities with a smaller need or less needy would get somewhat smaller subsidies. So that's the first general feature of the program.
Secondly and importantly, local districts would continue to take responsibility for developing the projects and for providing most of the financing for the projects. To be eligible for this support, in other words, the local community would have to raise the bulk of the financing. Federal support should make it easier for state and local governments to do the right thing because we would be helping to cut the cost of the financing of the project. So this should be understood as a partnership -- one of shared responsibility between the state, federal and local governments.
A third characteristic of the program is that the bulk of the credit subsidies would be allocated and administered by the states among the local communities. The states would have to have plans to ensure that funding is allocated by the relevant state authorities according to need -- need is certainly an important item here -- and also according to evidence that the interest rate subsidy is being used to support construction that otherwise would not have occurred. What we're trying to do here is fashion a program to encourage additional incremental funding of projects that would otherwise not have occurred without the subsidy. And so, part of the criteria here will focus on that incremental nature of the project.
A fourth characteristic is that the subsidies that would be made available could be used for a wide range of projects -- renovation, repair, construction of new facilities, fixing classrooms; for example, fixing wiring, adding wiring, improving energy efficiency, improving access for students and others with disabilities -- so that we would leave the project specification fairly broad to incorporate essentially the best information from the state and local governments about what is the most effective thing to do and the most pressing need to address.
Finally, although most of the support would be administered by the states, the 100 largest school districts by poverty, and perhaps as many as 25 or so additional large school districts, determined by the federal government to have special needs, would apply directly to the Department of Education for their credit subsidy. We believe that this approach will ensure that these large districts, particularly needy districts, particularly extreme kinds of needs, will receive adequate attention and appropriate treatment in the process of allocating the funds.
Now, just two additional points. Like all of the President's educational initiatives, this initiative is fully paid for and is fully consistent with balancing the budget by 2002. The $5 billion in federal funding over four years will be paid for by auctioning a portion of the broadcast spectrum between channels 60 and 69 that is not currently is use for TV broadcasting.
What's happened here is the technology keeps improving; the new digital technology has essentially freed up some new space on the broadcast spectrum, and that means the space can be used without disturbing the TV broadcasting that's already going on.
I want to emphasize -- and the documentation for this initiative makes clear -- that this is new funding from the spectrum. It is in addition to other spectrum proposals in our budget. So there's no double-counting here. This is new area on the spectrum that has been found, and it can be auctioned off for this price of $5 billion. So it is fully consistent with the budget.
Finally, let me just say what we anticipate in terms of the magnitude of effect from a program of $5 billion of federal support over a four-year period. Think of this as essentially the government is doing something to reduce for some period of time the costs to the local community of trying to finance repair, renovation and construction. And we anticipate that every dollar that the federal government puts in will subsidize about $4 billion of construction and renovation. In other words, the $5 billion that the federal government is going to put in should support $20 billion in construction and renovation around the country.
Now, one of the key criteria in allocating these subsidies will be what I mentioned before -- that the proposed activity is an incremental activity -- a construction project, a financing project that otherwise would not have been undertaken. We spent a lot of time on this and concluded that of that $20 billion that's supported by the $5 billion the federal government puts in, at least $10 billion of the $20 billion, with the criteria we're using we would anticipate would be incremental. What that boils down to is essentially we believe the $5 billion put in by the federal government will mean a 25-percent increase over the four years in projected spending on school repair, school renovation and school construction.
Finally, that estimate may actually be an underestimate. As I said, that's our sort of minimal estimate for the additional construction we would hope to obtain. There is an important bully pulpit aspect to this initiative. We believe that by calling federal attention to what is, after all, a program that -- a need which is national in scope, but a third of your schools are in need of repair and renovation, or 50 percent are in need of wiring for computer technology, you're not talking about just a local problem, you're talking about a national problem. By having the federal government involved in support and having the President involved in talking about this need with the nation, we believe we can really stimulate additional spending that will help provide educational opportunities for all Americans into the 21st century.
So let me stop with that as an introduction. There is some very good documentation that has been provided. I want to ask Gene Sperling to come up here. There are some others here that have worked on this, and I just want to introduce them so you know who's here: Joe Minarik, who is Associate Director for Economic Policy. Office of Management and Budget has worked hard on this. Mike Smith, the Under Secretary for Education at the Department of Education. Josh Gotbaum, the Assistant Secretary for Economic Policy at the Department of the Treasury. And Mozelle Thompson, the Deputy Assistant Secretary for Domestic Finance of the Department of the Treasury.
We have had a very good group work long and hard on this proposal, and I think we can adequately answer all of your questions. So why don't we open it up to questions, and I'll have Gene come up and other experts.
Q Do you think you're going to be able to raise even more money by selling more space on the spectrum? I mean, is this it for now, and how much more is out there?
DR. TYSON: Well, let me say a couple of things about this. Number one, as I think you know, so far the auctioning that we have done on the spectrum has raised considerably more than we had projected ourselves. Secondly, technology is changing rapidly. What we are proposing here today is new precisely because the technology has only recently, and quite recently, made this space available. So we do what we can in the context of what technology does afford us.
Q But this is the limit right now, technologically?
DR. TYSON: It is my understanding that this is the limit right now, technologically, that's right.
Q This has to be approved by Congress?
DR. TYSON: This has to be approved by Congress.
DR. TYSON: Well, I think that -- I would say two things in that regard. First of all, this is a well-documented need. The GAO study has been widely talked about by the press. It was mentioned, for example, by Pete Peterson. The need for school construction has been mentioned by Pete Peterson, it's been mentioned by numerous experts in the education area. I think Americans have shown in their -- in poll after poll and in their own statements to their representatives how important they feel the educational challenge confronting the nation is.
So I think there's strong support for this and strong documentation of the need. I think Congress can be affected by both evidence of the need and by evidence that their constituents would care about an initiative like this.
Q A different subject? On Cuba, are you concerned about the possibility of retaliation against American business if the President permits lawsuits?
DR. TYSON: Well, this is a briefing on the school construction initiative. What I will say is that, of course, the President will be making a decision in the next few days on this issue. As we said over and over again and when we went to Lyon, France, we believe that in exceptional circumstances, and certainly Cuba's actions are exceptional, sometimes one has to take exceptional means to try to influence a change in behavior of a rogue state.
Q I'm sorry, as a follow-up, are you concerned about the possibility of retaliation?
DR. TYSON: Let me just say that we are going to do what we think is appropriate to do in this case based on the need to take action to respond to Cuba's rogue behavior. In any action we take, the pros and cons, the costs and benefits of an action are always considered.
Q With so many schools in such bad shape, as you've outlined here, why did the administration wait until this particular moment to unveil this plan?
DR. TYSON: Well, I think as you know, some of this information is relatively new. The documentation of the need has been most thoroughly done by the GAO, and that has been a fairly recent development. The President has, I would say, a very long record, as you well know, of commitment in the education area and is, I think, always looking for things that are appropriate for the federal government working with state and local governments to do, or working with families to do, to increase educational opportunities.
Here is a case in which we have a very well documented need and an ability to move on that need right now. What's I think important about this program is this is a kind of jump-start program; it would last for a limited period of time, a limited amount of money, and we would hope that that would encourage state and local governments to take action now to address what is documented to be a major national need.
Q So it has nothing to do with the campaign?
DR. TYSON: I think it has to do with priorities. I think it has to do with priorities, and I think a campaign is about priorities. I think that clearly a campaign is about making a choice. And I think that the President's commitment to education as a key priority that defines his administration both in terms of values and in terms of economic growth strategy and in terms of economic opportunity strategy, that this initiative certainly is a defining initiative. But the President's priorities have been clear from the beginning in terms of commitment to education. And the campaign is about priorities, and it's about values.
Q I understand there's a sliding scale in terms of the amount of subsidy they would get. Was there any thought of means testing this so that all of the federal assistance would go to poor school districts and you wouldn't be giving any of it to relatively well-off school districts that can pay for their own?
DR. TYSON: We did talk about various ways to design this, and that was one possible design element. We really decided a sliding scale would essentially allow for the broadest possible involvement of local communities in thinking through their repair, renovation and construction needs and then applying for federal assistance.
Now clearly, there's a limited amount of money, and need is one of the aspects that -- one of the criteria for allocating the money. So need will be certainly a major criteria.
MR. SPERLING: The other thing is, in doing this, we would, in proportioning the money, while we would tried to make it proportional, we would try to make the formula targeted more towards need and poverty. So in dividing up among the states, or in the amount that would be administered to the 100 cities -- as you know, the top 100 cities with the highest amount of children in poverty would apply to the Department of Education. The pool that would be reserved for that would be more than just the proportional amount per student. It would take into account poverty.
So what we chose to do was to make this more of a universal program, but allow for different types of targeting so that you could ensure that more could go to the places with the greatest need.
One of the other problems with the way -- that suggest that, is there are some school districts that have both very well-off school districts and very poor -- well-off communities and poor communities inside. So it would not necessarily be so easy to just simply define a school district or exclude a school district. This way, we're recognizing a national problem.
In fact, what the GAO report showed I think that was significant, I think a lot of us knew that there were serious problems in the central cities. What this showed was that in addition to that, it was fairly widespread. And so this is a way that we could address that as a national problem, but allow for both targeting the subsidy and in doing the formula proportionally to allow poverty and need to be taken into account.
Q Gene, that formula is not devised yet? Is that still to be worked on?
MR. SPERLING: We are working on it now. One way -- what one could do is look at the number of Title I students in each state as kind of an indicator. But, as you know, in looking at other areas, formula divisions are relatively controversial and it's usually better done in some kind of coordination with the governors and mayors. So I think we wanted to leave a little flexibility in working that out.
Q I don't mean to belabor this. Can I have just one follow-up? If that formula's not done yet, can you answer this question: What would be the minimum assistance that, say, the wealthiest school district like Montgomery County in Maryland or Fairfax in Virginia could get? In other words, you get full 50 percent if you're among the poorest, but what would be the minimum?
MR. SPERLING: Well, I think the state -- the state could make a decision. I mean, the state could decide, first of all, that something -- an application was kind of a standard, normal amount of repair they were doing, it did not reflect a new or additional effort. And the state may decide they do not -- that they want to make that decision. But if they also felt there was something worthy, they could decide to give a 10 percent interest subsidy. They would have that flexibility.
Q When will you actually send this legislation to Congress?
MR. SPERLING: I don't think we know at this moment. I think we have to look at the legislative calendar and what else is happening right now. Obviously, there's still quite a bit in the appropriations. So I think that's something we'd have to --
Q Realistically, this is something that you would send up after -- if the President is reelected to a second term?
MR. SPERLING: I think we would have to see how the legislative calendar looked. I certainly think that if we thought there was the opportunity to pass this now, I think we would. I would say the following: We will certainly be shopping this around and seeing if we -- and trying to build a momentum and consensus for passing this. And if there is that consensus, then we could even draft it and begin taking that into account if there is bipartisan willingness to work with us.
So I think we would, I think, test out the waters and see if we had a chance of passing legislation. And it could be that with all the attention that was raised by the GAO report, which received not only national attention but very targeted local needs analysis statement, and if there's a positive reaction, then I think that we could definitely go forward with this. We definitely -- the people we spoke with on the Hill, are interested. But whether there would be a serious push, it's hard -- some of us may like that, but it has to obviously weigh in with all the other things, including Kassebaum-Kennedy, finishing minimum wage, and all the appropriation bills.
Q So are you, at the federal level, setting up the criteria by which these applications will be judged, but then the states will administer them? Is that the framework that you're looking at?
DR. TYSON: I think there is some general criteria. The states would obviously have lots of room within those general criteria. I mean, what we've written down there, what we've thought about is that need is clearly one. A second one that's very important and gets at the Montgomery County issue or any other school district issue is we would like there to be evidence that this is a project or an activity which otherwise would not have been undertaken. It's not that we want things to be pulled off the shelves that they were going to do anyway, but new projects.
We also have a list there of things -- purposes for which the project would be designed -- classroom improvement or expansion, energy efficiency. There's a list of about seven things. I think, obviously, there are tens of thousands of school districts that are going to -- if they apply, we felt the state would be much better equipped in most cases to evaluate a particular proposal according to those criteria and do a comparison among competing proposals. So there should be plenty of room really for state discretion here.
MR. SPERLING: I think that, if you look at the purposes, they're quite broad. I think, obviously, in listing the purposes, it was in many ways meant to exclude things that might be frivolous. And so, we wanted to make sure they were for valid educational purposes. And our notion was that a state would have the responsibility to come forward to show that they had a plan for criteria that would take into account overall need and, as Laura said, incremental additions to their school infrastructure.
So we would want to make sure that they were at least complying with the spirit of this as opposed to us saying, here are the criteria you must do. We would just ask that they come forward with a good faith plan that shows that they would be taking that criteria into account when making their decisions.
Q And that would be required in order to receive this money -- a state plan?
MR. SPERLING: At least the state showing that they would have that type of criteria in their decisions.
Q Senate leaders recently wrote a letter to the FCC calling for the giveaway of the spectrum to broadcasters for digital high definition TV. This morning there was a press conference of grass-roots organizations saying that that should be auctioned, and the proceeds of that should either go to public broadcasting or could be used -- for example, $40 billion to build more than 5,800 schools around the country. You're just talking about the auctioning of the channels 60 to 69. What about the auctioning of that full spectrum that's being talked about as a giveaway?
MR. SPERLING: We'll let Greg get up. First of all, I just wanted to point out that in this document, we tried to provide something that shows -- if you look at the page on the offsets, on page six, that walks through the different proposals we have and where some of them are. And some of that for us is already committed to our balanced budget proposal. So if we were to use any of those funds for another purpose, we would, in a sense, be double-counting. And so we were looking for -- and this was a new additional program. We were looking for a new additional offset. So this is a one-time, four-year program being paid for by a one-sale.
But Greg Simon, who is the Vice President's and really the President's expert on this issue could answer further.
MR. SIMON: The two points you raised -- first, the letter to the FCC suggesting that they give away the digital spectrum. We have opposed the idea of auctioning the digital spectrum, and we have proposed a plan to award, not give away -- and there's a difference -- the digital spectrum with certain public interest obligations that attach to its use, i.e., children's television, political debate and other things that are made possible by the abundance of channels that digital television will enjoy.
But we have said, because the transition to digital television is so important, both technologically and culturally, that we would award the digital licenses and then require the return of the channels television stations use now by the year 2005, and auction those channels, which, when they're all bundled together we feel are more valuable than if we were to auction the digital channels today.
Now, what we're doing in the proposal today, channels 60 to 69 are the least-used channels. There are only about 100 stations nationally that operate in that band. We are not moving any of those. They are protected under this proposal. But what we're doing is we're taking the value from the public's property in the air and we're using that value to renovate the public's property on the ground. And that's what we're doing in the channels 60 to 69.
Q A follow-up. Whether you're awarding it or you're giving it away, you're still not auctioning it, and it's worth $40 billion. The broadcasters will profit from this handsomely. Why not auction it?
MR. SIMON: Number one, CBO has never scored it, nor has OMB, to be worth $40 billion. The digital spectrum has been scored at around $12 billion by CBO. A lot of people have said all kinds of numbers. We can't operate on hypotheses like that.
Number two, the letter to the FCC that you referred to did not talk about giving back the channel they have now, nor did it talk about attaching any public interest obligations to the digital channels. We do attach public interest obligations and require the return of the analog so that it can be auctioned.
And I'd point out, there are a lot of people who estimate the value of these two different proposals who say that the auction of the analog is more valuable than the auction of the digital -- because of the way it's packaged it's more useful to people. If you auction the digital today, you're auctioning all the channels in between channels -- 5 and 7, channels 8 and 10, or 7 and 9. That is a very difficult spectrum to you. So the hypotheses that this is a gold mine is not borne out. The theory that there should be a public interest return is what we have said, both in obligations for the digital channel and in revenue from auction of the analog channels by the year 2005.
Q There's been a fair amount of criticism of the President's computers in the schools initiative on just this very point, that it ignores infrastructure problems like crumbling walls and peeling paint. And I'm wondering if that was part of the motivation for this initiative to try and counteract that criticism.
MR. SIMON: Well, number one, we have discovered in Net Day in California that when parents show up to help wire the schools and they see the shape some of the schools are in, they come back to paint them, to repair them, to fix windows. So once you get people interested in the infrastructure of schools at any level, they become involved at every level.
And number two, of course, we want to renovate the schools so that they're capable of being wired and being able to use the new educational technologies. The beauty of Net Day was it used a kind of wire that does not require special inside-the-wall wiring. You could send it through the ceiling and through heating ducts. Not every school can do that. So this is all of a piece. If we build the schools and then keep the chairs bolted to the floor and they can't use a phone or a computer, then we haven't done what we should do.
THE PRESS: Thank you.
END 1:17 P.M. EDT