Letter to Senate Finance Committee: September 23, 2008

September 23, 2008

The Honorable Max Baucus
Chairman
Senate Committee on Finance
Washington, DC 20510

The Honorable Charles E. Grassley
Ranking Member
Senate Committee on Finance
Washington, DC 20510

Re: The Jobs, Energy, Families and Disaster Relief Act of 2008 (S. 3335)

Dear Chairman Baucus and Ranking Member Grassley:

The National School Boards Association (NSBA), representing over 95,000 local school board members through state school boards associations across the nation, supports your leadership to enact the Jobs, Energy, Families and Disaster Relief Act of 2008 (S. 3335).

S. 3335 includes provisions that are very important to school districts, including reauthorization of the Secure Rural Schools and Community Self-Determination Act, an extension of the Qualified Zone Academy Bonds (QZAB) program, and an extension of the teacher expense deduction and enhanced deductions for specific school donations.

In addition, NSBA urges the inclusion of an exemption or deferral regarding recent Federal 403(b) Regulations (IRS Revenue Procedure 2007-71).

Secure Rural Schools Reauthorization
The “Secure Rural Schools” program provides a critical source of funding to 4,400 school districts and communities in 42 states with nontaxable federal forest lands that receive federal payments-in-lieu-of taxes. The proposed multi-year reauthorization of the law, as well as federal appropriations for “Secure Rural Schools” payments, is greatly needed since funding for the program expired in June 2008. This loss of funding has significantly impacted many school district budgets, affecting nearly 7,000 teachers and personnel.

With the significant increases in expenditures for transportation, utilities, school meals and cuts in state funding to local governments, the loss of funding provided by the “Secure Rural Schools” program is no small issue. For example, a loss of $80,000 in “Secure Rural Schools” payments would be the equivalent of two lost teachers’ salaries in Alleghany County, Virginia.

Qualified Zone Academy Bonds (QZABs)
The extension of the Qualified Zone Academy Bond (QZAB) Program would continue to provide critical, cost-effective resources to school districts for infrastructure repairs and modernization, as well as curriculum development. Since its inception in 1998, the program has strengthened public-private partnerships between school districts and businesses that have, in turn, contributed to innovative education programs and overall student achievement. Moreover, QZABs are a much-needed resource for schools in high-poverty communities with limited tax bases that need additional support for school modernization costs and classroom supplies.

Teacher expense deduction & enhanced deductions for specific school donations
The one-year extensions proposed for above-the line deductions for teachers and for enhanced deductions for specific school donations are very beneficial to our students and schools. Like the QZAB program, these deductions are especially helpful in providing resources to school districts—both urban and rural—for priorities including classroom supplies, textbooks, instructional materials and computers. These provisions also recognize the significant commitment of our teachers and the important role of businesses in ensuring the success of our students and schools.

Implementation of recently adopted Federal 403(b) Regulations (IRS Revenue Procedure 2007-71)
An exemption is needed for a number of school districts. New requirements mandated by the recently adopted Federal 403(b) regulations should be mitigated, as they are costly and burdensome to publicly-funded schools. If this is unobtainable, at the very minimum, the starting date for these requirements should be delayed until start of the fiscal year for schools – July 1, 2009.

The new Federal 403(b) regulations are imposing significant fiscal and staffing burdens on a number of small school systems throughout the country. The IRS, as well as various vendors and associations, has prepared sample documents for school systems to implement these dramatic changes; but, no funding has been provided for this federal mandate. Many school systems do not have legal counsel on staff to oversee implementation; and, the cost for legal services can be exorbitant as a growing number of school systems struggle to close budget shortfalls.

Along with concerns about costs for legal counsel and additional personnel, the potential for errors is a major factor as is the creation of new school system liabilities. In these tight financial times, costs may have to be paid by the employees, therefore reducing their savings by this amount.

One school system in Maine with just over 3,000 students and 500 staff members indicated that if it does not contract with a third party administrator, it will need to hire a full-time employee to administer this program at a cost of more than $60,000 per year. With more than 45,000 employees in Maine school systems, for example, the cost to administer this could annually top several million dollars plus 55 basis points on total investments.

The required date to implement these new regulations is January 1, 2009. Yet, most public schools with a fiscal year and contract year prior to that date need to implement the changes by Fall 2008. Nationwide, churches are allowed to start at the beginning of their plan year, which begins after December 31, 2009. It seems reasonable that public schools should be allowed a similar option if an exemption is not feasible. Therefore, the alternative requested is a deferred implementation until the start of school districts’ 2009-10 fiscal year.

Your leadership to ensure the enactment of the provisions stated above in the Jobs, Energy, Families and Disaster Relief Act of 2008 is greatly appreciated. NSBA will continue to urge Congress’ strong bipartisan support for these provisions that will provide needed assistance to our students, teachers, school systems and communities.

If we can be of further assistance, please contact Deborah Rigsby, director, federal legislation, at drigsby@nsba.org or 703-838-6208.

Thank you again for your leadership on these very important issues.

Sincerely,

Michael A. Resnick
Associate Executive Director

cc:     The Honorable Harry Reid, Majority Leader 
          The Honorable Richard Durbin, Majority Whip 
          Members, Senate Committee on Finance