Debate on Tax-Free Accounts Held Over Again

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For a second time, Senate Democrats successfully staved off a vote on a GOP-backed plan for tax-free education savings accounts late last week, frustrating Senate Republican leaders who vowed to push for a vote once again this week.

After the measure fell two votes shy of the 60 votes needed to head off a Democratic-led filibuster last Thursday, the plan's supporters scheduled a vote for this week on another motion to begin debate on amendments to the "A-Plus Education Savings Accounts" bill. The move sets up what may be this year's biggest debate on education policy in the Senate, given 1998's short, election-year schedule.

The education-savings-account plan would allow families to set up special accounts for education expenses, and any individual, business, or organization could deposit up to $2,000 each year for each child. The parents could withdraw the money for virtually any education expense, including private school tuition, home schooling, tutoring, or uniforms and supplies. The House passed the measure, 230-198, last fall.

In the Senate, the political back-and-forth turns on whether middle- and low-income families would take advantage of the plan and whether it would generate significant savings for them. Both parties spent much of last week pointing to an array of figures and charts that they said substantiated their claims.

Plenty of Attention

Throughout the week, the measure kept a high profile and attracted attention from the media and top Washington officials.

Vice President Al Gore spoke out against the plan, calling it in a statement "regressive tax policy masquerading as good education policy." The National PTA and Democrats also held a rally against the savings accounts on Capitol Hill on March 24.

But its chief sponsors, Sen. Paul Coverdell, R-Ga., and Sen. Robert G. Torricelli, a New Jersey Democrat who is one of only a few members of his party to back the proposal, insist that parents should be allowed to avoid taxes on such necessary expenses. Sen. Coverdell said he believes such accounts would encourage businesses and relatives to donate directly to a child's education as well.

And don't discount poor parents' desire to open such accounts for their children, some GOP members and conservative education groups say.

"It really creates an incentive not just for the wealthy, but for these low-income parents," said Fritz S. Steiger, the president of CEO America, a Bentonville, Ark.-based group that promotes and pays for voucher programs for low-income students. "It's not just the rich that have all the money, and they're going to plow it away in a savings account."

The GOP points to estimates that most--70 percent--of the families that would take advantage of the accounts are those making less than $75,000 a year. About half the families would include students in public schools, the bill's supporters say.

Democrats dispute those numbers and estimate the tax savings for public school families--who they estimate would make up only 30 percent of those taking advantage of the plan--would average only $7 a year. A family making less than $50,000 a year would only save $2.50, the Democrats said. They added that federal money would be better spent on President Clinton's $22 billion school construction plan.

"We can start building and modernizing 5,000 schools, or you can wait five years to get a meager $7 tax benefit," Secretary of Education Richard W. Riley said at the Democrats' rally last week.

Amendment Wrangling

By week's end, Republican leaders and their Democratic opponents had failed to sketch out a compromise on the number of amendments to the bill that would be debated. Two weeks ago, Democrats proposed more than 40 amendments, but Republicans--who have amendments of their own to offer--want to drastically scale back that number before they allow debate to begin.

Sen. Slade Gorton, R-Wash., has written an amendment that would allow state and local education agencies to set their own policies for disciplining disabled students under the Individuals with Disabilities Education Act, according to his spokeswoman, Cynthia Bergman. Sen. Judd Gregg, R-N.H., also is considering adding language that would boost federal funding for the IDEA.

In other Senate action last week, school construction aid found an unexpected supporter in Sen. Lauch Faircloth, R-N.C., who proposed moving $5 billion from a $30 billion foreign-aid account to pay interest on low-interest, long-term school construction bonds. Sen. Faircloth ultimately withdrew the amendment, but has vowed to bring it back.

During debate on a supplemental fiscal 1998 appropriations bill, Sen. Faircloth proposed setting up an "education stabilization fund" using funds from the Department of the Treasury that he said are being misspent on financial bailouts of foreign countries. His plan would allow the funds to be administered by the secretary of education, who would determine the loan rates and formula for distributing the bonds.

The move by a Republican to embrace federal aid for school construction is significant, said Edward R. Kealy, the executive director of the Committee for Education Funding, a Washington-based coalition of education groups. "This is the first time a prominent Republican member has said, 'Yes, there's a federal role for school construction,'" he said.

In the House, the Appropriations Committee approved a supplemental-spending bill that would cut the $199 million federal bilingual education budget by $75 million in the current fiscal year.

Mr. Kealy warned that that action may signal "the road to cutting education."

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