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 TITLE VIII--TRANSPORTATION DISCRETIONARY SPENDING GUARANTEE AND BUDGET   
                                 OFFSETS  
  
       Subtitle A--Transportation Discretionary Spending Guarantee  
  
SEC. 8101. DISCRETIONARY SPENDING CATEGORIES.  
  
    (a) Establishment of Separate Categories.--Section 251(c) of the   
Balanced Budget and Emergency Deficit Control Act of 1985 is   
amended <<NOTE: 2 USC 901.>>  as follows:  
            (1) FY1999.--In paragraph (3), strike ``and'' at the end of   
        subparagraph (B) and after subparagraph (C) add the following   
        new subparagraphs:  
                    ``(D) for the highway category: $21,885,000,000 in   
                outlays; and  
                    ``(E) for the mass transit category: $4,401,000,000   
                in outlays;''.  
            (2) FY2000.--In paragraph (4), strike ``and'' at the end of   
        subparagraph (A) and at the end add the following new   
        subparagraphs:  
                    ``(C) for the highway category: $24,436,000,000 in   
                outlays; and  
                    ``(D) for the mass transit category: $4,761,000,000   
                in outlays;''.  
            (3) FY2001.--In paragraph (5), strike the comma and insert   
        ``--'' after ``2001'', insert ``(A)'' before ``for'' and indent   
        the new subparagraph and move it 2 ems to the right, strike   
        ``and'' at the end of such subparagraph, and at the end add the   
        following new subparagraphs:  
                    ``(B) for the highway category: $26,204,000,000 in   
                outlays; and  
                    ``(C) for the mass transit category: $5,190,000,000   
                in outlays;''.  
            (4) FY2002.--In paragraph (6), strike the comma and insert   
        ``--'' after ``2002'', insert ``(A)'' before ``for'', indent the   
        new subparagraph and move it 2 ems to the right, and add at the   
        end the following new subparagraphs:  
                    ``(B) for the highway category: $26,977,000,000 in   
                outlays; and  
                    ``(C) for the mass transit category: $5,709,000,000   
                in outlays; and''.  
            (5) FY2003.--After paragraph (6), add the following new   
        paragraph:  
            ``(7) with respect to fiscal year 2003--  
                    ``(A) for the highway category: $27,728,000,000 in   
                outlays; and  
                    ``(B) for the mass transit category: $6,256,000,000   
                in outlays.''.  
  
    (b) <<NOTE: 2 USC 901 note.>>  Offsetting Adjustment in   
Discretionary Spending Limits.--  
            (1) Adjustment of nondefense category for fy1999.--The   
        discretionary spending limit set forth in section 251(c)(3)(B)   
        of the Balanced Budget and Emergency Deficit Control Act of   
        1985, as adjusted in conformance with section 251(b) of that   
        Act, is reduced by $859,000,000 in new budget authority and   
        $25,173,000,000 in outlays.  
            (2) Adjustment of discretionary category for fy2000.--The   
        discretionary spending limit set forth in section 251(c)(4)(A)   
        of the Balanced Budget and Emergency Deficit Control Act of   
        1985, as adjusted in conformance with section 251(b) of that   
        Act, is reduced by $859,000,000 in new budget authority and   
        $26,045,000,000 in outlays.  
            (3) Adjustment of discretionary spending limit for fy2001.--  
        The discretionary spending limit set forth in section   
        251(c)(5)(A) of the Balanced Budget and Emergency Deficit   
        Control Act of 1985, as adjusted in conformance with section   
        251(b) of that Act, is reduced by $859,000,000 in new budget   
        authority and $26,329,000,000 in outlays.  
            (4) Adjustment of discretionary spending limit for fy2002.--  
        The discretionary spending limit set forth in section   
        251(c)(6)(A) of the Balanced Budget and Emergency Deficit   
        Control Act of 1985, as adjusted in conformance with section   
        251(b) of that Act, is reduced by $859,000,000 in new budget   
        authority and $26,675,000,000 in outlays.  
  
    (c) Definitions of Highway Category and Mass Transit Category.--  
Section 250(c)(4) of the Balanced Budget and Emergency Deficit Control   
Act of 1985 is amended <<NOTE: 2 USC 900.>>  by inserting ``(A)'' after   
``(4)'' and by adding at the end the following new subparagraphs:  
            ``(B) The term `highway category' refers to the following   
        budget accounts or portions thereof that are subject to the   
        obligation limitations on contract authority set forth in the   
        Transportation Equity Act for the 21st Century:  
                    ``(i) 69-8083-0-7-401 (Federal-Aid Highways).  
                    ``(ii) 69-8020-0-7-401 (Highway Traffic Safety   
                Grants).  
                    ``(iii) 69-8048-0-7-401 (National Motor Carrier   
                Safety Program).  
                    ``(iv) 69-8016-0-7-401 (Operations and Research   
                NHTSA).  
            ``(C) The term `mass transit category' refers to the   
        following budget accounts or portions thereof that are subject   
        to the obligation limitations on contract authority provided in   
        the Transportation Equity Act for the 21st Century and for which   
        appropriations are provided pursuant to authorizations contained   
        in that Act (except that appropriations provided pursuant to   
        section 5338(h) of title 49, United States Code, as amended by   
        this section, shall not be included in this category):  
                    ``(i) 69-8191-0-7-401 (Mass Transit Capital Fund).  
                    ``(ii) 69-8350-0-7-401 (Trust Fund Share of   
                Expenses).  
                    ``(iii) 69-1129-0-1-401 (Formula Grants).  
                    ``(iv) 69-1120-0-1-401 (Administrative Expenses).  
                    ``(v) 69-1136-0-1-401 (University Transportation   
                Centers).  
                    ``(vi) 69-1137-0-1-401 (Transit Planning and   
                Research).  
            ``(D) Special rule.--(i) Any outlays in excess of the   
        discretionary spending limit set forth in section 251(c) for the   
        highway or mass transit category, as adjusted, for the budget   
        year shall be considered nondefense category outlays or   
        discretionary category outlays.  
            ``(ii) If the obligation limitations for accounts in the   
        highway or mass transit category provided in an appropriation   
        Act for a fiscal year exceed the obligation limitations set   
        forth in section 8103 of the Transportation Equity Act for the   
        21st Century for that year, as adjusted, the estimated outlays   
        flowing for each outyear from such excess obligations calculated   
        pursuant to clause (iii) shall be attributed to the   
        discretionary category in that outyear.  
            ``(iii) For purposes of clause (ii), outlays from excess   
        obligations shall be determined using the average of the   
        spendout rates for that category in the baseline.''.  
  
    (d) Adjustment to Highway and Mass Transit Categories.--Section   
251(b)(1) of the Balanced Budget and Emergency Deficit Control Act of   
1985 is amended <<NOTE: 2 USC 901.>>  by--  
            (1) striking ``When'' and inserting:  
                    ``(A) Concepts and definitions.--When''; and  
            (2) adding at the end the following:  
                    ``(B) Adjustment to align highway spending with   
                revenues.--(i) When the President submits the budget   
                under section 1105 of title 31, United States Code, OMB   
                shall calculate and the budget shall include adjustments   
                to the highway category for the budget year and each   
                outyear as provided in clause (ii)(I)(cc).  
                    ``(ii)(I)(aa) OMB shall take the actual level of   
                highway receipts for the year before the current year   
                and subtract the sum of the estimated level of highway   
                receipts in subclause (II) plus any amount previously   
                calculated under item (bb) for that year.  
                    ``(bb) OMB shall take the current estimate of   
                highway receipts for the budget year and subtract the   
                estimated level of receipts for that year.  
                    ``(cc) OMB shall take the sum of the amounts   
                calculated under items (aa) and (bb), add that sum to   
                the amount of obligations set forth in section 8103 of   
                the Transportation Equity Act for the 21st Century for   
                the highway category for the budget year, and calculate   
                the outlay change resulting from that change in   
                obligations relative to that amount for the budget year   
                and each outyear using current estimates. After making   
                the calculation under the preceding sentence, OMB shall   
                adjust the amount of obligations set forth in that   
                section for the budget year by adding the sum of the   
                amounts calculated under items (aa) and (bb).  
                    ``(II) The estimated level of highway receipts for   
                the purposes of this clause are--  
                          ``(aa) for fiscal year 1998, $22,164,000,000;  
                          ``(bb) for fiscal year 1999, $32,619,000,000;  
                          ``(cc) for fiscal year 2000, $28,066,000,000;  
                          ``(dd) for fiscal year 2001, $28,506,000,000;  
                          ``(ee) for fiscal year 2002, $28,972,000,000;   
                      and  
                          ``(ff) for fiscal year 2003, $29,471,000,000.  
                    ``(III) In this clause, the term `highway receipts'   
                means the governmental receipts credited to the highway   
                account of the Highway Trust Fund.  
            ``(C)(i) In addition to the adjustment required by   
        subparagraph (B), when the President submits the budget under   
        section 1105 of title 31, United States Code, for fiscal years   
        2000, 2001, 2002, or 2003, OMB shall calculate and the budget   
        shall include for the budget year and each outyear an adjustment   
        to the limits on outlays for the highway category and the mass   
        transit category equal to--  
                    ``(I) the outlays for the applicable category   
                calculated assuming obligation levels consistent with   
                the estimates prepared pursuant to subparagraph (D), as   
                adjusted, using current technical assumptions; minus  
                    ``(II) the outlays for the applicable category set   
                forth in the subparagraph (D) estimates, as adjusted.  
            ``(ii) The adjustment made pursuant to clause (i) in the   
        fiscal years 2002 and 2003 budget submissions of the President   
        under section 1105(a) of title 31, United States Code, shall not   
        exceed 4 percent plus cumulative carryovers. In this clause, the   
        term `cumulative carryovers' means the total of each amount by   
        which outlays for the highway and mass transit category for any   
        fiscal year are less than the outlay limit for that category, as   
        adjusted, for that year less any amount of carryover used in the   
        previous year.  
            ``(D)(i) When OMB and CBO submit their final sequester   
        report for fiscal year 1999, that report shall include an   
        estimate of the outlays for each of the categories that would   
        result in fiscal years 2000 through 2003 from obligations at the   
        levels specified in section 8103 of the Transportation Equity   
        Act for the 21st Century using current assumptions.  
            ``(ii) When the President submits the budget under section   
        1105 of title 31, United States Code, for fiscal years 2000,   
        2001, 2002, or 2003, OMB shall adjust the estimates made in   
        clause (i) by the adjustments by subparagraphs (B) and (C).  
            ``(E) OMB shall consult with the Committees on the Budget   
        and include a report on adjustments under subparagraphs (B) and   
        (C) in the preview report.''.  
  
    (e) Enforcement of Guarantee.--Rule XXI of the Rules of the House of   
Representatives is amended by adding at the end the following new   
clause:  
    ``9. It shall not be in order to consider any bill or joint   
resolution, or any amendment thereto or conference report thereon, that   
would cause obligation limitations to be below the level for any fiscal   
year set forth in section 8103 of the Transportation Equity Act for the   
21st Century, as adjusted, for the highway category or the mass transit   
category, as applicable.''.  
  
SEC. <<NOTE: 2 USC 902 note.>>  8102. CONFORMING THE PAYGO SCORECARD 
             WITH THIS ACT.  
  
    Upon the enactment of this Act, the Director of the Office of   
Management and Budget shall not make any estimates under section 252(d)   
of the Balanced Budget and Emergency Deficit Control Act of 1985 of   
changes in direct spending outlays and receipts for any fiscal year   
resulting from this title.  
  
SEC. <<NOTE: 2 USC 901 note.>>  8103. LEVEL OF OBLIGATION LIMITATIONS.

  
    (a) Highway Category.--For the purposes of section 251(b) of the   
Balanced Budget and Emergency Deficit Control Act of 1985, the level of   
obligation limitations for the highway category is--  
            (1) for fiscal year 1999, $25,883,000,000;  
            (2) for fiscal year 2000, $26,629,000,000;  
            (3) for fiscal year 2001, $27,158,000,000;  
            (4) for fiscal year 2002, $27,767,000,000; and  
            (5) for fiscal year 2003, $28,233,000,000.  
  
    (b) Mass Transit Category.--For the purposes of section 251(b) of   
the Balanced Budget and Emergency Deficit Control Act of 1985, the level   
of obligation limitations for the mass transit category is--  
            (1) for fiscal year 1999, $5,365,000,000;  
            (2) for fiscal year 2000, $5,797,000,000;  
            (3) for fiscal year 2001, $6,271,000,000;  
            (4) for fiscal year 2002, $6,747,000,000; and  
            (5) for fiscal year 2003, $7,226,000,000.  
  
For purposes of this subsection, the term ``obligation limitations''   
means the sum of budget authority and obligation limitations.  
  
<<NOTE: Veterans Benefits Act of 1998.>> Subtitle B--Veterans' Benefits  
  
SEC. <<NOTE: 38 USC 101 note.>>  8201. SHORT TITLE.  
  
    This subtitle may be cited as the ``Veterans Benefits Act of 1998''.  
  
SEC. 8202. PROHIBITION ON ESTABLISHMENT OF SERVICE-CONNECTION FOR   
            DISABILITIES RELATING TO USE OF TOBACCO PRODUCTS.  
  
    (a) Wartime Disability Compensation.--Section 1110 of title 38,   
United States Code, is amended by striking ``or abuse of alcohol or   
drugs'' and inserting ``, abuse of alcohol or drugs, or use of tobacco   
products''.  
    (b) Peacetime Disability Compensation.--Section 1131 of such title   
is amended by striking ``or abuse of alcohol or drugs''  
and inserting ``, abuse of alcohol or drugs, or use of tobacco   
products''.  
    (c) Applicability.--(1) Except as provided in paragraph (2), the   
amendments made by this section shall apply to any claims for   
compensation received by the Secretary of Veterans Affairs before, on,   
or after the date of enactment of this Act.  
    (2) The amendments made by this section shall not apply in the case   
of any such claims adjudicated by the Secretary before such date of   
enactment for which a service-connection was established for a   
disability on the basis of the use of tobacco products.  
  
SEC. 8203. TWENTY PERCENT INCREASE IN RATES OF BASIC EDUCATIONAL   
            ASSISTANCE UNDER MONTGOMERY GI BILL.  
  
    (a) Active Duty Educational Assistance.--  
            (1) Increase in rates.--Section 3015 of title 38, United   
        States Code, is amended--  
                    (A) in subsection (a)(1), by striking ``$400'' and   
                inserting ``$528 (as increased from time to time under   
                subsection (g))''; and  
                    (B) in subsection (b)(1), by striking ``$325'' and   
                inserting ``$429 (as increased from time to time under   
                subsection (g))''.  
            (2) CPI adjustment.--Subsection (g) of such section is   
        amended by striking ``beginning on or after October 1, 1994''   
        and all that follows through ``such rates'' and inserting ``,   
        the Secretary shall provide a percentage increase (rounded to   
        the nearest dollar) in the rates payable under subsections   
        (a)(1) and (b)(1)''.  
            (3) Technical amendments.--Such section is further amended--  
                    (A) in subsection (a), by striking ``subsections   
                (b), (c), (d), (e), (f), and (g) of'' in the matter   
                preceding paragraph (1); and  
                    (B) in subsection (b)--  
                          (i) by striking ``Except as provided in   
                      subsections (c), (d), (e), (f), and (g), in'' and   
                      inserting ``In''; and  
                          (ii) by inserting ``(except as provided in the   
                      succeeding subsections of this section)'' after   
                      ``under this chapter shall''.  
            (4) <<NOTE: 38 USC 3015 note.>>  Effective date.--The   
        amendments made by this subsection shall take effect on October   
        1, 1998, and shall apply with respect to educational assistance   
        allowances paid for months after September 1998. However, no   
        adjustment in rates of educational assistance shall be made   
        under subsection (g) of section 3015 of title 38, United States   
        Code, as amended by paragraph (2), for fiscal year 1999.  
  
    (b) Selected Reserve Educational Assistance.--  
            (1) Increase in rates.--Paragraph (1) of section 16131(b) of   
        title 10, United States Code, is amended--  
                    (A) in subparagraph (A), by striking ``$190'' and   
                inserting ``$251 (as increased from time to time under   
                paragraph (2))'';  
                    (B) in subparagraph (B), by striking ``$143'' and   
                inserting ``$188 (as increased from time to time under   
                paragraph (2))''; and  
                    (C) in subparagraph (C), by striking ``$95'' and   
                inserting ``$125 (as increased from time to time under   
                paragraph (2))''.  
            (2) CPI adjustment.--Paragraph (2) of such section is   
        amended by striking ``beginning on or after October 1, 1994''   
        and all that follows through ``such rates'' and inserting ``,   
        the Secretary shall provide a percentage increase (rounded to   
        the nearest dollar) in the rates payable under subparagraphs   
        (A), (B), and (C) of paragraph (1)''.  
            (3) Technical amendment.--Paragraph (1) of such section is   
        further amended by striking ``in paragraph (2) and''.  
            (4) <<NOTE: 10 USC 16131 note.>>  Effective date.--The   
        amendments made by this subsection shall take effect on October   
        1, 1998, and shall apply with respect to educational assistance   
        allowances paid for months after September 1998. However, no   
        adjustment in rates of educational assistance shall be made   
        under paragraph (2) of section 16131(b) of title 10, United   
        States Code, as amended by paragraph (2), for fiscal year 1999.  
  
SEC. 8204. INCREASE IN ASSISTANCE AMOUNT FOR SPECIALLY ADAPTED HOUSING.  
  
    (a) In General.--Section 2102 of title 38, United States Code, is   
amended--  
            (1) in the matter preceding paragraph (1) of subsection (a),   
        by striking ``$38,000'' and inserting ``$43,000''; and  
            (2) in subsection (b)(2), by striking ``$6,500'' and   
        inserting ``$8,250''.  
  
    (b) <<NOTE: 38 USC 2102 note.>>  Effective Date.--The amendments   
made by subsection (a) shall apply with respect to limitations under   
section 2102 of such title on assistance furnished to a veteran under   
section 2101 of such title on or after October 1, 1998.  
  
SEC. 8205. INCREASE IN AMOUNT OF ASSISTANCE FOR AUTOMOBILE AND ADAPTIVE   
            EQUIPMENT FOR CERTAIN DISABLED VETERANS.  
  
    (a) In General.--Section 3902(a) of title 38, United States Code, is   
amended by striking out ``$5,500'' and inserting in lieu thereof   
``$8,000''.  
    (b) <<NOTE: 38 USC 3902 note.>>  Effective Date.--The amendment made   
by subsection (a) shall apply with respect to assistance furnished under   
section 3902 of such title on or after October 1, 1998.  
  
SEC. <<NOTE: 38 USC 1521 note.>>  8206. INCREASE IN AID AND ATTENDANCE

             RATES FOR VETERANS ELIGIBLE FOR PENSION.  
  
    Effective October 1, 1998, the maximum annual rates of pension in   
effect as of September 30, 1998, under the following provisions of   
chapter 15 of title 38, United States Code, are increased by $600:  
            (1) Subsections (d)(1), (d)(2), (f)(2), and (f)(4) of   
        section 1521.  
            (2) Section 1536(d)(2).  

SEC. 8207. ELIGIBILITY OF CERTAIN REMARRIED SURVIVING SPOUSES FOR   
            REINSTATEMENT OF DEPENDENCY AND INDEMNITY COMPENSATION UPON   
            TERMINATION OF THAT REMARRIAGE.  
  
    (a) Restoration of Prior Eligibility.--Section 1311 of title 38,   
United States Code, is amended by adding at the end the following new   
subsection:  
    ``(e)(1) The remarriage of the surviving spouse of a veteran shall   
not bar the furnishing of dependency and indemnity compensation to such   
person as the surviving spouse of the veteran if the remarriage is   
terminated by death, divorce, or annulment unless the Secretary   
determines that the divorce or annulment was secured through fraud or   
collusion.  
    ``(2) If the surviving spouse of a veteran ceases living with   
another person and holding himself or herself out openly to the public   
as that person's spouse, the bar to granting that person dependency and   
indemnity compensation as the surviving spouse of the veteran shall not   
apply.  
    ``(3) The first month of eligibility for payment of dependency and   
indemnity compensation to a surviving spouse by reason of this   
subsection shall be the later of the month after--  
            ``(A) the month of the termination of such remarriage, in   
        the case of a surviving spouse described in paragraph (1); or  
            ``(B) the month of the cessation described in paragraph (2),   
        in the case of a surviving spouse described in that   
        paragraph.''.  
  
    (b) <<NOTE: 38 USC 1311 note.>>  Effective Date.--No payment may be   
made by reason of section 1311(e) of title 38, United States Code, as   
added by subsection (a), for any month before October 1998.  
  
SEC. <<NOTE: 10 USC 1174 note.>>  8208. EXTENSION OF PRIOR REVISION
TO OFFSET RULE FOR DEPARTMENT OF DEFENSE SPECIAL SEPARATION   
          BENEFIT PROGRAM.  
  
    The amendment made by section 653 of the National Defense   
Authorization Act for Fiscal Year 1997 (Public Law 104-201; 110 Stat.   
2583) to subsection (h)(2) of section 1174 of title 10, United States   
Code, shall apply to any payment of separation pay under the special   
separation benefits program under section 1174a of that title that was   
made during the period beginning on December 5, 1991, and ending on   
September 30, 1996.  
  
SEC. 8209. SENSE OF THE CONGRESS CONCERNING RECOVERY FROM TOBACCO   
            COMPANIES OF COSTS OF TREATMENT OF VETERANS FOR TOBACCO-  
            RELATED ILLNESSES.  
  
    It is the sense of the Congress--  
            (1) that the Attorney General or the Secretary of Veterans   
        Affairs, as appropriate, should take all steps necessary to   
        recover from tobacco companies amounts corresponding to the   
        costs which would be incurred by the Department of Veterans   
        Affairs for treatment of tobacco-related illnesses of veterans,   
        if such treatment were authorized by law; and  
            (2) that the Congress should authorize by law the treatment   
        of tobacco-related illnesses of veterans upon the recovery of   
        such amounts.  
              Subtitle C--Temporary Student Loan Provision.  
  
SEC. 8301. TEMPORARY STUDENT LOAN PROVISION.  
  
    (a) FFEL Interest Rates.--  
            (1) Amendment.--Section 427A of the Higher Education Act of   
        1965 (20 U.S.C. 1077a) is amended--  
                    (A) by redesignating subsections (j) and (k) as   
                subsections (k) and (l), respectively; and  
                    (B) by inserting after subsection (i) the following   
                new subsection:  
  
    ``(j) Interest Rates for New Loans Between July 1, 1998 and October    
1, 1998.--  
            ``(1) In general.--Notwithstanding subsection (h), but   
        subject to paragraph (2), with respect to any loan made,   
        insured, or guaranteed under this part (other than a loan made   
        pursuant to section 428B or 428C) for which the first   
        disbursement is made on or after July 1, 1998, and before   
        October 1, 1998, the applicable rate of interest shall, during   
        any 12-month period beginning on July 1 and ending on June 30,   
        be determined on the preceding June 1 and be equal to--  
                    ``(A) the bond equivalent rate of 91-day Treasury   
                bills auctioned at the final auction held prior to such   
                June 1; plus  
                    ``(B) 2.3 percent,  
        except that such rate shall not exceed 8.25 percent.  
            ``(2) In school and grace period rules.--Notwithstanding   
        subsection (h), with respect to any loan under this part (other   
        than a loan made pursuant to section 428B or 428C) for which the   
        first disbursement is made on or after July 1, 1998, and before   
        October 1, 1998, the applicable rate of interest for interest   
        which accrues--  
                    ``(A) prior to the beginning of the repayment period   
                of the loan; or  
                    ``(B) during the period in which principal need not   
                be paid (whether or not such principal is in fact paid)   
                by reason of a provision described in section   
                428(b)(1)(M) or 427(a)(2)(C),  
        shall be determined under paragraph (1) by substituting `1.7   
        percent' for `2.3 percent'.  
            ``(3) PLUS loans.--Notwithstanding subsection (h), with   
        respect to any loan under section 428B for which the first   
        disbursement is made on or after July 1, 1998, and before   
        October 1, 1998, the applicable rate of interest shall, during   
        any 12-month period beginning on July 1 and ending on June 30,   
        be determined on the preceding June 1 and be equal to the lesser   
        of--  
                    ``(A)(i) the bond equivalent rate of 91-day Treasury   
                bills auctioned at the final auction held prior to such   
                June 1; plus  
                    ``(ii) 3.1 percent; or  
                    ``(B) 9.0 percent.  
            ``(4) <<NOTE: Federal Register, publication.>>    
        Consultation.--The Secretary shall determine the applicable rate   
        of interest under this subsection after consultation with the   
        Secretary of the Treasury and shall publish such  
        rate in the Federal Register as soon as practicable after the   
        date of determination.''.  
            (2) Conforming amendment.--Section 428B(d)(4) (20 U.S.C.   
        1078-2(d)(4)) is amended by striking ``section 427A(c)'' and   
        inserting ``section 427A for loans made under this section''.  
  
    (b) Special Allowances.--  
            (1) Amendment.--Section 438(b)(2) of the Higher Education   
        Act of 1965 (20 U.S.C. 1087-1(b)(2)) is amended by adding at the   
        end the following new subparagraph:  
            ``(G) Loans disbursed between july 1, 1998, and october 1,   
        1998.--  
                    ``(i) In general.--Subject to paragraph (4) and   
                clauses (ii), (iii), and (iv) of this subparagraph, and   
                except as provided in subparagraph (B), the special   
                allowance paid pursuant to this subsection on loans for   
                which the first disbursement is made on or after July 1,   
                1998, and before October 1, 1998, shall be computed--  
                          ``(I) by determining the average of the bond   
                      equivalent rates of 91-day Treasury bills   
                      auctioned for such 3-month period;  
                          ``(II) by subtracting the applicable interest   
                      rates on such loans from such average bond   
                      equivalent rate;  
                          ``(III) by adding 2.8 percent to the resultant   
                      percent; and  
                          ``(IV) by dividing the resultant percent by 4.  
                    ``(ii) In school and grace period.--In the case of   
                any loan for which the first disbursement is made on or   
                after July 1, 1998, and before October 1, 1998, and for   
                which the applicable rate of interest is described in   
                section 427A(j)(2), clause (i)(III) of this subparagraph   
                shall be applied by substituting `2.2 percent' for `2.8   
                percent'.  
                    ``(iii) PLUS loans.--In the case of any loan for   
                which the first disbursement is made on or after July 1,   
                1998, and before October 1, 1998, and for which the   
                applicable rate of interest is described in section   
                427A(j)(3), clause (i)(III) of this subparagraph shall   
                be applied by substituting `3.1 percent' for `2.8   
                percent', subject to clause (v) of this subparagraph.  
                    ``(iv) Consolidation loans.--This subparagraph shall   
                not apply in the case of any consolidation loan.  
                    ``(v) Limitation on special allowances for PLUS   
                loans.--In the case of PLUS loans made under section   
                428B and disbursed on or after July 1, 1998, and before   
                October 1, 1998, for which the interest rate is   
                determined under 427A(j)(3), a special allowance shall   
                not be paid for such loan for such unless the rate   
                determined under subparagraph (A) of such section   
                (without regard to subparagraph (B) of such section)   
                exceeds 9.0 percent.''.  
            (2) Conforming amendments.--Section 438(b)(2) of such Act is   
        further amended--  
                    (A) in subparagraph (A), by striking ``(E), and   
                (F)'' and inserting ``(E), (F), and (G)'';  
                    (B) in subparagraph (B)(iv), by striking ``(E), or   
                (F)'' and inserting ``(E), (F), or (G)''; and  
                    (C) in subparagraph (C)(ii), by striking ``In the   
                case'' and inserting ``Subject to subparagraph (G), in   
                the case''.  
    (c) Direct Loan Interest Rates.--Section 455(b) (20 U.S.C. 1087e(b))   
is amended--  
            (1) by redesignating paragraph (5) as paragraph (6); and  
            (2) by inserting after paragraph (4) the following new   
        paragraph:  
            ``(5) Temporary interest rate provision.--  
                    ``(A) Rates for fdsl and fdusl.--Notwithstanding the   
                preceding paragraphs of this subsection, for Federal   
                Direct Stafford Loans and Federal Direct Unsubsidized   
                Stafford Loans for which the first disbursement is made   
                on or after July 1, 1998, and before October 1, 1998,   
                the applicable rate of interest shall, during any 12-  
                month period beginning on July 1 and ending on June 30,   
                be determined on the preceding June 1 and be equal to--  
                          ``(i) the bond equivalent rate of 91-day   
                      Treasury bills auctioned at the final auction held   
                      prior to such June 1; plus  
                          ``(ii) 2.3 percent,  
                except that such rate shall not exceed 8.25 percent.  
                    ``(B) In school and grace period rules.--  
                Notwithstanding the preceding paragraphs of this   
                subsection, with respect to any Federal Direct Stafford   
                Loan or Federal Direct Unsubsidized Stafford Loan for   
                which the first disbursement is made on or after July 1,   
                1998, and before October 1, 1998, the applicable rate of   
                interest for interest which accrues--  
                          ``(i) prior to the beginning of the repayment   
                      period of the loan; or  
                          ``(ii) during the period in which principal   
                      need not be paid (whether or not such principal is   
                      in fact paid) by reason of a provision described   
                      in section 428(b)(1)(M) or 427(a)(2)(C),  
                shall be determined under subparagraph (A) by   
                substituting `1.7 percent' for `2.3 percent'.  
                    ``(C) PLUS loans.--Notwithstanding the preceding   
                paragraphs of this subsection, with respect to Federal   
                Direct PLUS Loan for which the first disbursement is   
                made on or after July 1, 1998, and before October 1,   
                1998, the applicable rate of interest shall be   
                determined under subparagraph (A)--  
                          ``(i) by substituting `3.1 percent' for `2.3   
                      percent'; and  
                          ``(ii) by substituting `9.0 percent' for `8.25   
                      percent'.''.  
  
              Subtitle D--Block Grants for Social Services  
  
SEC. 8401. BLOCK GRANTS FOR SOCIAL SERVICES.  
  
    (a) Reduction of Grants.--Section 2003(c) of the Social Security Act   
(42 U.S.C. 1397b(c)) is amended by striking paragraphs (7) and (8) and   
inserting the following:  
            ``(7) $2,380,000,000 for the fiscal year 1997;  
            ``(8) $2,380,000,000 for the fiscal year 1998;  
            ``(9) $2,380,000,000 for the fiscal year 1999;  
            ``(10) $2,380,000,000 for the fiscal year 2000; and  
            ``(11) $1,700,000,000 for the fiscal year 2001 and each   
        fiscal year thereafter.''.  
  
    (b) Limitation on Amount of TANF Funds Transferable.--Section   
404(d)(2) of the Social Security Act (42 U.S.C. 604(d)(2)) is amended to   
read as follows:  
            ``(2) Limitation on amount transferable to title xx   
        programs.--  
                    ``(A) In general.--A State may use not more than the   
                applicable percent of the amount of any grant made to   
                the State under section 403(a) for a fiscal year to   
                carry out State programs pursuant to title XX.  
                    ``(B) Applicable percent.--For purposes of   
                subparagraph (A), the applicable percent is 4.25 percent   
                in the case of fiscal year 2001 and each succeeding   
                fiscal year.''.  
  
    (c) <<NOTE: 42 USC 604 note.>>  Effective Date.--The amendments made   
by this section take effect on October 1, 1998.  

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