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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 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) 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 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 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. 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. 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.

                     Subtitle B--Veterans' Benefits

SEC. 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) 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) 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) 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) 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. 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) 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. 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) 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) Effective Date.--The amendments made by this section take
effect on October 1, 1998.

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