To amend the Deficit Reduction Act of 1984 to clarify the Permanent University Fund arbitrage exception and to increase from 20 percent to 30 percent the amount of securities and obligations benefitting from the exception.

Amends the Deficit Reduction Act of 1984 to modify the special arbitrage rule pertaining to specified securities or obligations held in a fund which cannot be used under state law restrictions continuously in effect since October 9, 1969, to pay debt service on the bond issue or to finance the facilities that are to be financed with the proceeds of the bonds. Changes the effective date of such state law restrictions from October 9, 1969, to March 1, 1985, and requires that they be continuously in effect only through the bond issue's date of issue.

Extends such rule, as an alternative, to specified securities or obligations held in a fund whose annual distributions cannot exceed 7% of the average fair market value of the assets held in the fund, except to the extent distributions are necessary to pay debt service on the bond issue.