95-24216. Impact Aid Program  

  • [Federal Register Volume 60, Number 189 (Friday, September 29, 1995)]
    [Rules and Regulations]
    [Pages 50774-50800]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-24216]
    
    
    
    
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    Part XII
    
    
    
    
    
    Department of Education
    
    
    
    
    
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    34 CFR Part 218 et al.
    
    
    
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    Impact Aid Program; Final Rule
    
    Federal Register / Vol. 60, No. 189 / Friday, September 29, 1995 / 
    Rules and Regulations
    
    [[Page 50774]]
    
    
    DEPARTMENT OF EDUCATION
    
    34 CFR Parts 218, 219, 221, 222, and 223
    
    RIN 1810-AA80
    
    
    Impact Aid Program
    
    AGENCY: Department of Education
    
    ACTION: Final regulations.
    
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    SUMMARY: The Secretary issues these final regulations governing the 
    Impact Aid Program under title VIII of the Elementary and Secondary 
    Education Act of 1965, as amended by the Improving America's Schools 
    Act of 1994. The program, in general, provides assistance for 
    maintenance and operations costs to local educational agencies (LEAs) 
    that are affected by Federal activities. These final regulations 
    implement changes from the previous Impact Aid laws, Public Law 81-874 
    and Public Law 81-815, which were repealed when title VIII of the 
    Elementary and Secondary Education Act was enacted, and replace the 
    regulations currently found at 34 CFR parts 218, 219, 221, 222, and 
    223.
    
    EFFECTIVE DATE: These regulations take effect October 30, 1995.
    
    FOR FURTHER INFORMATION CONTACT: Catherine Schagh, U.S. Department of 
    Education, 600 Independence Avenue, SW, Room 4200 Portals Building, 
    Washington, DC 20202-6244. Telephone: (202) 260-3907. Individuals who 
    use a telecommunications device for the deaf (TDD) may call the Federal 
    Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 
    p.m., Eastern time, Monday through Friday.
    
    SUPPLEMENTARY INFORMATION: The 1994 reauthorization of the Elementary 
    and Secondary Education Act of 1965 (ESEA) revised many Federal 
    elementary and secondary education programs, including the Impact Aid 
    Program. Under that program, assistance is provided for maintenance and 
    operations costs to LEAs affected by Federal activities, including the 
    presence of tax-exempt Federal property and an increased student 
    population due to Federal property ownership or activities. The final 
    regulations in this document implement many of the changes made by 
    these amendments and are being published to clarify the operation of 
    title VIII of the ESEA (referred to in these regulations as ``the 
    Act'') for grantees. These final regulations also implement a change 
    made by an amendment to the General Education Provisions Act (GEPA).
        In addition, on March 4, 1995, President Clinton announced the 
    Regulatory Reinvention Initiative, which directed heads of Federal 
    departments and agencies to review all existing regulations to 
    eliminate those that are outdated and modify others to increase 
    flexibility and reduce burden. The Department has undertaken a thorough 
    review of the existing Impact Aid Program regulations in light of this 
    initiative.
        As a part of that process, the Secretary in this final regulation 
    has removed regulations that are obsolete due to changes made in the 
    statute by the Improving America's Schools Act of 1994 (IASA), or that 
    are unnecessary due to the fact that they simply repeated statutory 
    provisions. In addition, the Secretary has reorganized, streamlined, 
    and revised the remaining regulations so that they are more logically 
    organized, clearly stated, and easier to use. In that process, five 
    parts have been reduced to one; and the codified pages of Impact Aid 
    regulations have been reduced by more than 50 percent. These reductions 
    are due primarily to changes made by the IASA, which removed several 
    portions of the Impact Aid Program (e.g., the disaster assistance 
    program, previously codified in part 219, and much of the school 
    construction program, previously codified in part 221), and to the 
    consolidation and streamlining of remaining provisions.
        Except where changes were necessary to conform the previous 
    regulations to the new Impact Aid law (title VIII of the ESEA), and for 
    a few minor procedural changes, these final regulations contain the 
    same substantive provisions as in the previous regulations. The 
    Secretary intends to publish a notice of proposed rulemaking (NPRM) in 
    the near future to implement a few provisions in the new law that are 
    not included in these final regulations, and to make any substantive 
    changes that have been identified as needed under the Secretary's 
    reinvention review.
    
    General (Subpart A)
    
        Subpart A has been reorganized to include all of the Impact Aid 
    regulations with general applicability. These regulations previously 
    were in subparts A, B, C, E, and I of part 222.
    
    Sec. 222.2  What definitions apply to this part?
    
        The following program-specific definitions have been removed as 
    unnecessary: Arrangements, County, Current expenditures, Current fiscal 
    year of the local educational agency, Entitlement, Parent-pupil survey 
    (incorporated into Sec. 222.35), Prorated entitlement, and School year. 
    The remaining definitions in this section are generally applicable to 
    all of part 222.
        In Sec. 222.2(a)(1), the Secretary lists eight terms defined in 
    section 8013 of the ESEA that are used as defined in that section. The 
    Secretary has clarified the meanings of the remaining five terms in 
    section 8013 as follows: ``Federal property,'' ``Local educational 
    agency,'' and ``Revenues derived from local sources'' are found in 
    Sec. 222.2(c); and ``Free public education'' is found in Sec. 222.30 
    (as indicated in Sec. 222.2(a)(2)).
    
    Sec. 222.10  How long must a local educational agency retain records?
    
        The Department-wide record retention requirement in section 443(a) 
    (previously section 437(a)) of the GEPA was amended by the IASA to 
    reduce the period during which recipients must retain records from five 
    to three years. This change is implemented for the Impact Aid Program 
    in Sec. 222.10, which provides that an LEA now must keep its records 
    until the later of three years after the last payment it receives for a 
    fiscal year, or resolution of any pending audit or review and any 
    resulting payment adjustments.
    
    Payments for Federal Property Under Section 8002 of the Act 
    (Subpart B)
    
        The regulations in subpart B implement section 8002 of the ESEA, 
    previously section 2 of Pub. L. 81-874. These regulations, which have 
    been substantially streamlined by removing payment and obsolete 
    provisions, previously were in subpart J of part 222.
    
    Sec. 222.21  What requirements must a local educational agency meet 
    concerning Federal acquisition of real property within the local 
    educational agency?
    
        The general ten percent eligibility standard in section 8002 of the 
    ESEA (generally requiring federally owned property acquired since 1938 
    to comprise at least ten percent of the LEA's aggregate assessed value 
    as of the time of acquisition) was expanded by the ESEA under limited 
    circumstances. Section 222.21(a)(1)(ii) implements the expanded 
    standard in section 8002(a)(1)(C)(ii) of the ESEA concerning the 
    assessed value that is used for the purpose of determining eligibility 
    under section 8002(a)(1). That new standard provides that, under 
    certain specific circumstances, the assessed value used for that 
    eligibility test may be the assessed value in the first year preceding 
    or succeeding Federal acquisition, whichever is greater, rather than 
    the assessed value for the year of Federal acquisition as generally 
    required.
        Section 222.21(a)(2) incorporates the expanded eligibility standard 
    in section 8002(e), allowing certain additional districts containing 
    Forest Service property to qualify under the ten percent standard if 
    they have between 20,000 and 60,000 acres of Forest Service land 
    (rather than 50,000-55,000 acres as previously was required), and their 
    counties were chartered either in 
    
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    1875 or 1890 (rather than in 1875 only as previously required).
    
    Sec. 222.22  How does the Secretary treat compensation from Federal 
    activities for purposes of determining eligibility and payments?
    
        Section 8002(a)(2) of the ESEA retained a second eligibility 
    standard, which provides that an LEA may not receive a payment under 
    section 8002 if it is otherwise substantially compensated through 
    Federal activities related to the Federal property. This standard is 
    implemented in Sec. 222.22(a), which clarifies that the Secretary will 
    base the application of this standard upon the revenues that an LEA 
    receives from the Federal activities during the previous fiscal year, 
    rather than during the current year as previously occurred. This change 
    is consistent with the new payment provision in section 8002(b)(1) of 
    the ESEA, under which these revenues for the previous year must be 
    deducted from the amount that an LEA otherwise would be paid under 
    section 8002.
        In addition, Sec. 222.22(b) clarifies that the lack of substantial 
    compensation standard will be met only if the revenues received the 
    preceding year do not equal or exceed the maximum payment amount under 
    section 8002(b) of the ESEA. This is changed from the current 
    regulations, under which the revenues may not equal or exceed the 
    ``need-based'' entitlement amount. This change is necessary because the 
    need-based entitlement has been removed from the statute as a basis for 
    payment.
    
    Payments for Federally Connected Children Under Section 8003(b) and (e) 
    of the Act (Subpart C)
    
        The regulations in subpart C implement the basic payment provisions 
    for federally connected children under section 8003 of the ESEA, 
    including the provisions in section 8003(b) for basic support payments. 
    Under these provisions, payments are based upon certain categories of 
    federally connected children. Similar regulatory provisions 
    implementing section 3 of Pub. L. 81-874 previously were in subparts A, 
    C, and D of part 222.
    
    Sec. 222.34  If an applicant makes a second membership count, when must 
    that count be made?
    
        Basic support payments under section 8003 of the ESEA are based 
    upon the number of federally connected children in average daily 
    attendance (ADA) at an LEA, for whom the LEA provided a free public 
    education during the preceding school year. LEAs determine their number 
    of federally connected children through one or more membership counts 
    during the school year. If an LEA makes a second membership count, it 
    previously has been required to do so during the ``last quarter of the 
    school year.'' Because year-round schools often are not based upon 
    ``quarters,'' Sec. 222.34 has been revised to clarify that if an LEA 
    makes a second membership count, it must do so after January 31 but 
    before May 15. This time period for the optional second membership 
    count is to avoid the double counting of certain military children that 
    could now otherwise occur due to the new statutory provision in section 
    8006 of the ESEA (payments for sudden and substantial increases of 
    eligible children beginning with May 15).
    
    Sec. 222.35  How does a local educational agency count the membership 
    of its federally connected children?
    
        Membership counts are made by LEAs either through a parent-pupil 
    survey or a source check, or both. Section 222.35 explains what 
    information must be obtained in a parent-pupil survey and a source 
    check. The Secretary removes the previous requirement that an LEA 
    obtain the name of each child's teacher on the parent-pupil survey form 
    because it is unnecessary.
    
    Sec. 222.36  What minimum number of federally connected children must a 
    local educational agency have to receive a payment on behalf of those 
    children under section 8003(b) and (e)?
    
        Sections 8003(a)(3) and (b)(1)(B) of the ESEA establish minimum 
    thresholds for the number of federally connected children that an LEA 
    must have to receive a payment under section 8003 (except for a hold 
    harmless payment under section 8003(e) for fiscal year 1995). Section 
    222.36, which implements these provisions, clarifies that if an LEA 
    does not have the minimum number of federally connected children 
    described in section 8003(a)(1)(F) or (G) (federally connected children 
    who either reside on or whose parents are employed on Federal property, 
    but not both) necessary to meet the special rule described in section 
    8003(a)(3), those children are not counted for the purpose of section 
    8003 payments, or in determining whether the LEA meets the minimum 
    threshold under section 8003(b)(1)(B).
    
    Sec. 222.38  What is the maximum basic support payment that a local 
    educational agency may receive under section 8003(b)?
    
        Section 222.38 describes the maximum basic support payment that an 
    LEA may receive under section 8003(b)(1)(C) of the ESEA.
    
    Sec. 222.39  How does a State educational agency identify generally 
    comparable local educational agencies for local contribution rate 
    purposes?
    
    Sec. 222.40  How does a local educational agency select a local 
    contribution rate based on generally comparable local educational 
    agencies?
    
    Sec. 222.41  How does a State educational agency compute local 
    contribution rates based upon generally comparable local educational 
    agencies?
    
        Section 8003(b)(1)(C)(iii) of the ESEA establishes that one of the 
    factors upon which an LEA's maximum basic support amount may be based 
    is a local contribution rate (LCR) based on generally comparable LEAs 
    as determined under the regulations implementing Public Law 81-874 that 
    were in effect on January 1, 1994. Although the Secretary has revised 
    Secs. 222.39-222.41 slightly for clarity and to make necessary 
    technical changes consistent with the reauthorized statute, those 
    regulations retain the regulatory method for determining LCRs that was 
    in effect on January 1, 1994.
        Under those regulations, the term ``heavily impacted LEA'' is 
    changed to ``significantly impacted LEA'' to avoid confusion with the 
    section 8003(f) ``heavily impacted'' LEAs, which include LEAs with 
    different characteristics. Under these amended regulations, 
    ``significantly impacted'' is limited to two types of LEAs: (1) any LEA 
    having 20 percent or more of its ADA composed of children described 
    under section 3(a) of Public Law 81-874 (now described under section 
    8003(a)(1)(A)-(C) of the ESEA); and (2) any LEA having 50 percent or 
    more of its ADA composed of children described under both sections 3(a) 
    and (b) of Public Law 81-874 (now described under section 
    8003(a)(1)(A)-(G) of the ESEA).
        The Secretary revises the previous regulations to provide that LCRs 
    are computed based upon data from the third fiscal year preceding the 
    fiscal year for which the LCR is computed, rather than from the second 
    preceding fiscal year as in the previous regulations. This change is 
    based upon section 8003(c) of the ESEA, which specifies that basic 
    support payments are based upon one year older data than were used when 
    the previous LCR regulations initially were adopted.
    
    Payments Under Section 8003(d) of the Act for Local Educational 
    Agencies That Serve Children with Disabilities (Subpart D)
    
        The regulations in subpart D implement the provisions in section 
    8003(d) of the ESEA governing payments to LEAs that serve certain 
    federally connected children with 
    
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    disabilities. Similar regulatory provisions, implementing section 
    3(d)(2)(C) of Pub. L. 81-874, previously were in subpart H of part 222.
    
    Sec. 222.50  What definitions apply to this subpart?
    
        The following definitions in the Individuals with Disabilities 
    Education Act or its implementing regulations, or in 34 CFR Sec. 77.1, 
    have been added to this section: ``children with specific learning 
    disabilities,'' ``individualized education program,'' ``intermediate 
    educational unit,'' ``preschool,'' and ``special education.'' These 
    definitions currently apply to Impact Aid payments for federally 
    connected children with disabilities, but the full definitions were not 
    included in the previous regulations. Because these terms are used in 
    the text of the regulations and recipients of section 8003(d) funds are 
    subject to them, the full text of the definitions are now included in 
    the regulations for the convenience of applicant LEAs and other 
    readers.
    
    Sec. 222.51  Which children may a local educational agency count for 
    payment under section 8003(d)?
    
        Section 222.51 implements section 8003(d)(1) of the ESEA, which 
    provides for payments based upon certain categories of federally 
    connected children with disabilities. Previously, only federally 
    connected children with disabilities who had parents on active duty in 
    the uniformed services or who resided on Indian lands were eligible to 
    be counted for an additional payment to an LEA. Under section 
    8003(d)(1), those two categories of federally connected children with 
    disabilities, as well as children with parents who are foreign military 
    officers, may be counted by an LEA.
        Under the previous statute (Pub. L. 81-874), all LEAs received a 
    percentage increase in payment for each federally connected child with 
    disabilities served by the schools within the LEA. Under section 
    8003(d), a separate appropriation is provided for payments for children 
    with disabilities and weights are assigned to the different types of 
    eligible children. For children with parents on active duty in the 
    uniformed services or foreign military parents but who do not reside on 
    Federal property, an LEA receives one half of the amount that it 
    receives for the other categories of eligible federally connected 
    children with disabilities.
    
    Additional Assistance for Heavily Impacted Local Educational Agencies 
    under Section 8003(f) of the Act (Subpart E)
    
        The regulations in subpart E implement the provisions of section 
    8003(f) of the ESEA, which provides additional assistance to certain 
    heavily impacted LEAs. Although section 8003(f) is similar to section 
    3(d)(2)(B) of Public Law 81-874, there are several significant 
    additions to this section, including a provision for additional 
    assistance for LEAs affected by unusual geographic factors similar to 
    section 3(d)(3)(B)(ii) of the former law. The regulations implementing 
    these former provisions were previously in subpart K of part 222 and 
    Secs. 222.36 and 222.37, respectively.
    
    Sec. 222.62  Which local educational agencies are eligible to apply for 
    an additional payment under section 8003(f)?
    
        Section 8003(f) adds several new categories of LEAs that are 
    considered to be heavily impacted and eligible to apply for additional 
    assistance under the section. Section 222.62 describes the primary 
    characteristics of the categories of heavily impacted LEA applicants.
    
    Sec. 222.63  What other requirements must a local educational agency 
    meet in order to be eligible for financial assistance under section 
    8003(f)(2)(A)?
    
    Sec. 222.72  How does the Secretary determine a maximum payment for 
    local educational agencies that are eligible for financial assistance 
    under section 8003(f)(2)(A) and Sec. 222.63?
    
        Maximum payments for heavily impacted LEAs eligible under section 
    8003(f)(2)(A) are calculated in accordance with section 8003(f)(3). 
    Section 222.63 specifies the requirements in addition to those in 
    Sec. 222.62(a), (b), or (c) that an LEA must meet in order to be 
    eligible for a payment under section 8003(f)(2)(A). These requirements 
    are similar to requirements for LEAs that applied for section 
    3(d)(2)(B) assistance under Public Law 81-874, including that the LEA 
    must be making a reasonable tax effort as further described in 
    Secs. 222.66-222.71 and availing itself of all other potential revenues 
    such as State aid. Section 222.72 establishes how payments for LEAs 
    eligible under section 8003(f)(2)(A) are calculated in accordance with 
    the new statutory provisions.
    
    Sec. 222.64  What other requirements must a local educational agency 
    meet in order to be eligible for financial assistance under section 
    8003(f)(2)(B)?
    
    Sec. 222.73  How does the Secretary determine a maximum payment for 
    local educational agencies that are eligible for financial assistance 
    under section 8003(f)(2)(B) and Sec. 222.64?
    
        Payments for heavily impacted LEAs eligible under section 
    8003(f)(2)(B) are calculated by increasing the LCR of an eligible LEA 
    if the LEA's current expenditures are affected by unusual geographic 
    factors. Section 222.64 specifies the requirements in addition to those 
    in Sec. 222.62(d) that an LEA must meet in order to be eligible for 
    this type of payment.
        These requirements are the same as the requirements for LEAs that 
    applied for section 3(d)(3)(B)(ii) assistance under Pub. L. 81-874 and 
    that were in Sec. 222.37 of the former regulations. Like LEAs described 
    in section 8003(f)(2)(A), an eligible LEA under this section also must 
    be making a reasonable tax effort as further described in Secs. 222.66-
    222.71 and availing itself of all other potential revenues such as 
    State aid. Section 222.73 establishes how payments for LEAs eligible 
    under section 8003(f)(2)(B) are calculated.
    
    Sec. 222.74  How does the Secretary identify generally comparable local 
    educational agencies for purposes of section 8003(f)?
    
        Section 8003(f) uses the term ``generally comparable LEAs'' in 
    several different ways. Section 222.74 specifies how the term is 
    generally used throughout these regulations. Section 8003(f)(3)(A)(i) 
    also provides that payments for certain heavily impacted LEAs may be 
    calculated using the average per pupil expenditure of three generally 
    comparable LEAs, and Sec. 222.74 identifies how three generally 
    comparable LEAs are selected when that option is available. This 
    selection method was also available to LEAs under section 3(d)(2)(B) of 
    Public Law 81-874 and was described in Sec. 222.36 of the former Impact 
    Aid regulations.
    
    Special Provisions for Local Educational Agencies That Claim Children 
    Residing on Indian Lands (Subpart G)
    
        The regulations in subpart G implement the provisions in section 
    8004 of the ESEA that require an LEA that claims children residing on 
    Indian lands to establish policies and procedures for the equal 
    participation of those children in the LEA's programs and activities 
    supported with Impact Aid funds, and to consult with and afford parents 
    and Indian tribes an opportunity to present their views on those 
    programs and activities. Regulations implementing similar provisions in 
    section 5(b)(3) of Public Law 81-874 previously were in part 223.
        Previously, the statute did not impose on the Secretary the duty to 
    provide technical assistance to the LEAs and Indian tribes. Section 
    8004(d) specifically imposes that requirement on the Secretary and 
    gives the Secretary the authority to take various enforcement actions, 
    including withholding payments authorized under 
    
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    section 8003 from LEAs that fail to comply with section 8004(a).
    
    Facilities Assistance and Transfers under Section 8008 of the Act 
    (Subpart I)
    
        The regulations in subpart I implement the provisions in section 
    8008 of the ESEA concerning facilities maintenance. Pub. L. 81-815, the 
    former Impact Aid School Construction statute, was repealed as part of 
    the IASA. Under section 10 of Pub. L. 81-815, the Secretary had the 
    authority to make arrangements for ``constructing, leasing, renovating, 
    remodeling, or rehabilitating or otherwise providing'' the minimum 
    school facilities necessary for the education of certain federally 
    connected students for whom such facilities were unavailable.
        Section 8008 specifies that the Secretary may continue to provide 
    assistance for the school facilities that were supported under section 
    10 of Public Law 81-815. However, this authority indicates that the 
    Secretary is, as soon as practicable, to transfer to an appropriate LEA 
    or entity the United States' interest in those facilities. Due to these 
    statutory changes, the relevant regulations, Sec. 221.5 and subpart H, 
    which were previously contained in 34 CFR part 221, have been clarified 
    and streamlined, consistent with the more limited authorities in 
    section 8008.
    
    Impact Aid Administrative Hearings and Judicial Review under Section 
    8011 of the Act (Subpart J)
    
        The regulations in subpart J implement the provisions in section 
    8011(a) of the ESEA for administrative review following an adverse 
    action. Regulations implementing a similar administrative review 
    provision in section 5(g) of Pub. L. 81-874 previously were in part 
    218. This subpart governs all Impact Aid administrative hearings, 
    except Indian policies and procedures hearings (in subpart G) and 
    hearings concerning determinations under section 8009 of the ESEA (in 
    subpart K).
        In addition, the regulations in this subpart implement section 
    8011(b) of the ESEA, which changes the forum in which a party must seek 
    judicial review. Under that provision, if a party seeks review of the 
    Secretary's final decision following an administrative hearing 
    proceeding under section 8011(a), that review must be sought in the 
    United States Court of Appeals in the circuit in which the LEA or State 
    is located, rather than in a lower court such as a United States 
    District Court or the Court of Federal Claims as previously occurred.
    
    Determinations under Section 8009 of the Act (Subpart K)
    
        The regulations in subpart K implement the provisions in section 
    8009 of the ESEA. Under this section, States are prohibited from 
    considering Impact Aid in the allocation of State aid, except in those 
    cases where the Secretary determines and certifies that the State has 
    in effect a program of State aid that equalizes expenditures for free 
    public education among the State's LEAs. Sections 222.161-222.165 
    describe the substantive and procedural requirements for States to 
    obtain certification and consider Impact Aid in accordance with section 
    8009 of the ESEA. Regulations implementing similar provisions in 
    section 5(d) (1) and (2) of Pub. L. 81-874 previously were in subpart G 
    of part 222.
    
    Sec. 222.161  How is State aid treated under section 8009 of the Act?
    
        Section 8009 of the ESEA contains several changes from the previous 
    law that are implemented by Sec. 222.161. Section 222.161(a)(1)(iv)(4) 
    implements the new requirements in section 8009(b)(1) of the ESEA, 
    under which all States are prohibited from considering Impact Aid 
    before certification by the Secretary. Section 222.161(b) implements 
    the new requirement in section 8009(b)(2)(A) that determinations by the 
    Secretary are to be based on final data for the second fiscal year 
    preceding the fiscal year for which the determination is made if 
    substantially the same program of State aid was then in effect.
        This regulation also clarifies that, in those cases in which the 
    Secretary determines that the State has substantially revised its State 
    aid program, the Secretary may certify that program for any fiscal year 
    only if the Secretary determines, on the basis of projected data, that 
    the State's program will meet the disparity standard described in 
    Sec. 222.162. The State must also provide an assurance to the Secretary 
    that, if final data do not demonstrate that the State's program met 
    that standard for the fiscal year for which the determination is made, 
    the State will pay to each affected LEA the amount by which the State 
    reduced State aid to the LEA. The regulation requires that data 
    projections submitted by a State must set forth the assumptions upon 
    which the data projections are founded, be accompanied by an assurance 
    as to their accuracy, and be adjusted by actual data for the fiscal 
    year of determination that must be submitted to the Secretary as soon 
    as those data are available.
    
    Sec. 222.162  What disparity standard must a State meet in order to be 
    certified and how are disparities in current expenditures or revenues 
    per pupil measured?
    
        Section 8009(b)(2) of the ESEA establishes a new, single, statutory 
    standard for eligibility for the consideration of Impact Aid in a 
    State's allocation of State aid. That standard is based upon the 
    allowable disparities in per-pupil revenues or expenditures, under 
    which the range of permissible disparity is 25 percent for fiscal years 
    1995-97 and 20 percent for fiscal years 1998 and 1999. Section 222.162 
    reflects these requirements and specifies the method the Secretary will 
    employ to measure the statutory disparity standard. Detailed examples 
    of the application of this method to State funding programs are 
    provided in the Appendix following subpart K.
    
    Sec. 222.163  What proportion of funds distributed under the Act may a 
    State take into consideration upon certification?
    
        Once a State is certified by the Secretary, section 8009(d) of the 
    ESEA provides that the State may reduce State aid in a limited amount 
    equal to a specified proportion of certain Impact Aid receipts. 
    Specifically, the proportion established by section 8009(d) is the 
    proportion that the local tax revenues covered under the equalization 
    program are of the total local tax revenues attributable to current 
    expenditures for free public education within that agency. Section 
    222.163 clarifies how the Secretary applies this statutory limitation.
    
    Sec. 222.164  What procedures does the Secretary follow in making a 
    determination under section 8009?
    
        Section 222.164 specifies the procedures to be followed by the 
    Secretary in making determinations under section 8009. Those procedures 
    include the requirement that a submission by a State seeking 
    certification as equalized must be received by the Secretary no later 
    than 120 calendar days before the beginning of the State's fiscal year 
    for the year of the determination. The submission must include final 
    second preceding fiscal year disparity data (except as provided in 
    Sec. 222.161(b)(2)) enabling the Secretary to determine whether the 
    State qualifies.
        This regulation also provides that, before making a determination 
    under section 8009, the Secretary will afford the State, and all LEAs 
    in the State, an opportunity to present their views to the Department. 
    
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    Sec. 222.165  What procedures does the Secretary follow after making a 
    determination under section 8009?
    
        Section 222.165 describes the procedures for administrative appeals 
    of determinations by the Secretary and the procedures for corrective 
    actions by States.
    
    Waiver of Proposed Rulemaking
    
        In accordance with the Administrative Procedure Act (5 U.S.C. 553), 
    it is the Secretary's practice to offer interested parties the 
    opportunity to comment on proposed regulations. However, these 
    regulations merely reflect statutory changes, remove unnecessary and 
    obsolete regulatory provisions, reorganize and clarify the language of 
    the regulations, and make minor procedural revisions. Thus, the 
    regulations do not establish or affect substantive policy. Therefore, 
    the Secretary has determined with respect to amendments made due to 
    statutory changes that, pursuant to 5 U.S.C. 553(b)(B), publication of 
    a proposed rule is unnecessary and contrary to the public interest, and 
    with respect to the procedural changes that, pursuant to 5 U.S.C. 
    553(b)(A), public comment is not required.
    
    Regulatory Flexibility Act Certification
    
        The Secretary certifies that these regulations would not have a 
    significant economic impact on a substantial number of small entities. 
    The small entities that would be affected by these regulations are 
    small LEAs receiving Federal funds under this program. However, the 
    regulations would not have a significant economic impact on the small 
    LEAs affected because the regulations will not impose excessive 
    regulatory burdens or require unnecessary Federal supervision. The 
    regulations would impose minimal requirements to ensure the proper 
    expenditure of program funds.
    
    List of Subjects in Part 222
    
        Education, Education of children with disabilities, Elementary and 
    secondary education, Federally affected areas, Grant programs--
    education, Indians--education, Public housing, Reports and 
    recordkeeping requirements, School construction.
    
    34 CFR Part 218
    
        Education, Elementary and secondary education, Federally affected 
    areas, Grant programs--education.
    
    34 CFR Part 219
    
        Education, Elementary and secondary education, Federally affected 
    areas, Grant programs--education, Reports and recordkeeping 
    requirements, School construction.
    
    34 CFR Parts 221 and 222
    
        Education, Elementary and secondary education, Federally affected 
    areas, Grant programs--education, Reports and recordkeeping 
    requirements, School construction.
    
    34 CFR Part 223
    
        Education, Elementary and secondary education, Federally affected 
    areas, Grant programs--education, Indians--education.
        Dated: September 25, 1995.
    Thomas W. Payzant,
    Assistant Secretary for Elementary and Secondary Education.
    (Catalog of Federal Domestic Assistance Number 84.041, Impact Aid--
    Maintenance and Operations)
    
        For the reasons set out in the preamble and under the authority at 
    20 U.S.C. 7701-7714, the Secretary amends chapter II of title 34 of the 
    Code of Federal Regulations as follows:
    
    Part 218  [Removed]
    
        1.Part 218 is removed.
    
    Part 219  [Removed]
    
        2. Part 219 is removed.
    
    Part 221  [Removed]
    
        3. Part 221 is removed.
    
    Part 223  [Removed]
    
        4. Part 223 is removed.
        5. Part 222 is revised to read as follows:
    
    PART 222--IMPACT AID PROGRAMS
    
    Subpart A--General
    
    Sec.
    222.1   What is the scope of this part?
    222.2  What definitions apply to this part?
    222.3  How does a local educational agency apply for assistance 
    under section 8002 or 8003 of the Act?
    222.4  How does the Secretary determine when an application is 
    timely filed?
    222.5  When may a local educational agency amend its application?
    222.6  Which applications does the Secretary accept?
    222.7  What information may a local educational agency submit after 
    the application deadline?
    222.8  What action must an applicant take upon a change in its 
    boundary, classification, control, governing authority, or identity?
    222.9  What records must a local educational agency maintain?
    222.10  How long must a local educational agency retain records?
    222.11  How does the Secretary recover overpayments?
    222.12  [Reserved]
    222.13  What other statutes and regulations apply to this part?
    222.14-222.19  [Reserved]
    
    Subpart B--Payments for Federal Property under Section 8002 of the Act
    
    222.20  What definitions apply to this subpart?
    222.21  What requirements must a local educational agency meet 
    concerning Federal acquisition of real property within the local 
    educational agency?
    222.22  How does the Secretary treat compensation from Federal 
    activities for purposes of determining eligibility and payments?
    222.23-222.29  [Reserved]
    Subpart C--Payments for Federally Connected Children under Section 
    8003(b) and (e) of the Act
    222.30  What is ``free public education''?
    222.31  To which local educational agencies does the Secretary make 
    basic support payments under section 8003(b) of the Act?
    222.32  Upon what information is a local educational agency's basic 
    support payment based?
    222.33  When must an applicant make its first or only membership 
    count?
    222.34  If an applicant makes a second membership count, when must 
    that count be made?
    222.35  How does a local educational agency count the membership of 
    its federally connected children?
    222.36  What minimum number of federally connected children must a 
    local educational agency have to receive a payment on behalf of 
    those children under section 8003(b) and (e)?
    222.37  How does the Secretary calculate the average daily 
    attendance of federally connected children?
    222.38  What is the maximum basic support payment that a local 
    educational agency may receive under section 8003(b)?
    222.39  How does a State educational agency identify generally 
    comparable local educational agencies for local contribution rate 
    purposes?
    222.40  How does a local educational agency select a local 
    contribution rate based on generally comparable local educational 
    agencies?
    222.41  How does a State educational agency compute local 
    contribution rates based upon generally comparable local educational 
    agencies?
    222.42-222.49  [Reserved]
    Subpart D--Payments under Section 8003(d) of the Act for Local 
    Educational Agencies That Serve Children with Disabilities
    222.50  What definitions apply to this subpart?
    222.51  Which children may a local educational agency count for 
    payment under section 8003(d) of the Act?
    222.52  What requirements must a local educational agency meet to 
    receive a payment under section 8003(d)?
    222.53  What restrictions and requirements apply to the use of funds 
    provided under section 8003(d)?
    222.54  What supplement-not-supplant requirement applies to this 
    subpart?
    222.55  What other statutes and regulations are applicable to this 
    subpart?
    222.56-222.59  [Reserved] 
    
    [[Page 50779]]
    
    Subpart E--Additional Assistance for Heavily Impacted Local Educational 
    Agencies under Section 8003(f) of the Act
    222.60  What are the scope and purpose of these regulations?
    222.61  What data are used to determine a local educational agency's 
    eligibility and payment under section 8003(f) of the Act?
    222.62  Which local educational agencies are eligible to apply for 
    an additional payment under section 8003(f)?
    222.63  What other requirements must a local educational agency meet 
    in order to be eligible for financial assistance under section 
    8003(f)(2)(A)?
    222.64  What other requirements must a local educational agency meet 
    in order to be eligible for financial assistance under section 
    8003(f)(2)(B)?
    222.65  How may a State aid program affect a local educational 
    agency's eligibility for assistance under section 8003(f)?
    222.66  How does the Secretary determine whether a fiscally 
    independent local educational agency is making a reasonable tax 
    effort?
    222.67  What tax rates does the Secretary use if real property is 
    assessed at different percentages of true value?
    222.68  What tax rates does the Secretary use if two or more 
    different classifications of real property are taxed at different 
    rates?
    222.69  What tax rates may the Secretary use if substantial local 
    revenues are derived from local tax sources other than real property 
    taxes?
    222.70  How does the Secretary determine whether a fiscally 
    dependent local educational agency is making a reasonable tax 
    effort?
    222.71  What information must be provided by the State educational 
    agency?
    222.72  How does the Secretary determine a maximum payment for local 
    educational agencies that are eligible for financial assistance 
    under section 8003(f)(2)(A) and Sec. 222.63?
    222.73  How does the Secretary determine a maximum payment for local 
    educational agencies that are eligible for financial assistance 
    under section 8003(f)(2)(B) and Sec. 222.64?
    222.74  How does the Secretary identify generally comparable local 
    educational agencies for purposes of section 8003(f)?
    222.75  How does the Secretary compute the average per pupil 
    expenditure of generally comparable local educational agencies under 
    this subpart?
    222.76  What does the Secretary do if appropriation levels are 
    insufficient to pay in full the amounts calculated under 
    Secs. 222.72 and 222.73?
    222.77-222.79  [Reserved]
    
    Subpart F--[Reserved]
    
    Subpart G--Special Provisions for Local Educational Agencies that Claim 
    Children Residing on Indian Lands
    
    General
    
    222.90  What definitions apply to this subpart?
    222.91  What requirements must a local educational agency meet to 
    receive a payment under section 8003 of the Act for children 
    residing on Indian lands?
    222.92  What additional statutes and regulations apply to this 
    subpart?
    222.93  [Reserved]
    
    Indian Policies and Procedures
    
    222.94  What provisions must be included in a local educational 
    agency's Indian policies and procedures?
    222.95  How are Indian policies and procedures reviewed to ensure 
    compliance with the requirements in section 8004(a) of the Act?
    222.96-222.101  [Reserved]
    
    Indian Policies and Procedures Complaint and Hearing Procedures
    
    222.102  Who may file a complaint about a local educational agency's 
    Indian policies and procedures?
    222.103  What must be included in a complaint?
    222.104  When does the Assistant Secretary consider a complaint 
    received?
    222.105-222.107  [Reserved]
    222.108  What actions must be taken upon receipt of a complaint?
    222.109  When may a local educational agency reply to a complaint?
    222.110  What are the procedures for conducting a hearing on a local 
    educational agency's Indian policies and procedures?
    222.111  What is the authority of the hearing examiner in conducting 
    a hearing?
    222.112  What procedures are followed after the hearing?
    222.113  What are the responsibilities of the Assistant Secretary 
    after the hearing?
    222.114-222.129  [Reserved]
    
    Subpart H--[Reserved]
    
    Subpart I--Facilities Assistance and Transfers under Section 8008 of 
    the Act
    
    222.140  What definitions apply to this subpart?
    222.141  For what types of projects may the Secretary provide 
    assistance under section 8008 of the Act?
    222.142  What terms and conditions apply to minimum school 
    facilities operated under section 8008 by another agency?
    222.143  What terms and conditions apply to the transfer of minimum 
    school facilities?
    222.144-222.149  [Reserved]
    Subpart J--Impact Aid Administrative Hearings and Judicial Review under 
    Section 8011 of the Act
    222.150  What is the scope of this subpart?
    222.151  When is an administrative hearing provided to a local 
    educational agency?
    222.152  When may a local educational agency request reconsideration 
    of a determination?
    222.153  How must a local educational agency request an 
    administrative hearing?
    222.154  How must written submissions under this subpart be filed?
    222.155  When and where is an administrative hearing held?
    222.156  How is an administrative hearing conducted?
    222.157  What procedures apply for issuing or appealing an 
    administrative law judge's decision under section 8011(a) of the 
    Act?
    222.158  What procedures apply to the Secretary's review of an 
    initial decision or certified record?
    222.159  When and where does a party seek judicial review?
    
    Subpart K--Determinations under Section 8009 of the Act
    
    222.160  What are the scope and purpose of this subpart?
    222.161  How is State aid treated under section 8009 of the Act?
    222.162  What disparity standard must a State meet in order to be 
    certified and how are disparities in current expenditures or 
    revenues per pupil measured?
    222.163  What proportion of Impact Aid funds may a State take into 
    consideration upon certification?
    222.164  What procedures does the Secretary follow in making a 
    determination under section 8009?
    222.165  What procedures does the Secretary follow after making a 
    determination under section 8009?
    222.166-222.169 [Reserved]
    
    Appendix to Subpart K--Determinations Under Section 8009 of the Act--
    Methods of Calculations for Treatment of Impact Aid Payments under 
    State Equalization Programs
    
        Authority: 20 U.S.C. 7701-7714, unless otherwise noted.
    
    Subpart A--General
    
    
    Sec. 222.1  What is the scope of this part?
    
        The regulations in this part govern the provision of financial 
    assistance under title VIII of the Elementary and Secondary Education 
    Act of 1965 (ESEA) to local educational agencies (LEAs) in areas 
    affected by Federal activities.
    
    (Authority: 20 U.S.C. 7701-7714)
    
    
    Sec. 222.2  What definitions apply to this part?
    
        (a)(1) The following terms defined in section 8013 of the Act apply 
    to this part:
    
    Armed forces
    Average per-pupil expenditure
    Construction
    Current expenditures
    Indian lands
    Local contribution percentage
    Low-rent housing
    School facilities
    
        (2) The following term defined in Sec. 222.30 applies to this part:
    
    Free public education
    
        (b) The following terms defined in section 14101 of the ESEA 
    (General Provisions) also apply to this part:
    
    Average daily attendance (ADA)
    Child
    County
    Department
    Outlying area
    Parent 
    
    [[Page 50780]]
    
    Secretary
    State
    State educational agency (SEA)
    
        (c) In addition, the following definitions apply to this part:
        Act means title VIII of the Elementary and Secondary Education Act 
    of 1965 (ESEA), as amended.
        Applicant means any LEA that files an application for financial 
    assistance under section 8002, 8003, or 8006 of the Act and the 
    regulations in this part implementing those provisions. Except as 
    provided in section 8005(d)(4) of the Act, an SEA may be an applicant 
    for assistance under section 8003 only if the SEA directly operates and 
    maintains facilities for providing free public education for the 
    children it claims in its application.
    
    (Authority: 20 U.S.C. 7705 and 7713(9))
    
        Application means a complete and signed application in the form 
    approved by the Secretary, filed by an applicant.
    
    (Authority: 20 U.S.C. 7705)
    
        Federally connected children means children described in sections 
    8003(a)(1) and 8010(c)(2) of the Act.
    
    (Authority: 20 U.S.C. 7703(a)(1) and 7710(c)(2))
    
        Federal property.
        (1) The term means--
        (i) Federal property described in section 8013; and
        (ii) Ships that are owned by the United States and whose home ports 
    are located upon Federal property described in this definition.
        (2) Notwithstanding paragraph (1) of this definition, for the 
    purpose of section 8002 the term does not include--
        (i) Any real property that the United States does not own in fee 
    simple, except for Indian lands described in section 8013(7), and 
    transferred property described in section 8002(d); and
        (ii) Real property described in section 8002(c) (real property with 
    respect to which payments are being made under section 13 of the 
    Tennessee Valley Authority Act of 1933).
    
    (Authority: 20 U.S.C. 7702(c) and (d), and 7713(5) and (7))
    
        Fiscally dependent LEA means an LEA that does not have the final 
    authority to determine the amount of revenue to be raised from local 
    sources for current expenditure purposes.
    
    (Authority: 20 U.S.C. 7702(b)(2) and 7703(f))
    
        Fiscally independent LEA means an LEA that has the final authority 
    to determine the amount of revenue to be raised from local sources for 
    current expenditure purposes within the limits established by State 
    law.
    
    (Authority: 20 U.S.C. 7702(b)(2) and 7703(f))
    
        Local educational agency (LEA) is defined in section 8013(9). 
    Except for an SEA qualifying under section 8005(d)(4), the term 
    includes an SEA only so long as--
        (1) The SEA directly operates and maintains the facilities for 
    providing free public education for the children it claims in its 
    application;
        (2) The children claimed by the SEA actually are attending those 
    State-operated facilities; and
        (3) The SEA does not, through a tuition arrangement, contract, or 
    by any other means, pay another entity to operate and maintain 
    facilities for those children.
    
    (Authority: 20 U.S.C. 7705(d)(4) and 7713(9))
    
        Local real property tax rate for current expenditure purposes.
        (1) For a fiscally independent LEA, the term means the entire tax 
    levied on real property within the LEA, if all but a de minimus amount 
    of the total proceeds from the tax levy are available to that LEA for 
    current expenditures (as defined in section 8013).
        (2) For a fiscally dependent LEA, the term means the following:
        (i) The entire tax levied by the general government on real 
    property if all but a de minimus amount of the total proceeds from that 
    tax levy are available to the LEA for current expenditures (as defined 
    in section 8013);
        (ii) That portion of a local real property tax rate designated by 
    the general government for current expenditure purposes (as defined in 
    section 8013); or
        (iii) If no real property tax levied by the general government 
    meets the criteria in paragraphs (2)(i) or (ii) of this definition, an 
    imputed tax rate that the Secretary determines by--
        (A) Dividing the total local real property tax revenue available 
    for current expenditures of the general government by the total revenue 
    from all local sources available for current expenditures of the 
    general government;
        (B) Multiplying the figure obtained in paragraph (2)(iii)(A) of 
    this definition by the revenue received by the LEA for current 
    expenditures (as defined in section 8013) from the general government; 
    and
        (C) Dividing the figure obtained in paragraph (2)(iii)(B) of this 
    definition by the total current actual assessed value of all real 
    property in the district.
        (3) The term does not include any portion of a tax or revenue that 
    is restricted to or dedicated for any specific purpose other than 
    current expenditures (as defined in section 8013).
    
    (Authority: 20 U.S.C. 7702(b)(2) and 7703(f))
    
        Membership means the following:
        (1)(i) The definition given to the term by State law; or
        (ii) If State law does not define the term, the number of children 
    listed on an LEA's current enrollment records on its survey date(s).
        (2) The term includes children for whom the applicant is 
    responsible for providing a free public education, but who are 
    attending schools other than those operated by the applicant under a 
    tuition arrangement described in paragraph (4) of the definition of 
    ``free public education'' in Sec. 222.30.
        (3) The term does not include children who--
        (i) Have never attended classes in schools of the LEA or of another 
    educational entity with which the LEA has a tuition arrangement;
        (ii) Have permanently left the LEA;
        (iii) Otherwise have become ineligible to attend classes there; or
        (iv) Attend the schools of the applicant LEA under a tuition 
    arrangement with another LEA that is responsible for providing them a 
    free public education.
    
    (Authority: 20 U.S.C. 7703 and 8801(1))
    
        Parent employed on Federal property.
        (1) The term means the following:
        (i) An employee of the Federal Government who reports to work on, 
    or whose place of work is located on, Federal property.
        (ii) A person not employed by the Federal Government but who spends 
    more than 50 percent of his or her working time on Federal property 
    (whether as an employee or self-employed) when engaged in farming, 
    grazing, lumbering, mining, or other operations that are authorized by 
    the Federal Government, through a lease or other arrangement, to be 
    carried out entirely or partly on Federal property.
        (iii) A proportion, to be determined by the Secretary, based on 
    persons working on commingled Federal and non-Federal properties other 
    than those persons covered under paragraph (1)(ii) of this definition.
        (2) The term does not include a person who reports to work at a 
    work station not on Federal property but spends more than 50 percent of 
    his working time on Federal property providing services to operations 
    or activities authorized to be carried out on Federal property.
    
    (Authority: 20 U.S.C. 7701 and 7703)
    
        Real property.
        (1) The term means--
        (i) Land; and
        (ii) Improvements (such as buildings and appurtenances to those 
    buildings, railroad lines, utility lines, pipelines, and other 
    permanent fixtures), except as provided in paragraph (2).
        (2) The term does not include--
        (i) Improvements that are classified as personal property under 
    State law; or
        (ii) Equipment and movable machinery, such as motor vehicles, 
    movable house trailers, farm machinery, rolling railroad stock, and 
    floating dry 
    
    [[Page 50781]]
    docks, unless that equipment or movable machinery is classified as real 
    property or subject to local real property taxation under State law.
    
    (Authority: 20 U.S.C. 7702 and 7713(5))
    
        Revenues derived from local sources.
        (1) The term means--
        (i) Tax funds derived from real estate; and
        (ii) Other taxes or receipts that are received from the county, and 
    any other local tax or miscellaneous receipts.
        (2)(i) For the purpose of paragraph (1)(i) of this definition, the 
    term ``tax funds derived from real estate'' means--
        (A) Locally received funds that are derived from local taxation of 
    real property;
        (B) Tax funds that are received on account of Wherry-Spence housing 
    projects (12 U.S.C. 1702 et seq.) located on private property; and
        (C) All local real property tax funds that are received from either 
    the county or the State, serving as a collecting agency, and that are 
    returned to the LEA for expenditure by that agency.
        (ii) The term does not include--
        (A) Any payments under this Act or the Johnson-O'Malley Act (25 
    U.S.C. 452);
        (B) Tax payments that are received on account of Wherry-Spence 
    housing projects located on federally owned property; or
        (C) Local real property tax funds that are received by the State 
    and distributed to LEAs on a per-pupil or formula basis.
    
    (Authority: 20 U.S.C. 7713(11))
    
        State aid means any contribution, no repayment of which is 
    expected, made by a State to or on behalf of an LEA within the State 
    for the support of free public education.
    
    (Authority: 20 U.S.C. 7703)
    
        Uniformed services means the United States Army, Navy, Air Force, 
    Marine Corps, Coast Guard, National Oceanic and Atmospheric 
    Administration, and Public Health Service.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036).
    
    (Authority: 20 U.S.C. 7703(a)(1); 37 U.S.C. 101)
    
    
    Sec. 222.3  How does a local educational agency apply for assistance 
    under section 8002 or 8003 of the Act?
    
        An LEA must meet the following application requirements to be 
    considered for a payment under section 8002 or 8003:
        (a) Except as provided in paragraphs (b) and (d) of this section, 
    on or before January 31 of the fiscal year for which the LEA seeks 
    assistance under section 8002, or the fiscal year preceding the fiscal 
    year for which the LEA seeks assistance under section 8003, the LEA 
    must--
        (1) File with the Secretary a complete and signed application for 
    payment under section 8002 or 8003; and
        (2) Certify to the Secretary that it will file, and file, a copy of 
    the application referred to in paragraph (a) of this section with its 
    SEA.
        (b)(1) If any of the following events that give rise to eligibility 
    for payment occur after the filing deadline in paragraph (a)(1) of this 
    section, an LEA must file a complete and signed application within the 
    time limits required by paragraph (b)(2) of this section:
        (i) The United States Government initiates or reactivates a Federal 
    activity, or acquires real property.
        (ii) The United States Congress enacts new legislation.
        (iii) A reorganization of school districts takes place.
        (iv) Property, previously determined by the Secretary not to be 
    Federal property, is determined in writing by the Secretary to be 
    Federal property.
        (2) Except as provided in paragraph (d) of this section, within 60 
    days after the applicable event occurs but not later than September 30 
    of the fiscal year for which the LEA seeks assistance under section 
    8002, or of the fiscal year preceding the fiscal year for which the LEA 
    seeks assistance under section 8003, the LEA must--
        (i) File an application, as permitted by paragraph (b)(1) of this 
    section, with the Secretary; and
        (ii) File a copy of that application with its SEA.
        (c)(1) If the SEA wishes to notify the Secretary of any 
    inconsistencies or other concerns with an LEA's application, the SEA 
    must do so--
        (i) For an application subject to the filing deadlines in paragraph 
    (a)(1) of this section, on or before February 15 of the fiscal year for 
    which the LEA seeks assistance under section 8002, or of the fiscal 
    year preceding the fiscal year for which the LEA seeks assistance under 
    section 8003; and
        (ii) On or before fifteen days following the date by which an 
    application subject to the filing deadlines in paragraph (b) of this 
    section must be filed.
        (2) The Secretary does not process for payment a timely filed 
    application until any concerns timely raised by the SEA are resolved. 
    If the Secretary does not receive comments or notification from the SEA 
    by the applicable deadline set forth in paragraph (c)(1) of this 
    section, the Secretary assumes that the data and statements in the 
    application are, to the best of the SEA's knowledge, true, complete, 
    and correct.
        (d) If a filing date in this section falls on a Saturday, Sunday, 
    or Federal holiday, the deadline for filing is the next succeeding 
    business day.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7705)
    
    
    Sec. 222.4  How does the Secretary determine when an application is 
    timely filed?
    
        To be timely filed under Sec. 222.3, an application must--
        (a) Be received by the Secretary on or before the applicable filing 
    date; or
        (b) Bear a U.S. Postal Service postmark dated on or before that 
    filing date.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7705)
    
        Note to Paragraph (b) of this section: The U.S. Postal Service 
    does not uniformly provide a dated postmark. Before relying on this 
    method, an applicant should check with its local post office.
    
    
    Sec. 222.5  When may a local educational agency amend its application?
    
        (a) An LEA may amend its application following any of the events 
    described in Sec. 222.3(b)(1) by submitting a written request to the 
    Secretary and a copy to its SEA no later than the earlier of the 
    following events:
        (1) The 60th day following the applicable event.
        (2) By the end of the Federal fiscal year--
        (i) For which assistance is sought under section 8002; or
        (ii) Preceding the fiscal year for which the LEA seeks assistance 
    under section 8003.
        (b) The LEA also may amend its application no later than the end of 
    the Federal fiscal year for which assistance is sought under section 
    8002 or of the fiscal year preceding the fiscal year for which the LEA 
    seeks assistance under section 8003--
        (1) For an adjustment to its payment based on data obtained from a 
    second membership count; or
        (2) For an adjustment to its payment based on actual satisfactory 
    data regarding eligible Federal properties or federally connected 
    children if those data were not available at the time the LEA filed its 
    application.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7705)
    
    
    Sec. 222.6  Which applications does the Secretary accept?
    
        (a) The Secretary accepts or approves for payment any otherwise 
    approvable application under section 8002 or 8003 that is timely filed 
    with the Secretary in accordance with Secs. 222.3, 222.4, and 222.5, as 
    applicable.
        (b)(1) Except as provided in paragraph (b)(2) of this section, the 
    Secretary does not accept or approve for payment any application under 
    section 8002 or 8003 that is not timely filed with the Secretary.
        (2) The Secretary accepts and approves for payment any otherwise 
    approvable application filed within 60 
    
    [[Page 50782]]
    days of the applicable filing date established in Sec. 222.3, but 
    reduces the payment based on the application by 10 percent of the 
    amount that would have been paid if the application had been filed by 
    the applicable filing date established in that section.
    
    (Authority: 20 U.S.C. 7705)
    
    
    Sec. 222.7  What information may a local educational agency submit 
    after the application deadline?
    
        (a) General. Except as indicated in paragraph (b) of this section, 
    the Secretary does not consider information submitted by an applicant 
    after the deadlines prescribed in this subpart for submission of 
    applications and amendments to applications.
        (b) Information solicited by the Secretary. The Secretary may 
    solicit from an applicant at any time additional information to process 
    an application.
    
    (Authority: 20 U.S.C. 1221e-3, 7702, 7703, 7705, 7706)
    
    
    Sec. 222.8  What action must an applicant take upon a change in its 
    boundary, classification, control, governing authority, or identity?
    
        (a) Any applicant that is a party to an annexation, consolidation, 
    deconsolidation, merger, or other similar action affecting its 
    boundaries, classification, control, governing authority, or identity 
    must provide the following information to the Secretary as soon as 
    practicable:
        (1) A description of the character and extent of the change.
        (2) The effective date of the change.
        (3) Full identification of all predecessor and successor LEAs.
        (4) Full information regarding the disposition of the assets and 
    liabilities of all predecessor LEAs.
        (5) Identification of the governing body of all successor LEAs.
        (6) The name and address of each authorized representative 
    officially designated by the governing body of each successor LEA for 
    purposes of the Act.
        (b) If a payment is made under section 8002 or 8003 to an LEA that 
    has ceased to be a legally constituted entity during the regular school 
    term due to an action described in paragraph (a) of this section, the 
    LEA may retain that payment if--
        (1) An adjustment is made in the payment of a successor LEA to 
    account for the payment to the predecessor LEA; or
        (2)(i) The payment amount does not exceed the amount the 
    predecessor LEA would have been eligible to receive if the change in 
    boundaries or organization had not taken place; and
        (ii) A successor LEA is not an eligible applicant.
        (c) A predecessor LEA receiving any portion of a payment under 
    section 8002 or 8003 that exceeds the amount allowed by paragraph 
    (b)(2)(i) of this section must return the excessive portion to the 
    Secretary, unless the Secretary determines otherwise under section 8012 
    of the Act.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7702 and 7703)
    
    
    Sec. 222.9  What records must a local educational agency maintain?
    
        Except as otherwise provided in Sec. 222.10--
        (a) An LEA must maintain adequate written records to support the 
    amount of payment it received under the Act for any fiscal year;
        (b) On request, the LEA must make its records available to the 
    Secretary for the purpose of examination or audit; and
        (c) Each applicant must submit such reports and information as the 
    Secretary may require to determine the amount that the applicant may be 
    paid under the Act.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 1221e-3, 1232f, 7702, 7703, 7704, 7706)
    
    
    Sec. 222.10  How long must a local educational agency retain records?
    
        An LEA must retain the records described in Sec. 222.9 until the 
    later of--
        (a) Three years after the last payment for a fiscal year; or
        (b) If the records have been questioned on Federal audit or review, 
    until the question is finally resolved and any necessary adjustments to 
    payments have been made.
    
    (Authority: 20 U.S.C. 1221e-3, 1232f, 7702, 7703, 7704, 7706)
    
    
    Sec. 222.11  How does the Secretary recover overpayments?
    
        Except as otherwise provided in section 8012, the Secretary adjusts 
    for and recovers overpayments as follows:
        (a) If the Secretary determines that an LEA has received a payment 
    in excess of what it should have received under the Act and this part, 
    the Secretary deducts the amount of the overpayment from subsequent 
    payments for which the LEA is eligible under the Act.
        (b)(1) If the LEA is not eligible for subsequent payments under the 
    Act, the LEA must promptly refund the amount of the overpayment to the 
    Secretary.
        (2) If the LEA does not promptly repay the amount of the 
    overpayment or promptly enter into a repayment agreement with the 
    Secretary, the Secretary may use the procedures in 34 CFR part 30 to 
    offset that amount against payments from other Department programs or, 
    under the circumstances permitted in part 30, to request that another 
    agency offset the debt.
    
    (Authority: 20 U.S.C. 1221e-3, 1226a-1, 7702, 7703, 7706, 7712)
    
    
    Sec. 222.12  [Reserved]
    
    
    Sec. 222.13  What other statutes and regulations apply to this part?
    
        (a) The following Federal statutes and regulations on 
    nondiscrimination apply to assistance under this part:
        (1) The provisions of title VI of the Civil Rights Act of 1964 
    (Pub. L. 88-352) (prohibition of discrimination on the basis of race, 
    color or national origin), and the implementing regulations (34 CFR 
    part 100).
    
    (Authority: 42 U.S.C. 2000d-2000d-4)
    
        (2) The provisions of title IX of the Education Amendments of 1972 
    (Pub. L. 92-318) (prohibition of discrimination on the basis of sex), 
    and the implementing regulations (34 CFR part 106).
    
    (Authority: 20 U.S.C. 1681-1683)
    
        (3) The provisions of section 504 of the Rehabilitation Act of 1973 
    (Pub. L. 93-112) (prohibition of discrimination on the basis of 
    disability), and the implementing regulations (34 CFR part 104).
    
    (Authority: 29 U.S.C. 794)
    
        (4) The provisions of title II of the Americans with Disabilities 
    Act of 1990 (Pub. L. 101-336) (prohibition of discrimination on basis 
    of disability), and any implementing regulations.
    
    (Authority: 42 U.S.C. 12101-12213)
    
        (5) The provisions of the Age Discrimination Act of 1975 (Pub. L. 
    94-135) (prohibition of age discrimination), and any implementing 
    regulations.
    
    (Authority: 42 U.S.C. 6101)
    
        (b) The following Education Department General Administrative 
    Regulations (EDGAR):
        (1) Subparts A, E, F, and Secs. 75.900 and 75.910 of 34 CFR part 75 
    (Direct Grant Programs) for payments under sections 8003(d) (payments 
    for federally connected children with disabilities), 8007 
    (construction), and 8008 (school facilities), except for the following:
        (i) Section 75.603 does not apply to payments under section 8007 
    (construction) or section 8008 (school facilities).
        (ii) Section 75.605 does not apply to payments under section 8007 
    (construction).
        (iii) Sections 75.600-602, 75.604, and 75.606-617 apply to payments 
    under section 8007 (construction) only to the extent that funds 
    received under that section are used for major renovations or to 
    construct new school facilities.
        (2) 34 CFR part 77 (Definitions that Apply to Department 
    Regulations).
        (3) 34 CFR part 80 (Uniform Administrative Requirements for Grants 
    and Cooperative Agreements to State and Local Governments), for 
    payments under sections 8003(d) (payments for federally connected 
    children with 
    
    [[Page 50783]]
    disabilities), 8007 (construction), and 8008 (school facilities).
        (4) 34 CFR part 82 (New Restrictions on Lobbying).
        (5) 34 CFR part 85 (Governmentwide Debarment and Suspension 
    (Nonprocurement) and Governmentwide Requirements for Drug-free 
    Workplace (Grants)).
    
    (Authority: 20 U.S.C. 1221e-3)
    
    
    Secs. 222.14-222.19  [Reserved]
    
    Subpart B--Payments for Federal Property under Section 8002 of the 
    Act
    
    
    Sec. 222.20  What definitions apply to this subpart?
    
        In addition to the terms referenced or defined in Sec. 222.2, the 
    following definitions apply to this subpart:
        Acquisition or acquired by the United States.
        (1) The term means--
        (i) The receipt or taking by the United States of ownership in fee 
    simple of real property by condemnation, exchange, gift, purchase, 
    transfer, or other arrangement;
        (ii) The receipt by the United States of real property as trustee 
    for the benefit of individual Indians or Indian tribes; or
        (iii) The imposition by the United States of restrictions on sale, 
    transfer, or exchange of real property held by individual Indians or 
    Indian tribes.
        (2) The definition of ``acquisition'' in 34 CFR 77.1(c) 
    (Definitions that Apply to Department Regulations) of this title does 
    not apply to this subpart.
    
    (Authority: 20 U.S.C. 7702)
    
        Assessed value. For the purpose of determining eligibility under 
    section 8002(a)(1) and Sec. 222.21, the following definition applies:
        (1) The term means the value that is assigned to real property, for 
    the purpose of generating local real property tax revenues for current 
    expenditures (as defined in section 8013 of the Act), by a State or 
    local official who is legally authorized to determine that assessed 
    value.
        (2) The term does not include--
        (i) A value assigned to tax-exempt real property;
        (ii) A value assigned to real property for the purpose of 
    generating other types of revenues, such as payments in lieu of taxes 
    (PILOTs);
        (iii) Fair market value, or a percentage of fair market value, of 
    real property unless that value was actually used to generate local 
    real property tax revenues for current expenditures (as defined in 
    section 8013); or
        (iv) A value assigned to real property in a condemnation or other 
    court proceeding, or a percentage of that value, unless that value was 
    actually used to generate local real property tax revenues for current 
    expenditures (as defined in section 8013).
    
    (Authority: 20 U.S.C. 7702(a)(1))
    
        Eligible Federal property.
        (1) The term means ``Federal property'' as defined in Sec. 222.2(c) 
    for section 8002, which meets the following additional requirements:
        (i) The United States has acquired the Federal property since 1938; 
    and
        (ii) The Federal property was not acquired by exchange for other 
    Federal property that the United States owned within the school 
    district before 1939.
        (2) In addition, for local educational agencies (LEAs) that are 
    eligible under Sec. 222.21(a)(2), the term also means land acquired by 
    the United States Forest Service between 1915 and 1990.
    
    (Authority: 20 U.S.C. 7702)
    
    
    Sec. 222.21  What requirements must a local educational agency meet 
    concerning Federal acquisition of real property within the local 
    educational agency?
    
        (a) For an LEA with an otherwise approvable application to be 
    eligible to receive financial assistance under section 8002, the LEA 
    must meet the requirements in subpart A of these regulations and 
    Sec. 222.22, and, unless otherwise provided by statute as meeting the 
    requirements in section 8002(a)(1)(C), document--
        (1) That the United States owns or has acquired ``eligible Federal 
    property'' within the LEA, that has an aggregate assessed value of 10 
    percent or more of the assessed value of--
        (i) All real property in that LEA, based upon the assessed values 
    of the eligible Federal property and of all real property (including 
    that Federal property) on the date or dates of acquisition of the 
    eligible Federal property; or
        (ii) All real property in the LEA as assessed in the first year 
    preceding or succeeding acquisition, whichever is greater, only if--
        (A) The assessment of all real property in the LEA is not made at 
    the same time or times that the Federal property was so acquired and 
    assessed; and
        (B) State law requires an assessment be made of property so 
    acquired; or
        (2)(i) That, as demonstrated by written evidence from the United 
    States Forest Service satisfactory to the Secretary, the LEA contains 
    between 20,000 and 60,000 acres of land that has been acquired by the 
    United States Forest Service between 1915 and 1990; and
        (ii) That the LEA serves a county chartered by State law in 1875 or 
    1890.
        (b) ``Federal property'' described in section 8002(d) (certain 
    transferred property) is considered to be owned by the United States 
    for the purpose of paragraph (a) of this section.
        (c) If, during any fiscal year, the United States sells, transfers, 
    is otherwise divested of ownership of, or relinquishes an interest in 
    or restriction on, eligible Federal property, the Secretary 
    redetermines the LEA's eligibility for the following fiscal year, based 
    upon the remaining eligible Federal property, in accordance with 
    paragraph (a) of this section. This paragraph does not apply to a 
    transfer of real property by the United States described in section 
    8002(d).
        (d) Except as provided under paragraph (a)(2) of this section, the 
    Secretary's determinations and redeterminations of eligibility under 
    this section are based on the following documents:
        (1) For a new section 8002 applicant or newly acquired eligible 
    Federal property, only upon--
        (i) Original records as of the time(s) of Federal acquisition of 
    real property, prepared by a legally authorized official, documenting 
    the assessed value of that real property; or
        (ii) Facsimiles of those records such as microfilm or other 
    reproduced copies.
        (2) For a redetermination of an LEA's eligibility under section 
    8002(a)(1), only upon--
        (i) Records described in paragraph (d)(1) of this section; or
        (ii) Department records.
        (e) The Secretary does not base the determination or 
    redetermination of an LEA's eligibility under this section upon 
    secondary documentation such as estimates, certifications, or 
    appraisals.
    
    (Authority: 20 U.S.C. 7702(a)(1))
    
    
    Sec. 222.22  How does the Secretary treat compensation from Federal 
    activities for purposes of determining eligibility and payments?
    
        (a) An LEA with an otherwise approvable application is eligible to 
    receive assistance under section 8002 for a fiscal year only if the LEA 
    meets the requirements in subpart A of these regulations and 
    Sec. 222.21, and is not substantially compensated, for the loss in 
    revenue resulting from Federal ownership of real property by increases 
    in revenue accruing to the LEA during the previous fiscal year from 
    Federal activities with respect to the eligible Federal property in the 
    LEA.
        (b) The Secretary considers that an LEA is substantially 
    compensated by increases in revenue from Federal activities with 
    respect to the eligible Federal property if--
        (1) The LEA received new or increased revenue during the preceding 
    fiscal year that is generated directly from the eligible Federal 
    property or activities in or on that property; and
        (2) The revenue described in paragraph (b)(1) of this section 
    equals or exceeds the maximum payment amount under section 8002(b) for 
    the fiscal year for which the LEA seeks assistance.
        (c) If an LEA described in paragraph (a) of this section received 
    revenue described in paragraph (b)(1) of this 
    
    [[Page 50784]]
    section during the preceding fiscal year that is less than the maximum 
    payment amount under section 8002(b) for the fiscal year for which the 
    LEA seeks assistance, the Secretary reduces the LEA's section 8002 
    payment by an amount equal to that amount of revenue.
        (d) For purposes of this section, the amount of revenue that an LEA 
    receives during the previous fiscal year from activities conducted on 
    Federal property shall not include payments received by the agency from 
    the Secretary of Defense to support--
        (1) The operation of a domestic dependent elementary or secondary 
    school; or
        (2) The provision of a free public education to dependents of 
    members of the Armed Forces residing on or near a military 
    installation.
    
    (Authority: 20 U.S.C. 7702(a)(2) and (b)(1)(A))
    
    
    Secs. 222.23-222.29  [Reserved]
    
    Subpart C--Payments for Federally Connected Children under Section 
    8003(b) and (e) of the Act
    
    
    Sec. 222.30  What is ``free public education''?
    
        In addition to the terms defined in Sec. 222.2, the following 
    definition applies to this part:
        Free public education. (1) The term means education that is 
    provided--
        (i) At public expense;
        (ii)(A) As the complete elementary or secondary educational program 
    as determined under State law through grade 12; and
        (B) Preschool education, whether or not included as elementary 
    education by State law;
        (iii) In a school of the local educational agency (LEA) or under a 
    tuition arrangement with another LEA or other educational entity; and
        (iv) Under public supervision and direction, except with respect to 
    children with disabilities.
        (2) For the purpose of paragraph (1)(i) of this definition, 
    education is provided at public expense if--
        (i) There is no tuition charge to the child or the child's parents; 
    and
        (ii) Federal funds, other than funds under the Act, do not provide 
    a substantial portion of the educational program.
        (3) For the purpose of paragraph (1)(ii) of this definition, the 
    complete elementary or secondary educational program is the program 
    recognized by the State as meeting all requirements for elementary or 
    secondary education for the children claimed and, except for preschool 
    education, does not include a program that provides only--
        (i) Supplementary services or instruction; or
        (ii) A portion of the required educational program.
        (4) For the purpose of paragraph (1)(iii) of this definition, a 
    tuition arrangement must--
        (i) Satisfy all applicable legal requirements in the State; and
        (ii) Genuinely reflect the applicant LEA's responsibility to 
    provide a free public education to the children claimed under section 
    8003.
        (5) For the purpose of paragraph (1)(iv) of this definition, 
    education provided under public supervision and direction means 
    education that is provided--
        (i) In a school of the applicant LEA or another LEA; or
        (ii) By another educational entity, over which the applicant LEA, 
    or other public agency, exercises authority with respect to the 
    significant aspects of the educational program for the children 
    claimed. The Secretary considers significant aspects of the educational 
    program to include administrative decisions relating to teachers, 
    instruction, and curriculum.
    
    (Authority: 20 U.S.C. 7703, 7709, 7713(6))
    
    
    Sec. 222.31  To which local educational agencies does the Secretary 
    make basic support payments under section 8003(b) of the Act?
    
        The Secretary makes payments to an LEA with an otherwise approvable 
    application for children claimed under section 8003(b) of the Act if--
        (a) The LEA meets the requirements in subpart A of these 
    regulations and this subpart; and
        (b)(1) The LEA is responsible under applicable State or Federal law 
    for providing a free public education to those children;
        (2) The LEA is providing a free public education to those children; 
    and
        (3) The State provides funds for the education of those children on 
    the same basis as all other public school children in the State, unless 
    permitted otherwise under section 8009 of the Act.
    
    (Authority: 20 U.S.C. 7703 and 7709)
    
    
    Sec. 222.32  Upon what information is a local educational agency's 
    basic support payment based?
    
        (a) The Secretary determines an LEA's payment under section 8003(b) 
    on the basis of information in the LEA's application, including 
    information regarding the membership of federally connected children.
        (b) The LEA must supply information in its application regarding 
    its federally connected membership on the basis of any count described 
    in Secs. 222.33 through 222.35.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703 and 7705)
    
    
    Sec. 222.33  When must an applicant make its first or only membership 
    count?
    
        (a)(1) An applicant must select a day in the current school year as 
    the survey date for making the first membership count, which must be no 
    earlier than the fourth day of the regular school year and on or before 
    January 31.
        (2) The applicant must use the same survey date for all schools in 
    the LEA.
        (b) As of the survey date, the applicant must--
        (1) Count the membership of its federally connected children; and
        (2) Count the total membership of its children--both federally 
    connected and non-federally connected.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703, 7705, 7706)
    
    
    Sec. 222.34  If an applicant makes a second membership count, when must 
    that count be made?
    
        (a)(1) The applicant may, but is not required to, make a second 
    count of membership.
        (2) If the applicant chooses to make a second count of membership, 
    the applicant must select a day after January 31, but no later than May 
    14, as the survey date for making the second membership count, and make 
    that count in accordance with Sec. 222.33(b).
        (3) The applicant must use the same survey date for the second 
    membership count for all schools in the LEA.
        (b) The applicant may use the information obtained from a second 
    membership count to amend its application for assistance as described 
    in Sec. 222.5(b)(1).
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703 and 7705)
    
    
    Sec. 222.35  How does a local educational agency count the membership 
    of its federally connected children?
    
        An applicant counts the membership of its federally connected 
    children by using one or both of the following methods:
        (a) Parent-pupil survey. An applicant may conduct a parent-pupil 
    survey to count the membership of its federally connected children, 
    which must be counted as of the survey date.
        (1) The applicant shall conduct a parent-pupil survey by providing 
    a form to a parent of each pupil enrolled in the LEA to substantiate 
    the pupil's place of residence and the parent's place of employment. A 
    parent-pupil survey form must include the following:
        (i) Pupil enrollment information (this information may also be 
    obtained from school records), including--
        (A) Name of pupil;
        (B) Date of birth of the pupil; and
        (C) Name of public school and grade of the pupil.
        (ii) Pupil residence and parent employment information, including--
        (A) Address of the pupil's residence (or other location information 
    for that residence, such as legal description), 
    
    [[Page 50785]]
    including the name of the Federal facility if the pupil's residence is 
    on Federal property; and
        (B) Name (as it appears on the employer's payroll record) of the 
    parent (mother, father, legal guardian or other person standing in loco 
    parentis) who is employed on Federal property and with whom the pupil 
    resides (unless the parent is a member of the uniformed services on 
    active duty);
        (C) Name and address of the Federal property on which the parent is 
    employed (or other location information, such as legal description), 
    unless the parent is a member of the uniformed services on active duty;
        (D) If the parent is a member of the uniformed services on active 
    duty, the name, rank, and branch of service of that parent;
        (E) If the parent is a civilian employed on a Federal vessel, the 
    name of the vessel, hull number, and name of the controlling agency;
        (F) The signature of the parent supplying the information and the 
    date of such signature; and
        (G) The name of the parent's employer and the employer's address 
    (or other location information, such as legal description), unless a 
    parent is a member of the uniformed services on active duty.
        (2) An LEA may accept a parent-pupil survey form, or a parent-pupil 
    survey form that is signed by a person other than a parent, only under 
    unusual circumstances. In those instances, the parent-pupil survey form 
    must show why the parent did not sign the survey form, and when, how, 
    and from whom the residence and employment information was obtained.
        (b) Source Check. (1) An applicant may count the membership of its 
    federally connected children by using a source check to substantiate a 
    pupil's place of residence or parent's place of employment on the 
    survey date.
        (2) A source check is a form provided--
        (i) To a parent's employer, on which the employer certifies as to 
    the place of employment of a parent of a pupil claimed;
        (ii) To a housing official, on which the official certifies as to 
    the residence of each pupil claimed; or
        (iii) To a tribal official, on which the official certifies as to 
    the residence of each pupil claimed residing on Indian lands over which 
    that tribal official has jurisdiction.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703 and 7706)
    
    
    Sec. 222.36  What minimum number of federally connected children must a 
    local educational agency have to receive a payment on behalf of those 
    children under section 8003(b) and (e)?
    
        (a) Except as provided in paragraph (d) of this section, an LEA is 
    eligible to receive a payment under section 8003(b) (basic support and 
    learning opportunity threshold) and (e) (hold harmless) for a fiscal 
    year only if the total number of its eligible federally connected 
    children for whom it provided a free public education for the preceding 
    fiscal year was--
        (1) At least 400 who were in average daily attendance (ADA); or
        (2) At least 3 percent of the total number of children in ADA.
        (b) Except as provided in paragraph (d) of this section, an 
    applicant LEA is eligible to receive a payment under section 8003 for a 
    fiscal year on behalf of federally connected children described in 
    section 8003(a)(1)(F) or (G) only if the total number of those children 
    for whom it provided a free public education for the preceding fiscal 
    year was at least--
        (1) 2,000 in ADA; and
        (2) 15 percent of the total number of the children in ADA.
        (c) Children described in paragraph (b) of this section are counted 
    for the purposes of paragraph (a) of this section only if the applicant 
    LEA is eligible to receive a payment on behalf of those children under 
    section 8003.
        (d) This section does not apply to hold harmless payments under 
    section 8003(e) for fiscal year 1995.
    
    (Authority: 20 U.S.C. 7703(a)(3) and (b)(1)(B))
    
    
    Sec. 222.37  How does the Secretary calculate the average daily 
    attendance of federally connected children?
    
        (a) This section describes how the Secretary computes the ADA of 
    federally connected children for each category in section 8003 to 
    determine an applicant's payment.
        (b) If an LEA is in a State that collects actual ADA data for 
    purposes of distributing State aid for education, the Secretary 
    calculates the ADA of that LEA's federally connected children for the 
    current fiscal year payment as follows:
        (1) Except as provided in paragraph (b)(3) of this section--
        (i) By dividing the ADA of all the LEA's children for the second 
    preceding fiscal year by the LEA's total membership on its survey date 
    for the second preceding fiscal year (or, in the case of an LEA that 
    conducted two membership counts in the second preceding fiscal year, by 
    the average of the LEA's total membership on the two survey dates); and
        (ii) By multiplying the figure determined in paragraph (b)(1)(i) of 
    this section by the LEA's total membership of federally connected 
    children in each subcategory described in section 8003 and claimed in 
    the LEA's application for the current fiscal year payment (or, in the 
    case of an LEA that conducts two membership counts, by the average of 
    the LEA's total membership of federally connected children in each 
    subcategory on the two survey dates).
        (2)(i) For purposes of this section, actual ADA means raw ADA data 
    that have not been weighted or adjusted to reflect higher costs for 
    specific types of students for purposes of distributing State aid for 
    education.
        (ii) If an LEA provides a program of free public summer school, 
    attendance data for the summer session are included in the LEA's ADA 
    figure in accordance with State law or practice.
        (iii) An LEA's ADA count includes attendance data for children for 
    whom it makes tuition arrangements with other educational entities.
        (3) Attendance data are not counted for any child--
        (i) Who is not physically present at school for the daily minimum 
    time period required by the State, unless the child is--
        (A) Participating via telecommunication or correspondence course 
    programs that meet State standards; or
        (B) Being served by a State-approved homebound instruction program 
    for the daily minimum time period appropriate for the child; or
        (ii) Attending the applicant's schools under a tuition arrangement 
    with another LEA.
        (c) If an LEA is in a State that does not collect ADA data for 
    purposes of distributing State aid for education, the LEA or SEA shall 
    submit data necessary for the Secretary to calculate the ADA of the 
    LEA's federally connected children as follows:
        (1) If an LEA is in a State that formerly collected ADA data for 
    purposes of distributing State aid for education, the SEA may submit 
    the total ADA and total membership data for the State for each of the 
    last three fiscal years that ADA data were collected. The Secretary 
    uses these data to calculate the ADA of the LEA's federally connected 
    children by--
        (i) Dividing the total ADA data by the total membership data for 
    each of the three fiscal years and averaging the results; and
        (ii) Multiplying the average determined in paragraph (c)(1)(i) of 
    this section by the LEA's total membership of federally connected 
    children as described in paragraph (b)(1)(ii) of this section.
        (2) An LEA may submit attendance data based on sampling conducted 
    during the previous fiscal year. The sampling must include attendance 
    data for all children for at least 30 school days. The data must be 
    collected during 
    
    [[Page 50786]]
    at least three periods evenly distributed throughout the school year. 
    Each collection period must consist of at least five consecutive school 
    days. The Secretary uses these data to calculate the ADA of the LEA's 
    federally connected children by--
        (i) Determining the ADA of all children in the sample;
        (ii) Dividing the figure obtained in paragraph (c)(2)(i) of this 
    section by the LEA's total membership for the previous fiscal year; and
        (iii) Multiplying the figure determined in paragraph (c)(2)(ii) of 
    this section by the LEA's total membership of federally connected 
    children for the current fiscal year, as described in paragraph 
    (b)(1)(ii) of this section.
        (3) If an LEA is in a State that distributes State aid for 
    education based on data similar to attendance data, the SEA may request 
    that the Secretary use those data to calculate the ADA of the LEA's 
    federally connected children. If the Secretary determines that those 
    data are, in effect, equivalent to attendance data, the Secretary 
    allows use of the requested data and determines the method by which the 
    ADA of the LEA's federally connected children will be calculated.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703, 7706, 7713)
    
    
    Sec. 222.38  What is the maximum basic support payment that a local 
    educational agency may receive under section 8003(b)?
    
        The maximum basic support payment that an LEA may receive under 
    section 8003(b) for any fiscal year is the sum of its total weighted 
    student units under section 8003(a)(2) for the federally connected 
    children eligible to be counted as the basis for payment, multiplied by 
    the greater of one of the following:
        (a) One-half of the State average per pupil expenditure for the 
    third fiscal year preceding the fiscal year for which the LEA seeks 
    assistance.
        (b) One-half of the national average per pupil expenditure for the 
    third fiscal year preceding the fiscal year for which the LEA seeks 
    assistance.
        (c) The comparable local contribution rate (LCR) determined in 
    accordance with Secs. 222.39-222.41.
        (d) The State average per pupil expenditure multiplied by the local 
    contribution percentage as defined in section 8013(8) of the Act.
    
    (Authority: 20 U.S.C. 7703 (a), (b) and (c))
    
    
    Sec. 222.39  How does a State educational agency identify generally 
    comparable local educational agencies for local contribution rate 
    purposes?
    
        (a) To identify generally comparable LEAs within its State for LCR 
    purposes, the State educational agency (SEA) for that State shall use 
    data from the third fiscal year preceding the fiscal year for which the 
    LCR is being computed to group all of its LEAs, including all applicant 
    LEAs, as follows:
        (1) Grouping by grade dpan/legal classification alone. Divide all 
    LEAs into groups that serve the same grade span and then subdivide the 
    grade span groups by legal classification, if the Secretary considers 
    this classification relevant and sufficiently different from grade span 
    within the State. As an alternative grade-span division, after 
    consultation with the applicant LEAs in the State, divide all LEAs into 
    elementary, secondary, or unified grade-span groups, as appropriate, 
    within the State.
        (2) Grouping by Grade Span/Legal Classification and Size. (i) 
    Divide all LEAs into groups by grade span (or the alternative grade-
    span groups described in paragraph (a)(1)) of this section and legal 
    classification, if relevant and sufficiently different from grade span 
    and size.
        (ii) List all LEAs within each group in descending order by size as 
    measured by ADA, placing the LEA with the largest ADA at the top of the 
    list. A State that does not tabulate actual annual ADA shall use the 
    same formula for establishing ADA for the purpose of ranking LEAs by 
    size as the Department has approved for the purpose of calculating 
    payments under section 8003 for applicant LEAs in the State.
        (iii) After consultation with the applicant LEAs in the State, 
    divide each group into either two subgroups or three subgroups.
        (iv) To determine the subgroups, divide each list at the point(s) 
    that will result in as nearly equal numbers of LEAs in each subgroup as 
    possible, so that no group is more than one LEA larger than any other 
    group.
        (3) Grouping by grade span/legal classification and location. 
    Divide all LEAs into groups by grade span (or the alternative grade-
    span groups described in paragraph (a)(1) of this section) and, if 
    relevant and sufficiently different from grade span and location, legal 
    classification; then subdivide these groups by location, as determined 
    by placement inside or outside a metropolitan statistical area (MSA) as 
    defined by the U.S. Bureau of the Census. The Department will supply 
    SEAs with lists of MSA classifications for their LEAs, and only the 
    classifications on those lists will be recognized by the Department for 
    the purposes of these regulations.
        (4) Grouping by grade span/legal classification, size, and 
    location. (i) Divide all LEAs into groups by grade span (or the 
    alternative grade-span groups described in paragraph (a)(1) of this 
    section) and, if relevant and sufficiently different from grade span, 
    size, and location, legal classification; then subdivide these groups 
    by size (into two or three subgroups for each grade span, as described 
    in paragraph (a)(2) of this section); and further subdivide these 
    groups by location (inside or outside an MSA).
        (ii) In using both the size and location factors, the SEA shall 
    subdivide according to the size factor before the location factor.
        (b) After applying the following restrictions, the SEA shall 
    compute an LCR according to the provisions of Sec. 222.41 for each 
    group of generally comparable LEAs identified under paragraph (a) of 
    this section, as follows:
        (1) The SEA shall not, when computing an LCR, include the following 
    ``significantly impacted'' LEAs in any group of generally comparable 
    LEAs:
        (i) Any LEA having--in the third fiscal year preceding the fiscal 
    year for which the LCR is being computed--20 percent or more of its ADA 
    composed of children identified under section 8003(a)(1)(A)-(C).
        (ii) Any LEA having--in the third fiscal year preceding the fiscal 
    year for which the LCR is being computed--50 percent or more of its ADA 
    composed of children identified under section 8003(a)(1)(A)-(G) who 
    were eligible under Sec. 222.36 to be counted as the basis for payment 
    under section 8003.
        (2) The SEA may not compute an LCR for any group that contains 
    fewer than 10 LEAs.
        (c)(1) For an applicant LEA that satisfies the requirements 
    contained in paragraph (c)(3) of this section, the SEA, in consultation 
    with the LEA, may select a subgroup of 10 or more generally comparable 
    LEAs from the group identified under paragraph (a)(2) of this section 
    that includes the applicant LEA.
        (2) An LEA that otherwise meets either of the requirements of 
    paragraph (c)(3) of this section but serves a different span of grades 
    from all other LEAs in its State (and therefore cannot match any group 
    of generally comparable LEAs under paragraph (a)(2) of this section) 
    must be matched, for purposes of this paragraph (c) only, to a group 
    using legal classification and size as measured by ADA. The group 
    identified using legal classification and size will be the applicant's 
    group under paragraph (a)(2) of this section for purposes of this 
    paragraph (c) only.
        (3) In order to qualify under paragraph (c) (1) or (2) of this 
    section, an applicant LEA must either--
        (i)(A) Be located entirely on Federal land; and
        (B) Be raising either no local revenues or an amount of local 
    revenues the Secretary determines to be minimal; or
        (ii)(A) Be located in a State where State aid makes up no more than 
    40 
    
    [[Page 50787]]
    percent of the State average per pupil expenditure in the third fiscal 
    year preceding the fiscal year for which the LCR is being computed;
        (B) In its application, have federally connected children 
    identified under section 8003(a)(1)(A)-(C) equal to at least 20 percent 
    of its total ADA; and
        (C) In its application, have federally connected children 
    identified under section 8003(a)(1)(A)-(G) who were eligible under 
    Sec. 222.36 to be counted as the basis for payment under section 8003 
    equal to at least 50 percent of its total ADA.
        (4) In the case of an applicant LEA that meets either of the 
    requirements contained in paragraph (c)(3) of this section, the SEA, in 
    consultation with the LEA, may select 10 or more generally comparable 
    LEAs that share one or more common factors of general comparability 
    with the eligible applicant LEA, as follows:
        (i)(A) The SEA must consider one or more generally accepted, 
    objectively defined factors that affect the applicant's cost of 
    educating its children. Examples of such cost-related factors include 
    location inside or outside an MSA, sparsity of population, an unusually 
    large geographical area, economically depressed area, low-income 
    families, children with disabilities, neglected or delinquent children, 
    low-achieving children, children with limited English proficiency, and 
    minority children.
        (B) The SEA may not consider cost-related factors that can be 
    varied at the discretion of the applicant LEA or its generally 
    comparable LEAs or factors dependent on the wealth of the applicant LEA 
    or its generally comparable LEAs. Examples of factors that may not be 
    considered include special alternative curricular programs, pupil-
    teacher ratio, and per pupil expenditures.
        (ii) The SEA must apply the factor or factors of general 
    comparability recommended under paragraph (c)(4)(i)(A) of this section 
    in one of the following ways in order to identify 10 or more generally 
    comparable LEAs for the eligible applicant LEA, none of which may be 
    significantly impacted LEAs:
        (A) The SEA identifies all of the LEAs in the group to which the 
    eligible applicant LEA belongs under paragraph (a)(2) of this section 
    that share the recommended factor or factors. If the subgroup 
    containing the eligible applicant LEA includes at least 10 other LEAs 
    (excluding significantly impacted LEAs), it will be the eligible 
    applicant LEA's new group of generally comparable LEAs. The LCR for the 
    eligible applicant LEA shall be computed using the data for all of the 
    LEAs in the subgroup except the eligible applicant LEA.
    
        Example. An eligible applicant LEA contains a designated 
    economically depressed area, and the SEA recommends ``economically 
    depressed area'' as an additional factor of general comparability. 
    From the group of LEAs under paragraph (a)(2) of this section that 
    includes the eligible applicant LEA, the SEA identifies two 
    subgroups, those LEAs that contain a designated economically 
    depressed area and those that do not. The entire subgroup identified 
    by the SEA that includes the eligible applicant LEA is that LEA's 
    new group of generally comparable LEAs if it contains at least 10 
    LEAs.
    
        (B) After the SEA identifies all of the LEAs in the group that the 
    eligible applicant LEA belongs to under paragraph (a)(2) of this 
    section that share the recommended factor or factors, the SEA then 
    systematically orders all of the LEAs in the group that includes the 
    eligible applicant LEA. The SEA may further divide the ordered LEAs 
    into subgroups by using logical division points (e.g., the median, 
    quartiles, or standard deviations) or a continuous interval of the 
    ordered LEAs (e.g., a percentage or a numerical range). If the subgroup 
    containing the eligible applicant LEA includes at least 10 other LEAs 
    (excluding significantly impacted LEAs), it will be the eligible 
    applicant LEA's new group of generally comparable LEAs. The LCR for the 
    eligible applicant LEA shall be computed using the data for all of the 
    LEAs in the subgroup except the eligible applicant LEA.
    
        Example 1. An eligible applicant LEA serves an unusually high 
    percentage of children with disabilities, and the SEA recommends 
    ``proportion of children with disabilities'' as an additional 
    comparability factor. From the group of LEAs under paragraph (a)(2) 
    of this section that includes the eligible applicant LEA, the SEA 
    lists the LEAs in descending order according to the percentage of 
    children with disabilities enrolled in each of the LEAs. The SEA 
    divides the list of LEAs into four groups containing equal numbers 
    of LEAs. The group containing the eligible applicant LEA is that 
    LEA's new group of generally comparable LEAs if it contains at least 
    10 LEAs.
        Example 2. An eligible applicant LEA serves an unusually high 
    percentage of minority children, and the SEA recommends ``proportion 
    of minority children'' as an additional comparability factor. From 
    the group of LEAs under paragraph (a)(2) of this section that 
    includes the eligible applicant LEA, the SEA lists the LEAs in 
    descending order according to the percentage of minority children 
    enrolled in each of the LEAs. The SEA chooses from the list of LEAs 
    the 15 LEAs whose percentages of minority children are closest to 
    the eligible applicant LEA's. These 15 LEAs will be the eligible 
    applicant LEA's new group of generally comparable LEAs.
    
        (C) The SEA may recommend and apply more than one factor of general 
    comparability in selecting a new group of 10 or more generally 
    comparable LEAs for the eligible applicant LEA. If the subgroup 
    containing the eligible applicant LEA includes at least 10 other LEAs 
    (excluding significantly impacted LEAs), it will be the eligible 
    applicant LEA's new group of generally comparable LEAs. The LCR for the 
    eligible applicant LEA shall be computed using the data from all of the 
    LEAs in the subgroup except the eligible applicant LEA.
    
        Example. An eligible applicant LEA is very sparsely populated 
    and serves an unusually high percentage of children with limited 
    English proficiency. The SEA recommends ``sparsity of population'' 
    and ``proportion of children with limited English proficiency'' as 
    additional comparability factors. From the group of LEAs under 
    paragraph (a)(2) of this section that includes the eligible 
    applicant LEA, the SEA identifies all LEAs that are sparsely 
    populated. The SEA further subdivides the sparsely populated LEAs 
    into two groups, those that serve an unusually high percentage of 
    children with limited English proficiency and those that do not. The 
    subgroup of at least 10 sparsely populated LEAs that serve a high 
    percentage of children with limited English proficiency is the 
    eligible applicant LEA's new group of generally comparable LEAs.
    
        (4)(i) Using the new group of generally comparable LEAs selected 
    under paragraph (c)(4) of this section, the SEA shall compute the LCR 
    for the eligible applicant LEA according to the provisions of 
    Sec. 222.41.
        (ii) The SEA shall submit the resulting LCR to the Secretary and 
    provide the Secretary a description of the additional factor or factors 
    of general comparability and the data used to identify the new group of 
    generally comparable LEAs.
        (iii) The Secretary reviews the data submitted by the SEA, and 
    accepts the LCR for the purpose of use under section 8003(b)(1)(C)(iii) 
    in determining the LEA's maximum payment under section 8003 if the 
    Secretary determines that it meets the purposes and requirements of the 
    Act and this part.
        (d) This section does not apply to applicant LEAs located in--
        (1) Puerto Rico;
        (2) Wake Island;
        (3) Guam;
        (4) American Samoa;
        (5) Any outlying area; and
        (6) Any State in which there is only one LEA.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(b)(1)(C)(iii))
    
    
    Sec. 222.40  How does a local educational agency select a local 
    contribution rate based on generally comparable local educational 
    agencies?
    
        (a) In selecting an LCR based upon generally comparable LEAs, an 
    LEA shall use the following steps:
        (1) Step 1. The LEA shall select the factor or factors in 
    Sec. 222.39 the LEA wishes to use as the basis for general 
    comparability. 
    
    [[Page 50788]]
    
        (2) Step 2. Using State-supplied data, the LEA shall identify 
    within the State the entire group of LEAs (containing at least 10 LEAs 
    exclusive of significantly impacted LEAs described in 
    Sec. 222.39(b)(1)) that matches the factor or factors selected in Step 
    1 and that contains the applicant LEA or would contain the applicant 
    LEA if it were not significantly impacted.
        (3) Step 3. The LEA shall recommend to the Secretary the LCR, which 
    the SEA has computed according to the provisions of Sec. 222.39, based 
    on the group identified in Step 2.
        (b) A significantly impacted LEA described in Sec. 222.39(b)(1) 
    may--
        (1) Apply for assistance under this program; and
        (2) Under the generally comparable LEA method, recommend for itself 
    the LCR of any group in which it would be included based on grade span/
    legal classification, size, location, or a combination of these 
    factors, if it were not excluded as significantly impacted in 
    Sec. 222.39(b)(1).
    
        Example. An LEA applies for assistance under section 8003 and 
    wishes to recommend to the Secretary an LCR based on generally 
    comparable LEAs within its State.
    
    1. Characteristics of Applicant LEA
    
        The grade span of the applicant LEA is kindergarten through 
    grade 8 (K-8). In the applicant's State, legal classification of 
    LEAs is based on grade span, and thus does not act to further 
    subdivide groups of LEAs.
        The ADA of the applicant LEA is above the median ADA of LEAs 
    serving only K-8 in the State.
        The applicant LEA is located outside an MSA.
    
    2. Characteristics of Other LEAs Serving Same Grade Span
    
        The SEA of the applicant's State groups all LEAs in its State 
    according to the factors in Sec. 222.39.
        (a) The SEA identifies the following groups:
        (i) One hundred and one LEAs serve only K-8. The SEA has 
    identified a group of 50 LEAs having an ADA above the median ADA for 
    the group of 101, one LEA having an ADA at the median, and a group 
    of 50 LEAs having an ADA below the median ADA; and according to 
    Sec. 222.39(a)(2)(i), the SEA considers 51 LEAs to have an ADA below 
    the median ADA.
        (ii) Of the 101 LEAs in the group, the SEA has identified a 
    group of 64 LEAs as being inside an MSA and a group of 37 LEAs as 
    being outside an MSA.
        (iii) Among the group of 50 LEAs having an ADA above the median, 
    the SEA has identified a group of 35 LEAs as being inside an MSA and 
    a group of 15 LEAs as being outside an MSA.
        (iv) Among the group of 51 LEAs having an ADA at or below the 
    median, the SEA has identified a group of 29 LEAs as being inside an 
    MSA and 22 LEAs as being outside an MSA.
        (v) One LEA has 20 percent of its ADA composed of children 
    identified under section 8003(a)(1)(A)-(C) and, therefore, must be 
    excluded from any group it falls within before the SEA computes an 
    LCR for the group. The LEA has an ADA below the median ADA and is 
    located outside an MSA.
        (b) On the basis of Sec. 222.41, the SEA computes the LCR for 
    each group of generally comparable LEAs that the SEA has identified.
    
    3. Selection of Generally Comparable LEAs
    
        The applicant LEA selects the group of generally comparable LEAs 
    matching the factor or factors it wishes to use as the basis for 
    general comparability. Under the requirements of Sec. 222.39, the 
    applicant LEA must begin with the group that includes all LEAs with 
    its grade span, and, if relevant and sufficiently different, legal 
    classification. In this case, grade span and legal classification 
    happen to be the same. Thus, the group would include 100 LEAs, after 
    excluding the one significantly impacted LEA. The applicant LEA then 
    has several options:
        (a) Option 1. The applicant LEA may select as its group of 
    generally comparable LEAs on which to base its recommended LCR the 
    entire group of 100 LEAs serving K-8, after excluding the one 
    significantly impacted LEA. The applicant LEA then recommends to the 
    Secretary as its LCR the rate computed for this group by the SEA.
        (b) Option 2. Instead of selecting the group of 100, the 
    applicant LEA may select as its generally comparable group only 
    those LEAs within the 101 (the significantly impacted LEA must be 
    included initially for the purpose of determining the median ADA) 
    that have an ADA above the median ADA, that is, the group of 50. The 
    applicant LEA then recommends to the Secretary as its LCR the rate 
    computed for the group by the SEA.
        (c) Option 3. Instead of selecting either of the groups 
    described in Options 1 and 2, the applicant LEA may select as its 
    generally comparable group only those LEAs within the 100 that are 
    outside an MSA; that is, the group of 36, after excluding the one 
    significantly impacted LEA. The applicant LEA then recommends to the 
    Secretary as its LCR the rate computed for this group by the SEA.
        (d) Option 4. Instead of selecting any of the groups described 
    in Options 1, 2, and 3, the applicant LEA may select as its 
    generally comparable group only those LEAs that both have an ADA 
    above the median ADA for the 101 and are outside an MSA; that is, 
    the group of 15. The applicant LEA then recommends to the Secretary 
    as its LCR the rate computed for this group by the SEA. However, as 
    provided in Sec. 222.39(b)(2), if the SEA were to have identified 
    fewer than 10 LEAs under any factor or combination of factors, the 
    SEA would not have computed a rate for such a group. Therefore, an 
    applicant LEA included in such a group would not be able to use this 
    factor or combination of factors in recommending its LCR to the 
    Secretary. The significantly impacted LEA described in 
    Sec. 222.39(b)(1), while included for determining the median ADA, is 
    excluded from the computation of any group's LCR. However, the 
    significantly impacted LEA may recommend for itself the LCR of any 
    group it matches in grade span/legal classification, size, location, 
    or a combination of these factors, (that is, in the case of the 
    significantly impacted LEA referred to in this example, below the 
    median ADA and outside an MSA), provided the group contains at least 
    10 LEAs that are not significantly impacted.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(b)(1)(C)(iii) and 7703(f)(3)(A)(i)(II) 
    and (III))
    
    
    Sec. 222.41  How does a State educational agency compute local 
    contribution rates based upon generally comparable local educational 
    agencies?
    
        Except as otherwise specified in the Act, the SEA, subject to the 
    Secretary's review and approval, shall compute an LCR for each group of 
    generally comparable LEAs within its State that was identified using 
    the factors in Sec. 222.39, as follows:
        (a)(1) The SEA shall compile the aggregate local current 
    expenditures of the comparable LEAs in each group for the third fiscal 
    year preceding the fiscal year for which the LCR is being computed.
        (2) For purposes of this section, the SEA shall consider only those 
    aggregate current expenditures made by the generally comparable LEAs 
    from revenues derived from local sources. No State or Federal funds may 
    be included.
        (b) The SEA shall compile the aggregate number of children in ADA 
    to whom the generally comparable LEAs in each group provided a free 
    public education during the third fiscal year preceding the fiscal year 
    for which the LCR is being computed.
        (c) The SEA shall divide--
        (1) The aggregate current expenditures determined under paragraph 
    (a) of this section by;
        (2) The aggregate number of children determined under paragraph (b) 
    of this section.
        (d) The SEA shall submit the resulting figure as the ``comparable 
    LCR'' to be used by the Secretary under section 8003(b)(1)(C)(iii) in 
    determining the LEA's maximum payment amount under section 8003.
    
    (Authority: 20 U.S.C. 7703(b)(1)(C)(iii))
    
    
    Secs. 222.42-222.49  [Reserved]
    
    Subpart D--Payments under Section 8003(d) of the Act for Local 
    Educational Agencies That Serve Children with Disabilities
    
    
    Sec. 222.50  What definitions apply to this subpart?
    
        In addition to the terms referenced or defined in Sec. 222.2, the 
    following definitions in 20 U.S.C. 1401 or 34 CFR Sec. 77.1 apply to 
    this subpart:
        Children with disabilities means children--
        (1)(i) With mental retardation, hearing impairments including 
    deafness, speech or language impairments, visual impairments including 
    blindness, serious emotional disturbance, orthopedic impairments, 
    autism, traumatic brain injury, other health impairments, or specific 
    learning disabilities; and
        (ii) Who, by reason thereof, need special education and related 
    services.
        (2) The term ``children with disabilities'' for children aged 3 to 
    5, 
    
    [[Page 50789]]
    inclusive, may, at a State's discretion, include children--
        (i) Experiencing developmental delays, as defined by the State and 
    as measured by appropriate diagnostic instruments and procedures, in 
    one or more of the following areas: physical development, cognitive 
    development, communication development, social or emotional 
    development, or adaptive development; and
        (ii) Who, by reason thereof, need special education and related 
    services.
        Children with specific learning disabilities means children who 
    have a disorder in one or more of the basic psychological processes 
    involved in understanding or in using language, spoken or written, 
    which disorder may manifest itself in imperfect ability to listen, 
    think, speak, read, write, spell, or do mathematical calculations. 
    These disorders include conditions such as perceptual disabilities, 
    brain injury, minimal brain dysfunction, dyslexia, and developmental 
    aphasia. This term does not include children who have learning problems 
    which are primarily the result of visual, hearing, or motor 
    disabilities, of mental retardation, of emotional disturbance, or of 
    environmental, cultural, or economic disadvantage.
        Free appropriate public education means special education and 
    related services that--
        (1) Have been provided at public expense, under public supervision 
    and direction, and without charge;
        (2) Meet the standards of the State educational agency;
        (3) Include an appropriate preschool, elementary, or secondary 
    school education in the State involved; and
        (4) Are provided in conformity with the individualized education 
    program (IEP) required under section 1414(a)(5) of the Individuals with 
    Disabilities Education Act.
        Individualized education program (IEP) means--
        (1) A written statement for each child with a disability developed 
    in any meeting by a representative of the LEA or an intermediate 
    educational unit who shall be qualified to provide, or supervise the 
    provision of, specially designed instruction to meet the unique needs 
    of children with disabilities, the teacher, the parents or guardian of 
    the child, and whenever appropriate, the child, which statement must 
    include--
        (i) A statement of the present levels of educational performance of 
    the child;
        (ii) A statement of annual goals, including short-term 
    instructional objectives;
        (iii) A statement of the specific educational services to be 
    provided to the child, and the extent to which the child will be able 
    to participate in regular educational programs;
        (iv) A statement of the needed transition services for students 
    beginning no later than age 16 and annually thereafter (and, when 
    determined appropriate for the individual, beginning at age 14 or 
    younger), including, when appropriate, a statement of the interagency 
    responsibilities or linkages (or both) before the student leaves the 
    school setting;
        (v) The projected date for initiation and anticipated duration of 
    these services; and
        (vi) Appropriate objective criteria and evaluation procedures and 
    schedules for determining, on at least an annual basis, whether 
    instructional objectives are being achieved.
        (2) In the case where a participating agency, other than the 
    educational agency, fails to provide agreed upon services, the 
    educational agency shall reconvene the IEP team to identify alternative 
    strategies to meet the transition objectives.
        Intermediate educational unit means any public authority, other 
    than an LEA, that is under the general supervision of a State 
    educational agency, that is established by State law for the purpose or 
    providing free public education on a regional basis, and that provides 
    special education and related services to children with disabilities 
    within that State.
        Preschool means the educational level from a child's birth to the 
    time at which the State provides elementary education.
        Related services means transportation and those developmental, 
    corrective, and other supportive services (including speech pathology 
    and audiology, psychological services, physical and occupational 
    therapy, recreation, including therapeutic recreation, social work 
    services, counseling services, including rehabilitation counseling, and 
    medical services, except that medical services must be for diagnostic 
    and evaluation purposes only) as may be required to assist a child with 
    a disability to benefit from special education, and includes the early 
    identification and assessment of disabling conditions in children.
        Special education means specially designed instruction, at no cost 
    to parents or guardians, to meet the unique needs of a child with a 
    disability, including--
        (1) Instruction conducted in the classroom, in the home, in 
    hospitals and institutions, and in other settings; and
        (2) Instruction in physical education.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1), 1401, 7703, 7705, 7713; 37 
    U.S.C. 101)
    
    
    Sec. 222.51  Which children may a local educational agency count for 
    payment under section 8003(d) of the Act?
    
        (a) Except as provided in paragraph (b)(2) of this section, the 
    children described in sections 8003(a)(1)(A)(ii), (a)(1)(B), (a)(1)(C), 
    and (a)(1)(D) of the Act who are eligible for services under the 
    provisions of the Individuals with Disabilities Education Act (20 
    U.S.C. 1400 et seq.) may be counted by the local educational agency 
    (LEA) for the purpose of computing a payment under section 8003(d).
        (b)(1) An LEA may count a child or children described in paragraph 
    (a) of this section who attend private schools or residential programs 
    if the LEA has placed or referred the child or children in accordance 
    with the provisions of section 613 of the Individuals with Disabilities 
    Education Act, 20 U.S.C. 1400 et seq. and 34 CFR Part 300, subparts C 
    and D.
        (2) Children who are placed in private schools by their parents may 
    not be counted under section 8003(d), but may participate in public 
    school programs that use section 8003(d) funds.
    
    (Authority: 20 U.S.C. 1400 et seq. and 7703(d))
    
    
    Sec. 222.52  What requirements must a local educational agency meet to 
    receive a payment under section 8003(d)?
    
        To receive a payment under section 8003(d), an eligible LEA shall--
        (a) State in its application the number of federally connected 
    children with disabilities it claims for a payment under section 
    8003(d);
        (b) Have in effect a written IEP for each federally connected child 
    with disabilities claimed for a payment under section 8003(d); and
        (c) Meet the requirements of subparts A and C of the regulations in 
    this part.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 1400 et seq. and 7703)
    
    
    Sec. 222.53  What restrictions and requirements apply to the use of 
    funds provided under section 8003(d)?
    
        (a) An LEA shall use funds provided under section 8003(d) in 
    accordance with the provisions of section 8003(d)(2) and 34 CFR part 
    300.
        (b) Obligations and expenditures of section 8003(d) funds may be 
    incurred in either of the two following ways:
        (1) An LEA may obligate or expend section 8003(d) funds for the 
    fiscal year for which the funds were appropriated.
        (2) An LEA may reimburse itself for obligations or expenditures of 
    local and general State aid funds for the fiscal year for which the 
    section 8003(d) funds were appropriated.
        (c) An LEA shall use its section 8003(d) funds for the following 
    types of expenditures:
        (1) Expenditures that are reasonably related to the conduct of 
    programs or 
    
    [[Page 50790]]
    projects for the free appropriate public education of federally 
    connected children with disabilities. These expenditures may include 
    program planning and evaluation but may not include construction of 
    school facilities.
        (2) Acquisition cost (net invoice price) of equipment required for 
    the free appropriate public education of federally connected children 
    with disabilities.
        (i) If section 8003(d) funds are used for the acquisition of any 
    equipment described in this paragraph (c)(2) of this section, the fair 
    market value of any financial advantage realized through rebates, 
    discounts, bonuses, free pieces of equipment used in a program or 
    project for the free appropriate public education of federally 
    connected children with disabilities, or other circumstances, is not an 
    allowable expenditure and may not be credited as an expenditure of 
    those funds.
        (ii) Funds awarded under the provisions of section 8003(d) may be 
    used to acquire equipment for the free appropriate public education of 
    the federally connected children with disabilities only if title to the 
    equipment would be in the applicant agency.
        (d) An LEA shall account for the use of section 8003(d) funds as 
    follows:
        (1) By recording, for each fiscal year, the receipt (or credit) of 
    section 8003(d) funds separately from other funds received under the 
    Act, i.e., on a line item basis in the general fund account or in a 
    separate account; and
        (2) By demonstrating that, for each fiscal year, the amount of 
    expenditures for special education and related services provided to the 
    federally connected children with disabilities is at least equal to the 
    amount of section 8003(d) funds received or credited for that fiscal 
    year. This is done as follows:
        (i) For each fiscal year determine the amount of an LEA's 
    expenditures for special education and related services provided to all 
    children with disabilities.
        (ii) The amount determined in paragraph (d)(2)(i) of this section 
    is divided by the average daily attendance (ADA) of the total number of 
    children with disabilities the LEA served during that fiscal year.
        (iii) The amount determined in paragraph (d)(2)(ii) of this section 
    is then multiplied by the total ADA of the LEA's federally connected 
    children with disabilities claimed by the LEA for that fiscal year.
        (3) If the amount of section 8003(d) funds the LEA received (or was 
    credited) for the fiscal year exceeds the amount obtained in paragraph 
    (d)(2)(iii) of this section, an overpayment equal to the excess section 
    8003(d) funds is established. This overpayment may be reduced or 
    eliminated to the extent that the LEA can demonstrate that the average 
    per pupil expenditure for special education and related services 
    provided to federally connected children with disabilities exceeded its 
    average per pupil expenditure for serving non-federally connected 
    children with disabilities.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(d))
    
    
    Sec. 222.54  What supplement-not-supplant requirement applies to this 
    subpart?
    
        Funds provided under section 8003(d) may not supplant any State 
    funds that were or would have been available to the LEA for the free 
    appropriate public education of children counted under section 8003(d).
        (a) No section 8003(d) funds may be paid to an LEA whose per pupil 
    State aid for federally connected children with disabilities, either 
    general State aid or special education State aid, has been or would be 
    reduced as a result of eligibility for or receipt of section 8003(d) 
    funds, whether or not a State has a program of State aid that meets the 
    requirements of section 8009 of the Act and subpart K of the 
    regulations in this part.
        (1) A reduction in the per pupil amount of State aid for children 
    with disabilities, including children counted under section 8003(d), 
    from that received in a previous year raises a presumption that 
    supplanting has occurred.
        (2) The LEA may rebut this presumption by demonstrating that the 
    reduction was unrelated to the receipt of section 8003(d) funds.
        (b) In any State in which there is only one LEA, all funds for 
    programs for children with disabilities other than funds from Federal 
    sources are considered by the Secretary to be local funds.
    
    (Authority: 20 U.S.C. 7703(d))
    
    
    Sec. 222.55  What other statutes and regulations are applicable to this 
    subpart?
    
        Local educational agencies receiving funds under section 8003(d) 
    are subject to the requirements of the Individuals with Disabilities 
    Education Act, and related regulations (20 U.S.C. 1401 et seq. and 34 
    CFR part 300).
    
    (Authority: 20 U.S.C. 1401 et seq., 6314, and 7703(d))
    
    
    Secs. 222.56  222.59 [Reserved]
    
    Subpart E--Additional Assistance for Heavily Impacted Local 
    Educational Agencies under Section 8003(f) of the Act
    
    
    Sec. 222.60  What are the scope and purpose of these regulations?
    
        The regulations in this subpart implement section 8003(f) of the 
    Act, which provides financial assistance, in addition to payments under 
    sections 8003(b) and 8003(d) of the Act, to certain heavily impacted 
    local educational agencies (LEAs) that meet all relevant eligibility 
    requirements.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.61  What data are used to determine a local educational 
    agency's eligibility and payment under section 8003(f) of the Act?
    
        (a) Computations and determinations made with regard to an LEA's 
    eligibility (Secs. 222.61-222.71) and payment (Secs. 222.72-222.73) 
    under section 8003(f) are based on the LEA's final student and 
    financial data for the fiscal year for which it seeks assistance and, 
    in certain cases, final financial data for the preceding and second 
    preceding fiscal years of the LEAs determined under Secs. 222.39-222.41 
    or Sec. 222.74 to be generally comparable to the applicant LEA 
    (``generally comparable LEAs'').
        (b) For purposes of this subpart, ``level of education'' means 
    average per pupil expenditure amount.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.62  Which local educational agencies are eligible to apply for 
    an additional payment under section 8003(f)?
    
        Local educational agencies that are eligible to apply for 
    additional assistance under section 8003(f) include those that have--
        (a)(1) A tax effort equal to at least 95 percent of the average tax 
    rate of generally comparable LEAs identified under Secs. 222.39-222.41 
    or 222.74; and
        (2)(i) Federally connected children equal to at least 50 percent of 
    the total number of children in average daily attendance (ADA) if a 
    section 8003(b) payment is received on behalf of children described in 
    section 8003(a)(1)(F)-(G); or
        (ii) Federally connected children equal to at least 40 percent of 
    the total number of children in ADA if a section 8003(b) payment is not 
    received on behalf of children described in section 8003(a)(1)(F)-(G);
        (b)(1) A tax effort equal to at least 125 percent of the average 
    tax rate of generally comparable LEAs identified under Secs. 222.39-
    222.41; and
        (2) Federally connected children equal to at least 35 percent of 
    the total number of children in ADA;
        (c) The same boundaries as those of a Federal military 
    installation; or
        (d) Current expenditures that are not reasonably comparable to 
    those of generally comparable LEAs identified under Secs. 222.39-222.41 
    because unusual geographical factors affect the applicant LEAs' current 
    expenditures necessary to maintain a level of education equivalent to 
    that of generally comparable LEAs.
    
    (Authority: 20 U.S.C. 7703(f)) 
    
    [[Page 50791]]
    
    
    
    Sec. 222.63  What other requirements must a local educational agency 
    meet in order to be eligible for financial assistance under section 
    8003(f)(2)(A)?
    
        Subject to Sec. 222.65, an LEA described in Sec. 222.62(a), (b), or 
    (c) is eligible for financial assistance under section 8003(f)(2)(A) if 
    the Secretary determines that the LEA meets all of the following 
    requirements:
        (a) The LEA is eligible for a basic support payment under section 
    8003(b).
        (b) The LEA timely applies for assistance under section 8003(f) and 
    meets all of the other application and eligibility requirements of 
    subparts A and C of these regulations.
        (c) The LEA is exercising due diligence in availing itself of 
    revenues derived from State and other sources and, except for an LEA 
    described in Sec. 222.62(c), is making a reasonable tax effort in 
    accordance with the requirements of Secs. 222.66 - 222.71.
        (d) The eligibility of the LEA for State aid and the amount of 
    State aid are determined on a basis no less favorable than that for 
    other LEAs in the State.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.64  What other requirements must a local educational agency 
    meet in order to be eligible for financial assistance under section 
    8003(f)(2)(B)?
    
        Subject to Sec. 222.65, an LEA described in Sec. 222.62(d) is 
    eligible for financial assistance under section 8003(f)(2)(B) if the 
    Secretary determines that the LEA meets all of the following 
    requirements--
        (a) The LEA complies with the requirements of Sec. 222.63(a)-(d).
        (b)(1) As part of its section 8003(f) application, the LEA provides 
    the Secretary with documentation that demonstrates that the LEA is 
    unable to provide a level of education equivalent to that provided by 
    its generally comparable LEAs because--
        (i) The applicant's current expenditures are affected by unusual 
    geographical factors; and
        (ii) As a result, those current expenditures are not reasonably 
    comparable to the current expenditures of its generally comparable 
    LEAs.
        (2) The LEA's application must include--
        (i) A specific description of the unusual geographical factors on 
    which the applicant is basing its request for compensation under this 
    section and objective data demonstrating that the applicant is more 
    severely affected by these factors than any other LEA in its State;
        (ii) Objective data demonstrating the specific ways in which the 
    unusual geographical factors affect the applicant's current 
    expenditures so that they are not reasonably comparable to the current 
    expenditures of its generally comparable LEAs;
        (iii) Objective data demonstrating the specific ways in which the 
    unusual geographical factors prevent the applicant from providing a 
    level of education equivalent to that provided by its generally 
    comparable LEAs; and
        (iv) Any other information that the Secretary may require to make 
    an eligibility determination under this section.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.65  How may a State aid program affect a local educational 
    agency's eligibility for assistance under section 8003(f)?
    
        The Secretary determines that an LEA is not eligible for financial 
    assistance under section 8003(f) if--
        (a) The LEA is in a State that has an equalized program of State 
    aid that meets the requirements of section 8009; and
        (b) The State, in determining the LEA's eligibility for or amount 
    of State aid, takes into consideration the LEA's payment under section 
    8003(f).
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.66  How does the Secretary determine whether a fiscally 
    independent local educational agency is making a reasonable tax effort?
    
        (a) To determine whether a fiscally independent LEA, as defined in 
    Sec. 222.2(c), is making a reasonable tax effort as required by 
    Secs. 222.63 or 222.64, the Secretary compares the LEA's local real 
    property tax rates for current expenditure purposes (referred to in 
    this part as ``tax rates''), as defined in Sec. 222.2(c), with the tax 
    rates of its generally comparable LEAs.
        (b) For purposes of this section, the Secretary uses--
        (1) Actual tax rates if all the real property in the LEA and its 
    generally comparable LEAs is assessed at the same percentage of true 
    value; or
        (2) Tax rates computed under Secs. 222.67-222.69.
        (c) The Secretary determines that an LEA described in 
    Sec. 222.62(a) or (d) is making a reasonable tax effort if--
        (1) The LEA's tax rate is equal to at least 95 percent of the 
    average tax rate of its generally comparable LEAs;
        (2) Each of the LEA's tax rates for each classification of real 
    property is equal to at least 95 percent of each of the average tax 
    rates of its generally comparable LEAs for the same classification of 
    property;
        (3) The LEA taxes all of its real property at the maximum rates 
    allowed by the State, if those maximum rates apply uniformly to all 
    LEAs in the State; or
        (4) The LEA has no taxable real property.
        (d) The Secretary determines that an LEA described in 
    Sec. 222.62(b) is making a reasonable tax effort if--
        (1) The LEA's tax rate is equal to at least 125 percent of the 
    average tax rate of its generally comparable LEAs;
        (2) Each of the LEA's tax rates for each classification of real 
    property is equal to at least 125 percent of each of the average tax 
    rates of its generally comparable LEAs for the same classification of 
    property;
        (3) The LEA taxes all of its real property at the maximum rates 
    allowed by the State, if those maximum rates apply uniformly to all 
    LEAs in the State; or
        (4) The LEA has no taxable real property.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.67  What tax rates does the Secretary use if real property is 
    assessed at different percentages of true value?
    
        If the real property of an LEA and its generally comparable LEAs 
    consists of one classification of property but the property is assessed 
    at different percentages of true value in the different LEAs, the 
    Secretary determines whether the LEA is making a reasonable tax effort 
    under Sec. 222.66(c)(1) or (d)(1) by using tax rates computed by--
        (a) Multiplying the LEA's actual tax rate for real property by the 
    percentage of true value assigned to that property for tax purposes; 
    and
        (b) Performing the computation in paragraph (a) of this section for 
    each of its generally comparable LEAs and determining the average of 
    those computed tax rates.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.68  What tax rates does the Secretary use if two or more 
    different classifications of real property are taxed at different 
    rates?
    
        If the real property of an LEA and its generally comparable LEAs 
    consists of two or more classifications of real property taxed at 
    different rates, the Secretary determines whether the LEA is making a 
    reasonable tax effort under Sec. 222.66(c)(1) or (2) or 
    Sec. 222.66(d)(1) or (2) by using one of the following:
        (a) Actual tax rates for each of the classifications of real 
    property.
        (b) Tax rates computed in accordance with Sec. 222.67 for each of 
    the classifications of real property.
        (c) Tax rates computed by--
        (1) Determining the total true value of all real property in the 
    LEA by dividing the assessed value of each classification of real 
    property in the LEA by the percentage of true value assigned to that 
    property for tax purposes and aggregating the results;
        (2) Determining the LEA's total revenues derived from local real 
    property taxes for current expenditures (as defined in section 8013); 
    
    [[Page 50792]]
    
        (3) Dividing the amount determined in paragraph (c)(2) of this 
    section by the amount determined in paragraph (c)(1) of this section; 
    and
        (4) Performing the computations in paragraphs (c)(1), (2), and (3) 
    of this section for each of the generally comparable LEAs and 
    determining the average of their computed tax rates.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.69  What tax rates may the Secretary use if substantial local 
    revenues are derived from local tax sources other than real property 
    taxes?
    
        (a) In a State in which a substantial portion of revenues for 
    current expenditures for educational purposes is derived from local tax 
    sources other than real property taxes, the State educational agency 
    (SEA) may request that the Secretary take those revenues into account 
    in determining whether an LEA in that State is making a reasonable tax 
    effort under Sec. 222.66.
        (b) If, based upon the request of an SEA, the Secretary determines 
    that it is appropriate to take the revenues described in paragraph (a) 
    of this section into account in determining whether an LEA in that 
    State is making a reasonable tax effort under Sec. 222.66, the 
    Secretary uses tax rates computed by--
        (1) Dividing the assessed value of each classification of real 
    property in the LEA by the percentage of true value assigned to that 
    property for tax purposes and aggregating the results;
        (2) Determining the LEA's total revenues derived from local tax 
    sources for current expenditures (as defined in section 8013);
        (3) Dividing the amount determined in paragraph (b)(2) of this 
    section by the amount determined in paragraph (b)(1) of this section; 
    and
        (4) Performing the computations in paragraphs (b)(1), (2), and (3) 
    of this section for each of the generally comparable LEAs and 
    determining the average of those computed tax rates.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.70  How does the Secretary determine whether a fiscally 
    dependent local educational agency is making a reasonable tax effort?
    
        (a) If an LEA is fiscally dependent, as defined in Sec. 222.2(c), 
    the Secretary compares the LEA's imputed local tax rate, calculated 
    under paragraph (b) of this section, with the average tax rate of its 
    generally comparable LEAs, calculated under paragraph (c) of this 
    section, to determine whether the LEA is making a reasonable tax 
    effort.
        (b) The Secretary imputes a local tax rate for a fiscally dependent 
    LEA by--
        (1) Dividing the assessed value of each classification of real 
    property within the boundaries of the general government by the 
    percentage of true value assigned to that property for tax purposes and 
    aggregating the results;
        (2) Determining the amount of locally derived revenues made 
    available by the general government for the LEA's current expenditures 
    (as defined in section 8013); and
        (3) Dividing the amount determined in paragraph (b)(2) of this 
    section by the amount determined in paragraph (b)(1) of this section.
        (c) The Secretary performs the computations in paragraph (b) of 
    this section for each of the fiscally dependent generally comparable 
    LEAs and the computations in Secs. 222.67-222.69, whichever is 
    applicable, for each of the fiscally independent generally comparable 
    LEAs and determines the average of all those tax rates.
        (d) The Secretary determines that a fiscally dependent LEA 
    described in Sec. 222.62 (a) or (d) is making a reasonable tax effort 
    if its imputed local tax rate is equal to at least 95 percent of the 
    average tax rate of its generally comparable LEAs.
        (e) The Secretary determines that a fiscally dependent LEA 
    described in Sec. 222.62(b) is making a reasonable tax effort if its 
    imputed local tax rate is equal to at least 125 percent of the average 
    tax rate of its generally comparable LEAs.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.71  What information must be provided by the State educational 
    agency?
    
        The SEA of any State with an LEA applying for assistance under 
    section 8003(f) shall provide the Secretary with relevant information 
    necessary to determine whether the LEA is making a reasonable tax 
    effort under Secs. 222.67-222.70, whichever is applicable.
    
    (Approved by the Office of Management and Budget under control 
    number 1810-0036.)
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.72  How does the Secretary determine a maximum payment for 
    local educational agencies that are eligible for financial assistance 
    under section 8003(f)(2)(A) and Sec. 222.63?
    
        (a) Except as otherwise provided in paragraphs (b) through (c) of 
    this section or Sec. 222.76, the Secretary determines a maximum payment 
    under section 8003(f)(2)(A) for an eligible LEA by--
        (1) First calculating the greater of--
        (i) The State average per pupil expenditure (APPE) or the national 
    APPE;
        (ii) The APPE of generally comparable LEAs identified under 
    Secs. 222.39-222.41; or
        (iii) The APPE of three generally comparable LEAs identified under 
    Sec. 222.74;
        (2) Next subtracting from the amount calculated in paragraph (a)(1) 
    of this section the average State aid per pupil amount received by the 
    LEA;
        (3) Multiplying the amount calculated in paragraph (a)(2) of this 
    section by the total number of federally connected students in ADA who 
    are eligible for basic support payments under section 8003(b);
        (4) In the case of an LEA whose tax rate is at least 95 percent but 
    less than 100 percent of the average tax rate of its generally 
    comparable LEAs, reducing the amount calculated in paragraph (a)(3) of 
    this section by the percentage that the average tax rate of its 
    generally comparable LEAs exceeds the tax rate of the LEA; and
        (5) Subtracting from the amount calculated in paragraph (a)(3), or 
    paragraph (a)(4) of this section, the total amount of payments received 
    by the eligible LEA under sections 8003 (b) and (d) for the fiscal year 
    for which a payment is being determined under section 8003(f).
        (b) For the first step of the computations described in paragraph 
    (a) of this section, the Secretary calculates a maximum payment under 
    section 8003(f)(2)(A) for an eligible LEA described in Sec. 222.62 (b) 
    or (c) by multiplying the national APPE by .70, except that the 
    resulting amount may not exceed 125 percent of the State APPE.
        (c) For the fourth step of the computations described in paragraph 
    (a) of this section, generally comparable LEAs for reasonable tax 
    effort purposes are the LEAs whose APPE is identified in 
    Sec. 222.72(a)(1) except that for applicant LEAs for whom the national 
    APPE is identified, all LEAs in the applicant's State will be used as 
    generally comparable LEAs for reasonable tax effort purposes.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.73  How does the Secretary determine a maximum payment for 
    local educational agencies that are eligible for financial assistance 
    under section 8003(f)(2)(B) and Sec. 222.64?
    
        Except as otherwise provided in paragraphs (b) and (c) of this 
    section and Sec. 222.76, the Secretary determines a maximum payment 
    under section 8003(f)(2)(B) for an eligible LEA as follows:
        (a) The Secretary increases the eligible LEA's local contribution 
    rate (LCR) for section 8003(b) payment purposes up to the amount the 
    Secretary determines will compensate the applicant for the increase in 
    its current expenditures necessitated by the unusual geographical 
    factors identified under Sec. 222.64(b)(2), but no more than is 
    
    [[Page 50793]]
    necessary to allow the applicant to provide a level of education 
    equivalent to that provided by its generally comparable LEAs.
        (b) The increase in the LCR referred to in paragraph (a) of this 
    section may not exceed the per pupil share (computed with regard to all 
    children in ADA), as determined by the Secretary, of the increased 
    current expenditures necessitated by the unusual geographical factors 
    identified under Sec. 222.64(b)(2).
        (c) In the case of an LEA whose tax rate is at least 95 percent but 
    less than 100 percent of the average tax rate of its generally 
    comparable LEAs, reducing the amount calculated in paragraph (a) of 
    this section by the percentage that the average tax rate of its 
    generally comparable LEAs exceeds the tax rate of the LEA.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.74  How does the Secretary identify generally comparable local 
    educational agencies for purposes of section 8003(f)?
    
        (a) Except as otherwise provided in paragraph (b) of this section, 
    the Secretary identifies generally comparable LEAs for purposes of this 
    subpart in accordance with the LCR procedures described in 
    Secs. 222.39-222.41.
        (b) For applicant LEAs described in Sec. 222.62(a), to identify the 
    three generally comparable LEAs referred to in Sec. 222.72(a)(1)(iii), 
    the Secretary uses the following procedures:
        (1) The Secretary asks the SEA of the applicant LEA to identify 
    generally comparable LEAs in the State by first following the 
    directions in Sec. 222.39(a)(4), using data from the preceding fiscal 
    year. The SEA then removes from the resulting list any LEAs that are 
    significantly impacted, as described in Sec. 222.39(b)(1), except the 
    applicant LEA.
        (2) If the remaining LEAs are not in rank order by total ADA, the 
    SEA shall list them in that order.
        (3) The LEA may then select as its generally comparable LEAs, for 
    purposes of section 8003(f) only, three LEAs from the list that are 
    closest to it in size as determined by total ADA (e.g., the next three 
    larger LEAs, the next three smaller, the next two larger and the next 
    one smaller, or the next one larger and the next two smaller).
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.75  How does the Secretary compute the average per pupil 
    expenditure of generally comparable local educational agencies under 
    this subpart?
    
        The Secretary computes APPE under this subpart by--
        (a) Dividing the sum of the total current expenditures for the 
    preceding fiscal year for the identified generally comparable LEAs by 
    the sum of the total ADA of those LEAs for the same fiscal year and 
    performing this calculation again using data for the second preceding 
    year; and
        (b) Increasing or decreasing the APPE for the preceding fiscal year 
    by the percentage the APPE of the generally comparable LEAs increased 
    or decreased from the second preceding fiscal year to the preceding 
    fiscal year.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Sec. 222.76  What does the Secretary do if appropriation levels are 
    insufficient to pay in full the amounts calculated under Secs. 222.72 
    and 222.73?
    
        Payments under section 8003(f) for eligible LEAs will be ratably 
    reduced if the funds available for assistance under that section are 
    insufficient to pay the full amounts determined under Secs. 222.72 and 
    222.73.
    
    (Authority: 20 U.S.C. 7703(f))
    
    
    Secs. 222.77-222.79  [Reserved]
    
    Subpart F--[Reserved]
    
    Subpart G--Special Provisions for Local Educational Agencies That 
    Claim Children Residing on Indian Lands
    
    General
    
    
    Sec. 222.90  What definitions apply to this subpart?
    
        In addition to the definitions in Sec. 222.2, the following 
    definitions apply to this subpart:
        Indian children means children residing on Indian lands who are 
    recognized by an Indian tribe as being affiliated with that tribe.
        Indian tribe means any Indian tribe, band, nation, or other 
    organized group or community, including any Alaska Native village or 
    regional or village corporation as defined in or established under the 
    Alaska Native Claims Settlement Act (85 Stat. 688), which is recognized 
    as eligible for the special programs and services provided by the 
    United States to Indians because of their status as Indians.
    
    (Authority: 20 U.S.C. 7713, 7881, 7938, 8801)
    
    
    Sec. 222.91  What requirements must a local educational agency meet to 
    receive a payment under section 8003 of the Act for children residing 
    on Indian lands?
    
        To receive a payment under section 8003 of the Act for children 
    residing on Indian lands, a local educational agency (LEA) must--
        (a) Meet the application and eligibility requirements in section 
    8003 and subparts A and C of these regulations;
        (b) Develop and implement policies and procedures in accordance 
    with the provisions of section 8004(a) of the Act; and
        (c) Include in its application for payments under section 8003--
        (1) An assurance that the LEA established these policies and 
    procedures in consultation with and based on information from tribal 
    officials and parents of those children residing on Indian lands who 
    are Indian children; and
        (2) A copy of the policies and procedures or documentation that the 
    LEA has received a waiver in accordance with the provisions of section 
    8004(c).
    
    (Authority: 20 U.S.C. 7703(a), 7704(a), (c), and (d)(2))
    
    
    Sec. 222.92  What additional statutes and regulations apply to this 
    subpart?
    
        (a) The following statutes and regulations apply to LEAs that claim 
    children residing on Indian lands for payments under section 8003:
        (1) The General Education Provisions Act (GEPA) in 20 U.S.C. 1221 
    et seq., unless otherwise noted.
        (2) Other relevant regulations in this part.
        (b) The following statutes, rules, and regulations do not apply to 
    any hearing proceedings under this subpart:
        (1) Administrative Procedure Act.
        (2) Federal Rules of Civil Procedure.
        (3) Federal Rules of Evidence.
        (4) GEPA, Part E.
        (5) 34 CFR Part 81.
    
    (Authority: 20 U.S.C. 1221 et seq. unless otherwise noted, 7703, and 
    7704)
    
    
    Sec. 222.93  [Reserved]
    
    Indian Policies and Procedures
    
    
    Sec. 222.94  What provisions must be included in a local educational 
    agency's Indian policies and procedures?
    
        (a) An LEA's Indian policies and procedures (IPPs) must include a 
    description of the specific procedures for how the LEA will--
        (1) Give the tribal officials and parents of Indian children an 
    opportunity to comment on whether Indian children participate on an 
    equal basis with non-Indian children in the education programs and 
    activities provided by the LEA;
        (2) Assess the extent to which Indian children participate on an 
    equal basis with non-Indian children served by the LEA;
        (3) Modify, if necessary, its education program to ensure that 
    Indian children participate on an equal basis with non-Indian children 
    served by the LEA;
        (4) Disseminate relevant applications, evaluations, program plans 
    and information related to the education programs of the LEA in 
    sufficient time to allow the tribes and parents of Indian children an 
    opportunity to review the materials and make recommendations on the 
    needs of the Indian children and how the LEA may help those children 
    realize the benefits of the LEA's education programs and activities;
        (5) Gather information concerning Indian views, including those 
    regarding 
    
    [[Page 50794]]
    the frequency, location, and time of meetings;
        (6) Notify the Indian parents and tribes of the locations and times 
    of meetings;
        (7) Consult and involve tribal officials and parents of Indian 
    children in the planning and development of the LEA's education 
    programs and activities; and
        (8) Modify the IPPs if necessary, based upon the results of any 
    assessment described in paragraph (b) of this section.
        (b) Tribes and parents of Indian children may assess the 
    effectiveness of their input regarding the participation of Indian 
    children in the LEA's education programs and activities and the 
    development and implementation of the IPPs, and share the results of 
    that assessment with the LEA.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704)
    
    
    Sec. 222.95  How are Indian policies and procedures reviewed to ensure 
    compliance with the requirements in section 8004(a) of the Act?
    
        (a) The Director of the Impact Aid Program (Director) periodically 
    reviews applicant LEAs' IPPs to ensure that they comply with the 
    provisions of section 8004(a) and Sec. 222.94.
        (b) If the Director determines either that the LEA's IPPs do not 
    comply with the minimum standards of section 8004(a), or that the IPPs 
    have not been implemented in accordance with Sec. 222.94, the Director 
    provides the LEA with written notification of the deficiencies related 
    to its IPPs and requires that the LEA take appropriate action.
        (c) An LEA shall make the necessary changes within 60 days of 
    receipt of written notification from the Director.
        (d) If the LEA fails to make the necessary adjustments or changes 
    within the prescribed period of time, the Director may withhold all 
    payments that the LEA is eligible to receive under section 8003.
        (e) Each LEA that has developed IPPs shall review those IPPs 
    annually to ensure that they--
        (1) Comply with the provisions in section 8004(a); and
        (2) Are implemented by the LEA in accordance with Sec. 222.94.
        (f) If an LEA determines that its IPPs do not meet the requirements 
    in paragraphs (e) (1) and (2) of this section, the LEA shall amend its 
    IPPs to conform with those requirements within 60 days of its 
    determination.
        (g) An LEA that amends its IPPs shall send a copy of the amended 
    IPPs to--
        (1) The Director for approval; and
        (2) The affected tribe or tribes.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1), 7704 (a) and (d)(2))
    
    
    Secs. 222.96-222.101  [Reserved]
    
    Indian Policies and Procedures Complaint and Hearing Procedures
    
    
    Sec. 222.102  Who may file a complaint about a local educational 
    agency's Indian policies and procedures?
    
        (a) Only a tribal chairman or an authorized designee for a tribe 
    that has students attending an LEA's schools may file a written 
    complaint with the Assistant Secretary for Elementary and Secondary 
    Education (Assistant Secretary) regarding any action of the LEA 
    pursuant to, or relevant to, section 8004(a) and Sec. 222.94.
        (b) If a tribe files a complaint through a designee, the tribe 
    shall acknowledge in writing in the complaint that the designee is 
    authorized to act on its behalf.
    
    (Authority: 20 U.S.C. 7704(e)(1))
    
    
    Sec. 222.103  What must be included in a complaint?
    
        For purposes of this subpart, a complaint is a signed statement 
    that includes--
        (a) An allegation that an LEA has failed to develop and implement 
    IPPs in accordance with section 8004(a);
        (b) Information that supports the allegation;
        (c) A specific request for relief; and
        (d) A statement describing what steps the tribe has taken to 
    resolve with the LEA the matters on which the complaint is based.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)(1))
    
    
    Sec. 222.104  When does the Assistant Secretary consider a complaint 
    received?
    
        (a) The Assistant Secretary considers a complaint to have been 
    received only after the Assistant Secretary determines that the 
    complaint--
        (1) Satisfies the requirements in Secs. 222.102 and 222.103; and
        (2) Is in writing and signed by the tribal chairman or the tribe's 
    authorized designee.
        (b) If the Assistant Secretary determines that a complaint fails to 
    meet the requirements in Secs. 222.102-222.103, the Assistant Secretary 
    notifies the tribe or its designee in writing that the complaint has 
    been dismissed for purposes of invoking the hearing procedures in 
    Secs. 222.102-222.113.
        (c) Any notification that a complaint has been dismissed includes 
    the reasons why the Assistant Secretary determined that the complaint 
    did not meet the requirements in Secs. 222.102 and 222.103.
        (d) Notification that a complaint has been dismissed does not 
    preclude other efforts to investigate or resolve the issues raised in 
    the complaint, including the filing of an amended complaint.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)(1))
    
    
    Sec. 222.105-222.107  [Reserved]
    
    
    Sec. 222.108  What actions must be taken upon receipt of a complaint?
    
        Within 10 working days of receipt of a complaint, the Secretary or 
    his designee--
        (a) Designates a hearing examiner to conduct a hearing;
        (b) Designates a time for the hearing that is no more than 30 days 
    after the designation of a hearing examiner;
        (c) Designates a place for the hearing that, to the extent 
    possible, is--
        (1) Near the LEA; or
        (2) At another location convenient to the tribe and the LEA, if it 
    is determined that there is good cause to designate another location;
        (d) Notifies the tribe and the LEA of the time, place, and nature 
    of the hearing; and
        (e) Transmits copies of the complaint to the LEA and the affected 
    tribe or tribes.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e))
    
    
    Sec. 222.109  When may a local educational agency reply to a complaint?
    
        An LEA's reply to the charges in the complaint must be filed with 
    the hearing examiner within 15 days of the date the LEA receives a copy 
    of the notice and complaint described in Sec. 222.108 (d) and (e) from 
    the hearing examiner.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e))
    
    
    Sec. 222.110  What are the procedures for conducting a hearing on a 
    local educational agency's Indian policies and procedures?
    
        Hearings on IPP complaints filed by an Indian tribe or tribes 
    against an LEA are conducted as follows:
        (a) The hearing must be open to the public.
        (b) Parties may be represented by counsel.
        (c)(1) Each party may submit oral and written testimony that is 
    relevant to the issues in the proceeding and make recommendations 
    concerning appropriate remedial actions.
        (2) A party may object to evidence it considers to be irrelevant or 
    unduly repetitious.
        (d) No party shall communicate orally or in writing with the 
    hearing examiner or the Assistant Secretary on matters under review, 
    except minor procedural matters, unless all parties to the complaint 
    are given--
        (1) Timely and adequate notice of the communication; and
        (2) Reasonable opportunity to respond.
        (e) For each document that a party submits, the party shall--
        (1) File one copy for inclusion in the record of the proceeding; 
    and
        (2) Provide a copy to each of the other parties to the proceeding. 
    
    [[Page 50795]]
    
        (f) Each party shall bear only its own costs in the proceeding.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e))
    
    
    Sec. 222.111  What is the authority of the hearing examiner in 
    conducting a hearing?
    
        The hearing examiner is authorized to conduct a hearing under 
    section 8004(e) and Secs. 222.109-222.113 as follows:
        (a) The hearing examiner may--
        (1) Clarify, simplify, or define the issues or consider other 
    matters that may aid in the disposition of the complaint;
        (2) Direct the parties to exchange relevant documents or 
    information; and
        (3) Examine witnesses.
        (b) The hearing examiner--
        (1) Regulates the course of proceedings and conduct of the parties;
        (2) Arranges for the preparation of a transcript of each hearing 
    and provides one copy to each party;
        (3) Schedules the submission of oral and documentary evidence;
        (4) Receives, rules on, excludes, or limits evidence;
        (5) Establishes and maintains a record of the proceeding, including 
    any transcripts referenced above;
        (6) Establishes reasonable rules governing public attendance at the 
    proceeding; and
        (7) Is bound by all applicable statutes and regulations and may 
    neither waive them nor rule them invalid.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e))
    
    
    Sec. 222.112  What procedures are followed after the hearing?
    
        (a) Each party may submit to the hearing examiner additional 
    evidence that is relevant to the issues raised at the hearing, within 
    the time period and in the manner specified by the hearing examiner.
        (b) Within 30 days after the hearing, the hearing examiner--
        (1) Makes, on the basis of the record, written findings of fact and 
    recommendations concerning any appropriate remedial action that should 
    be taken;
        (2) Submits those findings and recommendations, along with the 
    hearing record, to the Assistant Secretary; and
        (3) Sends a copy of those findings and recommendations to each 
    party.
        (c)(1) Each party may file with the Assistant Secretary comments on 
    the hearing examiner's findings and recommendations.
        (2) The comments must be received by the Assistant Secretary within 
    10 days after the party receives a copy of the hearing examiner's 
    findings and recommendations.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e))
    
    
    Sec. 222.113  What are the responsibilities of the Assistant Secretary 
    after the hearing?
    
        (a) Within 30 days after receiving the entire hearing record and 
    the hearing examiner's findings and recommendations, the Assistant 
    Secretary makes, on the basis of the record, a written determination 
    that includes--
        (1) Any appropriate remedial action that the LEA must take;
        (2) A schedule for completing any remedial action; and
        (3) The reasons for the Assistant Secretary's decision.
        (b) After completing the final determination required by paragraph 
    (a) of this section, the Assistant Secretary sends the parties a copy 
    of that determination.
        (c) The Assistant Secretary's final determination under paragraph 
    (a) of this section is the final action of the Department concerning 
    the complaint and is subject to judicial review.
    
    (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e))
    
    
    Secs. 222.114-222.129  [Reserved]
    
    Subpart H--[Reserved]
    
    Subpart I--Facilities Assistance and Transfers Under Section 8008 
    of the Act
    
    
    Sec. 222.140  What definitions apply to this subpart?
    
        In addition to the terms referenced or defined in Sec. 222.2, the 
    following definitions apply to this subpart:
        Minimum school facilities means those school facilities for which 
    the Secretary may provide assistance under this part as follows:
        (1) The Secretary, after consultation with the State educational 
    agency and the local educational agency (LEA), considers these 
    facilities necessary to support an educational program--
        (i) For the membership of students residing on Federal property to 
    be served at normal capacity; and
        (ii) In accordance with applicable Federal and State laws and, if 
    necessary or appropriate, common practice in the State.
        (2) The term includes, but is not restricted to--
        (i) Classrooms and related facilities; and
        (ii) Machinery, utilities, and initial equipment, to the extent 
    that these are necessary or appropriate for school purposes.
        Providing assistance means constructing, leasing, renovating, 
    remodeling, rehabilitating, or otherwise providing minimum school 
    facilities.
    
    (Authority: 20 U.S.C. 7708)
    
    
    Sec. 222.141  For what types of projects may the Secretary provide 
    assistance under section 8008 of the Act?
    
        The types of projects for which the Secretary may provide 
    assistance under section 8008 of the Act during any given year include, 
    but are not restricted to, one or more of the following:
        (a)(1) Emergency repairs to existing facilities for which the 
    Secretary is responsible under section 8008.
        (2) As used in this section, the term ``emergency repairs'' means 
    those repairs necessary--
        (i) For the health and safety of persons using the facilities;
        (ii) For the removal of architectural barriers to the disabled; or
        (iii) For the prevention of further deterioration of the 
    facilities.
        (b) Renovation of facilities for which the Secretary is responsible 
    under section 8008 to meet the standards of minimum school facilities 
    in exchange for an LEA or another appropriate entity accepting transfer 
    of the Secretary's interest in them under Sec. 222.143.
        (c) Provision of temporary facilities on Federal property pending 
    emergency repairs.
        (d) Construction of replacement minimum school facilities when more 
    cost-effective than renovation and when the replacement facilities are 
    to be transferred to local ownership under Sec. 222.143.
    
    (Authority: 20 U.S.C. 7708)
    
    
    Sec. 222.142  What terms and conditions apply to minimum school 
    facilities operated under section 8008 by another agency?
    
        When minimum school facilities are provided under section 8008, the 
    Secretary may--
        (a) Arrange for the operation of the facilities by an agency other 
    than the Department;
        (b) Establish terms and conditions for the operation of the 
    facilities; and
        (c) Require the operating agency to submit assurances and enter 
    into other arrangements that the Secretary specifies.
    
    (Authority: 20 U.S.C. 7708)
    
    
    Sec. 222.143  What terms and conditions apply to the transfer of 
    minimum school facilities?
    
        When the Secretary transfers to an LEA or other appropriate entity 
    (transferee) facilities that have been used to carry out the purposes 
    of section 10 of Pub. L. 81-815 or section 8008, the Secretary 
    establishes appropriate terms and conditions for the transfer including 
    that it be--
        (a) Without charge; and
        (b) Consented to by the transferee.
    
    (Authority: 20 U.S.C. 7708) 
    
    [[Page 50796]]
    
    
    
    Secs. 222.144-222.149  [Reserved]
    
    Subpart J--Impact Aid Administrative Hearings and Judicial Review 
    Under Section 8011 of the Act
    
    
    Sec. 222.150  What is the scope of this subpart?
    
        (a) Except as provided in paragraph (b) of this section, the 
    regulations in this subpart govern all Impact Aid administrative 
    hearings under section 8011(a) of the Act and requests for 
    reconsideration.
        (b) Except as otherwise indicated in this part, the regulations in 
    this subpart do not govern the following administrative hearings:
        (1) Subpart G, Secs. 222.90-222.114 (Indian policies and procedures 
    tribal complaint and withholding hearings.
        (2) Subpart K, Sec. 222.165 (hearings concerning determinations 
    under section 8009 of the Act).
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.151   is an administrative hearing provided to a local 
    educational agency?
    
        (a) Any local educational agency (LEA) that is adversely affected 
    by the Secretary's (or the Secretary's delegatee's) action or failure 
    to act upon the LEA's application under the Act or Pub. L. 81-874 is 
    entitled to an administrative hearing in accordance with this subpart.
        (b) An applicant is entitled to an administrative hearing under 
    this subpart only if--
        (1) The applicant files a written request for an administrative 
    hearing within 60 days of its receipt of written notice of the adverse 
    action; and
        (2) The issues of fact or law specified in the hearing request are 
    material to the determination of the applicant's rights and are not 
    committed wholly to the discretion of the Secretary.
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.152  When may a local educational agency request 
    reconsideration of a determination?
    
        (a)(1) An LEA may request reconsideration of any determination made 
    by the Secretary (or the Secretary's delegatee) under the Act or Pub. 
    L. 81-874, either in addition to or instead of requesting an 
    administrative hearing under Sec. 222.151.
        (2) A request for reconsideration, or actual reconsideration by the 
    Secretary (or the Secretary's delegatee), does not extend the time 
    within which an applicant must file a request for an administrative 
    hearing under Sec. 222.151, unless the Secretary (or the Secretary's 
    delegatee) extends that time limit in writing.
        (b) The Secretary's consideration of a request for reconsideration 
    is not prejudiced by a pending request for an administrative hearing on 
    the same matter, or the fact that a matter has been scheduled for a 
    hearing. The Secretary (or the Secretary's delegatee) may, but is not 
    required to, postpone the administrative hearing due to a request for 
    reconsideration.
        (c) The Secretary may reconsider any determination under the Act or 
    Pub. L. 81-874 concerning a particular party unless the determination 
    has been the subject of an administrative hearing under this part with 
    respect to that party.
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.153  How must a local educational agency request an 
    administrative hearing?
    
        An applicant requesting a hearing in accordance with this subpart 
    must--
        (a)(1) If it mails the hearing request, address it to the 
    Secretary, c/o Director, Impact Aid Program, 600 Independence Ave., SW, 
    Portals 4200, Washington, DC 20202-6244; or
        (2) If it hand-delivers the hearing request, deliver it to the 
    Director, Impact Aid Program, Portals Building, Room 4200, 1250 
    Maryland Avenue, SW, Washington DC;
        (b) Clearly specify in its written hearing request the issues of 
    fact and law to be considered; and
        (c) Furnish a copy of its hearing request to its State educational 
    agency (SEA) (unless the applicant is an SEA).
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.154  How must written submissions under this subpart be filed?
    
        (a) All written submissions under this subpart must be filed by 
    hand-delivery, mail, or facsimile transmission. The Secretary 
    discourages the use of facsimile transmission for documents longer than 
    five pages.
        (b) If agreed upon by the parties, a party may serve a document 
    upon the other party or parties by facsimile transmission.
        (c) The filing date for a written submission under this subpart is 
    the date the document is--
        (1) Hand-delivered;
        (2) Mailed; or
        (3) Sent by facsimile transmission.
        (d) A party other than the Department filing by facsimile 
    transmission is responsible for confirming that a complete and legible 
    copy of the document was received by the Department, including by the 
    administrative law judge (ALJ).
        (e) If a document is filed by facsimile transmission, the Secretary 
    or ALJ, as applicable, may require the filing of a follow-up hard copy 
    by hand-delivery or by mail within a reasonable period of time.
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.155  When and where is an administrative hearing held?
    
        Administrative hearings under this subpart are held at the offices 
    of the Department in Washington, DC, at a time fixed by the ALJ, unless 
    the ALJ selects another place based upon the convenience of the 
    parties.
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.156  How is an administrative hearing conducted?
    
        Administrative hearings under this subpart are conducted as 
    follows:
        (a) The administrative hearing is conducted by an ALJ appointed 
    under 5 U.S.C. 3105, who issues rules of procedure that are proper and 
    not inconsistent with this subpart.
        (b) The parties may introduce all relevant evidence on the issues 
    stated in the applicant's request for hearing or on other issues 
    determined by the ALJ during the proceeding. The application in 
    question and all amendments and exhibits must be made part of the 
    hearing record.
        (c) Technical rules of evidence, including the Federal Rules of 
    Evidence, do not apply to hearings conducted under this subpart, but 
    the ALJ may apply rules designed to assure production of the most 
    credible evidence available, including allowing the cross-examination 
    of witnesses.
        (d) Each party may examine all documents and other evidence offered 
    or accepted for the record, and may have the opportunity to refute 
    facts and arguments advanced on either side of the issues.
        (e) A transcript must be made of the oral evidence unless the 
    parties agree otherwise.
        (f) Each party may be represented by counsel.
        (g) The hearing examiner is bound by all applicable statutes and 
    regulations and may neither waive them nor rule them invalid.
    
    (Authority: 5 U.S.C. 556 and 3105; 20 U.S.C. 7711(a))
    
    
    Sec. 222.157  What procedures apply for issuing or appealing an 
    administrative law judge's decision under section 8011(a) of the Act?
    
        (a) Decision. An ALJ must issue a decision under section 8011(a) as 
    follows:
        (1) Based upon the hearing record, the ALJ--
        (i) Makes written findings and an initial decision; or
        (ii) Makes recommended findings and a proposed decision, and 
    certifies the entire record to the Secretary for a final decision.
        (2) The ALJ mails to each party a copy of--
        (i) The written findings and initial decision; or
        (ii) The certified record, recommended findings, and proposed 
    decision.
        (3) An ALJ's initial decision constitutes the Secretary's final 
    decision 
    
    [[Page 50797]]
    without any further proceedings unless--
        (i) The applicant, within the time limits stated in paragraph 
    (c)(1) of this section, requests the Secretary to review the decision 
    and that request is granted; or
        (ii) The Secretary otherwise determines, within the time limits 
    stated in paragraph (c)(2) of this section, to review the initial 
    decision.
        (b) Administrative appeal of an initial decision. (1) The applicant 
    may, within 30 days of the date of the receipt of an initial decision, 
    request the Secretary to review that decision.
        (2) The Secretary may--
        (i) Grant or deny a timely request for review of an initial 
    decision; or
        (ii) Otherwise determine to review the decision, so long as that 
    determination is made within 45 days of the date of receipt of the 
    initial decision.
        (3) The Secretary mails to each party written notice of--
        (i) The Secretary's action granting or denying a request for review 
    of an initial decision; or
        (ii) The Secretary's determination to review an initial decision.
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.158  What procedures apply to the Secretary's review of an 
    initial decision or certified record?
    
        When the Secretary reviews an initial decision or certified record 
    (including the ALJ's proposed findings and recommended decision), the 
    Secretary--
        (a) Notifies the applicant in writing that it may file a written 
    statement or comments; and
        (b) Promptly gives to each party written notice of the Secretary's 
    final decision.
    
    (Authority: 20 U.S.C. 7711(a))
    
    
    Sec. 222.159  When and where does a party seek judicial review?
    
        If an LEA or a State that is aggrieved by the Secretary's final 
    decision following an administrative hearing proceeding under this 
    subpart wishes to seek judicial review, the LEA or State must, within 
    60 days after receiving notice of the Secretary's final decision, file 
    with the United States Court of Appeals for the circuit in which that 
    LEA or State is located a petition for review of the final agency 
    action, in accordance with section 8011(b) of the Act.
    
    (Authority: 20 U.S.C. 7711(b))
    
    Subpart K--Determinations Under Section 8009 of the Act
    
    
    Sec. 222.160  What are the scope and purpose of this subpart?
    
        (a) Scope. This subpart applies to determinations made by the 
    Secretary under section 8009 of the Act.
        (b) Purpose. The sole purpose of the regulations in this subpart is 
    to implement the provisions of section 8009. The definitions and 
    standards contained in this subpart apply only with respect to section 
    8009 and do not establish definitions and standards for any other 
    purpose.
    
    (Authority: 20 U.S.C. 7709)
    
    
    Sec. 222.161  How is State aid treated under section 8009 of the Act?
    
        (a) General rules. (1) A State may take into consideration payments 
    under sections 8002 and 8003(b) of the Act (including hold harmless 
    payments calculated under section 8003(e)) in allocating State aid if 
    that State has a State aid program that qualifies under Sec. 222.162, 
    except as follows:
        (i) Those payments may be taken into consideration for each 
    affected local educational agency (LEA) only in the proportion 
    described in Sec. 222.163.
        (ii) A State may not take into consideration that portion of an 
    LEA's payment that is generated by the portion of a weight in excess of 
    one under section 8003(a)(2)(B) of the Act (children residing on Indian 
    lands) or payments under section 8003(d) of the Act (children with 
    disabilities), section 8003(f) of the Act (heavily impacted LEAs) and 
    section 8003(g) of the Act (LEAs with high concentrations of children 
    with severe disabilities).
        (iii) A State may not take into consideration increases in payment 
    under the following subsections of section 3(d) of Pub. L. 81-874:
        (A) Section 3(d)(2)(B) (increase for heavily impacted LEAs).
        (B) Section 3(d)(2)(C) (increase for children with disabilities and 
    children with specific learning disabilities).
        (C) Section 3(d)(2)(D) (increase for children residing on Indian 
    lands).
        (D) Section 3(d)(3)(B)(ii) (increase for unusual geographical 
    factors).
        (2) No State aid program may qualify under this subpart if a court 
    of that State has determined by final order, not under appeal, that the 
    program fails to equalize expenditures for free public education among 
    LEAs within the State or otherwise violates law, and if the court's 
    order provides that the program is no longer in effect.
        (3) No State, whether or not it has an equalization program that 
    qualifies under Sec. 222.162, may, in allocating State aid, take into 
    consideration an LEA's eligibility for payments under the Act if that 
    LEA does not apply for and receive those payments.
        (4) Any State that takes into consideration payments under the Act 
    in accordance with the provisions of section 8009 in allocating State 
    aid to LEAs must reimburse any LEA for any amounts taken into 
    consideration for any fiscal year to the extent that the LEA did not in 
    fact receive payments in those amounts during that fiscal year.
        (5) A State may not take into consideration payments under the Act 
    or under Public Law 874 before the State's State aid program has been 
    certified by the Secretary.
        (b) Data for determinations. (1) Except as provided in paragraph 
    (b)(2) of this section, determinations under this subpart requiring the 
    submission of financial or school population data must be made on the 
    basis of final data for the second fiscal year preceding the fiscal 
    year for which the determination is made if substantially the same 
    program was then in effect.
        (2)(i) If the Secretary determines that the State has substantially 
    revised its State aid program, the Secretary may certify that program 
    for any fiscal year only if--
        (A) The Secretary determines, on the basis of projected data, that 
    the State's program will meet the disparity standard described in 
    Sec. 222.162 for the fiscal year for which the determination is made; 
    and
        (B) The State provides an assurance to the Secretary that, if final 
    data do not demonstrate that the State's program met that standard for 
    the fiscal year for which the determination is made, the State will pay 
    to each affected LEA the amount by which the State reduced State aid to 
    the LEA.
        (ii) Data projections submitted by a State must set forth the 
    assumptions upon which the data projections are founded, be accompanied 
    by an assurance as to their accuracy, and be adjusted by actual data 
    for the fiscal year of determination that must be submitted to the 
    Secretary as soon as these data are available.
        (c) Definitions. The following definitions apply to this subpart:
        (1) State aid means any contribution, no repayment for which is 
    expected, made by a State to or on behalf of LEAs within the State for 
    current expenditures for the provision of free public education.
        (2) Equalize expenditures means to meet the standard set forth in 
    Sec. 222.162.
        (3) Current expenditures means the total charges incurred for the 
    benefit of the school year in an elementary (including pre-
    kindergarten) or secondary school program. ``Current expenditures'' 
    does not include--
        (i) Expenditures for capital outlay;
        (ii) Expenditures for debt service for capital outlay;
        (iii) Expenditures from State sources for special cost 
    differentials of the type specified in Sec. 222.162(c)(2);
        (iv) Expenditures of revenues from local or intermediate sources 
    that are designated for special cost differentials of the type 
    specified in Sec. 222.162(c)(2);
        (v) Expenditures of funds received by the agency under sections 
    8002 and 8003(b) (including hold harmless payments calculated under 
    section 
    
    [[Page 50798]]
    8003(e)) or under Pub. L. 81-874 that are not taken into consideration 
    under the State aid program and exceed the proportion of those funds 
    that the State would be allowed to take into consideration under 
    Sec. 222.163; or
        (vi) Expenditures of funds received by the agency under Pub. L. 81-
    874 that were not taken into consideration under the State aid program 
    and exceed the proportion of funds the State was permitted to take into 
    consideration under that law.
        (4) Revenue means an addition to assets that does not increase any 
    liability, does not represent the recovery of an expenditure, does not 
    represent the cancellation of certain liabilities without a 
    corresponding increase in other liabilities or a decrease in assets, 
    and does not represent a contribution of fund capital in food service 
    or pupil activity funds. Furthermore, the term ``revenue'' includes 
    only revenue for current expenditures.
    
    (Authority: 20 U.S.C. 7709)
    
    
    Sec. 222.162  What disparity standard must a State meet in order to be 
    certified and how are disparities in current expenditures or revenues 
    per pupil measured?
    
        (a) Percentage disparity limitation. The Secretary will consider 
    that a State aid program equalizes expenditures if the disparity in the 
    amount of current expenditures or revenue per pupil for free public 
    education among LEAs in the State is no more than 25 percent for fiscal 
    years 1995, 1996, and 1997; and no more than 20 percent for fiscal 
    years 1998 and 1999. In determining the disparity percentage, the 
    Secretary shall disregard LEAs with per pupil expenditures or revenues 
    above the 95th percentile or below the 5th percentile of those 
    expenditures or revenues in the State. The method for calculating the 
    percentage of disparity in a State is set forth in the appendix to this 
    subpart.
        (b)(1) Weighted average disparity for different grade level groups. 
    If a State requests it, the Secretary will make separate disparity 
    computations for different groups of LEAs in the State that have 
    similar grade levels of instruction.
        (2) In those cases, the weighted average disparity for all groups, 
    based on the proportionate number of pupils in each group, may not be 
    more than the percentage provided in paragraph (a) of this section. The 
    method for calculating the weighted average disparity percentage is set 
    out in the appendix to this subpart.
        (c) Per pupil figure computations. In calculating the current 
    expenditures or revenue disparities under this section, computations of 
    per pupil figures are made on one of the following bases:
        (1) The per pupil amount of current expenditures or revenue for an 
    LEA is computed on the basis of the total number of pupils receiving 
    free public education in the schools of the agency. The total number of 
    pupils is determined in accordance with whatever standard measurement 
    of pupil count is used in the State.
        (2) If a State aid program uses ``weighted pupil,'' ``classroom,'' 
    ``instructional unit,'' or another designated measure of need in 
    determining allocations of State aid to take account of special cost 
    differentials, the computation of per pupil revenue or current 
    expenditures may be made on those bases. The two allowable categories 
    of special cost differentials are--
        (i) Those associated with pupils having special educational needs, 
    such as children with disabilities, economically disadvantaged 
    children, non-English speaking children, and gifted and talented 
    children; and
        (ii) Those associated with particular types of LEAs such as those 
    affected by geographical isolation, sparsity or density of population, 
    high cost of living, or special socioeconomic characteristics within 
    the area served by an LEA.
        (d) Revenues and current expenditures included in determinations. 
    All revenues or current expenditures must be included for each LEA in 
    the State in determining the percentage of disparity under paragraph 
    (a) of this section.
    
    (Authority: 20 U.S.C. 7709)
    
    
    Sec. 222.163  What proportion of Impact Aid funds may a State take into 
    consideration upon certification?
    
        (a) Provision of law. Section 8009(d)(1)(B) provides that, upon 
    certification by the Secretary, in allocating State aid a State may 
    consider as local resources funds received under sections 8002 and 
    8003(b) (including hold harmless payments calculated under section 
    8003(e)) and Pub. L. 81-874 only in proportion to the share that local 
    tax revenues covered under a State equalization program are of total 
    local tax revenues. Determinations of proportionality must be made on a 
    case-by-case basis for each LEA affected and not on the basis of a 
    general rule to be applied throughout a State.
    
    (Authority: 20 U.S.C. 7709)
    
        (b) Computation of proportion. (1) In computing the share that 
    local tax revenues covered under a State equalization program are of 
    total local tax revenues for an LEA with respect to a program 
    qualifying under Sec. 222.162, the proportion is obtained by dividing 
    the amount of local tax revenues covered under the equalization program 
    by the total local tax revenues attributable to current expenditures 
    for free public education within that LEA.
        (2) In cases where there are no local tax revenues for current 
    expenditures and the State provides all of those revenues on behalf of 
    the LEA, the State may consider up to 100 percent of the funds received 
    under the Act by that LEA in allocating State aid.
    
    (Authority: 20 U.S.C. 7709(d)(1)(B))
    
        (c) Application of proportion to Impact Aid payments. Except as 
    provided in Sec. 222.161(a)(1)(ii) and (iii), the proportion 
    established under this section (or a lesser proportion) for any LEA 
    receiving payments under sections 8002 and 8003(b) (including hold 
    harmless payments calculated under section 8003(e)) and Pub. L. 81-874 
    may be applied by a State to actual receipts of those payments or 
    payments under Pub. L. 81-874.
    
    (Authority: 20 U.S.C. 7709(d)(1)(B))
    
    
    Sec. 222.164  What procedures does the Secretary follow in making a 
    determination under section 8009?
    
        (a) Initiation. (1) A proceeding under this subpart leading to a 
    determination by the Secretary under section 8009 may be initiated--
        (i) By the State educational agency (SEA) or other appropriate 
    agency of the State;
        (ii) By an LEA; or
        (iii) By the Secretary, if the Secretary has reason to believe that 
    the State's action is in violation of section 8009.
        (2) Whenever a proceeding under this subpart is initiated, the 
    party initiating the proceeding shall give adequate notice to the State 
    and all LEAs in the State.
        (b) Submission. (1) A submission by a State or LEA under this 
    section must be made in the manner requested by the Secretary and must 
    contain the information and assurances as may be required by the 
    Secretary in order to reach a determination under section 8009 and this 
    subpart.
        (2)(i) A State in a submission shall--
        (A) Demonstrate how its State aid program comports with 
    Sec. 222.162; and
        (B) Demonstrate for each LEA receiving funds under the Act that the 
    proportion of those funds that will be taken into consideration 
    comports with Sec. 222.163.
        (ii) The submission must be received by the Secretary no later than 
    120 calendar days before the beginning of the State's fiscal year for 
    the year of the determination, and must include (except as provided in 
    Sec. 222.161(c)(2)) final second preceding fiscal year disparity data 
    enabling the Secretary to determine whether the standard in 
    Sec. 222.162 has been met. The submission is considered timely if 
    received by the Secretary on or before the filing deadline or if it 
    bears a U.S. Postal Service postmark dated on or before the filing 
    deadline. 
    
    [[Page 50799]]
    
        (3) An LEA in a submission must demonstrate whether the State aid 
    program comports with section 8009.
        (4) Whenever a proceeding is initiated under this subpart, the 
    Secretary may request from a State the data deemed necessary to make a 
    determination. A failure on the part of a State to comply with that 
    request within a reasonable period of time results in a summary 
    determination by the Secretary that the State aid program of that State 
    does not comport with the regulations in this subpart.
        (5) Before making a determination under section 8009, the Secretary 
    affords the State, and all LEAs in the State, an opportunity to present 
    their views.
        (c) Determinations. The Secretary reviews the participants' 
    submissions and any views presented at a predetermination hearing under 
    paragraph (b)(5) of this section, including views submitted during the 
    post-hearing comment period. Based upon this review, the Secretary 
    issues a written determination setting forth the reasons for the 
    determination in sufficient detail to enable the State or LEAs to 
    respond. The Secretary affords reasonable notice of a determination 
    under this subpart and the opportunity for a hearing to the State or 
    any LEA adversely affected by the determination.
    
    (Authority: 20 U.S.C. 7709)
    
        Note to Paragraph (b)(2) of this section: The U.S. Postal 
    Service does not uniformly provide a dated postmark. Before relying 
    on this method, an applicant should check with its local post 
    office.
    
    
    Sec. 222.165  What procedures does the Secretary follow after making a 
    determination under section 8009?
    
        (a) Request for hearing. (1) A State or LEA that is adversely 
    affected by a determination under section 8009 and this subpart and 
    that desires a hearing regarding that determination must submit a 
    written request for a hearing within 30 days of receipt of the 
    determination. The time within which a request must be filed may not be 
    extended unless the Secretary, or the Secretary's delegatee, extends 
    the time in writing at the time notice of the determination is given.
        (2) A request for a hearing in accordance with this section must 
    specify the issues of fact and law to be considered.
        (3) If an LEA requests a hearing, it must furnish a copy of the 
    request to the State. If a State requests a hearing, it must furnish a 
    copy of the request to all LEAs in the State.
        (b) Right to intervene. Any LEA or State that is adversely affected 
    by a determination shall have the right of intervention in the hearing.
        (c) Time and place of hearing. The hearing is held at a time and 
    place fixed by the Secretary or the Secretary's delegatee (with due 
    regard to the mutual convenience of the parties).
        (d) Counsel. In all proceedings under this section, all parties may 
    be represented by counsel.
        (e) Proceedings. The Secretary refers the matter in controversy to 
    an administrative law judge (ALJ) appointed under 5 U.S.C. 3105.
        (f) Filing requirements. (1) Any written submission under this 
    section must be filed by hand-delivery, mail, or facsimile 
    transmission. The Secretary discourages the use of facsimile 
    transmission for documents longer than five pages.
        (2) If agreed upon by the parties, service of a document may be 
    made upon the other party by facsimile transmission.
        (3) The filing date for a written submission under this section is 
    the date the document is--
        (i) Hand-delivered;
        (ii) Mailed; or
        (iii) Sent by facsimile transmission, followed by a mailed hard 
    copy.
        (4) A party filing by facsimile transmission is responsible for 
    confirming that a complete and legible copy of the document was 
    received by the Department.
        (g) Procedural rules. (1) If, in the opinion of the ALJ, no dispute 
    exists as to a material fact the resolution of which would be 
    materially assisted by oral testimony, the ALJ shall afford each party 
    to the proceeding an opportunity to present its case--
        (i) In whole or in part in writing; or
        (ii) In an informal conference after affording each party 
    sufficient notice of the issues to be considered.
        (2) With respect to hearings involving a dispute as to a material 
    fact the resolution of which would be materially assisted by oral 
    testimony, the ALJ shall afford the following procedures to each party:
        (i) Sufficient notice of the issues to be considered at the 
    hearing.
        (ii) An opportunity to make a record of the proceedings.
        (iii) An opportunity to present witnesses on the party's behalf.
        (iv) An opportunity to cross-examine other witnesses either orally 
    or through written interrogatories.
        (h) Decisions. The ALJ shall make an initial decision based upon 
    written findings, which shall be forwarded to the Secretary. The 
    Secretary may, by appropriate notification to the parties, determine to 
    review it or certify it as the final decision of the Secretary without 
    further proceedings. Written notice of the initial decision shall be 
    sent to all parties. In any case in which the Secretary modifies or 
    reverses the initial decision, a notice of that action shall be 
    accompanied by a written statement of the grounds for the reversal or 
    modification. Notice of the final decision of the Secretary is served 
    upon all parties to the hearing, the hearing panel and any LEA that may 
    be adversely affected.
    
    (Authority: 20 U.S.C. 7709 and 7711)
    
        (i) Corrective Action. (1) Within 30 days after a determination by 
    the Secretary that a State has been in violation of section 8009 unless 
    the determination is timely appealed by the State, the State shall 
    provide satisfactory written assurances that it will undertake 
    appropriate corrective action if necessary.
        (2) A State found by the Secretary to have been in violation of 
    section 8009 following a hearing shall provide, within 30 days after 
    disposal of the hearing request (such as by a final decision issued 
    under this subpart or withdrawal of the hearing request), satisfactory 
    assurances that it is taking corrective action, if necessary.
        (3) At any time during a hearing under this subpart, a State may 
    provide the Secretary appropriate assurances that it will undertake 
    corrective action if necessary. The Secretary or the ALJ, as 
    applicable, may stay the proceedings pending completion of corrective 
    action.
    
    (Authority: 20 U.S.C. 7709)
    
    
    Secs. 222.166-222.169  [Reserved]
    
    Appendix to Subpart K
    
    Determinations Under Section 8009 of the Act--Methods of 
    Calculations for Treatment of Impact Aid Payments Under State 
    Equalization Programs
    
        The following paragraphs describe the methods for making certain 
    calculations in conjunction with determinations made under the 
    regulations in this subpart. Except as otherwise provided in the 
    regulations, these methods are the only methods that may be used in 
    making these calculations.
        1. Determinations of disparity standard compliance under 
    Sec. 222.162(b)(1).
        (a) The determinations of disparity in current expenditures or 
    revenue per pupil are made by--
        (i) Ranking all LEAs having similar grade levels within the 
    State on the basis of current expenditures or revenue per pupil for 
    the second preceding fiscal year before the year of determination;
        (ii) Identifying those LEAs in each ranking that fall at the 
    95th and 5th percentiles of the total number of pupils in attendance 
    in the schools of those LEAs; and
        (iii) Subtracting the lower current expenditure or revenue per 
    pupil figure from the higher for those agencies identified in 
    paragraph (ii) and dividing the difference by the lower figure.
        Example: In State X, after ranking all LEAs organized on a grade 
    9-12 basis in order of the expenditures per pupil for the fiscal 
    year in question, it is ascertained by counting the number of pupils 
    in attendance in those agencies in ascending order of expenditure 
    that the 5th percentile of student population is reached at LEA A 
    with a per pupil expenditure of $820, and that the 95th percentile 
    of student population is reached at 
    
    [[Page 50800]]
    LEA B with a per pupil expenditure of $1,000. The percentage disparity 
    between the 95th and 5th percentile LEAs is 22 percent ($1,000-$820 
    = $180/$820). The program would meet the disparity standard for 
    fiscal years before fiscal year 1998 but would not for subsequent 
    years.
        (b) In cases under Sec. 222.162(b), where separate computations 
    are made for different groups of LEAs, the disparity percentage for 
    each group is obtained in the manner described in paragraph (a) 
    above. Then the weighted average disparity percentage for the State 
    as a whole is determined by--
        (i) Multiplying the disparity percentage for each group by the 
    total number of pupils receiving free public education in the 
    schools in that group;
        (ii) Summing the figures obtained in paragraph (b)(i); and
        (iii) Dividing the sum obtained in paragraph (b)(ii) by the 
    total number of pupils for all the groups.
    
                                     Example                                
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
    Group 1 (grades 1-6), 80,000 pupils x 18.00%=..................   14,400
    Group 2 (grades 7-12), 100,000 pupils x 22.00%=................   22,000
    Group 3 (grades 1-12), 20,000 pupils x 35.00%=.................    7,000
                                                                    --------
        Total 200,000 pupils.......................................   43,400
        43,400/200,000=21.70% Disparity                                     
    ------------------------------------------------------------------------
    
        2. Determinations under Sec. 222.163(b) as to maximum proportion 
    of payments under the Act that may be taken into consideration by a 
    State under an equalization program. The proportion that local tax 
    revenues covered under a State equalization program are of total 
    local tax revenues for a particular LEA shall be obtained by 
    dividing: (a) The amount of local tax revenues covered under the 
    equalization program by (b) the total local tax revenues 
    attributable to current expenditures within the LEA. Local revenues 
    that can be excluded from the proportion computation are those 
    received from local non-tax sources such as interest, bake sales, 
    gifts, donations, and in-kind contributions.
    
    Examples
    
        Example 1. State A has an equalization program under which each 
    LEA is guaranteed $900 per pupil less the LEA contribution based on 
    a uniform tax levy. The LEA contribution from the uniform tax levy 
    is considered under the equalization program. LEA X contributes the 
    proceeds of the uniform tax levy, $700 per pupil, and the State 
    contributes the $200 difference. No other local tax revenues are 
    applied to current expenditures for education by LEA X. The 
    percentage of funds under the Act that may be taken into 
    consideration by State A for LEA X is 100 percent ($700/$700). If 
    LEA X receives $100 per pupil in payments under the Act, $100 per 
    pupil may be taken into consideration by State A in determining LEA 
    X's relative financial resources and needs under the program. LEA X 
    is regarded as contributing $800 and State A would now contribute 
    the $100 difference.
        Example 2. The initial facts are the same as in Example 1, 
    except that LEA X, under a permissible additional levy outside the 
    equalization program, raises an additional $100 per pupil not 
    covered under the equalization program. The permissible levy is not 
    included in local tax revenues covered under the equalization 
    program but it is included in total local tax revenues. The 
    percentage of payments under the Act that may be taken into 
    consideration is 87.5 percent ($700/$800). If LEA X receives $100 
    per pupil in payments under the Act, $87.50 per pupil may be taken 
    into consideration. LEA X is now regarded as contributing $787.50 
    per pupil under the program and State A would now contribute $112.50 
    per pupil as the difference.
        Example 3. State B has an equalization program under which each 
    LEA is guaranteed $900 per pupil for contributing the equivalent of 
    a two mill tax levy. LEA X contributes $700 per pupil from a two 
    mill tax levy and an additional $500 per pupil from local interest, 
    bake sales, in-kind contributions, and other non-tax local sources. 
    The percentage of funds under the Act that may be taken into 
    consideration by State A for LEA X is 100 percent ($700/$700). The 
    local revenue received from interest, bake sales, in-kind 
    contributions and other non-tax local revenues are excluded from the 
    computation since they are from non-tax sources. If LEA X receives 
    $100 per pupil in payments under the Act, $100 per pupil may be 
    taken into consideration by State A in determining LEA X's relative 
    financial resources and needs under the program. LEA X is regarded 
    as contributing $800 and State A would now contribute the $100 
    difference.
        Example 4. State C has an equalization program in which each 
    participating LEA is guaranteed a certain per pupil revenue at 
    various levels of tax rates. For an eight mill rate the guarantee is 
    $500, for nine mills $550, for 10 mills $600. LEA X levies a 10 mill 
    rate and realizes $300 per pupil. Furthermore, it levies an 
    additional 10 mills under a local leeway option realizing another 
    $300 per pupil. The $300 proceeds of the local leeway option are not 
    included in local tax revenues covered under the equalization 
    program, but they are included in total local tax revenues. The 
    percentage of payments under the Act that may be taken into 
    consideration is 50 percent ($300/$600). If LEA X receives $100 per 
    pupil in payments under the Act, $50 per pupil may be taken into 
    consideration. LEA X may be regarded as contributing $350 per pupil 
    under the program and State B would now contribute $250 as the 
    difference.
        Example 5. The initial facts are the same as in Example 4, 
    except that LEA Y in State C, while taxing at the same 10 mill rate 
    for both the equalization program and leeway allowance as LEA X, 
    realizes $550 per pupil for each tax. As with LEA X, the percentage 
    of payments under the Act that may be taken into consideration for 
    LEA Y is 50 percent (550/1100). If LEA Y receives $150 per pupil in 
    payments under the Act, then up to $75 per pupil normally could be 
    taken into consideration. However, since LEA Y would have received 
    only $50 per pupil in State aid, only $50 of the allowable $75 could 
    be taken into consideration. Thus, LEA Z may be regarded as 
    contributing $600 per pupil under the program and State B would not 
    contribute any State aid.
    
    [FR Doc. 95-24216 Filed 9-28-95; 8:45 am]
    BILLING CODE 4000-01-P
    
    

Document Information

Effective Date:
10/30/1995
Published:
09/29/1995
Department:
Education Department
Entry Type:
Rule
Action:
Final regulations.
Document Number:
95-24216
Dates:
These regulations take effect October 30, 1995.
Pages:
50774-50800 (27 pages)
RINs:
1810-AA80
PDF File:
95-24216.pdf
CFR: (180)
34 CFR 222.62(a)
34 CFR 222.72(a)(1)
34 CFR 222.39(a)(2)(i)
34 CFR 222.62(b)
34 CFR 222.39(b)(1))
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