Provides for state and local flexibility, under specified conditions, to: (1) exclude from AYP and academic assessments the performance of certain limited English proficient students; (2) include in favorable AYP graduation rates certain students who require extra time to graduate due to exceptional circumstances or disability; (3) modify academic content and achievement standards in the individual education plans of students with disabilities; (4) develop assessments locally and use multiple assessments; and (5) have alternative qualification requirements for special education teachers and rural teachers.

Subjects social studies teachers to ESEA competence requirements. Treats teacher competence in general science or social sciences as competence in those subjects' subdisciplines.

Directs the Comptroller General to study the adequacy of ESEA school improvement funds.

Allows states, which meet certain requirements, to measure AYP using individual growth models measuring individual student progress from grade to grade.

Requires that each school be given a grade based on the percentage of AYP factors it has attained. Gives grade A schools greater flexibility in the use of school improvement funds and states and LEAs greater flexibility in choosing the ESEA intervention they consider appropriate for lower-graded schools that fail to make AYP for two years.

Requires schools to provide parents with student progress report cards showing the school's AYP grade. Requires states to include their performance on the National Assessment of Educational Progress on schoolwide and statewide progress report cards.