[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]




[[Page 50773]]

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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and Public Law 81-815, which were repealed when title VIII of the 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 

[[Page 50775]]
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 

[[Page 50776]]
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 

[[Page 50777]]
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. 

[[Page 50778]]


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