[Federal Register Volume 64, Number 151 (Friday, August 6, 1999)]
[Rules and Regulations]
[Pages 42837-42839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20156]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION

34 CFR Part 611

RIN 1840-AC67


Teacher Quality Enhancement Grants Program

AGENCY: Office of Postsecondary Education, Department of Education

ACTION: Final regulations

-----------------------------------------------------------------------

SUMMARY: The Assistant Secretary for Postsecondary Education (Assistant 
Secretary) issues regulations that apply the eight percent (8%) 
indirect cost limitation for the Department's educational training 
grants to all funds that States and local educational agencies receive 
under the Teacher Quality Enhancement Grants Program for States and 
Partnerships authorized by sections 201-205 of the Higher Education Act 
(HEA), as amended by the Higher Education Amendments of 1998. These 
regulations would ensure that the limited funding available to support 
program activities is concentrated on direct support for improvements 
in teacher licensing, certification, preparation, and recruitment, 
rather than for recipient ``overhead.''

DATES: These regulations are effective on September 7, 1999.

FOR FURTHER INFORMATION CONTACT: Dr. Louis Venuto, Higher Education 
Programs, Office of Postsecondary Education, 400 Maryland Ave. SW., 
Portals Building, Room 6234, Washington, D.C. 20202-5131: Telephone: 
(202) 708-8847, or by FAX to: (202) 260-9272. Inquiries also may be 
sent by e-mail to: Louis__V[email protected]. If you use a 
telecommunications device for the deaf (TDD), you may call the Federal 
Information Relay Service (FIRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternate format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in the preceding 
paragraph.

SUPPLEMENTARY INFORMATION:

Background

    The Nation faces an immediate need for significant improvements in 
teacher licensure, certification, preparation, and recruitment. 
America's schools will need to hire 2.2 million teachers over the next 
decade, more than half of whom will be first-time teachers. As 
classrooms grow more challenging and diverse, these teachers will need 
to be well prepared to teach all students to the highest standards. 
Contemporary classrooms and social conditions confront teachers with a 
range of complex challenges previously unknown in the profession. New 
education goals and tougher standards, more rigorous assessments, site-
based management, greater interest in parental involvement, the 
continuing importance of safety and discipline, and expanded use of 
technology increase the knowledge and skills that teaching demands.
    On October 8, 1998, the President signed into law the Higher 
Education Amendments of 1998 (Pub. L. 105-244). Title II of this law 
addresses the Nation's need to ensure that new teachers enter the 
classroom prepared to teach all students to high standards by 
authorizing, as Title II of the HEA, Teacher Quality Enhancement Grants 
for States and Partnerships.
    The new Teacher Quality Enhancement Grants Program consists of 
three different competitive grant programs: (1) The State Grants 
Program, which is designed to help States promote a broad array of 
improvements in teacher licensure, certification, preparation and 
recruitment, (2) the Partnership Grants for Improving Teacher 
Preparation Program, which is designed to have schools of education, 
schools of arts and sciences, high-need local educational agencies 
(LEAs) and others work together to ensure that new teachers have the 
content knowledge and skills their students need of them when they 
enter the classroom, and (3) the Teacher Recruitment Program, which is 
designed to help schools and school districts with severe teacher 
shortages to secure the high-quality teachers that they need. For 
Fiscal Year 1999, Congress appropriated $75 million for grants to 
States and partnerships to implement activities under these programs.
    These three programs are designed to increase student achievement 
by implementing comprehensive approaches to improving teacher quality. 
They collectively provide an historic opportunity to make positive 
change in the recruitment, preparation, licensing, and on-going support 
of teachers in America. As such, the success of these programs is 
critical to the Nation's ability to succeed in increasing student 
achievement for all students. However, to achieve success those awarded 
Teacher Quality Enhancement Grants must ensure that they focus their 
grant funds on costs that are directly associated with securing needed 
improvements in teaching and the teaching profession. For this reason, 
on May 19, 1999, the Assistant Secretary published a Notice of Proposed 
Rulemaking (NPRM) for this program in the Federal Register (64 FR 
27403) that proposed a limit of eight percent (8%) on the indirect cost 
rate that States and LEAs receiving Teacher Quality Program funds could 
use to pay for their overhead and other expenses that they could charge 
as ``indirect costs.'' This eight-percent rate is the same maximum rate 
that the Department, under 34 CFR 75.562(a), now permits institutions 
of higher education (IHEs) and nonprofit agencies to use in charging 
indirect costs to education training grants. As the May 18, 1999 NPRM 
explained, by establishing this maximum eight-percent indirect cost for 
States and LEAs, these recipients will have the same limitation on 
their indirect costs as do those IHEs and nonprofit organizations that 
receive funds awarded under the programs' initial competitions. See the 
Notice Inviting Applications for New Awards and Final Procedures and 
Requirements for FY 1999 Competitions Under the Teacher Quality 
Enhancement Grant Programs, 64 FR 6139, 6145-46 (February 8, 1999). 
Therefore, this regulation will have all

[[Page 42838]]

recipients of program funds subject to the same maximum indirect cost 
rate.
    The NPRM recognized that, absent a limitation of this kind, 
Secs. 75.560-75.564 and 80.22 of the Education Department's General 
Administrative Regulations (EDGAR), which incorporate Federal cost 
principles developed by the Office of Management and Budget (OMB), 
permit grantees to claim these costs. However, it also explained that 
the best data available to the Department indicate that over 20 States 
have indirect cost rates of over 15 percent; two States have an 
indirect cost rates of 34 percent. Absent the establishment, through 
program regulations, of a limitation on recipient indirect cost rates, 
States with these indirect cost rates that are awarded State or Teacher 
Recruitment Program grants could devote 15 percent or more of their 
grant awards to support their overall overhead expenses and other 
indirect costs rather than the direct costs of improving teacher 
quality.
    The Secretary continues to believe that allowing States, LEAs, and 
other Teacher Quality Enhancement grant recipients to use program funds 
to compensate themselves for these very high general overhead and 
related expenses is inconsistent with the vital purpose of the programs 
and the expectations that Congress and the Nation have for their 
success. Accordingly, for reasons explained more fully in the NPRM, 
given (1) the pivotal significance of the Teacher Quality Enhancement 
Grant programs, (2) the national need that these programs have a 
maximum impact on the quality and quantity of highly-qualified new 
teachers, and (3) the fact that these programs are competitive, the 
Secretary issues 34 CFR 611.41 (renumbered from proposed Sec. 611.30 in 
the NPRM). Section 611.41 establishes a maximum indirect cost rate that 
a State or LEA receiving funds under any of the Teacher Quality 
Enhancement Grant Programs may use in charging program funds as 
indirect costs. Under this regulation, a State or LEA may charge 
Teacher Quality Enhancement Grants Program funds for indirect costs at 
a rate that is limited to eight percent or its negotiated rate, 
whichever is less.
    Section 611.41 will apply to any funding that States and LEAs 
receive under the three Teacher Quality Enhancement Grant programs, 
both under the initial and any subsequent program. As explained above, 
the Department previously established this limitation for IHEs and 
nonprofit organizations that receive program funds awarded in the 
initial 1999 grant competitions. In proposed regulations that the 
Secretary will develop to govern future competitions under the three 
Teacher Quality Enhancement Grant programs, the Secretary intends to 
propose that this eight-percent limitation for IHEs and nonprofit 
organizations apply to future competitions as well. This proposal, if 
finalized, would make the eight-percent maximum indirect cost rate 
applicable to all grant funds awarded under all grant competitions held 
under these programs, regardless of the recipient.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM, one party 
submitted comments on the proposed regulation. An analysis of the 
comment and of the changes in the regulations since publication of the 
NPRM follows.
    Comment: The commenter noted that the cost principles in OMB 
Circular A-87, which govern Federal grants to State and local 
governments, authorize grantees to recover indirect costs that are 
otherwise allowable. The commenter, a State official, acknowledged that 
the proposed rule for the Teacher Quality programs would itself have 
minimal impact on his state. However, the commenter expressed concern 
about what appeared to be a trend on the part of Federal programs to 
cap administrative costs, and thus create an ``unfunded mandate.''
    Discussion: The three new Teacher Quality Enhancement Grant 
programs offer an opportunity to improve teacher quality in America by 
effectively addressing the immediate need for significant improvements 
in teacher licensure, certification, preparation, and recruitment. 
However, success will depend upon how well we use the resources that 
Congress provides to make sustained and meaningful improvements in 
teacher licensure, certification, preparation, and recruitment. For 
fiscal year 1999, Congress appropriated $75 million for these three 
component programs. If these funds, and funds that Congress will 
appropriate for use in future years, are to achieve their purposes, we 
need to ensure that they are used as effectively as possible. To do so, 
it is necessary to place a reasonable limitation on the amount of 
program funds that Title II grant recipients may use to reimburse 
themselves for the ``indirect costs'' of program activities.
    Doing so does not create, as the commenter suggests, an unfunded 
mandate. Rather, Sec. 611.41 strikes a reasonable balance between the 
need to focus as much funding for the Teacher Quality Enhancement Grant 
programs as possible on direct services to improve teacher licensure, 
certification, preparation, and recruitment, and the reality that, to 
do so, recipients will encounter some indirect costs. In this regard, 
the Secretary continues to believe that States and LEAs receiving 
Teacher Quality Enhancement Grant funds do not need to apply high 
general indirect cost rates in order to fairly compensate themselves 
for the overhead and other indirect costs associated with activities 
they will conduct.
    Moreover, because these programs are competitive, States and LEAs 
(as well as IHEs and nonprofit agencies) that believe that they need 
additional indirect costs to implement these needed grant activities 
simply need not apply or accept grant awards. Therefore, this 
regulation does not impose any non-reimbursed indirect costs on 
unwilling recipients, and so does not establish an unfunded mandate.
    The Department has no plans to apply this limitation on State and 
LEA indirect cost rates to other grant programs. However, any decision 
to propose doing so would come only after the Department weighs State 
and LEA interests in charging indirect costs authorized in both EDGAR 
regulations and OMB cost principles against the Nation's need to 
maximize the amount of grant funds supporting direct program services. 
In weighing these relative interests, one consideration must be whether 
a proposal to limit indirect cost rates can be expected to discourage 
submission of high-quality applications. In this regard, we note that 
the Department announced in the application packages used for the 
initial Teacher Quality Enhancement grant competitions its intent to 
propose the eight-percent limitation on State and LEA indirect cost 
rates. Nonetheless, 40 States applied for the State Program grants, and 
large numbers of LEAs are included as partners in the 220 partnerships 
that applied for the Partnership Program grants. Also relevant here is 
the fact that no State applicant for 1999 grant competitions requested 
an indirect cost reimbursement in excess of eight percent.
    State and Teacher Recruitment grant awards have yet to be 
announced. However, the Secretary is pleased with the number of high-
quality applications, and believes that this outpouring of interest in 
the new Teacher Quality Enhancement Grants Program demonstrates that 
the limitation on indirect costs has not discouraged high-quality 
applications for these important awards.
    Change: None.

[[Page 42839]]

Goals 2000: Educate America Act

    The Goals 2000: Educate America Act (Goals 2000) focuses the 
Nation's education reform efforts on the eight National Education Goals 
and provides a framework for meeting them. Goals 2000 promotes new 
partnerships to strengthen schools and expands the Department's 
capacities for helping communities to exchange ideas and obtain 
information needed to achieve the goals.
    These regulations address the National Education Goal that the 
Nation's teaching force will have the content knowledge and teaching 
skills needed to instruct all American students for the next century.

Paperwork Reduction Act of 1995

    These regulations do not contain any information collection 
requirements.

Intergovernmental Review

    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
Order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document is intended to provide early notification of our 
specific plans and actions for this program.

Assessment of Educational Impact

    In the NPRM we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Electronic Access to This Document

    You may review this document, as well as all other Department of 
Education documents published in the Federal Register, in text or 
portable document format (PDF) on the World Wide Web at either of the 
following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html

To use the PDF you must have the Adobe Acrobat Reader Program with 
Search, which is available free at either of the previous sites. If you 
have questions about using the PDF, call the U.S. Government Printing 
Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC 
area at (202) 512-1530.

    Note: The official version of the document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://
www.access.gpo.gov/nara/index.html

(Catalog of Federal Domestic Assistance Number 84.336: Teacher 
Quality Enhancement Grants Program)

List of Subjects in 34 CFR Part 611

    Colleges and universities, Elementary and secondary education, 
Grant programs--education.

    Program Authority: 20 U.S.C. 1021 et seq.

    Dated: August 2, 1999.
Claudio F. Prieto,
Acting Assistant Secretary for Postsecondary Education.

    For the reasons discussed in the preamble, the Secretary amends 
Chapter VI of title 34 of the Code of Federal Regulations by adding a 
new part 611 to read as follows:

PART 611--TEACHER QUALITY ENHANCEMENT GRANTS PROGRAM

Sec.

Subpart A-D

Subpart E--Other Grant Conditions

611.41  What is the maximum indirect cost rate for States and local 
educational agencies?

    Authority: 20 U.S.C. 1021 et seq., unless otherwise noted.

Subpart A-D--[Reserved]

Subpart E--Other Grant Conditions


Sec. 611.41  What is the maximum indirect cost rate for States and 
local educational agencies?

    Notwithstanding 34 CFR 75.560-75.562 and 34 CFR 80.22, the maximum 
indirect cost rate that a State or local educational agency receiving 
funding under the Teacher Quality Enhancement Grants Program may use to 
charge indirect costs to these funds is the lesser of--
    (a) The rate established by the negotiated indirect cost agreement; 
or
    (b) Eight percent.

(Authority: 20 U.S.C. 1021 et seq.)

[FR Doc. 99-20156 Filed 8-5-99; 8:45 am]
BILLING CODE 4000-01-P