[Federal Register Volume 64, Number 245 (Wednesday, December 22, 1999)]
[Rules and Regulations]
[Pages 71964-71972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33119]



[[Page 71963]]

_______________________________________________________________________

Part V

Department of Education
_______________________________________________________________________



34 CFR Part 76



State-administered Programs; Final Rule

  Federal Register / Vol. 64, No. 245 / Wednesday, December 22, 1999 / 
Rules and Regulations  

[[Page 71964]]



DEPARTMENT OF EDUCATION

34 CFR Part 76


State-administered Programs

AGENCY: Office of Elementary and Secondary Education, Department of 
Education.

ACTION: Final regulations.

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

SUMMARY: The Secretary amends the Education Department General 
Administrative Regulations (EDGAR) governing State-administered 
programs. These final regulations are necessary to implement a recent 
statutory change that affects all elementary and secondary education 
programs administered by the United States Department of Education 
(Department) under which the Secretary allocates funds to States on a 
formula basis. The regulations will ensure that charter schools opening 
for the first time or significantly expanding their enrollment receive 
the funds for which they are eligible under these programs.

DATES: These regulations are effective January 21, 2000.

FOR FURTHER INFORMATION CONTACT: Leslie Hankerson, U.S. Department of 
Education, 400 Maryland Avenue, SW., room 3C120, Washington, DC 20202-
6140. Telephone: (202) 205-8524. 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 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in the preceding 
paragraph.

SUPPLEMENTARY INFORMATION: On May 18, 1999, the Secretary published in 
the Federal Register (64 FR 27152) a notice of proposed rulemaking 
(NPRM) proposing to revise sections in EDGAR governing State-
administered programs. These proposed amendments were designed to 
ensure that charter schools opening for the first time or significantly 
expanding their enrollment receive the funds for which they are 
eligible under these programs.
    Prior to publishing the NPRM, the Department took a number of steps 
to consult with State and local officials regarding the statutory 
provision that these final regulations implement, and the specific 
measures the Secretary proposed to undertake to assist States and 
localities in meeting their obligations under it. In December 1998, the 
Department sent two letters to chief State school officers informing 
them of changes to the Public Charter Schools Program (PCSP) as a 
result of passage of the Charter School Expansion Act of 1998 (Act). 
The second letter specifically highlighted the requirement in section 
10306 of the Act that the Secretary and States take measures to ensure 
that charter schools receive the Federal-to-State formula funds for 
which they are eligible within five months of opening for the first 
time or expanding their enrollment. In March 1999, Department officials 
discussed the new provision and our plans for implementing it with 
State and local officials, as well as charter school operators and 
developers, at our national conference on charter schools.
    Since publication of the NPRM, we have consulted with State 
officials through an SEA chat room on the Department's internet web 
site, and at several meetings, including two national Title I meetings. 
In addition, we sent two letters to chief State school officers and 
State program directors specifically requesting comments on the NPRM.
    In the preamble to the NPRM, the Secretary discussed on pages 27152 
and 27153 the major provisions in the proposed regulations. These 
provisions would amend Part 76 of EDGAR by redesignating subpart H as 
subpart I, and adding a new subpart H. The proposed provisions included 
the following:
     For covered programs in which States and local educational 
agencies (LEAs) allocate funds by formula, a requirement that States 
and LEAs implement procedures that ensure that each charter school 
opening for the first time or significantly expanding its enrollment on 
or before November 1 of an academic year receives the full amount of 
funds for which it is eligible within five months of the date the 
charter school opens or significantly expands its enrollment.
     For each charter school opening or significantly expanding 
its enrollment after November 1 but before February 1 of an academic 
year, a requirement that States and LEAs implement procedures that 
ensure that the charter school receives at least a pro rata portion of 
the funds for which the charter school is eligible within five months 
of the date the charter school opens or significantly expands its 
enrollment.
     For each charter school opening or significantly expanding 
its enrollment on or after February 1, a provision permitting, but not 
requiring, States and LEAs to implement procedures to provide the 
charter school with a pro rata portion of the funds for which the 
charter school is eligible under a covered program.
     For covered programs in which States and LEAs award funds 
through a competitive process, a requirement that States and LEAs 
implement procedures that ensure that each eligible charter school 
scheduled to open during the academic year has a full and fair 
opportunity to compete to participate in the program.
     A general prohibition against States and LEAs relying on 
enrollment or eligibility data from a prior year in determining a 
charter school's eligibility to receive funds under a covered program 
during an academic year in which the charter school opens for the first 
time or significantly expands its enrollment, even if allocations to 
other LEAs or public schools are based on a prior year's data.
     An exemption from the proposed regulations for SEAs and 
LEAs that do not allocate funds by formula or hold competitions among 
eligible applicants under a covered program.
    These final regulations contain several significant changes from 
the NPRM. These changes are fully explained in the ``Analysis of 
Comments and Changes'' attached as an appendix to these final 
regulations. The changes pertain to the meaning of the term significant 
expansion of enrollment; the time period within which SEAs and LEAs are 
required to make allocations to charter schools that open or expand 
between November 1 and February 1; the entities that can provide the 
required 120-day notice to an SEA or LEA; and the penalty for a charter 
school's failure to comply with the 120-day notice requirement.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM, 14 parties 
submitted comments on the proposed regulations. An analysis of the 
comments and of the changes in the regulations since publication of the 
NPRM is published as an appendix at the end of these final regulations.
    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. Generally, we do 
not address technical and other minor changes.

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 does not require you to respond 
to a collection of information unless it displays a valid OMB control 
number. We display the valid OMB control number assigned to the 
collections of information in these final regulations at the end of the 
affected sections of the regulations.

[[Page 71965]]

Intergovernmental Review

    Some of the programs that are affected by these final regulations 
are subject to the requirements of Executive Order 12372 and the 
regulations in 34 CFR Part 79. The objective of the Executive order is 
to foster an intergovernmental partnership and a strengthened 
federalism by relying on processes developed by State and local 
governments for coordination and review of proposed Federal financial 
assistance.
    In accordance with this order, we intend this document to provide 
early notification of the Department's specific plans and actions for 
these programs.

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 on 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 view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet 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 this 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 does not apply.)

List of Subjects in 34 CFR Part 76

    Administrative practice and procedure, Compliance, Eligibility, 
Grant administration, Reporting and recordkeeping requirements.

    Dated: December 16, 1999.
Richard W. Riley,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary amends 
part 76 of title 34 of the Code of Federal Regulations as follows:

PART 76--STATE-ADMINISTERED PROGRAMS

    1. The authority citation for part 76 is revised to read as 
follows:

    Authority: 20 U.S.C. 1221e-3, 3474, 6511(a), and 8065a, unless 
otherwise noted.

    2. Subpart H of part 76 is redesignated as subpart I.
    3. A new subpart H is added to part 76 to read as follows:

Subpart H--How Does a State or Local Educational Agency Allocate 
Funds to Charter Schools?

General

76.785  What is the purpose of this subpart?
76.786  What entities are governed by this subpart?
76.787  What definitions apply to this subpart?

Responsibilities for Notice and Information

76.788  What are a charter school LEA's responsibilities under this 
subpart?
76.789  What are an SEA's responsibilities under this subpart?

Allocation of Funds by State Educational Agencies

76.791  On what basis does an SEA determine whether a charter school 
LEA that opens or significantly expands its enrollment is eligible 
to receive funds under a covered program?
76.792  How does an SEA allocate funds to eligible charter school 
LEAs under a covered program in which the SEA awards subgrants on a 
formula basis?
76.793  When is an SEA required to allocate funds to a charter 
school LEA under this subpart?
76.794  How does an SEA allocate funds to charter school LEAs under 
a covered program in which the SEA awards subgrants on a 
discretionary basis?

Adjustments

76.796  What are the consequences of an SEA allocating more or fewer 
funds to a charter school LEA under a covered program than the 
amount for which the charter school LEA is eligible when the charter 
school LEA actually opens or significantly expands its enrollment?
76.797  When is an SEA required to make adjustments to allocations 
under this subpart?

Applicability of This Subpart to Local Educational Agencies

76.799  Do the requirements in this subpart apply to LEAs?

Subpart H--How Does a State or Local Educational Agency Allocate 
Funds to Charter Schools?

General


Sec. 76.785  What is the purpose of this subpart?

    The regulations in this subpart implement section 10306 of the 
Elementary and Secondary Education Act of 1965 (ESEA), which requires 
States to take measures to ensure that each charter school in the State 
receives the funds for which it is eligible under a covered program 
during its first year of operation and during subsequent years in which 
the charter school expands its enrollment.

(Authority: 20 U.S.C. 8065a)


Sec. 76.786  What entities are governed by this subpart?

    The regulations in this subpart apply to--
    (a) State educational agencies (SEAs) and local educational 
agencies (LEAs) that fund charter schools under a covered program, 
including SEAs and LEAs located in States that do not participate in 
the Department's Public Charter Schools Program;
    (b) State agencies that are not SEAs, if they are responsible for 
administering a covered program. State agencies that are not SEAs must 
comply with the provisions in this subpart that are applicable to SEAs; 
and
    (c) Charter schools that are scheduled to open or significantly 
expand their enrollment during the academic year and wish to 
participate in a covered program.

(Authority: 20 U.S.C. 8065a)


Sec. 76.787  What definitions apply to this subpart?

    For purposes of this subpart--
    Academic year means the regular school year (as defined by State 
law, policy, or practice) and for which the State allocates funds under 
a covered program.
    Charter school has the same meaning as provided in title X, part C 
of the ESEA.
    Charter school LEA means a charter school that is treated as a 
local educational agency for purposes of the applicable covered 
program.
    Covered program means an elementary or secondary education program 
administered by the Department under which the Secretary allocates 
funds to States on a formula basis, except that the term does not 
include a program or portion of a program under which an SEA awards 
subgrants on a discretionary, noncompetitive basis.

[[Page 71966]]

    Local educational agency has the same meaning for each covered 
program as provided in the authorizing statute for the program.
    Significant expansion of enrollment means a substantial increase in 
the number of students attending a charter school due to a significant 
event that is unlikely to occur on a regular basis, such as the 
addition of one or more grades or educational programs in major 
curriculum areas. The term also includes any other expansion of 
enrollment that the SEA determines to be significant.

(Authority: 20 U.S.C. 8065a)

Reponsibilities for Notice and Information


Sec. 76.788  What are a charter school LEA's responsibilities under 
this subpart?

    (a) Notice. At least 120 days before the date a charter school LEA 
is scheduled to open or significantly expand its enrollment, the 
charter school LEA or its authorized public chartering agency must 
provide its SEA with written notification of that date.
    (b) Information. (1) In order to receive funds, a charter school 
LEA must provide to the SEA any available data or information that the 
SEA may reasonably require to assist the SEA in estimating the amount 
of funds the charter school LEA may be eligible to receive under a 
covered program.
    (2)(i) Once a charter school LEA has opened or significantly 
expanded its enrollment, the charter school LEA must provide actual 
enrollment and eligibility data to the SEA at a time the SEA may 
reasonably require.
    (ii) An SEA is not required to provide funds to a charter school 
LEA until the charter school LEA provides the SEA with the required 
actual enrollment and eligibility data.
    (c) Compliance. Except as provided in Sec. 76.791(a), or the 
authorizing statute or implementing regulations for the applicable 
covered program, a charter school LEA must establish its eligibility 
and comply with all applicable program requirements on the same basis 
as other LEAs.

(Approved by the Office of Management and Budget under control 
number 1810-0623)

(Authority: 20 U.S.C. 8065a)


Sec. 76.789  What are an SEA's responsibilities under this subpart?

    (a) Information. Upon receiving notice under Sec. 76.788(a) of the 
date a charter school LEA is scheduled to open or significantly expand 
its enrollment, an SEA must provide the charter school LEA with timely 
and meaningful information about each covered program in which the 
charter school LEA may be eligible to participate, including notice of 
any upcoming competitions under the program.
    (b) Allocation of Funds. (1) An SEA must allocate funds under a 
covered program in accordance with this subpart to any charter school 
LEA that--
    (i) Opens for the first time or significantly expands its 
enrollment during an academic year for which the State awards funds by 
formula or through a competition under the program;
    (ii) In accordance with Sec. 76.791(a), establishes its eligibility 
and complies with all applicable program requirements; and
    (iii) Meets the requirements of Sec. 76.788(a).
    (2) In order to meet the requirements of this subpart, an SEA may 
allocate funds to, or reserve funds for, an eligible charter school LEA 
based on reasonable estimates of projected enrollment at the charter 
school LEA.
    (3)(i) The failure of an eligible charter school LEA or its 
authorized public chartering agency to provide notice to its SEA in 
accordance with Sec. 76.788(a) relieves the SEA of any obligation to 
allocate funds to the charter school within five months.
    (ii) Except as provided in Sec. 76.792(c), an SEA that receives 
less than 120 days' actual notice of the date an eligible charter 
school LEA is scheduled to open or significantly expand its enrollment 
must allocate funds to the charter school LEA on or before the date the 
SEA allocates funds to LEAs under the applicable covered program for 
the succeeding academic year.
    (iii) The SEA may provide funds to the charter school LEA from the 
SEA's allocation under the applicable covered program for the academic 
year in which the charter school LEA opened or significantly expanded 
its enrollment, or from the SEA's allocation under the program for the 
succeeding academic year.

(Approved by the Office of Management and Budget under control 
number 1810-0623)

(Authority: 20 U.S.C. 8065a)

Allocation of Funds by State Educational Agencies


Sec. 76.791  On what basis does an SEA determine whether a charter 
school LEA that opens or significantly expands its enrollment is 
eligible to receive funds under a covered program?

    (a) For purposes of this subpart, an SEA must determine whether a 
charter school LEA is eligible to receive funds under a covered program 
based on actual enrollment or other eligibility data for the charter 
school LEA on or after the date the charter school LEA opens or 
significantly expands its enrollment.
    (b) For the year the charter school LEA opens or significantly 
expands its enrollment, the eligibility determination may not be based 
on enrollment or eligibility data from a prior year, even if the SEA 
makes eligibility determinations for other LEAs under the program based 
on enrollment or eligibility data from a prior year.

(Authority: 20 U.S.C. 8065a)


Sec. 76.792  How does an SEA allocate funds to eligible charter school 
LEAs under a covered program in which the SEA awards subgrants on a 
formula basis?

    (a) For each eligible charter school LEA that opens or 
significantly expands its enrollment on or before November 1 of an 
academic year, the SEA must implement procedures that ensure that the 
charter school LEA receives the proportionate amount of funds for which 
the charter school LEA is eligible under each covered program.
    (b) For each eligible charter school LEA that opens or 
significantly expands its enrollment after November 1 but before 
February 1 of an academic year, the SEA must implement procedures that 
ensure that the charter school LEA receives at least a pro rata portion 
of the proportionate amount of funds for which the charter school LEA 
is eligible under each covered program. The pro rata amount must be 
based on the number of months or days during the academic year the 
charter school LEA will participate in the program as compared to the 
total number of months or days in the academic year.
    (c) For each eligible charter school LEA that opens or 
significantly expands its enrollment on or after February 1 of an 
academic year, the SEA may implement procedures to provide the charter 
school LEA with a pro rata portion of the proportionate amount of funds 
for which the charter school LEA is eligible under each covered 
program.

(Authority: 20 U.S.C. 8065a)


Sec. 76.793  When is an SEA required to allocate funds to a charter 
school LEA under this subpart?

    Except as provided in Secs. 76.788(b) and 76.789(b)(3):
    (a) For each eligible charter school LEA that opens or 
significantly expands its enrollment on or before November 1 of an 
academic year, the SEA must allocate funds to the charter school LEA 
within five months of the date the charter school LEA opens or 
significantly expands its enrollment; and

[[Page 71967]]

    (b)(1) For each eligible charter school LEA that opens or 
significantly expands its enrollment after November 1, but before 
February 1 of an academic year, the SEA must allocate funds to the 
charter school LEA on or before the date the SEA allocates funds to 
LEAs under the applicable covered program for the succeeding academic 
year.
    (2) The SEA may provide funds to the charter school LEA from the 
SEA's allocation under the program for the academic year in which the 
charter school LEA opened or significantly expanded its enrollment, or 
from the SEA's allocation under the program for the succeeding academic 
year.

(Authority: 20 U.S.C. 8065a)


Sec. 76.794  How does an SEA allocate funds to charter school LEAs 
under a covered program in which the SEA awards subgrants on a 
discretionary basis?

    (a) Competitive programs. (1) For covered programs in which the SEA 
awards subgrants on a competitive basis, the SEA must provide each 
eligible charter school LEA in the State that is scheduled to open on 
or before the closing date of any competition under the program a full 
and fair opportunity to apply to participate in the program.
    (2) An SEA is not required to delay the competitive process in 
order to allow a charter school LEA that has not yet opened or 
significantly expanded its enrollment to compete for funds under a 
covered program.
    (b) Noncompetitive discretionary programs. The requirements in this 
subpart do not apply to discretionary programs or portions of programs 
under which the SEA does not award subgrants through a competition.

(Authority: 20 U.S.C. 8065a)

Adjustments


Sec. 76.796  What are the consequences of an SEA allocating more or 
fewer funds to a charter school LEA under a covered program than the 
amount for which the charter school LEA is eligible when the charter 
school LEA actually opens or significantly expands its enrollment?

    (a) An SEA that allocates more or fewer funds to a charter school 
LEA than the amount for which the charter school LEA is eligible, based 
on actual enrollment or eligibility data when the charter school LEA 
opens or significantly expands its enrollment, must make appropriate 
adjustments to the amount of funds allocated to the charter school LEA 
as well as to other LEAs under the applicable program.
    (b) Any adjustments to allocations to charter school LEAs under 
this subpart must be based on actual enrollment or other eligibility 
data for the charter school LEA on or after the date the charter school 
LEA first opens or significantly expands its enrollment, even if 
allocations or adjustments to allocations to other LEAs in the State 
are based on enrollment or eligibility data from a prior year.

(Authority: 20 U.S.C. 8065a)


Sec. 76.797  When is an SEA required to make adjustments to allocations 
under this subpart?

    (a) The SEA must make any necessary adjustments to allocations 
under a covered program on or before the date the SEA allocates funds 
to LEAs under the program for the succeeding academic year.
    (b) In allocating funds to a charter school LEA based on 
adjustments made in accordance with paragraph (a) of this section, the 
SEA may use funds from the SEA's allocation under the applicable 
covered program for the academic year in which the charter school LEA 
opened or significantly expanded its enrollment, or from the SEA's 
allocation under the program for the succeeding academic year.

(Authority: 20 U.S.C. 8065a)

Applicability of This Subpart to Local Educational Agencies


Sec. 76.799  Do the requirements in this subpart apply to LEAs?

    (a) Each LEA that is responsible for funding a charter school under 
a covered program must comply with the requirements in this subpart on 
the same basis as SEAs are required to comply with the requirements in 
this subpart.
    (b) In applying the requirements in this subpart (except for 
Secs. 76.785, 76.786, and 76.787) to LEAs, references to SEA (or 
State), charter school LEA, and LEA must be read as references to LEA, 
charter school, and public school, respectively.

(Authority: 20 U.S.C. 8065a)

Appendix to the Preamble--Analysis of Comments and Changes

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Need for Final Regulations

    Comments: Five commenters expressed strong support for the 
issuance of final regulations in order to ensure that charter 
schools opening for the first time or significantly expanding their 
enrollment receive the Federal-to-State formula funds for which they 
are eligible in a timely fashion. Two commenters objected to the 
issuance of final regulations as premature and inconsistent with the 
Department's regulatory principles. These commenters recommended 
that the Secretary issue the proposed regulations as nonregulatory 
guidance to determine whether final regulations are absolutely 
necessary.
    Discussion: The Secretary believes that these final regulations 
are necessary to ensure that charter schools opening for the first 
time or significantly expanding their enrollment receive the funds 
for which they are eligible under the covered programs in accordance 
with the requirements of section 10306 of the Act. A number of State 
and local officials as well as charter school operators have raised 
questions about the proper interpretation of section 10306 of the 
Act, and have requested guidance from the Department regarding 
implementation of the provision. Due to a number of factors, 
including the importance of the statutory requirement and the high 
level of uncertainty regarding its interpretation, the Secretary 
believes that final regulations are necessary to ensure a uniform 
interpretation of the law among States. Also, consistent with the 
Department's Principles for Regulating, the provisions in these 
final regulations are intended to allow SEAs and LEAs maximum 
flexibility to develop procedures that will enable them to comply 
with the statutory requirement in a manner that minimizes any 
disruption in State and local administration of the covered 
programs.
    Changes: None.

Need for Nonregulatory Guidance

    Comments: Six commenters recommended that the Secretary issue 
nonregulatory guidance to assist States in implementing these final 
regulations. Three commenters specifically requested guidance on the 
effect of the regulations on State administration of funds under 
Part B of the Individuals with Disabilities Education Act (IDEA), 
including the funding formulas in the Grants to States Program and 
the Preschool Grants Program.
    Discussion: The Secretary agrees that the issuance of 
nonregulatory guidance would be useful to assist States in 
implementing these final regulations. Accordingly, within the next 
several months, we intend to issue guidance that will address 
specific implementation issues relating to the various covered 
programs, including allocation issues under Part B of IDEA and Title 
I, Part A (Title I) of the Elementary and Secondary Education Act of 
1965 (ESEA). For a discussion of the effect of these final 
regulations on Part B of IDEA, see ``Allocation of Funds'' in this 
``Analysis of Comments and Changes.''
    Changes: None.

Information Collection Requirements

    Comments: One commenter requested that the Secretary describe in 
the final regulations the specific types of information SEAs and 
LEAs will be expected to collect under the regulations.
    Discussion: The two provisions in these regulations that impose 
information collection requirements on SEAs, LEAs, and charter 
schools are Secs. 76.788 and 76.789(a). Section 76.788 requires new 
and expanding charter schools to notify their SEA or LEA of the date 
the charter school is scheduled to open or expand, and to provide 
the SEA or LEA with eligibility and enrollment data.

[[Page 71968]]

Under Sec. 76.789(a), SEAs and LEAs must provide timely and 
meaningful information to new and expanding charter schools.
    In light of the potential administrative burden that compliance 
with the statutory requirement may place on States and localities, 
we believe it is important to allow States and LEAs as much 
flexibility as possible in determining the specific information they 
will need to collect from and provide to charter schools, and in 
developing the necessary procedures for transferring that 
information. We believe it would be counterproductive to include any 
additional specifications for the collection of information in these 
final regulations.
    Changes: None.

Definition of Academic Year (Sec. 76.787)

    Comment: One commenter recommended that the Secretary define 
academic year in the final regulations.
    Discussion: We agree that defining academic year in these final 
regulations is useful, and considered several factors in crafting 
the definition. First, while all State laws require a minimum number 
of days that school districts must provide academic instruction, 
most States give their districts discretion to establish the actual 
opening dates and calendar of the school year. In a few cases, 
States establish the school calendar year for its LEAs. In either 
case, the opening dates of the school or academic year typically 
range from mid-August to mid-September. Another important factor 
that is incorporated into the definition is the use of the term 
academic year as a placeholder reference for the fiscal year or 
budget period for which a State allocates funds under a covered 
program.
    Changes: We have revised Sec. 76.787 to add a definition for the 
term academic year. The definition preserves State and local 
flexibility in establishing an academic year calendar, but 
references the fiscal period for which the State allocates funds 
under a covered program.

Definition of Charter School LEA (Sec. 76.787)

    Comments: Two commenters objected to the definition of charter 
school LEA set forth in the proposed regulations because it would 
allow charter schools to be treated as an LEA for purposes of some 
covered programs but not others. These commenters expressed concern 
that charter schools will manipulate the system by claiming to be an 
LEA or a public school within an LEA for different programs, 
depending on whether the charter school deems it to be convenient. 
One commenter recommended that the definition of charter school LEA 
be based on State law.
    Discussion: We disagree that allowing a charter school to be 
treated as an LEA for purposes of some covered programs and a public 
school within an LEA for purposes of other covered programs will 
lead to widespread manipulation of the system by charter schools. 
Each of the Federal statutes governing the covered programs defines 
LEA for purposes of the programs authorized under the statute. 
Because these definitions are broad and rely heavily on State law, 
the Secretary generally will defer to the State on the question of 
whether a charter school is an LEA or a public school within an LEA.
    As a general rule, however, a charter school cannot be an LEA 
and a public school within an LEA under the same Federal definition. 
Title XIV of the ESEA defines LEA for purposes of programs 
authorized under the ESEA. Because both the Title I Program and the 
Safe and Drug-Free Schools and Communities Program are authorized 
under the ESEA, for example, a charter school could not be an LEA 
for purposes of Title I and a school within an LEA for purposes of 
Safe and Drug-Free Schools. Likewise, because the Carl D. Perkins 
Vocational and Technical Education Act of 1998 (Perkins III) adopts 
the ESEA definition of LEA, a charter school could not be treated 
differently for purposes of ESEA programs and programs authorized 
under Perkins III.
    IDEA, on the other hand, contains its own definition of LEA. 
Therefore, it is conceivable that a charter school could be treated 
as an LEA for purposes of ESEA and Perkins III programs, and a 
public school within an LEA for purposes of programs authorized 
under Part B of IDEA. The charter school would have to be treated 
consistently, however, under the Preschool Grants Program and the 
Grants to States Program, since both of these programs are 
authorized under Part B of IDEA.
    One possible exception to the general rule that a charter school 
cannot be treated as an LEA and a public school within an LEA under 
different covered programs that rely on the same Federal definition 
of LEA, is where a State law provision specifically authorizes 
charter schools to elect to be treated as an LEA or a public school 
within an LEA for purposes of a particular program. In such a case, 
the Secretary generally will defer to State law.
    Changes: None.

Definition of Significant Expansion of Enrollment (Sec. 76.787)

    Comments: Six commenters requested that the Secretary include in 
the final regulations a definition for significant expansion of 
enrollment in order to avoid unnecessary conflict between States and 
charter schools. Two of these commenters recommended that the term 
be defined based on congressional intent and the Secretary's 
considerations in the preamble to the proposed regulations. One 
commenter opposed defining the term in the final regulations but 
suggested, instead, that the final regulations include a provision 
specifically authorizing States to define the term.
    Discussion: We agree that defining significant expansion of 
enrollment in these final regulations is necessary to clarify a 
major component of the regulations. Consistent with the overall 
intent of these final regulations, however, we believe that the term 
should be defined in a manner that gives meaning to the statutory 
provision upon which these regulations are based, while allowing 
States maximum flexibility in implementing the statutory and 
regulatory requirements. The requirements in these final regulations 
are not triggered by minor increases in enrollment caused by normal 
turnover. Rather, these regulations apply to substantial increases 
in enrollment that are caused by significant, or abnormal, events.
    A charter school for the performing arts, for example, may offer 
two educational programs that focus on music and art. If the charter 
school were to add a third educational program in dance, and the 
addition of that educational program resulted in a substantial 
increase in the number of students attending the charter school, 
then the SEA or LEA serving the charter school would be required to 
comply with these final regulations when providing funds to the 
charter school under a covered program. It is not enough for a 
charter school to experience a significant event, but the event must 
also result in a substantial increase in the number of students 
attending the charter school.
    Changes: We have revised Sec. 76.787 to define the term 
significant expansion of enrollment. The definition is similar to 
the definition set forth in the preamble to the proposed 
regulations, but is broader in that it focuses on substantial 
increases in a charter school's overall enrollment without regard to 
student eligibility for program funds. In addition, SEAs are given 
flexibility to treat any expansion of enrollment as significant.

120-Day Notice Requirement (Sec. 76.788(a))

    Comments: One commenter supported the 120-day notice 
requirement, but recommended that charter schools also be required 
to provide auditable enrollment information to the State or LEA at 
the time the charter school provides the notice. Another commenter 
opposed the 120-day notice requirement because of the delay that 
many charter schools encounter in receiving approval of their 
charters. This commenter recommended that the regulations be revised 
to require charter schools to notify the State or LEA of the date 
the charter school is scheduled to open or expand 60 days before the 
charter school opens or expands, or within 30 days of the date the 
charter school receives its charter.
    Discussion: We believe that it is unreasonable to expect a 
charter school that has not yet opened or expanded to be able to 
provide auditable enrollment information to its SEA or LEA. It is 
not unreasonable, however, to expect a charter school to know, at 
least 120 days in advance, the date the charter school anticipates 
opening or expanding. Most successful charter schools will spend at 
least 120 days planning prior to opening for the first time or 
significantly expanding their enrollment. Because SEAs and LEAs may 
be required to reserve a portion of funds under each covered program 
for eligible charter schools that open or expand during the academic 
year, SEAs and LEAs will need to know as early as possible the 
number of charter schools that are scheduled to open or expand. 
Moreover, these final regulations do not preclude a prospective 
charter school from notifying its SEA or LEA of the date the charter 
school is scheduled to open, pending final approval of its charter.
    Changes: None.

[[Page 71969]]

Penalty for Charter School's Failure to Provide Notice 
(Sec. 76.789(b)(3))

    Comments: One commenter objected to the language in the proposed 
regulations that would allow an entity other than the charter school 
to notify the State or LEA of the date the charter school is 
scheduled to open or expand. A second commenter recommended that the 
regulations be revised to require a charter school that fails to 
meet the 120-day notice requirement to wait for the next grant cycle 
to receive funds under the applicable covered program.
    Discussion: We agree that the charter school should bear primary 
responsibility for notifying the SEA or LEA of the date the charter 
school is scheduled to open or expand. Allowing an unspecified 
number of entities other than the charter school to place the SEA or 
LEA on notice could lead to unnecessary conflict between SEAs and 
LEAs and charter schools. In some cases, however, it may be more 
efficient for the responsible authorized public chartering agency to 
notify the SEA or LEA of the scheduled opening or expansion dates 
for its charter schools, rather than require each charter school to 
provide the notice individually.
    We also agree that SEAs and LEAs should not be required to meet 
the five-month funding requirement with respect to charter schools 
that open or expand on or before November 1, if the charter school 
fails to comply with the 120-day notice requirement. As stated 
above, SEAs and LEAs will need to know as early as possible the 
number of charter schools that may be eligible to receive funds 
under a covered program in order to ensure that the funds are 
available for the charter school when it actually opens or expands.
    Changes: We have revised Sec. 76.788(a) to specify that a 
charter school or its authorized public chartering agency must 
notify the SEA or LEA of the date the charter school is scheduled to 
open or expand. We have revised proposed Sec. 76.788(a)(2) 
(Sec. 76.789(b)(3) in these final regulations) further to specify 
the time period within which SEAs and LEAs must provide funds to 
charter schools that open or expand before November 1, but fail to 
provide 120 days' notice. Finally, we have revised Sec. 76.789 to 
delete the reference to notice provided through some means other 
than Sec. 76.788(a).

Estimates of Projected Enrollment (Secs. 76.788(b)(1) and 76.789(b)(2))

    Comments: One commenter recommended that the regulations require 
States and LEAs to rely on reasonable and objective data in 
estimating the amount of funds to reserve for charter schools under 
a covered program, and specifically authorize SEAs and LEAs to 
gather the data or require the charter school to provide it. Another 
commenter proposed that the final regulations include a new 
provision requiring estimates of projected enrollment to be based on 
the characteristics of the currently enrolled population, previous 
year enrolled population, or existing applications for enrollment at 
the charter school. Several commenters expressed opposition to the 
use of assumed proportionality (i.e., surrounding LEAs' 
proportionate demographic characteristics) in projecting enrollment 
at a charter school that is scheduled to open or expand. Another 
commenter objected to the use of the term ``available'' in the 
provision requiring charter schools to provide to the SEA or LEA any 
available data or information that the SEA or LEA may reasonably 
require to assist it in estimating the amount of funds to reserve 
for the charter school. This commenter stated that SEAs and LEAs 
should be able to collect any data that they may reasonably require.
    Discussion: Section 76.789(b)(2) authorizes an SEA or LEA to 
reserve an appropriate amount of funds or make an initial allocation 
to eligible charter schools based on projected data. Accordingly, 
Sec. 76.788(b)(1) requires a charter school to provide its SEA or 
LEA with any ``available'' data or information that the SEA may 
reasonably require to make these projections.
    We agree that any data upon which an SEA or LEA relies to 
estimate the amount of funds to reserve for a new or expanding 
charter school should be reasonable. We believe that adoption of the 
remaining suggestions in the comments, however, would add 
unnecessary prescription to these final regulations. It is important 
to understand that these provisions concern only projected data that 
would be used until actual data are available. Under Sec. 76.796, 
any allocations based on projected data that are inaccurate must be 
adjusted. Obviously, an SEA or LEA would want any projected data it 
uses to be as accurate as possible in order to reduce the need to 
make adjustments. Although these provisions require the new or 
expanding charter school to provide any available data to its SEA or 
LEA, there is nothing in these final regulations that would preclude 
an SEA or LEA from collecting the data itself.
    It should also be noted that SEAs and LEAs are not required to 
use projected data. Rather, the SEA or LEA could reserve funds off 
the top of its total allocation and wait until actual data are 
available before making any allocations to charter schools.
    Changes: We have revised Sec. 76.789(b)(2) to require any 
estimates of a charter school's projected enrollment to be 
reasonable.

Actual Enrollment and Eligibility Data (Sec. 76.788(b)(2))

    Comments: One commenter recommended that charter schools be 
required to provide the SEA or LEA with actual enrollment and 
eligibility data within 60 days of opening or expanding.
    Discussion: Section 76.788(b)(2) requires a charter school to 
provide actual enrollment and eligibility data to the SEA or LEA at 
a time the SEA or LEA may reasonably require. We do not believe it 
would be appropriate to prescribe a specific period in the 
regulations for submitting the data. In many instances, 60 days 
would be unnecessarily long and might create difficulties for SEAs 
and LEAs in making funds available to eligible charter schools 
within five months. In other instances, depending on the specific 
circumstances, 60 days may not be sufficiently long. We believe 
these final regulations appropriately provide flexibility to each 
SEA and LEA to set a reasonable timeframe for collecting actual 
enrollment and eligibility data from charter schools.
    Changes: None.

Timely and Meaningful Information (Sec. 76.789)

    Comments: One commenter recommended that the Secretary define 
timely and meaningful information in the final regulations, while 
another commenter requested clarification of the meaning of the term 
in either the regulations or nonregulatory guidance.
    Discussion: Section 76.789 requires SEAs and LEAs to provide 
charter schools with timely and meaningful information about each 
covered program in which the charter school may be eligible to 
participate, including notice of any upcoming competitions. We have 
refrained from defining timely and meaningful information in these 
final regulations because we do not believe that a single definition 
can comprehensively address all covered programs. Essentially, this 
provision requires SEAs and LEAs to provide charter schools with the 
information they reasonably need to know in order to make an 
informed decision about whether to apply to participate in a 
particular covered program, and the steps they need to take to do 
so. For example, for each covered program, we would expect an SEA to 
provide basic program information, such as the program's purpose, 
target population, eligibility requirements, application packages, 
dates of any competitions, copies of the statute, relevant 
regulations and guidance, etc. In terms of timing, the SEA should 
provide the information as early as possible to afford the charter 
school a genuine opportunity to apply to participate in the 
applicable covered program.
    Changes: None.

Eligibility (Secs. 76.788(c) and 76.789(b)(1)(ii))

    Comments: Several commenters recommended that the Secretary 
clarify that charter schools must meet the same program and 
eligibility requirements as other LEAs and public schools in order 
to receive funds under an applicable covered program, and that the 
proposed regulations would not require a State or LEA to provide 
funds to charter schools if the State or LEA does not provide funds 
to other LEAs and public schools under the program. Two of these 
comments were made with specific reference to Title I and Part B of 
IDEA.
    Discussion: Based on section 10306 of the Act, which these 
regulations implement, and its legislative history, it is clear that 
charter schools must receive the proportionate amount of funds for 
which they are eligible under the covered programs. In the absence 
of statutory or other regulatory language to the contrary, these 
final regulations should not be interpreted to afford any special 
rights or privileges to charter schools with regard to program 
eligibility. Thus, an SEA or LEA is not required to comply with 
these final regulations with respect to a new or expanding charter 
school that does not meet the eligibility and other program 
requirements of the applicable covered program. In determining a 
charter school's eligibility to receive funds under a covered 
program during an academic year in which

[[Page 71970]]

the charter school opens for the first time or significantly expands 
its enrollment, however, SEAs and LEAs may not rely on enrollment or 
eligibility data from a prior year, even if allocations to other 
LEAs or public schools are based on a prior year's data.
    Nor do these final regulations require an SEA or LEA to provide 
funds to an eligible charter school if the SEA or LEA does not 
provide funds to other eligible LEAs or public schools under the 
program. Under Title I, for example, an LEA may choose to provide 
funds or services to eligible public schools in its district. If the 
LEA opts to provide services, rather than funds, to the Title I-
eligible public schools in its district, these regulations would not 
require the LEA to provide funds to new or expanding charter 
schools. For a discussion of whether these final regulations require 
LEAs to provide funds to new and expanding charter schools under 
Part B of IDEA if the LEA does not provide funds to other eligible 
public schools, see ``Allocation of Funds'' in this ``Analysis of 
Comments and Changes.''
    Changes: We have revised proposed Secs. 76.788(b)(1)(ii) and 
76.790(a)(2) (Secs. 76.788(c) and 76.789(b)(1)(ii), respectively, in 
these final regulations) to clarify that a charter school must 
establish its eligibility and comply with all applicable program 
requirements in order to receive funds under these final 
regulations.

Date on Which a Charter School Opens or Expands (Secs. 76.792-76.793)

    Comments: Two commenters expressed support for the provisions in 
the regulations that require States and LEAs to provide funds to 
charter schools that open or expand prior to February 1. One of 
these commenters noted that its State law requires charter schools 
to open between August 15 and September 15. Another commenter 
recommended that the regulations be revised either to eliminate any 
requirement that States provide funding to charter schools that open 
after November 1, or to give States more flexibility in providing 
funds to charter schools that open after that date. Another 
commenter stated that the pro rata calculation should be flexible 
enough to allow States to use days rather than months.
    Discussion: We agree that February 1 is a reasonable cut-off 
date for States to be required to provide some funding to eligible 
charter schools under the covered programs. Because these final 
regulations require States to provide only a pro rata portion of 
funds to eligible charter schools that open or expand between 
November 1 and February 1, charter schools will have an incentive to 
open or expand before November 1, thereby easing the potential 
administrative burden on States.
    On the other hand, some charter schools may be unable to open or 
expand prior to November 1. While it would be unfair to require 
these charter schools to forgo entirely the funds for which they are 
otherwise eligible under a covered program, States should be given 
additional flexibility in providing funds to the charter schools. 
Such flexibility will ease further the potential administrative 
burden that funding charter schools opening or expanding late in the 
academic year poses for States and local school districts.
    Changes: We have revised Sec. 76.792(b) to allow States to use 
days to calculate the pro rata allocation for charter schools that 
open or expand between November 1 and February 1 of an academic 
year. We have also revised Sec. 76.793 to require SEAs and LEAs to 
provide funds to charter schools that open or expand on or before 
November 1 within five months, and to give SEAs and LEAs additional 
flexibility in providing funds to charter schools that open after 
November 1. Specifically, for charter schools that open or expand 
between November 1 and February 1, we have added a new paragraph 
requiring SEAs and LEAs to provide funds to those charter schools on 
or before the date the SEA or LEA provides funds to LEAs and public 
schools under the program for the succeeding academic year.
    Comments: One commenter stated that the final regulations should 
apply only to charter schools that have actually opened or 
significantly expanded their enrollment, rather than to charter 
schools that are scheduled to open or expand.
    Discussion: Many States and LEAs make allocations under the 
covered programs, particularly Title I and Part B of IDEA, in the 
spring or summer preceding the academic year for which the 
allocations are made. Therefore, in order to give meaning to section 
10306 of the Act, which these final regulations implement, and 
ensure that funds are available for charter schools that open or 
expand during the academic year, it may be necessary for SEAs and 
LEAs to reserve a portion of funds under a particular covered 
program. In the absence of some advance notification to the SEA or 
LEA of a charter school's plans to open or expand, the SEA or LEA 
would have no way of knowing whether to reserve funds, or the amount 
of funds to reserve, for a charter school. Likewise, while it may be 
appropriate in some cases, a charter school should not be required 
to wait until after it opens to receive information about upcoming 
application deadlines or ongoing competitions under the covered 
programs in which the charter school is eligible to apply to 
participate.
    On the other hand, it is important to note that these final 
regulations do not require SEAs or LEAs to provide any funds to 
charter schools before the charter school actually opens or 
significantly expands its enrollment. Under Sec. 76.789(b)(2), for 
example, SEAs and LEAs may either allocate funds to or reserve funds 
for charter schools based on estimates of projected enrollment. 
Moreover, Sec. 76.788(b)(2)(ii) specifically states that an SEA or 
LEA is not required to provide funds to a charter school that fails 
to provide the enrollment or eligibility data the SEA or LEA 
reasonably requires. Thus, although an SEA or LEA may provide funds 
to a charter school before the charter school actually opens or 
expands, nothing in these final regulations requires them to do so.
    Changes: We have revised Sec. 76.792 to clarify further that 
SEAs and LEAs are not required to provide any funds to a charter 
school that has not yet opened or expanded.

Use of Term Full Amount of Funds (Sec. 76.792)

    Comments: One commenter recommended that the Secretary replace 
the term full amount of funds in Sec. 76.792(a) of the regulations 
with the term commensurate share of funds in order to eliminate any 
ambiguity that use of the former term may cause. This commenter and 
a second commenter also stated that the Secretary should define or 
clarify the meaning of the term commensurate share.
    Discussion: The intent of these final regulations is to require 
SEAs and LEAs to provide to each eligible charter school the amount 
of funds the charter school would receive under each program's 
statutory allocation formula if the charter school is included in 
the SEA or LEA's initial allocation. Under many of the covered 
programs, LEAs and public schools receive the proportionate amount 
of funds for which they are eligible, based on the total amount of 
funds that are available under the program and the program's 
statutory allocation formula.
    These regulations are not intended to guarantee each charter 
school a particular funding level, or entitlement, that may be 
conditional based upon the appropriation level for any covered 
program. We agree that use of the term full amount does not convey 
this intent clearly, but are concerned that the term commensurate 
share may lack clarity as well. We believe that the term 
proportionate amount best conveys the intent of these final 
regulations. Changes: We have replaced the term full amount of funds 
in Sec. 76.792(a) with the term proportionate amount of funds. We 
have also inserted the term proportionate amount of funds in 
Secs. 76.792(b) and 76.792(c) to clarify further the purpose of 
these final regulations as discussed above.

Allocation of Funds (Secs. 76.792-76.794)

    Comments: One commenter stated that the final regulations should 
clarify that SEAs and LEAs are not required to send 100 percent of 
the funds for which a charter school is eligible to the charter 
school within the time periods specified in the regulations, but 
that they are required only to ensure that the appropriate amount of 
funds flow to the charter school. We believe the commenter meant 
that the SEA or LEA is not required to make one lump sum payment to 
the charter school at the beginning of the grant period.
    Discussion: The commenter is correct in that these final 
regulations do not require SEAs and LEAs to send 100 percent of the 
funds for which a charter school is eligible to the charter school 
within the prescribed time periods. Department regulations prohibit 
recipients of Federal funds from earning excess interest on those 
funds. Therefore, when awarding subgrants under the covered 
programs, SEAs and LEAs are generally required only to ensure that 
the appropriate amount of grant funds are made available for draw 
down by the subgrant recipient--in this case, the charter school. 
The subgrant recipient, in turn, draws down funds on an as needed 
basis. Thus, while SEAs and LEAs are not actually required to send 
funds to the charter school, they are required to ensure that the 
proportionate

[[Page 71971]]

amount of funds for which the charter school is eligible is made 
available to the charter school within the time periods specified in 
these final regulations.
    Changes: None.
    Comments: One commenter requested that language be included in 
the final regulations specifically authorizing States to use non-
Federal funds to supplement allocations to LEAs. Although this 
comment was made with specific reference to Part B of IDEA, the 
discussion that follows is applicable to all of the covered 
programs.
    Discussion: States must follow applicable program requirements 
when allocating funds to LEAs under a covered program. While an SEA 
may use non-Federal funds to supplement LEA allocations that are 
reduced as a result of the SEA's compliance with section 10306 of 
the Act and these final regulations, the State may not substitute 
non-Federal funds for Federal funds when awarding subgrants under a 
covered program.
    Changes: None.
    Comments: One commenter requested that the Secretary revise the 
regulations to make the provisions governing competitive 
discretionary grant programs applicable to noncompetitive 
discretionary grant programs, so that prospective charter school 
applicants that fail to meet the application deadline for either 
type of discretionary grant program would be required to wait for 
the next grant cycle in order to receive funds under the program.
    Discussion: Under Sec. 76.794(b), SEAs and LEAs are completely 
exempt from the requirements of these final regulations when 
allocating funds under noncompetitive discretionary programs. 
Therefore, as a practical matter, SEAs and LEAs could require any 
school, including new and expanding charter schools, that fail to 
meet the application deadline to wait until the next grant cycle to 
apply for funds under these programs. Two of the covered programs 
under which SEAs or LEAs have total discretion either to provide 
services directly or award funds to subgrantees on a noncompetitive 
basis are Migrant Education and Neglected and Delinquent Children. 
In addition, a number of programs, such as Part B of IDEA and Safe 
and Drug-Free Schools, require SEAs to allocate a majority of funds 
on a formula basis, but also allow a portion of funds to be 
distributed on a discretionary basis. For these programs, the SEA 
would not be required to comply with these final regulations when 
distributing the discretionary portion of the funds on a 
noncompetitive basis. If the SEA distributes the discretionary 
portion of the funds on a competitive basis, Sec. 76.794(a) would 
apply.
    As stated in the preamble to the NPRM, the Secretary encourages 
SEAs and LEAs to consider charter schools on the same basis as other 
LEAs and public schools when providing funds on a discretionary, but 
noncompetitive, basis. Nevertheless, it is not the intent of these 
regulations to restrict in any way the discretionary authority of 
SEAs and LEAs with respect to these funds.
    Changes: We have revised the definition of covered program in 
Sec. 76.787 to clarify that noncompetitive discretionary programs 
are not covered by these final regulations, even though funds are 
allocated to the State on a formula basis. We have also revised 
Sec. 76.794(b) accordingly.
    Comments: One commenter requested guidance on how LEAs can meet 
the requirements of these final regulations when allocating funds to 
new or expanded charter schools under Part B of IDEA.
    Discussion: There is nothing in section 10306 of the Act, these 
final regulations, or the IDEA Amendments of 1997 that would compel 
an LEA to make allocations of Part B funds to charter schools that 
are public schools of that LEA, if the LEA does not make allocations 
of such funds to its other schools. Under section 613(a)(5) of IDEA, 
if an LEA provides Part B funds or services to public schools of the 
LEA, it must provide those funds or services in the same manner to 
charter schools that are public schools of the LEA. Likewise, if the 
LEA has eligibility criteria that its public schools must meet in 
order to receive Part B funds and the charter school meets those 
criteria, the LEA must provide Part B funds to the new or expanded 
charter school in the same manner that the LEA provides such funds 
to its other public schools. If an LEA allocates Part B funds to its 
public schools on a formula basis, in accordance with Sec. 76.791 of 
these final regulations, the eligibility determination for the new 
or expanded charter school may not be based on enrollment or 
eligibility data from a prior year. In addition, funding allocations 
made on a formula basis must be made within the time periods 
specified in Sec. 76.793 of these final regulations.
    As stated in the Office of Special Education Programs (OSEP) 
Memorandum 99-12, if an LEA provides Part B funds to charter schools 
that are public schools within the LEA, a State can require that 
allocations of Part B funds be transferred from the LEA where the 
child was previously served and counted, or would have been served, 
to the LEA that distributes Part B funds to the charter school where 
the child is attending. In addition, the State can require that the 
funds be transferred from the public school of the LEA where the 
child was previously served and counted, or would have been served, 
to the charter school of the same LEA where the child is attending.
    Changes: None.
    Comments: One commenter requested guidance on how SEAs can meet 
the requirements of these final regulations when providing funds to 
new or expanded charter school LEAs under the current formula in the 
IDEA Preschool Grants Program and the permanent formula that will 
become effective for the IDEA Grants to States program when the 
appropriation for that program exceeds $4,924,672,200.
    Discussion: Under the formula at sections 611(g)(2)(B) and 
619(g)(1) of Part B of IDEA, the State allocation to each eligible 
LEA is the total of three amounts--the base payment, the population 
payment, and the poverty payment. The base payment is the amount the 
LEA would have received for the base year had the State allocated 75 
percent of its award to the local level (for the Grants to States 
Program, the base year is the fiscal year preceding the first fiscal 
year in which the amount appropriated for the program is more than 
$4,924,672,200; for the Preschool Grants Program, the base year is 
Federal fiscal year 1997). Therefore, the amount of Part B funds 
that a State must use to make base payments is set at 75 percent of 
the State's base year grant, and remains the same for each 
subsequent fiscal year. Federal regulations at 34 CFR 300.712(b)(2) 
and 34 CFR 301.31(b) provide information on when base payments must 
be adjusted. Because of section 10306 of the Act and these final 
regulations, base payments must also be adjusted when a charter 
school experiences a significant expansion of enrollment as defined 
in Sec. 76.787 of these final regulations.
    When calculating base payments for new or expanded charter 
school LEAs, States must use the method described in 34 CFR 
300.712(b)(2)(i) and 34 CFR 301.31(b)(1). Thus, if a charter school 
LEA opens for the first time or significantly expands its 
enrollment, the State must divide the base allocation for LEAs that 
would have been responsible for serving children with disabilities 
now being served by the charter school LEA, among the charter school 
LEA and affected LEAs based on the relative numbers of children with 
disabilities currently provided special education by each of the 
LEAs. Once the base payment for affected LEAs and the charter school 
LEA is calculated using the method described above, the State may 
use its State set-aside funds to supplement the subgrant of an LEA 
whose base payment is decreased as a result of having its base 
allocation divided. However, supplements provided for this purpose 
do not change the amount of the base payment the LEA is entitled to 
receive, and the SEA is not required to continue to provide these 
supplemental funds in future years.
    The population payment (85 percent of the remaining flow-through 
funds after the base payments are made) is an amount based on the 
eligible agency's relative numbers of children enrolled in public 
and private elementary and secondary schools within the LEA's 
jurisdiction. The population payment should be allocated to new or 
expanded charter schools based on the number of elementary and 
secondary school children enrolled in the charter school. Under 
Sec. 76.791 of these final regulations, the State may not rely on 
enrollment data from a prior year in calculating the new or expanded 
charter school's population payment, even if population payments to 
other LEAs are based on a prior year's enrollment data.
    The poverty payment (15 percent of the remaining flow through 
funds after the base payments are made) is an amount based on the 
eligible agency's relative numbers of children living in poverty, as 
determined by the SEA. The poverty factor chosen must be applied 
uniformly to all eligible subgrantees. For example, if the State 
uses aggregate data on children who are eligible for free or 
reduced-price meals under the United States Department of 
Agriculture's National School Lunch Program, this data must be 
applied to the new or expanded charter school LEA to determine its 
poverty payment. Under Sec. 76.791, the State may not rely on 
enrollment or eligibility data from a prior year in calculating the 
new or expanded charter school LEA's poverty payment, even

[[Page 71972]]

if poverty payments to other LEAs are based on data from a prior 
year.
    Section 76.790(b)(2) of these final regulations provides the SEA 
with flexibility to allocate funds to eligible charter school LEAs 
based on reasonable estimates of projected enrollment at the charter 
school LEA. Under Sec. 76.796, the SEA would be required to make 
appropriate adjustments to the subgrants of the new or expanded 
charter school LEA and affected LEAs based on actual enrollment and 
eligibility data. Under Sec. 76.797(a), any required adjustments 
would have to be made on or before the date the SEA allocates funds 
to LEAs for the succeeding academic year.
    The requirements in section 10306 of the Act and these final 
regulations apply only when a State or LEA allocates funds under a 
covered program to a charter school during its first year of 
operation or during subsequent years when the charter school 
significantly expands its enrollment. In all other years, an SEA or 
LEA allocates Part B funds to charter schools in the same manner as 
it allocates funds to other eligible LEAs and public schools. The 
only entities that are eligible to receive Part B funds under IDEA 
are entities that are established as LEAs under State law and those 
charter schools that are public schools of an LEA where that LEA 
distributes Part B funds to its other public schools.
    Changes: None.
    Comments: One commenter requested guidance on how an SEA or LEA 
reallocates funds if a charter school closes. Although this comment 
was made with specific reference to Part B of IDEA, the discussion 
that follows is applicable to all of the covered programs.
    Discussion: Neither section 10306 of the Act nor these final 
regulations prescribe closeout or reallocation procedures for SEAs 
or LEAs to follow if and when a charter school closes. Therefore, as 
a general rule, if a charter school that has received funds in 
accordance with these final regulations closes, SEAs and LEAs should 
follow the same procedures that are used to close out subgrants and 
reallocate funds for other eligible entities under the applicable 
program.
    Changes: None.

Adjustments (Secs. 76.796-76.797)

    Comments: Three commenters expressed support for the requirement 
in the proposed regulations that States and LEAs make adjustments to 
allocations to charter schools based on actual enrollment and 
eligibility data. One of these commenters recommended that the 
regulations include a provision specifically authorizing charter 
schools to challenge the amount of the SEA or LEA's allocation, 
while another commenter recommended that the regulations prescribe 
additional remedies for States to recover overpayments. A fourth 
commenter opposed any requirement that States make adjustments for 
underpayments to charter schools, and a fifth commenter recommended 
that the Secretary delete the provision authorizing States and LEAs 
to make adjustments to allocations in the succeeding year. The fifth 
commenter questioned the usefulness of Sec. 76.797, in light of the 
ability of States to recover overpayments from charter schools 
through offset of subsequent allocations.
    Discussion: If an SEA or LEA has allocated more or fewer funds 
to a charter school than the amount for which the charter school is 
eligible based on actual enrollment or eligibility data, Sec. 76.796 
requires the SEA or LEA to make appropriate adjustments. The purpose 
of this provision is to ensure that charter schools receive the 
amount of funds they are eligible to receive--no more and no less. 
Accordingly, it requires SEAs and LEAs to make adjustments to 
charter school allocations for both overpayments and underpayments, 
as well as appropriate adjustments to the allocations of other LEAs 
and public schools. For example, if projected enrollment data result 
in an SEA allocating too few funds to a charter school LEA, the SEA 
would be required to adjust upward the charter school LEA's 
allocation when actual enrollment data are available. Similarly, if 
the SEA reserves more funds off the top of its total allocation than 
are needed to make allocations to eligible charter school LEAs, the 
SEA must return the excess funds to its other LEAs in proportion to 
their initial allocations. Our nonregulatory guidance will provide 
program-specific examples of how adjustments can be made.
    If a charter school LEA believes its allocation under a covered 
program is inaccurate, it, like any other LEA, may appeal to the SEA 
under section 432(a) of the General Education Provisions Act. 
Moreover, nothing in Sec. 76.796 is intended to limit the remedies 
otherwise available by law to SEAs or LEAs to recoup overpayments of 
funds.
    Section 76.797 requires SEAs and LEAs to make any necessary 
adjustments on or before the date the SEA or LEA allocates funds to 
LEAs for the succeeding academic year. In other words, an SEA may 
make adjustments immediately, when it makes the next year's 
allocations, or anytime in between. This provision affords SEAs and 
LEAs flexibility to make adjustments when it is most convenient, 
provided those adjustments are made no later than when the SEA or 
LEA provides funds to LEAs and public schools for the succeeding 
academic year.
    Changes: None.

Applicability of Provisions to LEAs (Sec. 76.799)

    Comments: One commenter stated that the regulations should be 
expanded to address LEA-specific circumstances.
    Discussion: Section 76.799(a) specifies that LEAs that are 
responsible for funding charter schools under a covered program are 
subject to the same requirements as SEAs. In Sec. 76.799(b), we also 
explain that the terms LEA, charter school, and public school should 
be read in place of the terms SEA (or State), charter school LEA, 
and LEA, respectively, in these regulations to accomplish the 
requirement. When these substitute references are applied, these 
regulations already instruct LEAs on their responsibilities to new 
and expanding charter schools when allocating funds under the 
covered programs. Within the next several months, the Department 
also expects to issue nonregulatory guidance that will provide 
additional program-specific guidance for SEAs, LEAs, and charter 
schools.
    Finally, as noted in the preamble to the NPRM, States are 
directly responsible for ensuring that LEAs meet the requirements of 
section 10306 of the Act and these final regulations. Accordingly, 
the Department expects that some SEAs may also provide guidance to 
LEAs on these matters. The Secretary believes that all of these 
measures are a satisfactory means of providing the expanded LEA-
specific guidance that the commenter seeks, and that further 
regulations on this issue are unnecessary at this time.
    Changes: None.

[FR Doc. 99-33119 Filed 12-21-99; 8:45 am]
BILLING CODE 4000-01-U