[Federal Register Volume 76, Number 221 (Wednesday, November 16, 2011)]
[Notices]
[Pages 70986-70994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29581]


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DEPARTMENT OF EDUCATION

[Docket ID ED-2011-OS-0008]
RIN 1894-AA01


Race to the Top Fund Phase 3

AGENCY: Department of Education.

ACTION: Notice of final requirements.

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SUMMARY: The Secretary of Education (Secretary) announces requirements 
for Phase 3 of the Race to the Top program. In this phase the 
Department intends to make awards to States that were finalists but did 
not receive funding under the Race to the Top Fund Phase 2 competition 
held in fiscal year (FY) 2010. These States are Arizona, California, 
Colorado, Illinois, Kentucky, Louisiana, New Jersey, Pennsylvania, and 
South Carolina. We take this action to establish the information and 
assurances that applicants must provide in order to receive Race to the 
Top Fund Phase 3 awards.

DATES: Effective Date: These requirements are effective November 16, 
2011.

FOR FURTHER INFORMATION CONTACT: Meredith Farace, Implementation and 
Support Unit, 400 Maryland Avenue SW., Washington, DC 20202-6200. 
Telephone: (202) 453-6690 or by email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
(800) 877-8339.

SUPPLEMENTARY INFORMATION:
    Purpose of Program: The Race to the Top program, the largest 
competitive education grant program in U.S. history, is designed to 
provide incentives to States to implement system-changing reforms that 
result in improved student achievement, narrowed achievement gaps, and 
increased high school graduation and college enrollment rates.
    Program Authority: American Recovery and Reinvestment Act of 2009 
(ARRA), Division A, Section 14006, Public Law 111-5, as amended by 
section 310 of Division D, Title III of Public Law 111-117, the 
Consolidated Appropriations Act, 2010, and section 1832(a)(2) of Public 
Law 112-10, the Department of Defense and Full-Year Continuing 
Appropriations Act, 2011 (FY 2011 Appropriations Act). (Note: In the 
ARRA, the Race to the Top program is referred to as ``State Incentive 
Grants.'')
    We published a notice of proposed requirements for this program in 
the Federal Register on September 12, 2011 (76 FR 56183) and a notice 
correcting the notice of proposed requirements in the Federal Register 
on September 23, 2011 (76 FR 59124). For purposes of this notice, the 
notice of proposed requirements and correction notice collectively are 
referred to as the ``NPR''. The NPR contained background information 
and our reasons for proposing the particular requirements.
    There are two significant differences between the requirements 
proposed in the NPR and these final requirements. In response to a 
comment, we have added an application requirement for performance 
measures for activities proposed for funding under Race to the Top 
Phase 3 for which there were no such measures included in a State's 
Race to the Top Phase 2 application. We also have removed a requirement 
from the Proposed Budget Requirements that would have required States 
to include in Part II of their applications a description of their 
processes for allocating at least 50 percent of their Race to the Top 
Phase 3 funds to participating LEAs. These changes are described in 
greater detail below in the Analysis of Comments and Changes section.
    Public Comment: In response to our invitation in the NPR, 10 
parties submitted comments on the proposed requirements. In the 
following section, we have summarized and provided responses to the 
comments received. We group major issues addressed in these comments 
according to subject. Generally, we do not address technical and other 
minor changes.
    Analysis of Comments and Changes: An analysis of the comments and 
any changes in the requirements since publication of the NPR follows.

Eligible States

    Comment: One commenter recommended opening the Race to the Top 
Phase 3 application process to all States. The commenter claimed that 
many States that were not finalists under the Race to the Top Phase 2 
competition have made progress in the four ARRA assurance areas since 
the Phase 2 competition and would be in a stronger position to compete 
under a Phase 3 award process open to all applicants.
    Discussion: The notice of proposed requirements included a 
discussion of the reasons for the Department's decision to use Race to 
the Top Phase 3 funds to make awards only to States that were 
finalists, but did not receive funding, under the 2010 Race to the Top 
Phase 2 competition. First, the Secretary stated that the number of 
competitive, high-quality applications submitted during the Phase 2 
competition greatly exceeded the number that could be supported with 
available ARRA funds and indicated his hope that additional funding 
would be made available to fund those applications. Second, the FY 2011 
Appropriations Act specifically authorizes the Secretary to make awards 
``on the basis of previously submitted applications,'' thus 
specifically allowing the Department to use FY 2011 Race to the Top 
Phase 3 funds for awards to unfunded finalists from the Phase 2 
competition. And third, consistent with the Secretary's emphasis on 
making rewards and incentives an integral part of Federal education 
policy and programs, the Department views Race to the Top Phase 3 as a 
unique opportunity

[[Page 70987]]

to reward the efforts of all nine unfunded finalists from the Phase 2 
competition while at the same time enabling them to make meaningful 
progress on key elements of their comprehensive statewide reform plans.
    Changes: None.

Assurances

    Comment: One commenter recommended limiting the number of 
assurances required in each Race to the Top Phase 3 application to only 
those that are relevant to the specific activities selected for funding 
in each application. The commenter also suggested modifying the 
assurances and other requirements of Race to the Top Phase 3 to 
incorporate the recently announced principles of Elementary and 
Secondary Education Act (ESEA) flexibility.
    Discussion: A key goal of Race to the Top Phase 3 is to provide an 
incentive for the unfunded finalists from the Race to the Top Phase 2 
competition to maintain their momentum for comprehensive reform and 
continue working to implement key elements of their Race to the Top 
Phase 2 plans even in the absence of full funding for those plans. The 
assurances included in section IV of these final requirements are 
intended to reinforce this goal by requiring eligible applicants to 
demonstrate a uniform, visible, ongoing commitment to the comprehensive 
set of conditions and reforms included in their Race to the Top Phase 2 
plans. Limiting the assurances to those related to the specific 
activities proposed for funding under Race to the Top Phase 3 would 
undermine the comprehensive approach to education reform embodied in 
Race to the Top.
    The principles of the Department's ESEA flexibility are intended to 
support individual State efforts to develop and implement college- and 
career-ready standards and aligned assessments; differentiated 
recognition, accountability, and support systems; and teacher and 
principal evaluation systems. The Department recognizes that while 
supporting similar strategies to improve academic achievement for all 
students, the requirements of the Race to the Top program and ESEA 
flexibility may not be possible in all instances. As discussed 
elsewhere in this notice, the Department is making Race to the Top 
Phase 3 awards on the basis of previously submitted Phase 2 
applications and the activities proposed by eligible States in those 
applications in response to the requirements and priorities that 
applied to the Race to the Top Phase 2 application. Accordingly, we 
decline to alter those assurances in order to incorporate ESEA 
flexibility, even though States receiving Race to the Top Phase 3 
awards are also free to submit ESEA flexibility requests.
    Changes: None.
    Comment: One commenter expressed concern about the Education Jobs 
Fund maintenance-of-effort (MOE) requirement in assurance (a). This 
commenter asked for clarification as to whether funds provided by the 
State Fiscal Stabilization Fund and the Education Jobs Fund may be 
counted as ``State support'' for the purposes of meeting assurance (a) 
and whether a State would be required to meet the MOE requirement only 
for FY 2011. The commenter also recommended removing assurance (a) from 
the final requirements because it could prevent some eligible States 
from applying for Race to the Top Phase 3 funds. Another commenter 
recommended strengthening the fiscal requirements of Race to the Top 
Phase 3 through the addition of a supplement-not-supplant requirement.
    Discussion: The Department included the Education Jobs Fund MOE 
requirement in the assurances for Race to the Top Phase 3 as a measure 
of a State's commitment to maintaining the fiscal support for education 
needed to create the conditions for education reform consistent with 
successful implementation of Race to the Top reform plans. The 
Department believes that a Race to the Top Phase 3 award is unlikely to 
contribute to meaningful change and improvement in a State that is 
reducing its overall financial support for schools and postsecondary 
institutions. In determining whether a State has met the Education Jobs 
Fund MOE requirement for the purpose of satisfying assurance (a), the 
data used must include only State support for education. Federal funds, 
including those received from the State Fiscal Stabilization Fund and 
the Education Jobs Fund, are not considered State support for 
education. However, State appropriations to local governments to 
support elementary and secondary education may be included as State 
support. The Department believes that the MOE requirement in this final 
notice is adequate to ensure continued State support for education and 
declines to limit State flexibility or add a supplement-not-supplant 
requirement.
    Changes: None.
    Comment: One commenter raised the possibility that a State 
legislature could create statutory barriers to the development of 
teacher and principal evaluation systems between the time a State 
submits Part I of its Race to the Top Phase 3 application and the time 
the State submits Part II of its application, potentially resulting in 
the State not meeting assurance (c) regarding legal, statutory, or 
regulatory barriers at the State level to linking data on student 
achievement or student growth to teachers and principals for the 
purpose of teacher and principal evaluation. To account for this 
possibility, the commenter recommended that the language ``[a]t the 
time the State submits its application'' in assurance (c) be 
interpreted as applying only to the date on which a State submits Part 
I of the application.
    Discussion: The Department interprets the language ``[a]t the time 
the State submits its application'' in assurance (c) to cover 
submission of both Parts I and II of the application for Race to the 
Top Phase 3 funds. Moreover, the Department notes that changes in State 
law, regulation, or policy after the receipt of a Race to the Top Phase 
3 award that prevent full and effective implementation of Phase 3 
activities would need to be reviewed and considered on a case-by-case 
basis by the Department, and could result in changes in or the possible 
partial or complete termination of a Phase 3 award.
    Changes: None.
    Comment: One commenter requested clarification as to whether 
assurance (d), regarding a State's commitment to improving the quality 
of its assessments, is intended to commit a State to adopting and 
implementing a particular set of assessments before it has the 
opportunity to review the completed assessments.
    Discussion: Assurance (d) does not commit a State to adopt or 
implement a particular set of assessments in advance of the completion 
of those assessments. It merely reiterates and reinforces the 
commitment that the State made in its Race to the Top Phase 2 
application to improve the quality of the State's assessments, as 
demonstrated by the State's participation in one or more consortia of 
States working to develop and implement common, high-quality 
assessments aligned with a common set of K-12 standards.
    Changes: None.
    Comment: One commenter requested clarification of assurance (e) 
regarding the maintenance of the conditions for reform described in the 
State's Race to the Top Phase 2 application. More specifically, the 
commenter asked whether the assurance was primarily focused on the 
statutory and regulatory framework for core reforms or whether it was 
focused on specific activities that would support that statutory and 
regulatory framework, but that a State may not be able to afford in the 
absence

[[Page 70988]]

of the funds sought as part of its Race to the Top Phase 2 application.
    Discussion: Assurance (e) is primarily focused on the maintenance 
of the statutory and regulatory framework for the core reforms included 
in a State's Race to the Top Phase 2 application, not on the specific 
activities in the application.
    Changes: None.
    Comment: One commenter expressed concern that assurance (f), 
regarding a State's commitment to comprehensive reforms and innovation, 
could be interpreted as support for the full implementation of plans 
and strategies included in the State's Race to the Top Phase 2 
application.
    Discussion: The Department recognizes that States are not able to 
fully implement their Race to the Top Phase 2 plans absent the full 
amount of funding sought in their Phase 2 applications. Assurance (f) 
is simply meant to reinforce a State's commitment to its Race to the 
Top Phase 2 plan as the framework for State and local education reform 
efforts going forward, even in the absence of funding levels that would 
support full implementation of that plan.
    Changes: None.

Selection of Activities for Funding

    Comment: One commenter asked whether a State must select, for 
funding under Race to the Top Phase 3, activities exactly as they were 
described in its Phase 2 application, or whether those activities could 
be modified, changed, or combined to ensure that Race to the Top Phase 
3 funds have the greatest impact on advancing State reform plans.
    Discussion: To meet assurance (g), States must select activities 
that are consistent with the commitment to comprehensive reform and 
innovation that the State demonstrated in its Race to the Top Phase 2 
application, including activities that are most likely to improve 
science, technology, engineering, and mathematics (STEM) education. The 
Department intends for this assurance to require an eligible State to 
select activities from its Phase 2 application for funding under Race 
to the Top Phase 3, while permitting the State to adjust the scope, 
budget, timelines, and performance measures of those selected 
activities. A State is not permitted, however, to use Race to the Top 
Phase 3 funds for activities that were not included in its Phase 2 
application.
    Changes: None.

Science, Technology, Engineering, and Mathematics (STEM) Education

    Comment: One commenter proposed allowing States to include, as part 
of their Race to the Top Phase 3 STEM plans, activities related to one 
or more of the four core education reform areas that were not 
specifically included in their Phase 2 applications.
    Discussion: As noted in response to a more general comment 
regarding the selection of activities for funding under Race to the Top 
Phase 3, assurance (g) requires States to limit their selection of 
activities, ``including activities that are most likely to improve STEM 
education,'' to the activities from their Race to the Top Phase 2 
applications. However, States have flexibility to select activities to 
support the STEM focus in Race to the Top Phase 3 that might not have 
been described as STEM-related in their Phase 2 applications. In 
addition, States may modify the scope, budget, and timelines of 
activities selected from their Phase 2 applications for funding under 
Race to the Top Phase 3.
    Changes: None.
    Comment: One commenter asked whether a State could elect to focus 
the STEM activities in its Race to the Top Phase 3 plan on just one of 
the four core ARRA education reform areas or whether a STEM focus is 
required in all four reform areas.
    Discussion: As we stated in the NPR, an eligible applicant could 
demonstrate an emphasis on promoting STEM education by selecting 
activities ``within one or more of the four core education reform 
areas.''
    Changes: None.
    Comment: Two commenters requested a definition of the term 
``meaningful share'' as it is used in section V. Budget Requirements to 
describe the amount of a State's Race to the Top Phase 3 award that 
must be allocated to advance STEM education.
    Discussion: The proposed budget requirements, which are retained in 
these final requirements, were intended to give States flexibility in 
demonstrating how their detailed plans and budgets would make a 
meaningful contribution to advancing STEM education. In general, a 
``meaningful share'' in the STEM context means funding for STEM-related 
activities at a level that would be likely to result in a measurable 
improvement in one or more STEM outcomes related to each activity. For 
example, a $2 million investment in expanding the number of teachers 
qualified to teach Advanced Placement (AP) Calculus would be considered 
meaningful if the State could demonstrate that this level of funding 
would lead to a significant increase in the number of students in high-
poverty schools taking AP Calculus over a 3-year period.
    Changes: None.
    Comment: One commenter recommended the addition of new language to 
the competitive preference priority for STEM education that was 
included in the Race to the Top Phase 2 competition.
    Discussion: The Department is making Race to the Top Phase 3 awards 
on the basis of previously submitted Phase 2 applications and the 
activities proposed by eligible States in those applications in 
response to the requirements and priorities that applied to the Race to 
the Top Phase 2 application. Modifying those existing priorities and 
requirements would not be consistent with this process, and the 
Department declines to make the change recommended by the commenter.
    Changes: None.

Participating Local Educational Agencies (LEAs)

    Comment: One commenter asked whether a State could revise or 
replace previously negotiated memoranda of understanding (MOUs) with 
participating LEAs.
    Discussion: In general, a State will not need to revise or replace 
the MOUs with participating LEAs included in its Race to the Top Phase 
2 application. However, the Department expects that States will work 
with LEAs during the application process and at the beginning of the 
grant period to update and finalize local scopes of work.
    Changes: None.
    Comment: Two commenters asked whether a State receiving Race to the 
Top Phase 3 funds must allocate the LEA share of those funds to the 
LEAs that signed MOUs and were listed as participating LEAs in the 
State's Phase 2 application. Two commenters requested clarification as 
to whether participating LEAs listed on a State's Phase 2 application 
may ``opt out'' of participation in Race to the Top Phase 3 as well as 
whether previously non-participating LEAs may sign up to participate in 
Race to the Top Phase 3.
    Discussion: The Department expects that a State receiving Race to 
the Top Phase 3 funds will allocate the LEA share of those funds to the 
participating LEAs listed in its Phase 2 application. However, the 
final identity and number of participating LEAs for Race to the Top 
Phase 3 will depend on the activities selected for funding and the 
final scopes of work developed for participating LEAs. In part, this is 
because participating LEAs may

[[Page 70989]]

withdraw from a State's Race to the Top reform plan, and States may 
sign up previously non-participating LEAs as participating LEAs for 
Race to the Top Phase 3.
    Changes: None.
    Comment: Several commenters requested that we add flexibility to 
the final requirements so that States would be permitted to select the 
LEAs that will participate in Race to the Top Phase 3 activities and 
receive at least 50 percent of their State's Race to the Top Phase 3 
award. Commenters sought, for example, to modify the list of 
participating LEAs submitted as part of States' Phase 2 applications 
and to limit the number of participating LEAs in order to maximize the 
impact of available funding. Two commenters requested flexibility to 
delay selection of participating LEAs until the beginning of the grant 
period (instead of submitting a list of participating LEAs with the 
application, as was required in the Race to the Top Phase 1 and Phase 2 
competitions).
    Discussion: The Department recognizes that the limited scope of and 
funding available under Race to the Top Phase 3 may create challenges 
in ensuring the full and effective participation of the LEAs included 
on a State's Phase 2 list. However, the Department believes that the 
most appropriate way to meet this challenge will be for States to work 
carefully and thoughtfully with LEAs during the application process and 
at the beginning of the grant period to update the local scopes of 
work. States do not have the discretion to select participating LEAs or 
limit LEA participation by using certain demographic or geographic 
characteristics, setting new requirements for such participation, or 
employing a competitive process to determine which LEAs may 
participate. All LEAs in a State, including public charter schools 
identified as LEAs under State law, must have the opportunity to 
participate in the State's Race to the Top Phase 3 application if they 
commit to implementing ``all or significant portions'' of the State's 
plan. As described earlier in this preamble, the Department generally 
expects a State receiving Race to the Top Phase 3 funds to allocate the 
LEA share of those funds to the participating LEAs listed in its Phase 
2 application, with adjustments resulting from decisions by some LEAs 
to drop out of Race to the Top Phase 3 and others to sign up for the 
first time.
    Changes: None.
    Comment: One commenter recommended requiring States to document the 
process by which they sign up participating LEAs, including the request 
for such participation and any responses indicating the decisions of 
LEAs regarding participation.
    Discussion: The Department believes that the process used by States 
to determine participating LEAs for the Race to the Top Phase 2 
competition was adequate for ensuring that every LEA was provided a 
fair opportunity to sign up for Race to the Top. The Department 
declines to create new, potentially burdensome administrative 
requirements for this process as part of Race to the Top Phase 3.
    Changes: None.
    Comment: One commenter asked whether participating LEAs would be 
permitted to pool their Race to the Top Phase 3 allocations, such as 
through an educational service agency, in order to carry out the 
activities required by the State's Race to the Top Phase 3 plan.
    Discussion: Participating LEAs have flexibility, consistent with 
the requirements of their State's plan, in how they spend their share 
of Race to the Top Phase 3 funds and will be permitted to pool 
resources with other participating LEAs to more effectively carry out 
the State's plan.
    Changes: None.

Race to the Top Phase 3 Allocations

    Comment: One commenter expressed concern that the proposed amounts 
available to each of the nine eligible States under Race to the Top 
Phase 3 would be too small to have a meaningful impact in those States, 
particularly if a portion of the funds must be dedicated to STEM 
activities. The commenter recommended that the Department consider 
alternative funding strategies, such as funding fewer States, requiring 
States to provide matching funds in order to receive a Race to the Top 
Phase 3 award, or allowing States to select the reform areas most in 
need of funding.
    Discussion: As discussed in the NPR and in the Regulatory 
Alternatives Considered section of this notice, the Department already 
has considered alternative methods of awarding Race to the Top Phase 3 
funds, and believes that the approach described in the NPR and retained 
in these final requirements will result in the optimal use of available 
funding, fulfilling the twin goals of rewarding unfunded finalists from 
the 2010 Race to the Top Phase 2 competition and enabling them to make 
meaningful progress on key elements of their comprehensive statewide 
reform plans. The Department also notes that while these final 
requirements do require States to ensure that the activities selected 
for funding under Race to the Top Phase 3 make a meaningful 
contribution to advancing STEM education, States will have considerable 
flexibility to select the mix of activities that best meets their 
needs. Finally, the Department believes that requiring matching funds 
for Race to the Top Phase 3 awards would be inconsistent with the 
decision, authorized by Congress, to make such awards on the basis of 
previously submitted applications, which did not include a matching 
requirement.
    Changes: None.
    Comment: One commenter requested that we modify the final 
requirements to allow States the flexibility to use, in view of reduced 
award levels, the LEA share of funds on behalf of participating LEAs 
without actually awarding funds to participating LEAs. One benefit of 
this approach, according to the commenter, would be to reduce reporting 
and other accountability burdens on participating LEAs.
    Discussion: Retaining the LEA share of Race to the Top Phase 3 
funds under State control, even if used for the benefit of 
participating LEAs, is not permitted under section 14006(c) of the 
ARRA, which requires States to subgrant at least 50 percent of their 
Race to the Top awards directly to LEAs based on their relative shares 
of funds made available under part A of Title I of the ESEA. Note, 
however, that LEAs must use their funding in a manner that is 
consistent with the State's plan and the MOU or other binding agreement 
between the LEA and the State. A State also may establish more detailed 
rules on uses of funds, provided they are consistent with the ARRA, and 
may require that participating LEAs use their funds to pay for certain 
activities that are required elements of the State's plan.
    Changes: None.
    Comment: One commenter recommended that the Department clarify 
options for funding charter schools that are not LEAs, as well as the 
flexibility of States to use their share of any Race to the Top award 
to include such schools in Race to the Top activities or for other 
purposes, such as to provide extra support to urban or rural areas or 
to promote specific reform strategies, such as STEM education.
    Discussion: The Department has previously clarified in guidance 
provided during the Race to the Top Phase 1 and Phase 2 competitions 
that participating LEAs must include charter and non-charter schools in 
an equitable manner (see http://www2.ed.gov/programs/racetothetop/faq-grantee.pdf). That guidance also specifies that States have 
considerable flexibility in using Race to the Top funds to implement 
their approved reform plans. The State share of any Race to the Top 
award is

[[Page 70990]]

available for State-level activities, for allocation to LEAs or 
schools, including charter schools, under a formula or process of the 
State's own choosing, or for other purposes consistent with the State's 
plan. The Department believes this previously issued guidance 
sufficiently addresses the issues raised by the commenter.
    Changes: None.
    Comment: One commenter stated that the use of poverty data on 
children ages 5 to 17 to allocate Race to the Top funds to States 
should not be interpreted as limiting the use of those funds to serve 
children only in that age range.
    Discussion: Guidance issued for the Race to the Top Phase 1 and 
Phase 2 competitions makes it clear that Race to the Top funds may be 
used for a wide range of activities and purposes consistent with a 
State's Race to the Top plan, and that these funds are not limited to 
particular age ranges or groups of children (see http://www2.ed.gov/programs/racetothetop/faq.pdf). The Department also notes that although 
LEAs receive subgrants from the State based on their relative shares of 
funding received through Title I, Part A of the ESEA, these subgrants 
are not subject to the restrictions on uses of funds that apply to 
Title I funds.

Applications

    Comment: One commenter recommended that the Department require Race 
to the Top Phase 3 applicants to update their Phase 2 applications in 
order to demonstrate, and permit an assessment of, progress in 
improving the conditions of education in each State.
    Discussion: The Department notes that significant progress in 
implementing the Race to the Top Phase 2 plans of eligible applicants 
was predicated at least in part on the receipt of an award under the 
Phase 2 competition. Since none of the eligible applicants under Race 
to the Top Phase 3, by definition, was funded under the Phase 2 
competition, the Department does not believe it would be fair to 
require those applicants to demonstrate progress in implementing their 
plans by updating their Phase 2 applications as a condition of 
receiving Race to the Top Phase 3 funds. The Department believes that 
the assurances required in section VI of these final requirements will 
provide a sufficient demonstration of the ongoing commitment to 
comprehensive reform and innovation to qualify an eligible State for a 
Race to the Top Phase 3 award. The Department also notes that the FY 
2011 Appropriations Act specifically authorizes the Secretary to make 
awards ``on the basis of previously submitted applications'' rather 
than new or updated applications.
    Changes: None.

Performance Measures

    Comment: One commenter asked how the Department would measure the 
progress of a Race to the Top Phase 3 grantee in the implementation of 
activities for which the overall Race to the Top program does not 
include a performance measure.
    Discussion: The Department agrees that the more limited scope of 
Race to the Top Phase 3 means that funded activities may not be covered 
by existing Race to the Top performance measures. In response to this 
comment, and to ensure meaningful evaluation of grantee performance 
under Race to the Top Phase 3, the Department has added an application 
requirement to these final requirements specifying that an eligible 
applicant must include in Part II of its application for Race to the 
Top Phase 3 funds performance measures by sub-criteria for any 
activities selected for funding under Race to the Top Phase 3 for which 
such measures were not included in the State's Phase 2 application.
    Changes: The Department has added a new application requirement in 
section III.B of these final requirements stating that a State must 
include in Part II of its application performance measures, by sub-
criteria, for any activities selected for funding under Race to the Top 
Phase 3 for which such measures were not included in the State's Phase 
2 application.

Evaluation

    Comment: One commenter requested clarification of the amount of 
funding that a State could use for evaluation under Race to the Top 
Phase 3, both for internal evaluation purposes and for meeting 
assurance (i) regarding any evaluation of the program conducted and 
supported by the Department.
    Discussion: A State receiving Race to the Top Phase 3 funding has 
discretion, consistent with the overall flexibility afforded to States 
in the use of State-level Race to the Top funds for any purpose related 
to the State's reform plan, to reserve funding for evaluation of the 
activities in their Phase 2 applications that are funded with Race to 
the Top Phase 3 awards. Note, however, that any evaluation conducted 
and supported by the Department will be paid for by the Department and 
the State would not be required to use any Race to the Top Phase 3 
funds for such evaluations.
    Changes: None.

Race to the Top Amendment Process

    Comment: One commenter recommended that the Department formalize 
and streamline the amendment process for State plans under the Race to 
the Top program. The commenter noted that with Race to the Top Phase 3 
expected to raise the total number of Race to the Top grantees to 21, a 
more formal process for submitting, reviewing, and approving amendment 
requests would reduce paperwork burdens, lower costs, and reduce 
regulatory uncertainty.
    Discussion: The Department declines to make any changes to the Race 
to the Top amendment process in these final requirements at this time 
because it does not believe such changes are necessary. That said, the 
Department continuously reviews all aspects of the administration of 
the Race to the Top program, as well as other Department education 
programs, to reduce burdens and costs and improve program 
effectiveness. If, as a part of this ongoing review process, the 
Department identifies changes that would reduce burdens and costs and 
improve the effectiveness of this program, the Department will 
certainly explore making those changes.
    Changes: None.

General Comments

    Comment: One commenter recommended a wide range of changes to the 
requirements for the Race to the Top program, not only for Race to the 
Top Phase 3, but also for retroactive application to Phase 1 and Phase 
2 grantees. Recommendations included the use of multiple sources of 
evidence to determine student academic growth, the use of multiple 
indicators of professional practice in teacher and principal 
evaluations, protecting the privacy of school personnel when 
publicizing performance ratings, requiring well-prepared and 
experienced teachers in struggling schools, greater flexibility in 
selecting interventions for struggling schools, supporting the adoption 
of college- and career-ready standards and assessments without 
participation in consortia, ensuring equity and adequacy in education 
funding, and the protection of collective bargaining rights.
    Discussion: As noted elsewhere in this preamble, the FY 2011 
Appropriations Act specifically authorizes the Secretary to make Race 
to the Top Phase 3 awards on the basis of previously submitted 
applications, and this is the approach provided for in these final 
requirements. The Department declines to retroactively

[[Page 70991]]

change program requirements where grantees previously received 
competitive awards on the basis of compliance with those requirements. 
Moreover, such action would undermine the progress under way in the 
current 12 Race to the Top States because it would potentially require 
significant modifications to existing, approved Race to the Top reform 
plans. In addition, such an action could prevent nine additional States 
that previously submitted competitive, high-quality applications from 
implementing those plans with Race to the Top Phase 3 funds.
    Changes: None.
    Comment: One commenter suggested two modifications to the proposed 
requirements for Race to the Top Phase 3 to support improved 
achievement and assessment results. First, the commenter recommended 
revising the requirements so that they encourage a stronger emphasis on 
creating what the commenter described as equal conditions for 
education, through such actions as strengthening libraries in high-
poverty school districts. Second, the commenter called for redesigning 
academic assessments to better capture deeper knowledge and higher-
order thinking skills.
    Discussion: The Department believes that the current Race to the 
Top program already supports the reforms recommended by the commenter. 
All Race to the Top applicants, including the nine unfunded Phase 2 
finalists eligible for Race to the Top Phase 3, must demonstrate a 
strong commitment to and progress toward adopting and implementing 
college- and career-ready academic standards as well as to creating, 
adopting, and implementing new, comprehensive assessments aligned with 
those standards. These new standards and assessments, which by 
definition are linked closely to the knowledge and skills required to 
move successfully into higher education or a career, represent a 
concrete step in the direction of the more meaningful assessment system 
suggested by the commenter. In addition, while the reforms encouraged 
by the Race to the Top program are intended to leverage system-wide 
change and innovation, they also include a special emphasis on efforts 
to turn around struggling schools, many of them in high-poverty 
communities, through comprehensive interventions that may include 
activities to improve school climate and provide social-emotional and 
community-oriented services and supports for students.
    Changes: None.
    Comment: None.
    Discussion: In addition to making technical and other minor edits 
to improve the clarity and readability of these final requirements, the 
Department made changes in two additional areas where the language in 
the NPR might have created confusion or was deemed unnecessary. First, 
the language in the Application Assurances section regarding standards 
and assessments did not consistently describe those standards and 
assessments as being linked to college- and career-readiness. The 
Department has clarified this link in these final requirements, 
specifically in assurances (d), (e), and (f). Second, the proposed 
Budget Requirements included a requirement for a description of the 
State's process for allocating 50 percent of its Race to the Top Phase 
3 award to participating LEAs. The Department has determined that this 
proposed requirement is unnecessary because the underlying statutory 
requirement in section 140006(c) of the ARRA clearly specifies the 
process for allocation of Race to the Top funds to participating LEAs. 
Consequently, the Department has removed the requirement, described in 
the NPR under Proposed Budget Requirements, that the plan and budget 
required by Part II of a State's application include a description of 
the State's process for allocating at least 50 percent of Race to the 
Top Phase 3 funds to participating LEAs.
    Changes: The Department has modified language in these final 
requirements to clarify that the references to common standards and 
assessments in assurances (d), (e), and (f) must be linked to college- 
and career-readiness. In addition, the Department has removed a 
requirement from the Proposed Budget Requirements that would have 
required States to include in Part II of their applications a 
description of their processes for allocating at least 50 percent of 
their Race to the Top Phase 3 funds to participating LEAs.

Final Requirements

    The Secretary announces the following requirements for Race to the 
Top Phase 3 awards. Except where otherwise indicated in these final 
requirements, the applicable final requirements and definitions of key 
terms from the notice of final priorities, requirements, definitions, 
and selection criteria, published in the Federal Register on November 
18, 2009 (74 FR 59688), apply to the Race to the Top Phase 3 
application process.
    I. Award Process: The Department will make awards through a two-
part application process. States that meet the eligibility requirements 
must submit Part I of the application. Part I must meet the 
requirements in part A of the Application Requirements section and 
provide the required assurances listed in the Application Assurances 
section.
    The Department will notify eligible applicants that met the 
application requirements and provided the required application 
assurances and will provide an estimate of the Race to the Top Phase 3 
funds available to each based on the number of qualified applicants.
    Qualified applicants then must submit Part II of the application 
for review and approval by the Secretary. Part II must meet the 
requirements in Part B of the Application Requirements section. It must 
also include a detailed plan and budget describing the activities 
selected from the State's Race to the Top Phase 2 application that will 
be implemented with Race to the Top Phase 3 funding in accordance with 
the Budget Requirements in these final requirements.
    II. Eligibility Requirements: States that were finalists, but did 
not receive grant awards, in the 2010 Race to the Top Phase 2 
competition are eligible to receive Race to the Top Phase 3 awards. 
Therefore, only the States of Arizona, California, Colorado, Illinois, 
Kentucky, Louisiana, New Jersey, Pennsylvania, and South Carolina are 
eligible to apply for Race to the Top Phase 3 awards.
    III. Application Requirements: To receive Race to the Top Phase 3 
funding, an eligible applicant must meet two application requirements:
    A. In Part I of the application, a State must submit the signatures 
of the Governor, the State's chief school officer, and the president of 
the State board of education, or their authorized representatives.
    B. In Part II of the application, a State must include performance 
measures, by sub-criteria, for any activities selected for funding 
under Race to the Top Phase 3 for which such measures were not included 
in the State's Phase 2 application.
    IV. Application Assurances: The Governor (or the Governor's 
authorized representative) must provide the following assurances in the 
State's Race to the Top Phase 3 application:
    (a) The State is in compliance with the Education Jobs Fund 
maintenance-of-effort requirements in section 101(10)(A) of Public Law 
111-226.
    (b) The State is in compliance with the State Fiscal Stabilization 
Fund Phase 2 requirements with respect to Indicator (b)(1) regarding 
the State's statewide longitudinal data system. (See notice of final 
requirements, definitions, and approval criteria for the State Fiscal

[[Page 70992]]

Stabilization Fund Program published in the Federal Register on 
November 12, 2009 (74 FR 58436), and the interim final requirement for 
the State Fiscal Stabilization Fund Program published in the Federal 
Register on September 23, 2011 (76 FR 59036)).
    (c) At the time the State submits its application, there are no 
legal, statutory, or regulatory barriers at the State level to linking 
data on student achievement or student growth to teachers and 
principals for the purpose of teacher and principal evaluation.
    (d) The State will maintain its commitment to improving the quality 
of its assessments, evidenced by the State's participation in a 
consortium of States that--
    (i) Is working toward jointly developing and implementing common, 
high-quality assessments aligned with a common set of K-12 standards 
that prepare students for college and careers; and
    (ii) Includes a significant number of States.
    (e) The State will maintain, at a minimum, the conditions for 
reform described in its Race to the Top Phase 2 application, 
including--
    (i) The State's adoption and implementation of a common set of K-12 
standards that prepare students for college and careers, as specified 
in section (B)(1)(ii) of the State's Race to the Top Phase 2 
application;
    (ii) The State's statutory and regulatory framework related to 
improving teacher and school leader effectiveness and ensuring an 
equitable distribution of effective teachers and leaders, as described 
in section D of the State's Race to the Top Phase 2 application;
    (iii) The State's statutory and regulatory framework for 
implementing effective school and LEA turnaround measures, as described 
in section E of the State's Race to the Top Phase 2 application; and
    (iv) The State's statutory and regulatory framework for supporting 
the creation and expansion of high-performing charter schools and other 
innovative schools, as described in section (F)(2) of its Race to the 
Top Phase 2 application.
    (f) The State will maintain its commitment to comprehensive reforms 
and innovation designed to increase student achievement and to 
continued progress in the four reform areas specified in the ARRA, 
including the adoption and implementation of college- and career-ready 
standards and high-quality assessments, improving the collection and 
use of data, increasing teacher effectiveness and equity in the 
distribution of effective teachers, and turning around the State's 
lowest achieving schools.
    (g) The State will select activities for funding that are 
consistent with the commitment to comprehensive reform and innovation 
that the State demonstrated in its Race to the Top Phase 2 application, 
including activities that are most likely to improve STEM education.
    (h) The State will comply with all of the accountability, 
transparency, and reporting requirements that apply to the Race to the 
Top program (See the notice of final priorities, requirements, 
definitions, and selection criteria for the Race to the Top Fund 
published in the Federal Register on November 18, 2009 (74 FR 59688)), 
with the exception of reporting requirements applicable solely to funds 
provided under the ARRA. (Note: The ARRA section 1512 reporting 
requirements do not apply to the funds we will award under the Race to 
the Top Phase 3 award process).
    (i) A State will comply with the requirements of any evaluation of 
the program, or of specific activities pursued as part of the program, 
conducted and supported by the Department.
    V. Budget Requirements: An eligible applicant must apply for a 
proportional share of the approximately $200 million available for Race 
to the Top Phase 3 awards based primarily on its share of the 
population of children ages 5 through 17 across the nine States. The 
estimated amounts for which each eligible State could apply are shown 
in the following table. The amounts provided in this table are based on 
the assumption that all eligible States will apply for a share of 
available funding; the amounts will increase if one or more eligible 
States do not apply or do not meet the application requirements.

------------------------------------------------------------------------
                          State                               Amount
------------------------------------------------------------------------
Colorado................................................     $12,250,000
Louisiana...............................................      12,250,000
South Carolina..........................................      12,250,000
Kentucky................................................      12,250,000
Arizona.................................................      17,500,000
Illinois................................................      28,000,000
Pennsylvania............................................      28,000,000
New Jersey..............................................      28,000,000
California..............................................      49,000,000
------------------------------------------------------------------------

    Once the Department notifies an applicant of the final amount of 
funds it is eligible to receive, the applicant must submit a Part II 
application that includes a detailed plan and budget. The plan and 
budget must describe the activities the applicant has selected from its 
Race to the Top Phase 2 application that it proposes to implement with 
Race to the Top Phase 3 funding, including how the State will allocate 
a meaningful share of its Phase 3 award to advance STEM education in 
the State.
    The plan and budget must also provide--
    (a) An explanation of why the applicant has selected these 
activities; and
    (b) An explanation of why the applicant believes these activities 
will have the greatest impact on advancing its overall statewide reform 
plan.
    These final requirements do not preclude us from proposing 
additional priorities, requirements, definitions, or selection 
criteria, subject to meeting applicable rulemaking requirements.

    Note: This notice does not solicit applications. In any year in 
which we choose to use one or more of these requirements we invite 
applications through a notice in the Federal Register.

Executive Orders 12866 and 13563

    Under Executive Order 12866, the Secretary must determine whether a 
regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive order and subject to review by the Office 
of Management and Budget (OMB). Section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action likely to 
result in a rule that may (1) have an annual effect on the economy of 
$100 million or more, or adversely affect a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or Tribal governments or communities in a 
material way (also referred to as an ``economically significant'' 
rule); (2) create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency; (3) materially alter the 
budgetary impacts of entitlement grants, user fees, or local programs 
or the rights and obligations of recipients thereof; or (4) raise novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive order.
    It has been determined that this regulatory action will have an 
annual effect on the economy of more than $100 million because the 
amount of government transfers through the Race to the Top Phase 3 
award process exceeds that amount. Therefore, this action is 
economically significant and subject to OMB review under section 
3(f)(1) of Executive Order 12866. Notwithstanding this determination, 
we have assessed the potential costs and benefits--both quantitative 
and

[[Page 70993]]

qualitative--of this regulatory action and have determined that the 
benefits justify the costs.
    The Department has also reviewed these final requirements pursuant 
to Executive Order 13563, published on January 21, 2011 (76 FR 3821). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
regulations only upon a reasoned determination that their benefits 
justify their costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor their regulations to impose the 
least burden on society, consistent with obtaining regulatory 
objectives, taking into account, among other things, and to the extent 
practicable, the costs of cumulative regulations; (3) select, in 
choosing among alternative regulatory approaches, those approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive impacts; 
and equity); (4) the extent feasible, specify performance objectives, 
rather than specifying the behavior or manner of compliance that 
regulated entities must adopt; and (5) identify and assess available 
alternatives to direct regulation, including providing economic 
incentives to encourage the desired behavior, such as user fees or 
marketable permits, or providing information upon which choices can be 
made by the public.
    We emphasize as well that Executive Order 13563 requires agencies 
``to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible.'' In its 
February 2, 2011, memorandum (M-11-10) on Executive Order 13563, 
improving regulation and regulatory review, the Office of Information 
and Regulatory Affairs has emphasized that such techniques may include 
``identifying changing future compliance costs that might result from 
technological innovation or anticipated behavioral changes.''
    We are issuing these final requirements only upon a reasoned 
determination that their benefits justify their costs and we selected, 
in choosing among alternative regulatory approaches, those approaches 
that maximize net benefits. Based on the analysis below, the Department 
believes that these final requirements are consistent with the 
principles in Executive Order 13563.
    In this section we discuss the need for regulatory action, the 
costs and benefits, as well as regulatory alternatives we considered.

Need for Federal Regulatory Action

    These requirements are needed to implement the Race to the Top 
Phase 3 award process in the manner that the Secretary believes will 
best enable the program to achieve its objectives of creating the 
conditions for effective reform and meaningful innovation in education 
while helping States that were finalists, but did not receive funding 
under the Race to the Top Phase 2 competition, to implement selected 
elements of their comprehensive reform proposals submitted as part of 
their Race to the Top Phase 2 applications.

Potential Costs and Benefits

    Under Executive Order 12866, we have assessed the potential costs 
and benefits of this regulatory action and have determined that these 
final requirements will not impose significant additional costs to 
State applicants or the Federal Government. Most of the requirements 
involve re-affirming the commitments and plans already completed as 
part of the 2010 Race to the Top Phase 2 competition or other Federal 
education programs. As an example of a requirement that will result in 
minimal additional burden and cost, we are requiring that States 
applying for Race to the Top Phase 3 funding provide an assurance that 
they are meeting the MOE requirements of the Education Jobs Fund 
program. Similarly, other final requirements, in particular those 
related to maintaining conditions for reform required under the Race to 
the Top Phase 2 competition, require continuation of existing 
commitments and investments rather than the imposition of additional 
burdens and costs. For example, States will be required to continue 
implementation of common K-12 academic content standards. The 
Department believes States will incur minimal costs in developing plans 
and budgets for implementing selected activities from their Race to the 
Top Phase 2 proposals, because in most cases such planning will entail 
revisions to existing plans and budgets already developed as part of 
the Race to the Top Phase 2 application process, and not the 
development and implementation of entirely new plans and budgets. In 
all such cases, the Department believes that the benefits resulting 
from these requirements will exceed their costs.

Regulatory Alternatives Considered

    An alternative to promulgation of the types of requirements 
announced in this notice would be for the Secretary to use FY 2011 Race 
to the Top funds to make awards to the one or two highest scoring 
unfunded applicants from the 2010 Race to the Top Phase 2 competition. 
However, the Department believes that the scores of the unfunded 
finalists from the Race to the Top Phase 2 competition are too closely 
grouped to support awarding all FY 2011 Race to the Top funds to the 
one or two States with the highest scores. Furthermore, the Department 
believes that the approximately $200 million available from the FY 2011 
Appropriations Act for the Race to the Top program would not support 
full implementation of the comprehensive reform plans submitted by any 
of the unfunded finalists from the 2010 Race to the Top Phase 2 
competition. The Department also believes that making available 
meaningful amounts of FY 2011 Race to the Top funding to all of the 
unfunded finalists from the 2010 Race to the Top Phase 2 competition 
offers the greatest promise for sustaining the nationwide reform 
momentum created by the Race to the Top Phase 1 and Phase 2 
competitions.
    Finally, the Department believes that simply funding the one or two 
highest scoring applicants that did not win an award in the 2010 Race 
to the Top Phase 2 competition would result in a missed opportunity to 
reward the efforts of all nine unfunded finalists from that competition 
and to enable them to make meaningful progress on key elements of their 
comprehensive statewide reform plans.

Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in the following table, we have prepared an accounting 
statement showing the classification of the expenditures associated 
with the provisions of this regulatory action. This table provides our 
best estimate of the Federal payments to be made to States under this 
program as a result of this regulatory action. Expenditures are 
classified as transfers to States.

[[Page 70994]]



                          Accounting Statement Classification of Estimated Expenditures
----------------------------------------------------------------------------------------------------------------
                   Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................  $200,000,000.
From Whom To Whom?............................  Federal Government to States.
----------------------------------------------------------------------------------------------------------------

    The Race to the Top Phase 3 award process will provide 
approximately $200 million in competitive grants to eligible States.

Paperwork Reduction Act of 1995

    As we mentioned in the NPR, these final requirements contain 
information collection requirements. However, because the eligible 
applicants for Race to the Top Phase 3 awards are fewer than 10, these 
collections are not subject to approval under the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3502(3)(A)(i)).

Waiver of Delayed Effective Date and Congressional Review Act

    The Administrative Procedure Act requires that a substantive rule 
be published at least 30 days before its effective date, except as 
otherwise provided for good cause (5 U.S.C. 553(d)(3)). The Secretary 
has determined that a delayed effective date for these final 
requirements is unnecessary and contrary to the public interest, and 
that good cause exists to waive the requirement for a delayed effective 
date.
    These final requirements are needed to award the Race to the Top 
funds provided by the FY 2011 Appropriations Act to qualified 
applicants by December 31, 2011, or the funds will lapse. Even on an 
extremely expedited timeline, it is impracticable for the Department to 
adhere to a 30-day delayed effective date for the notice of final 
requirements and make grant awards to qualified applicants by the 
December 31, 2011 deadline. When the 30-day delayed effective date is 
added to the time the Department will need to receive applications 
(approximately 20 days), review the applications (approximately 20 
days), and finally approve applications (approximately 21 days), the 
Department will not be able to award funds authorized under the FY 2011 
Appropriations Act to applicants by December 31, 2011.
    These requirements have been determined to be major for purposes of 
the Congressional Review Act (CRA) (5 U.S.C. 801, et seq.). However, 
for the reasons outlined in the preceding paragraph, the Department has 
determined that, pursuant to section 808(2) of the CRA, the delay in 
the effective date generally required for congressional review is 
contrary to the public interest and waived for good cause.

Regulatory Flexibility Act Certification

    The Secretary certifies that this regulatory action will not have a 
significant economic impact on a substantial number of small entities. 
The small entities that this regulatory action will affect are small 
LEAs receiving funds under this program.
    This regulatory action will not have a significant economic impact 
on small LEAs because they will be able to meet the costs of compliance 
with this regulatory action using the funds provided under this 
program.

Effect on Other Levels of Government

    We have also determined that this regulatory action would not 
unduly interfere with State, local, and Tribal governments in the 
exercise of their governmental functions.

Assessment of Educational Impact

    In the NPR, in accordance with section 411 of the General Education 
Provisions Act, 20 U.S.C. 1221e-4, we requested comments on whether the 
proposed requirements 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 NPR and on our review, we have 
determined that these final requirements do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

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 provides early notification of our specific plans and 
actions for this program.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or computer diskette) on request to the program contact 
person listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: 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 is 
available via the Federal Digital System at http://www.gpo.gov/fdsys. 
At this site you can view this document, as well as all other documents 
of this Department published in the Federal Register, in text or Adobe 
Portable Document Format (PDF). To use PDF you must have Adobe Acrobat 
Reader, which is available free at this site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at http://www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

    Dated: November 9, 2011.
Arne Duncan,
Secretary of Education.
[FR Doc. 2011-29581 Filed 11-15-11; 8:45 am]
BILLING CODE 4000-01-P