[Federal Register Volume 81, Number 182 (Tuesday, September 20, 2016)]
[Rules and Regulations]
[Pages 64728-64745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22407]



[[Page 64727]]

Vol. 81

Tuesday,

No. 182

September 20, 2016

Part VI





 Department of Education





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34 CFR Part 222





 Impact Aid Program; Final Rule

  Federal Register / Vol. 81 , No. 182 / Tuesday, September 20, 2016 / 
Rules and Regulations  

[[Page 64728]]


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DEPARTMENT OF EDUCATION

34 CFR Part 222

RIN 1810-AB24
[Docket ID ED-2015-OESE-0109]


Impact Aid Program

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

ACTION: Final regulations.

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SUMMARY: The Secretary amends the Impact Aid Program (IAP) regulations 
issued under title VII of the Elementary and Secondary Education Act of 
1965, as amended by the Every Student Succeeds Act (ESEA or the Act). 
These regulations govern Impact Aid payments to local educational 
agencies (LEAs). The program, in general, provides assistance for 
maintenance and operations costs to LEAs that are affected by Federal 
activities. These regulations update, clarify, and improve the current 
regulations.

DATES: These regulations are effective January 31, 2017. For more 
information, see SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: Kristen Walls, U.S. Department of 
Education, 400 Maryland Avenue SW., room 3C103 LBJ, Washington, DC 
20202. Telephone: (202) 260-3858 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: January 31, 2017 is the due date for Impact 
Aid applications for fiscal year (FY) 2018, and these regulations will 
apply to our review of those and subsequent fiscal year applications. 
We will allow for early implementation of these regulations. For 
example, if before January 31, 2017, an applicant submits an 
application and can establish eligibility under these regulations (but 
not the prior regulations), we would consider the request as one for 
early implementation of these regulations and deem the applicant 
eligible.
    Additionally, affected parties do not have to comply with the new 
information collection requirements in 34 CFR part 222 until the 
Department of Education (Department) publishes in the Federal Register 
the control number assigned by the Office of Management and Budget 
(OMB) to this information collection requirement. Publication of the 
control number notifies the public that OMB has approved this 
information collection requirement under the Paperwork Reduction Act of 
1995.
    In the preamble of the NPRM, we discussed (pages 81481 through 
81487) the major changes proposed in that document to improve, clarify, 
and update the regulations governing the IAP.
    Under the ESEA, prior to amendment by the Every Student Succeeds 
Act (ESSA) (Pub. L. 114-95), the IAP statutory provisions were 
contained in title VIII. Payments for Federal Property were under 
section 8002 of the Act and Payments for Federally Connected Children 
were under section 8003 of the Act. Under the ESEA, as amended by ESSA, 
all IAP statutory provisions are now in title VII and references in 
this document are to the new statutory citations, i.e., section 7002 
for Payments for Federal Property, and section 7003 for Payments for 
Federally Connected Children. While comments received from the public 
may refer to either ``section 8003'' or ``section 7003,'' these 
regulations reference the current statutory sections.
    The Department recognizes that there are changes to the statute 
under ESSA that may require additional regulatory action. However, the 
amendments in this regulatory action are related exclusively to the 
proposed changes in the NPRM that was published on December 30, 2015, 
in the Federal Register (80 FR 81477), which do not relate to the ESSA 
revisions. Any regulatory changes resulting from the passage of ESSA 
would be proposed in a separate NPRM.
    Tribal Consultation: On December 30, 2015, the Secretary published 
a notice of proposed rulemaking (NPRM) for this program in the Federal 
Register (80 FR 81477). The NPRM followed a process of consultation 
under Executive Order 13175 (``Consultation and Coordination with 
Indian Tribal Governments'') that began with a request for tribal input 
that we announced via the Office of Indian Education's listserv on July 
2, 2015, and July 14, 2015, and continued with two nationally 
accessible tribal consultation teleconferences on July 15, 2015, and 
July 28, 2015. In the NPRM, we discussed this process in detail (80 FR 
81477).
    Public Comment: In response to our invitation to comment in the 
NPRM, 66 parties submitted comments. Twenty five comments encouraged 
consultation with teachers during the implementation of ESSA and two 
comments addressed appropriation levels for the Impact Aid Programs. We 
do not discuss these comments as they are not related to the 
regulations proposed in the NPRM. Thirty nine comments related directly 
to the proposed regulations. We discuss the substantive issues under 
the section numbers to which the comments pertain. Several comments did 
not pertain to a specific section of the proposed regulations. We 
discuss these comments based on the general topic area. In addition, 
the Department solicited comments on three topics, as follows:
     What are some alternative methods for counting federally 
connected children besides the parent-pupil survey form or source check 
collection tools?
     As these regulations would require source checks for 
children residing on Indian lands and eligible low rent housing, what 
types of technical assistance would you like the Department to provide 
to properly educate and inform LEAs on the source check process?
     As the Department is beginning to look at alternative 
sources for data collection, can you propose ways in which online data 
collection might be used to facilitate the data collection process? 
This may include but is not limited to the online collection of parent-
pupil survey forms and the use of student information systems for data 
collection.
    The comments received related to these questions will be discussed 
in the related general topic area in the following section. Generally, 
we do not address comments unrelated to the IAP, and we do not discuss 
technical and other minor changes.
    Analysis of Comments and Changes: An analysis of the comments and 
any changes from the regulations as proposed in the NPRM follows.

Methods of Data Collection

    Comments: Many commenters supported the addition of an electronic 
method to the approved systems of application data collection in Sec.  
222.35, specifically one that would leverage existing student 
information systems (SISs). In general, the commenters felt that the 
use of paper data collection is antiquated and costly as LEAs must 
support two different reporting systems for data collection and 
warehousing. One commenter stated that the use of an electronic student 
count would significantly reduce the burden of the Impact Aid 
application process, would be more cost-effective, reduce staff time 
for LEAs that choose to use this method, and would potentially improve 
the accuracy of the count. The commenter also stated that an electronic 
count would make the audit process and

[[Page 64729]]

general oversight of the program less burdensome for Department staff.
    Two commenters requested increased flexibility around the 
requirement that source check and parent-pupil survey forms be signed 
on or after the LEA's chosen survey date, to allow LEAs to use 
electronic information collected during the school registration 
process. One commenter proposed allowing forms that have been signed 
within 60 days of the survey date. Another commenter proposed using 
registration data in lieu of the parent-pupil survey form.
    A few commenters suggested that electronic methods be explicitly 
identified as allowable in the regulations. One commenter requested 
that electronic signatures be added as a valid form of certification 
and one commenter requested that references to written records be 
removed from the regulations.
    Multiple commenters suggested the Department find ways to use the 
new military student identifier, required by title I of the ESEA, as 
amended by the ESSA, to streamline data collection for Impact Aid.
    One commenter suggested that the source check document be revised 
to add a column to document the number of children who reside on 
Federal property or whose parents work on Federal property. The 
commenter stated that this might require collaboration with certifying 
officials; however, it would be helpful to the LEAs counting federally 
connected children.
    Discussion: We support methods of electronic data collection that 
decrease burden for school districts while still providing required 
evidence of the connection between students and Federal properties on a 
specific survey date. To that end, we are investigating various SISs 
and their capabilities as they relate to the IAP requirements for data 
collection. To provide more flexibility on data collection methods, 
including electronic systems or hybrids of parent-pupil surveys and 
source checks, we are adding a paragraph to Sec.  222.35 that allows an 
LEA to use an alternate method of data collection with the Secretary's 
approval. Thus, an LEA's SIS could be one such method, if an LEA can 
demonstrate that its SIS is capable of collecting and generating data 
in a manner that provides all of the information needed by IAP to 
verify student eligibility.
    The membership count, both total membership and federally connected 
membership, is a snapshot of the LEA's student composition on a 
particular date. It allows analysis of correlated data at a particular 
point in time. To ensure accuracy of student count numbers submitted on 
an application, an LEA must verify annually the parent's military duty 
status or employment location and student's residence location to 
confirm the student's federally-connected eligibility. Under the 
current regulations, unchanged by these final regulations, the LEA may 
select as a survey date any day between the fourth day of the school 
year and January 30 (Sec.  222.34(a)(2)). Although registration data 
may provide a baseline to identify children the LEA believes to be 
federally connected, information obtained during registration, 
including a student's residence or a parent's place of employment, can 
change at any time and may be outdated by the survey date. For example, 
an LEA must have a mechanism, electronic or otherwise, for parents and/
or certifying officials to update the information or confirm that there 
have been no changes since registration, to ensure that the district is 
only claiming eligible students whom the district is actually educating 
as of a specific date during the school year, and to ensure that those 
students meet all eligibility requirements as of that date. The current 
regulations did not specify that the parent must sign a parent-pupil 
survey form on or after the survey date; as a result, these final 
regulations clarify this requirement. With the addition of a third 
option for data collection, a district, for example, may be able to 
have a housing, Indian lands official, or military official verify 
data, which could eliminate the burden of having parents re-confirm 
data or sign a parent-pupil survey form.
    With regard to electronic signatures, there is nothing in the 
current regulations that prevents an LEA from using an electronically 
signed parent-pupil survey form or source check form. The Department's 
interpretation of the word ``written'' does not preclude the use of 
electronic records.
    As the Department works with States and LEAs to implement the new 
military identifier required by the ESEA, as amended by the ESSA, it 
may become appropriate to use the identifier in lieu of, or as a 
component of, the count of eligible children under the IAP. The 
Department may issue guidance to LEAs on this issue in the future.
    With regard to the suggestion for revising the source check 
document, there is no required source check form that districts must 
use. Rather, the Department provides sample source check templates for 
the convenience of the LEA. The LEA may add information to enhance the 
value of the document as long as the information needed to verify the 
child's residence location or the parents' place of employment is 
included.
    Changes: Section 222.35 is revised by adding a new paragraph (c) 
that allows an LEA to use an alternate method of data collection with 
the Department's approval. In addition, in paragraph (a)(4), language 
is added to clarify that the parent's signature on a survey form must 
be dated on or after the LEA's survey date.

Technical Assistance

    Comments: Several commenters suggested making available recorded 
Webinars and an annual handbook to educate LEAs on the required methods 
of data collection.
    One commenter appreciated efforts to keep LEAs informed through the 
use of listservs and Webinars. The commenter recommended, however, that 
changes to the application or the accompanying forms should be posted 
to the Department's Web site and sent to each LEA. The commenter 
recommended that the Department also distribute the documents to LEAs 
because Webinar participation is limited and many LEAs cannot 
participate.
    The commenter also recommended that an automatic verification 
system for application submissions, including for signature and 
assurance pages, be implemented. The commenter also requested that the 
application system not be shut down during the application period. 
Finally, the commenter requested additional clarification about who may 
sign a source check document.
    Discussion: We appreciate the suggestions to improve technical 
assistance to grantees. The Department continues to review ways to 
increase and improve communication. With regard to the request for 
additional technical assistance for source check documents, we will 
work to improve our technical assistance and outreach on all aspects of 
the Impact Aid Program including this and related regulatory matters.
    Changes: None.

Definitions--Membership (Sec.  222.2)

    Comment: One organization expressed support for the clarification 
of the definition of membership, in particular, that a student must 
reside in the State in which the LEA is located except when there is a 
formal agreement between States.
    Discussion: On occasion, certain LEAs have reported in membership 
children who reside in another State. Children who reside in one State 
and attend school in a different State are generally excluded from 
Impact Aid. Under the

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current regulations, eligible students must be supported by State aid. 
States typically do not provide State education aid for children who 
reside in other States. The amended regulation clarifies the rule and 
provides two exceptions to it: one is statutory (section 8010(c)) and 
the other is for children who are covered under a formal tuition or 
enrollment agreement between two States.
    Changes: None.

Definitions--Parent Employed on Federal Property (Sec.  222.2)

    Comment: Two organizations supported updating Sec.  222.2 to 
include the circumstance of telework. One commenter stated that the 
updated regulation makes sense, given how technology has changed the 
way people work. One commenter discussed telework in relation to 
distance learning, using the example of a school district on eligible 
Indian lands that hires a teacher who may sometimes work on the 
eligible property, from home, or on a non-tribal or non-Federal 
property.
    Discussion: As telework is becoming more common among Federal 
workers, it is necessary to recognize this change. With respect to non-
Federal employees who telework, the LEA should use the definition of 
``Parent employed on Federal property,'' in paragraphs (1)(ii), and (2) 
of Sec.  222.2(c). The amended definition of ``Parent employed on 
Federal property'' in paragraph (1)(i) addresses telework only for 
Federal employees, and provides that the eligibility of the child 
depends on the location of the parent's regular duty station, and not 
physical working location, on the survey date.
    Changes: None.
    Comment: Numerous commenters expressed concerns over the proposed 
changes to the exception in the definition of a ``parent who is 
employed on Federal property,'' specifically a parent who is not 
employed by the Federal government and reports to work at a location 
not on Federal property. Several commenters asked the Department to 
reword the regulation to improve the clarity of the provision.
    One commenter stated that the proposed regulation would exclude 
parents whose job is providing services on Federal property, but who 
are not Federal employees and whose duty station is not on Federal 
property. The commenter urged the Department to refrain from excluding 
these parents.
    Discussion: The change in this definition is intended to clarify, 
but not change the definition of a parent employed on Federal property. 
Under this definition, as the current regulation has been implemented 
and under this clarification, simply performing a service on a Federal 
property does not demonstrate that a person is employed on Federal 
property. This definition will not be applied differently than it has 
in the past.
    In response to the commenter who stated the regulation would 
exclude parents whose job is providing services on Federal property, 
but who are not Federal employees and whose duty station is not on 
Federal property, the Department clarifies that such parents are 
currently excluded from the definition of a ``parent employed on 
Federal property.'' These individuals would continue to be excluded 
from that definition under the amended regulation.
    The Department acknowledges the complexity of the regulation and 
the concerns of the commenters. To better illustrate the rule, the 
Department added examples of eligibility and ineligibility under the 
regulation, depending on the parent's employment situation.
    Changes: We have added examples of when parents meet the definition 
of a ``parent employed on Federal property,'' and when they do not.

Amendment Deadline (Sec. Sec.  222.3(b)(2) and 222.5(a)(2) and (b)(2))

    Comments: Many comments were submitted regarding the change in the 
amendment deadline from September 30 to June 30 in both Sec.  222.3 and 
Sec.  222.5. Most comments recognized that the shortened amendment 
period would facilitate prompt payments, and supported the change. Two 
commenters were concerned that some LEAs that amend their applications 
in September may have difficulty with the change. One commenter 
suggested that the Department increase communications about this change 
clearly and regularly so that LEAs that have typically amended their 
applications in September can properly prepare for the change. One 
commenter opposed shortening the deadline as it would pose a problem 
for LEAs with large memberships. The commenter stated that because the 
shortened timeframe and the amendment date fall at the end of most 
LEAs' fiscal year, the change poses significant problems for LEAs with 
large memberships.
    Discussion: Each year many LEAs submit applications in January 
showing incomplete counts of eligible children and provide complete and 
accurate information through amendments submitted as late as September 
30. This practice impedes the Department's ability to review the 
applications and prepare initial payments in a timely fashion. The 
Department is expected to make Impact Aid payments generally no later 
than two years after funds are appropriated (ESEA section 7010(d), 
codifying a provision previously in the National Defense Authorization 
Act (NDAA) of 2013)). A June 30th amendment deadline will ensure that 
the Department receives complete application information that can be 
reviewed in a timelier manner. LEAs with large membership may need to 
revise their business processes to accommodate the change. The 
Department appreciates that many commenters support this change and the 
Department will take measures to provide technical assistance and 
inform LEAs of changes included in this final rule.
    Changes: None.

Second Membership Count Sec.  222.5(b)(1)

    Comment: Numerous commenters opposed the proposal to remove the 
second membership count provisions in current Sec.  222.34.
    Discussion: The Department appreciates the comments advocating 
against the proposed change, and retains the second membership count 
provisions in current Sec.  222.34. The proposed regulation that would 
have updated Sec.  222.5(b)(1) to be consistent with this proposed 
change is no longer necessary. A more complete discussion related to 
the second membership count can be found in the subsequent discussion 
of Sec.  222.34.
    Changes: The proposed revisions in Sec. Sec.  222.33, 222.34 and 
Sec.  222.5(b)(1) to remove the second membership count provisions in 
the current regulations are not included in these final regulations.

Section 7002 (Sec. Sec.  222.22-222.24)

    Comments: Several commenters opposed the inclusion of all payments 
in lieu of taxes (PILTs) in the calculation of other Federal revenue, 
as described in Sec.  222.22. The commenters stated that including 
PILTs in the payment calculation would cause some current grantees to 
become ineligible for funding. One commenter argued that the current 
payment formula may artificially depress an LEA's maximum payment, so 
that an LEA with PILTs included as other Federal revenue would be 
considered substantially compensated. One commenter noted that payments 
for PILTs can be inconsistent, and including them in the payment 
calculation could cause budgetary turmoil for grantees.
    Discussion: Comments related to PILTs informed the Department's 
further research into the issues of PILTs

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and how they are categorized and disbursed. PILTs that are made by the 
Department of Interior (DOI) under the authority of Chapter 69 of Title 
31 of the U.S. Code are made based only on the presence of tax-exempt 
Federal property regardless of whether activities are taking place on 
the Federal property. See ``PILT (Payments in Lieu of Taxes): Somewhat 
Simplified,'' Congressional Research Service (2015), available at 
www.fas.org/sgp/crs/misc/RL31392.pdf. In fact, in calculating the 
amount of PILT payments, the DOI subtracts payments from Federal 
activities, including payments from the Forest Service under the 
Bankhead-Jones Farm Tenant Act, the Secure Rural Schools and Community 
Self-Determination Act, and others; payments from Bureau of Land 
Management (BLM) under the Taylor Grazing Act, Mineral Lands Leasing 
Act, and others; payments from the Fish and Wildlife Service, and 
payments from the Federal Energy Regulatory Commission. While those 
payments from other Federal agencies are due to activities on the 
Federal property, the DOI PILTs are not. Section 7002 of the Act 
specifically requires revenues deriving from activities on Federal 
property to be taken into account, but not other revenues. This further 
analysis of PILTs indicates that PILTs from DOI should not be 
considered as revenue generated from activities on the Federal 
property, and, we have revised the regulation to clarify this. Such DOI 
PILTs will not affect an LEA's eligibility for section 7002 Impact Aid 
payments, or the maximum amount of such payments. This interpretation 
is consistent with our current policy. Applicants will continue to 
report all revenues deriving from activities on the Federal property 
(e.g., from mining, forestry, grazing etc.), but need not report the 
DOI PILT revenues.
    Changes: The final regulation clarifies that only payments for 
activities conducted on Federal property will be included as other 
Federal revenue in the ESEA section 7002 eligibility and payment 
calculations. The final regulation also gives examples of the types of 
Federal revenue that must be reported, and stipulates that Impact Aid 
and other Department payments should not be reported as Federal 
revenue.
    Comments: Two commenters supported the proposed changes regarding 
the eligibility requirements for consolidated LEAs and calculating a 
single real property tax rate at Sec. Sec.  222.23 and 222.24.
    Discussion: We finalize these regulations as proposed.
    Changes: None.

Definition of Free Public Education--Exclusion of Charter School Start 
Up Funds (Sec.  222.30)

    Comments: Two commenters raised concerns about the eligibility of 
charter schools in general. The Department received three comments in 
support of the provision that would exclude charter school startup 
funds from the calculation of determining whether an LEA receives a 
substantial portion of Federal funds under Sec.  222.30(2)(ii). Another 
commenter suggested that the regulations specify the types of charter 
school funds to be excluded, and the process by which the Secretary 
determines whether Federal funds provide a substantial portion of the 
LEA's educational program in relation to other LEAs in the State. All 
commenters agreed that the provision is consistent with the intent of 
the statute.
    Discussion: Some charter schools are eligible for Impact Aid 
because they qualify as an ``LEA'' under State law and meet the other 
eligibility requirements. In order for any LEA to be eligible for 
Impact Aid, it must demonstrate that its funding comes primarily from 
non-Federal revenue sources. Under the current statute, when 
determining Federal revenue amounts, the Impact Aid Program does not 
include Title I Part A funds.
    Under section 7003(a) of the Act, an LEA can only claim students 
for Impact Aid if the LEA provides a free public education to those 
students. Section 7003 Impact Aid funds are intended to replace local 
revenues lost due to Federal activity. Under the current regulations, 
if Federal funds are providing for the educational program (e.g., 
schools funded by DOI), that Federal source already compensates for the 
lack of local tax revenue. As a result, the LEA is not eligible for 
Impact Aid for those students.
    The amended regulation would exclude Federal charter school startup 
funds from the calculation of whether Federal funds provide a 
substantial portion of an LEA's program. These funds are generally 
available in the first two years of a charter school's operations; the 
funds can be used for a host of purposes other than current 
expenditures, and are not long-term funding sources.
    Under the amended regulation, in analyzing the share of the 
education program funded by Federal sources, the Department would 
compare the LEA's finances to other LEAs in the State to account for 
circumstances unique to the State. After considering whether to specify 
the exact Federal grant program funds that may be excluded under this 
provision, we decline to do so in these regulations, because those 
programs may change over time. Program staff will coordinate with the 
Charter Schools Program to ensure that the appropriate funds are 
excluded.
    While the calculation of a substantial portion of Federal funds is 
not changing under these regulations, we also decline to state a 
specific formula for that analysis, to be able to fairly analyze the 
portion of Federal funding for LEAs in different States. The Department 
compares an LEA's portion of Federal funding to other LEAs in that 
State to avoid funding disparities among States that may skew or create 
a disadvantage for an LEA. The amount of Federal funding that an LEA 
receives, as a percentage of all revenues, can vary greatly from State 
to State. For example, for the FY 2016 Impact Aid application year, 
State X LEAs had a Federal contribution average of 12.13 percent 
whereas State Y LEAs had a Federal contribution average of 6.33 
percent. Comparing the percentage of Federal funds to all LEA revenues 
for State Y LEAs and State X LEAs could disadvantage State X LEAs. For 
that reason, we continue to resolve these questions on a case-by-case 
basis comparing LEAs only to other LEAs in the State.
    Changes: None.

Timely and Complete Applications (Sec. Sec.  222.32 and 222.33)

    Comments: Many commenters opposed the proposed language in Sec.  
222.32 that clarifies that an LEA's submission of its membership count 
of federally connected students must be part of the LEA's timely and 
complete application. No commenters favored this change. Commenters 
interpreted this change to mean that an LEA may not amend its 
membership count.
    Discussion: This regulatory change does not prohibit an LEA from 
amending its application under the conditions specified in Sec.  
222.5(b), including when data become available that were not available 
at the time of the application.
    The current regulations require that an applicant submit a complete 
and signed application by the deadline (34 CFR 222.3(a)(1)). The 
Department's longstanding policy requires an accurate membership count 
as of the application deadline. The LEA's authorized representative 
certifies, by signing the application cover page, that the statements 
contained in the application and the data included are, to the best of 
the authorized representative's knowledge, true, complete, and correct.

[[Page 64732]]

    Recent application reviews revealed that some LEAs have estimated 
the number of eligible federally connected students at the time of 
application, and then used the amendment process to gain time to 
complete the membership count. This is contrary to the attestation of 
the authorized representative who signs the application and is contrary 
to current program rules. This practice delays reviews and payments for 
all LEA applicants.
    Under Sec.  222.5(b)(1), an LEA may amend its application based on 
actual data regarding eligible Federal properties or federally 
connected children if the data were not available at the time the LEA 
filed its application and are acceptable to the Secretary. The survey 
data should be complete and should reflect data available before the 
application is submitted. The LEA may report verified data counted 
through a parent-pupil survey form or a source check document or an 
approved alternate method (see Sec.  222.35). For example, if an LEA 
has 1,000 federally connected children in membership, but, at the time 
of application, has only received 100 parent-pupil survey forms, the 
LEA may claim those 100 federally connected children; that is the data 
available when the LEA files the application. If the LEA received 900 
additional forms after the application was submitted, or if an 
additional source check document post-application shows 900 students, 
the LEA may amend its application to include the newly-documented 
federally connected children.
    The amended regulation in Sec.  222.32 is intended to underscore 
the importance of accurate applications. Complete and accurate 
application data supports timely processing of all applications and 
speeds payments to all LEAs. To further explain that the student count 
data submitted with an application must be verified data and not an 
estimate, in Sec.  222.33(c) we revised the proposed language that the 
data be ``complete by the application deadline'' to requiring that it 
be ``accurate and verifiable'' by the deadline.
    Changes: In section 222.33(c) we change ``complete'' to ``accurate 
and verifiable'' in describing the student count data to be submitted 
with an application.

Second Membership Count (Sec.  222.33-222.34)

    Comments: Numerous commenters opposed the proposed elimination of a 
second membership count. Commenters generally stated that eliminating 
the second membership count might unfairly penalize an LEA that 
experiences an influx of federally connected children between February 
and May. Commenters asked to retain this provision as it is important 
for LEAs located near military installations whose student enrollment 
may increase unexpectedly due to military activities. In these 
instances eliminating the option to submit a second membership count 
would delay increased Impact Aid funding for a full school year.
    Discussion: While this provision is seldom used, the Department 
recognizes the provision's importance to certain applicants whose 
student enrollment may increase unexpectedly during the school year.
    Changes: The proposed changes to eliminate the second membership 
count in Sec. Sec.  222.5(b)(1), 222.33, and 222.34 are not included in 
the final regulations.

Parent-Pupil Survey Forms and Source Checks (Sec. Sec.  222.33-222.35)

    Comments: The comments to the proposed changes generally supported 
the clarification of information required on a parent-pupil survey 
form. The commenters did, however, request that the Department allow an 
applicant to report multiple children from one family on the same form, 
to reduce burden on parents with multiple children.
    Commenters also universally opposed the requirement that LEAs 
document children residing on eligible Indian lands and in eligible 
low-rent housing with a source check form. The commenters stated that 
requiring the source check could increase the administrative burden for 
some LEAs and force a duplicative process, particularly for large LEAs. 
Others argued that some LEAs have sophisticated operations in place to 
collect data through a parent-pupil survey; it could be burdensome for 
those districts to change their methods. Further, commenters stated 
that there are only two current data-collection methods; the authority 
over which method to use should remain a local decision.
    A few commenters asked for flexibility in requiring a complete 
address or legal description for certain Federal properties. The 
commenters stated that certain Federal agencies prohibit employees from 
sharing their work location. These commenters contend that funding for 
many federally connected children is being lost due to the national 
security concerns of other Federal agencies.
    Discussion: The Department appreciates the support for the 
clarification of the information required on a parent-pupil survey 
form. With regard to the issue of whether multiple children can be 
reported on one form, there is no regulatory prohibition against this 
practice, either in the current or these final regulations. The 
Department will permit this practice; however, the forms must indicate 
if the children are to be split among different application tables. For 
example, if one military family resides on a military installation with 
three children claimed on one survey form, and one of the three 
children has a disability and an active Individualized Education Plan 
(IEP), then that child should be reported on one application table, 
while the other two children should be claimed on another application 
table. When more than one child is listed on one form, the LEA is 
responsible for clearly documenting the application table on which the 
children were reported. The LEA also ensures the form shows all 
required information for each child listed.
    The opposition to requiring source checks for children residing on 
eligible Indian lands and children residing on eligible low rent 
housing was uniform. The Department will not finalize the proposed 
amendment to Sec.  222.35, and will continue to allow LEAs to use 
parent-pupil survey forms for all children. However, if there is no 
evidence establishing the eligibility of the Federal properties for 
children who reside on Indian lands or in low-rent housing, additional 
certifications may be required. The LEA is responsible for ensuring 
that the properties where the children reside are eligible Federal 
properties, and must be able to provide the supporting documentation 
establishing the eligibility of the property. For example, an LEA may 
document 50 children residing on Indian lands through the use of 
parent-pupil survey forms. The LEA must also have on file documentation 
establishing that the Indian lands claimed meet the statutory 
definition of ``Indian lands.'' The LEA may be required to have the 
Bureau of Indian Affairs (BIA) or a delegated tribal official (with 
access to the property records) certify that the lands meet one of the 
categories of eligible Indian lands under the definition. To meet this 
requirement the LEA could send to the appropriate official the legal 
descriptions of the lands where the children reside, to have the list 
certified as eligible Indian lands.
    The Department appreciates the concerns expressed regarding lost 
funds for federally connected children whose parents are prohibited 
from releasing their work locations. Impact Aid funding is based on the 
identification of eligible Federal properties, with the

[[Page 64733]]

exception of payments for children described in sections 
7003(a)(1)(D)(i) and 7003(a)(1)(D)(ii) of the Act. The Department is 
responsible for ensuring that payments are made correctly and within 
the limits of the statute. Many Federal government employees do not 
work on an eligible Federal property. The Department will work with 
other Federal agencies and LEAs to try to obtain an approved method to 
identify the Federal property. The current regulations in Sec. Sec.  
222.35(a)(1)(ii)(A) and (C) allow for alternative location information 
for a child's residence or a parent's place of employment, and this 
flexibility is retained in these final regulations (paragraphs 
222.35(a)(2)(ii)(A) and (a)(3)(i)(B)). For example, alternative 
location information may be the name of a widely recognized military 
installation or Federal site for which the name and location are 
commonly known but typically not represented by a street address, such 
as the Pentagon or Jewel Cave National Monument.
    To further assist LEAs who have difficulty obtaining information 
for students residing with a parent on Federal property, and for 
parents working on Federal property, and for the reasons stated above 
in the discussion of ``Methods of Data Collection,'' we have added 
paragraph (c) to Sec.  222.35 to permit an LEA to propose a third 
option for collection of data.
    Changes: In Sec.  222.35 we add paragraph (c) to permit a third 
data collection option. The proposed change to require a source check 
for children residing on eligible Indian lands and children residing on 
eligible low rent housing in proposed Sec.  222.35(b)(1) is not 
included in the final rule.

State Average Attendance Ratios (Sec.  222.37)

    Comments: Uniformly, all comments on this section supported the 
Department's proposal to allow any State to use a State average daily 
attendance (ADA) ratio. Commenters stated that the proposed regulation 
will expedite the payment process by allowing the Secretary to 
calculate an ADA ratio for the 15 States that do not currently use a 
ratio.
    Discussion: The Department appreciates the support for this amended 
regulation.
    Changes: None.

Rationale for the Use of Special Additional Factors for Determining 
Generally Comparable LEAs (Sec.  222.40)

    Comments: One commenter read the proposed regulation to mean that 
an LEA would be required to submit generally comparable district (GCD) 
data at the time of application, which would shift the data collection 
burden from the Department to the LEA.
    One commenter said that a rationale for the use of special 
additional factors is unnecessary, as the use of factors is already 
outlined in the regulations. Two commenters proposed that an SEA submit 
an overarching policy statement on the use of additional factors in the 
State, and not be required to submit a rationale for each individual 
LEA. The policy statement would only need to be updated if the policy 
changed.
    Two commenters mentioned that the Department has recently rejected 
the data provided by the SEA, or has asked for it in a manner or format 
that is inconsistent with the States' policies.
    Discussion: This regulatory change does not affect the process by 
which the SEA annually submits the GCD data, at the request of the 
Department; the LEA is not required under this provision to submit the 
information. The Department sends a memo to the SEAs each year asking 
for GCD data and provides the regulations that specify how the data 
should be presented. The LEA does not normally play a role in the 
collection or submission of GCD data. The proposed regulation would not 
have changed this process; however, we have revised Sec.  
222.40(d)(1)(iii) to clarify that the SEA, not the LEA, must submit the 
GCD data at the request of the Department.
    Section 222.40(d)(1) includes examples of special additional 
factors that can be used in determining GCDs, used for both the local 
contribution rate determined under Sec.  222.40, and for heavily 
impacted districts under the limited circumstances in Sec.  222.74. 
Consistent with the ESEA (7703(b)(1)(C)(iii)), regulations (Sec.  
222.40(d)), and longstanding program policy, we require an SEA that 
uses a special additional factor or factors in selecting GCDs to submit 
the resulting local contribution rates and a description of the 
additional factor or factors of general comparability and the data used 
to identify the new group of generally comparable LEAs. The current 
regulations in Sec.  222.40(d) contain the rules for what type of 
additional factors may be considered, and require that the factors be 
objectively defined and must ``affect the applicant's cost of educating 
its children.'' The Secretary analyzes the data to ensure that it meets 
the purposes and requirements of the statute and regulations. In order 
to make this determination, the SEA submission must include a 
description of how the selected factors increase the education costs 
for the LEA.
    In response to the commenter that argued that the rationale for the 
use of special additional factors is unnecessary because examples of 
special additional factors are outlined in the regulations, the 
Department notes that the presence of an example does not suggest that 
it would be an acceptable factor for every LEA; the regulations require 
that the factor must increase costs for that particular LEA. Thus each 
LEA's individual characteristics will dictate the suitable cost factors 
for selecting its GCDs. For the reasons stated above, an SEA cannot 
submit one overarching memo to explain the use of special additional 
factors for all the LEAs in the State.
    With regard to the comment concerning SEA data that IAP rejected, 
the regulations in Sec.  222.39 specifically describe how the data must 
be sorted to identify GCDs. If a State submits data that is not 
organized in such a way that the analysis can be conducted under Sec.  
222.39, the Department may ask the SEA to produce the data in a manner 
that is consistent with Sec.  222.39.
    Changes: Proposed Sec.  222.40(d)(1)(iii) is revised to clarify 
that the SEA, not the LEA, submits the GCD data at the request of the 
Department, and to specifically require that an SEA that uses any 
additional factor will be required to submit a rationale for its use 
with its annual submission of generally comparable district data.

Eligibility for Heavily Impacted LEAs (Sec.  222.62)

    Comments: The majority of respondents opposed the proposed 
regulation that would require LEAs to submit heavily impacted data with 
the application. They claimed that this will place an additional burden 
on LEAs applying under section 7003(b)(2) of the Act. One commenter 
appreciated the need to speed the processing of applications for these 
LEAs; however, the commenter opposed shifting the data collection 
burden by requiring LEAs applying for section 7003(b)(2) funding to 
provide the tax rate, per-pupil expenditure, and federally connected 
membership percentage data with the application. The commenter 
contended that LEAs--even continuing LEAs--may not have access to this 
information, and if they do, they may not have access to this 
information by the application deadline. The commenter was concerned 
that LEAs applying for consideration under section 7003(b)(2) of the 
Act would have to rely on the State to provide this information in a 
timely manner. With limited resources at the State level, an LEA may 
not be able to obtain the data

[[Page 64734]]

by the application deadline, thereby losing its ability to be 
considered for funding under this provision. The commenter was further 
concerned that this proposal would shift the collection of this data 
from the Department to LEAs, and increases the administrative burden 
for LEAs. The commenter encouraged the Department to consider clearly 
stating the eligibility requirements on the application form as that 
might reduce the number of ineligible districts that apply.
    A few commenters had concerns about the Department using data other 
than that submitted by the SEA. One commenter stated that the SEA was 
better equipped to make calculations with its data than the Department. 
Another commenter suggested that the Department provide technical 
assistance to the heavily impacted LEAs, including the name of the SEA 
contact. The commenter said that LEAs feel ``out of the loop'' and some 
LEAs have different tax rates than what the SEA provides to the 
Department.
    One commenter noted that the timing involved with SEAs and LEAs 
reporting tax rates may not allow for changes in the tax rates. The 
commenter was concerned that any changes may not be reported to the 
Department to reflect the current rates.
    One commenter stated that asking an LEA to submit data with the 
application may give the false impression that the LEA is eligible 
before an eligibility determination is made by the IAP.
    The Department received two comments in support of this provision. 
The commenters noted that the provision of tax rate data at the time of 
application would speed the processing of heavily impacted 
applications.
    Discussion: The proposed regulation should have specified that the 
LEA will be required to provide only its tax rate and the State average 
tax rate for the third preceding year with the IAP application. The 
application uses tax rate data from the third preceding year, as 
required by the statute, and that data should be readily available at 
the time of application. In providing these data the applicant LEA will 
demonstrate its understanding of the eligibility requirements for these 
payments and preliminary evidence that it meets the requirements. 
Currently, many applicants request consideration for payment under 
section 7003(b)(2) of the Act without evaluating whether they meet the 
tax rate requirement. Requiring the tax rate data with the application 
will allow the Department to more quickly determine initial eligibility 
and focus on making timely and accurate payments to LEAs that are 
eligible for funding under this provision. Most SEAs or State 
Departments of Revenues have this data available on their respective 
Web sites.
    The tax rate data submitted by the LEA with the application will 
not be used to make final heavily impacted eligibility determinations; 
rather, the certified tax rate submitted by the SEA under Sec.  222.73 
will be used to determine the LEA's final tax rate eligibility and the 
category under which the LEA will be paid. Thus, if the tax rate data 
initially submitted by an LEA was obtained from the SEA and is 
confirmed by IAP to be accurately calculated and the final State tax 
rate data for the third preceding fiscal year, no further tax rate data 
will be needed to complete the program's eligibility determinations 
related to average tax rate. However, if the tax rate submitted with 
the application does not match the data submitted by the SEA under 
Sec.  222.73, IAP may need to further evaluate the tax rate data 
provided. For example, if the SEA amends its tax rate data after the 
LEA's initial submission but before the LEA's application is reviewed, 
IAP may need to conduct an additional review of the tax rate data. If 
the LEA provides initial tax rate data or the SEA provides later final 
State tax rate data that shows that the LEA does not meet the tax rate 
requirement, then the LEA will not receive heavily impacted funding.
    The Department is constantly reviewing its internal process for 
consistency and efficiency. The Department welcomes any suggestions for 
improvements for communicating with LEAs. If an SEA submits data that 
the LEA believes is incorrect, the LEA should discuss this with the SEA 
and the Department. Our Web site contains a list of SEA representatives 
for each State located at http://www2.ed.gov/about/offices/list/oese/impactaid/searl.html. If an SEA presents data that is not organized in 
such a way that the Department can conduct the heavily impacted 
eligibility determination, the Department may ask the SEA to produce 
the data in a manner that is consistent with the requirements in the 
statute. For example, if an SEA submits a total tax rate instead of a 
tax rate for current expenditures only, as required by the statute, the 
Department requires the SEA to submit corrected data.
    With regard to the comment about the timing of the reporting of tax 
rates, the statute requires the Program to use third preceding year tax 
rates, so that accurate final data will be available for completing 
heavily impacted LEA eligibility determinations.
    With regard to whether the requirement to submit data with the 
application will generate confusion about eligibility status, the 
Department will work with LEAs to make sure that the heavily impacted 
eligibility status is clear.
    Changes: The final regulation adds language to specify that the LEA 
must provide its tax rate data with the annual application, and that 
the SEA will verify final tax rate data under the process in Sec.  
222.73.

Indian Policies and Procedures (IPPs)(Sec.  222.91-95)

    Comments: Most commenters made the point that the majority of the 
relationships between tribal entities and LEAs are strong and that both 
parties work to ensure a positive relationship that provides equal 
participation of Indian lands children in the educational program. 
There was general support for the extension of time that an LEA has to 
amend its IPPs from 60 days to 90 days. The majority of all comments on 
this part of the proposed regulations opposed any regulatory action 
that would increase burden on LEAs; however, they did not specify which 
provisions might constitute an additional burden.
    One commenter suggested that if an LEA's total student population 
residing on Indian lands exceeds 70 percent, the Department should 
reasonably be able to assume that students residing on Indian lands are 
receiving an education on an equal basis with other children. In these 
situations, the commenter suggested that an automatic waiver of the 
requirements for Indian Policies and Procedures (IPPs) should be 
considered for these LEAs. The commenter suggested that this rule might 
lessen the administrative burden on the Department by reducing the 
number of IPP reviews that are conducted annually.
    Two entities representing Impact Aid LEAs that have children 
residing on Indian lands favored the regulation requiring the LEA to 
provide a written response to the comments, recommendations and 
concerns brought to the LEA by the parents of Indian children and 
tribes regarding the educational services the LEA is providing to 
Indian children. One commenter encouraged open communication between 
LEAs and tribes and parents of Indian children throughout the year, and 
not just during the consultation process.
    One commenter also supported the requirement that, when a tribe 
supports an LEA's request to waive the IPP requirements, the tribe must 
attest that

[[Page 64735]]

it has received a copy of the IPPs and is aware of the rights the tribe 
is waiving.
    A few commenters stated that there is a fundamental lack of 
understanding about the purpose of Impact Aid funds and how they can be 
used, which is at the discretion of the school board. One commenter 
suggested that requiring a tribe to sign off on the Impact Aid 
application would provide the tribe unintended and unauthorized power 
to disrupt a payment. The commenter argued that the written 
notification to tribal officials from the LEA should be more than 
adequate. This commenter also stated that adding burdensome 
requirements to a subjective process will not provide clarity and 
order.
    A few commenters requested that the Department define what 
constitutes a ``reasonable'' request from parents of children residing 
on Indian lands and tribal officials. The commenters stated that 
factors such as budget constraints may prevent a district from agreeing 
to certain requests.
    Several commenters supported the Department's proposal to increase 
flexibility within the withholding of payments provision in Sec.  
222.95. Under the new language, in case of a violation, the Department 
would be able to withhold part of an LEA's payment or the entire 
payment.
    Several commenters stated that there is a need for intermediary 
steps between filing a complaint with the Department, and the penalty 
that the Department withholds a payment to an LEA as a result of the 
complaint. Specifically, one commenter suggested the Department provide 
technical assistance or mediation at the request of either party, 
establish positive incentives rather than punishment, and issue non-
regulatory guidance to advance the shared goal of better communication, 
rather than imposing additional requirements for LEAs. The commenter 
was concerned that the regulations will add additional steps to the 
application process and require additional time and burden for LEAs, 
particularly when noncompliance may lead to withholding Impact Aid 
funds.
    One commenter was concerned that the proposed requirements could 
lead to a hostile situation between the LEA and the tribes and parents 
of children residing on Indian lands. The commenter urged the 
Department to better explain to tribes and parents that Impact Aid 
grant funds are treated like local revenues and can be expended at the 
discretion of the LEA.
    One commenter urged the Department to refrain from using the term 
``Indian'' as it is viewed as a derogatory reference. Instead, the 
commenter urges the Department to replace the term with ``Native 
American.''
    Discussion: The Department recognizes that the majority of 
relationships between LEAs, tribal leaders, and the parents of children 
residing on Indian lands are strong and that the entities work together 
to provide the best educational services to children residing on Indian 
lands. However, due to IPP issues that have arisen during Program 
oversight of the IPP requirements, as well as from comments received 
during the Department's tribal consultations on the proposed 
regulations (see NPRM, 80 FR 81477, 81478), we believe that changes to 
the regulations are needed to effectuate the intent of the statutory 
IPP requirements.
    The Department does not have the authority under the statute to 
grant blanket waivers through the regulatory process. Moreover, because 
LEAs receive additional IAP funding for each student residing on Indian 
lands, and those funds are not required to be spent on those specific 
students, Congress enacted the IPP requirements to ensure that those 
students participate on an equal basis with other students and that 
their parents and their tribe have input into the LEA's general 
educational program and activities (ESEA section 7004, as amended by 
ESSA). The process is about more than simply equal access; it is also 
about ensuring that the tribes and parents of children residing on 
Indian lands have a mechanism for providing input into the educational 
program.
    One of the concerns that arose during the Department's tribal 
consultation was the lack of LEA communication back to the parents or 
the tribe that have made recommendations or comments to the LEA. As 
recognized by several of the commenters, requiring LEAs to provide a 
response to the tribes and parents of children residing on Indian lands 
is important to ensure that the input receives meaningful 
consideration; written response to all comments is a standard business 
practice when consultation or public input has occurred. In the Federal 
government, for example, the rulemaking process ensures the public is 
allowed to comment on and make recommendations for changes in 
regulations. Once the comments are received, the Federal government is 
required to respond to the comments in its final regulatory document.
    Although we do not wish to impose additional and unnecessary burden 
on IAP applicants, we do not think it is unreasonable or overly 
burdensome for LEAs to provide feedback by notifying the tribes and 
parents of children residing on Indian lands how their recommendations, 
comments, or concerns were addressed. The vast majority of these 
consultations occur in a public forum in which minutes are taken. 
Assembling the comments, concerns, and recommendations and explaining 
how or why they are or are not implemented is a significant part of 
ensuring meaningful consultation.
    The Department appreciates support for the amended regulation that 
would require a tribe to attest that it has received a copy of the IPPs 
before the tribe provides the LEA with a waiver of the rights afforded 
the tribe under the IPP consultation process. The IAP's tribal 
consultation (see NPRM (80 FR 81477) revealed that some tribal 
officials are not receiving copies of the IPPs and were being asked to 
waive their rights without being informed of those rights. Informed 
consent is imperative in the waiver process. To ask for a waiver to 
expedite the application process without providing the tribe with the 
information it needs to make an informed decision goes against the 
intent of the IPP consultation process.
    With regard to the comment that giving the tribes the authority to 
sign off on the application provides the tribe with unintended and 
unauthorized power, the Department would like to clarify that the tribe 
does not sign off on the Impact Aid application before it can be 
submitted, and would not be required to do so under the proposed or 
final regulations. Under these final regulations, the LEA will be 
required to sign an assurance indicating that it has replied in writing 
to the tribes' and parents' comments, concerns, and recommendations 
before submitting the application. The LEA should retain documentation 
to demonstrate that the LEA has complied with this communication 
requirement. For example, if the LEA's communication is emailed or 
faxed to the tribe, the LEA should retain the fax transmission document 
or a ``read receipt'' for an email to demonstrate that the document was 
sent and received by the appropriate tribal officials. If an LEA sends 
home with children who reside on Indian lands a copy of that 
communication for the parents, the LEA should retain a copy of the memo 
to demonstrate that the LEA has made a good faith effort to inform 
parents of such children about how the LEA has or has not implemented 
recommendations or rectified concerns identified during the IPP 
process.
    With regard to the suggestion that the Department provide guidance 
on what

[[Page 64736]]

constitutes a reasonable request by a tribe or parent of a child 
residing on Indian lands relating to improving the LEA's educational 
program or activities, it is not appropriate for the Department to set 
guidelines around what recommendations may or may not be appropriate 
for an LEA to adopt. This is a matter that varies by the local 
situation. As we clarify in these amended regulations, the legal 
responsibility of the LEA is to ensure that tribes and parents have an 
opportunity to give meaningful input, and to thoroughly consider any 
comments and recommendations in its decision-making process.
    We appreciate the support for the option in Sec.  222.95 under 
which the Department may withhold part of a payment to an LEA for an 
IPP violation in addition to having the authority to withhold the 
entire payment. Through both the tribal consultation and the comments 
received in response to this NPRM, the Department has heard that the 
withholding of all funds can severely disrupt the provision of 
educational services. Under the amended regulation, the Department 
could, for example, elect to withhold only the part of the Impact Aid 
payment associated with the .25 additional weight afforded to children 
residing on Indian lands until a dispute is resolved or an IPP is 
corrected. If an LEA is noncompliant, each case at the stage of the 
proceeding referenced in the regulation will be reviewed on its own 
merits, and the Department will fully explain what the LEA needs to do 
to become compliant and receive the withheld funds.
    In response to comments about the need for ways to resolve disputes 
other than a tribe filing a formal complaint and the Department 
withholding payment to an LEA for a violation of the IPP requirements, 
these are statutory steps that will continue to be available. However, 
the Department encourages the use of third-party mediation to resolve 
issues and can suspend a complaint upon request of the complainant to 
allow for such a process. The Department can provide technical 
assistance on the IPP consultation process, but cannot act as a 
mediator to resolve issues between the parties. The Department is open 
to suggestions on how it can provide non-regulatory guidance as a 
method to advance the shared goal of better communication.
    The Department appreciates the comment about providing positive 
incentives to comply with the IPP process and the need for technical 
assistance and possibly non-regulatory guidance to all parties for the 
IPP consultation process. Although the Department must respond to 
complaints pursuant to the procedure required by the statute, we 
welcome any ideas for how to inject positive incentives or specific 
technical assistance from any person or organization with an interest 
in this process.
    The Department is aware that certain tribal officials and parents 
of children who reside on Indian lands believe that they should be able 
to dictate to the LEA how Impact Aid funds are used. This is an issue 
outside the scope of these regulations and the statute, as the Impact 
Aid statute generally imposes no restrictions on the use of basic 
support funds (State or local restrictions may apply) provided for 
students residing on Indian lands; however, the Program will make an 
effort to clarify this when providing technical assistance to LEAs.
    The Department appreciates the concerns related to the use of the 
term ``Indian.'' IAP uses this term to reflect the statutory definition 
of ``Indian lands'' and related provisions. IAP does not use the term 
``Native American'' as it is too broad to fit the scope of the statute 
and these regulations, which are limited in relevant part to school 
districts that claim students who reside on ``Indian lands'' regardless 
of their ethnicity. For these reasons, we retain the use of the term 
``Indian Policies and Procedures.''
    Changes: None.

Section 7009 (Sec. Sec.  222.161-222.164)

    Comment: Several commenters supported the changes to the 
equalization regulations. One commenter specifically supported the 
provision that provides a process by which, if IAP's determination is 
delayed, States can get permission from the IAP to make estimated State 
aid payments that take into account Impact Aid receipts. The commenter 
stated that this process would prevent LEAs from having to pay back the 
State if the IAP eventually certifies the State as equalized. Another 
commenter, however, stated that allowing a State to withhold an LEA's 
aid without an equalization certification from the Department is 
inexcusable. The commenter further contended that allowing SEAs to 
withhold State aid while the determination process is ongoing could 
result in inaccurate State aid payments that may take months or years 
to correct.
    Discussion: Section 7009(d)(2) of the Act prohibits States from 
taking Impact Aid into consideration as local revenues when making 
State aid payments before the Secretary certifies that the State's 
program of aid is equalized. Section 222.161(a)(6) will give States 
undergoing the section 7009 certification process the option, with the 
Department's permission, to make estimated State aid payments that 
count Impact Aid as local effort in cases where we have not been able 
to determine whether the State meets the equalization requirements 
before the start of the State's fiscal year. This may happen when an 
LEA requests a pre-determination hearing, which, due to the timeline 
required, is held just two to three months before the State's fiscal 
year begins. When the issues presented at that hearing are complex, it 
can take time for us to work through the legal issues and make a 
determination.
    Currently, States do not request permission to make estimated 
payments that take Impact Aid into account as local effort when the 
determination process in ongoing, and there is no timeframe for when 
States must correct payments if we decline to certify that the State's 
program is equalized. While we agree that allowing States to make 
estimated aid payments that account for Impact Aid before we have 
certified the State to do so may result in incorrect estimated 
payments, the regulation is intended to reduce budgetary uncertainty 
for States as well as LEAs. If a State is prohibited from reducing 
estimated payments when a determination is delayed, LEAs could have to 
pay back to the State large sums if the IAP ultimately certifies the 
State. The new provision allows us to consider the State's past record, 
and any changes to its State aid formula, before we give permission to 
make estimated State aid payments. It also ensures that, in cases where 
we decline to certify, estimated payments that the State reduced for 
Impact Aid funds will be corrected within 60 days. However, upon 
further analysis of the possible scenarios under this provision, we 
have deleted the proposed 30-day time limit for States to request 
permission to make estimated payments that take into account Impact 
Aid, to allow more flexibility.
    Changes: None.
    Comment: One commenter requested that the Department provide an 
example in Sec.  222.162 of how it accounts for special cost 
differentials in the disparity test using the four methods outlined in 
the proposed regulation.
    Discussion: Every State's funding formula is different, which makes 
it difficult to provide practical, instructive examples. We will 
provide technical assistance, including examples of actual approved 
disparity test data submissions, to anyone interested in the section 
7009 process. Every State certified in recent years has accounted

[[Page 64737]]

for special cost differentials using one of the four methods.
    Changes: None.
    Comment: One commenter requested that the Department provide 
examples of cost differentials.
    Discussion: Cost differentials are discussed at length in Sec.  
222.162(c)(2), including examples.
    Changes: None.
    Comments: Two commenters favored the proposed regulation at Sec.  
222.164 which requires the Department to inform the State and LEAs of 
the right to request a pre-determination hearing when a proceeding is 
initiated under section 7009.
    Discussion: We finalize this regulation as proposed.
    Changes: None.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this 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 loan 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 stated in the 
Executive order.
    This final regulatory action is not a significant regulatory action 
subject to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (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 its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these final regulations only on a reasoned 
determination that their benefits would justify their costs. In 
choosing among alternative regulatory approaches, we selected those 
approaches that would maximize net benefits. Based on the analysis that 
follows, the Department believes that these final regulations are 
consistent with the principles in Executive Order 13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    Discussion of Costs and Benefits: In accordance with both Executive 
orders, the Department has assessed the potential costs and benefits, 
both quantitative and qualitative, of this regulatory action. The 
potential costs associated with this regulatory action are those 
resulting from statutory requirements and those we have determined as 
necessary for administering the Department's programs and activities. 
Upon review of the costs to the LEA, we have determined there is 
minimal financial or resource burden associated with these changes, and 
that the net impact of the changes would be a reduction in burden 
hours. Certain affected LEAs would need to respond in writing to 
comments from tribes and parents of Indian students, but this time 
burden would be balanced by other proposed regulatory changes, which 
result in a net decrease of both burden hours and cost associated with 
these regulations.
    Elsewhere in this section, under Paperwork Reduction Act of 1995, 
we identify and explain burdens specifically associated with 
information collection requirements.

Paperwork Reduction Act of 1995

    In the Federal Register (80 FR 81487-81489), the NPRM identified 
the sections of the proposed regulations that would impact the burden 
and costs associated with the information collection package. Sections 
222.35, 222.37, 222.40, 222.62, and 222.91 contain information 
collection requirements. Under the PRA the Department submitted a copy 
of these sections to OMB for its review.
    In the NPRM (80 FR 81487-81489), we estimated the total burden for 
the collection of information through the application package to be 
104,720 hours. This estimation was based largely on a decrease in hours 
resulting from proposed changes related to the requirement for source 
check documents for children residing on Indian lands and low rent 
housing in Sec.  222.35. This proposed change would have significantly 
reduced the number of parent pupil survey forms collected annually. 
After consideration of the public comments, we have decided to not 
include the proposed changes to Sec.  222.35 in the final rule. The 
changes to the burden estimates from the proposed rule are summarized 
below.

Collection of Information

Revised Burden Hours for Section 222.35

    The proposed regulations would have required that LEAs claiming 
children who reside on Indian lands and children who reside in low-rent 
housing use a source check document to obtain the data required to 
determine the children's eligibility. This change would have 
significantly decreased the burden hours for the collection of parent-
pupil survey forms and increased the burden hours for the use of source 
check forms. The proposed regulation would have reduced the number of 
respondents for parent-pupil survey forms from 500,000 to 355,000, 
which would have resulted in a decrease of burden hours from

[[Page 64738]]

125,000 to 88,750 burden hours. Based on strong public opposition to 
this change the Department has decided not to include this change in 
the final rule. Since this change is no longer being revised, the 
burden hours for this provision remain 125,000. The total number of 
respondents for parent-pupil survey forms remains 500,000.
    The proposed change that would have mandated the use of source 
check forms for children residing on Indian lands or children residing 
in low-rent housing would have doubled the number of source checks 
being collected annually. The Department, therefore, increased the 
burden associated with source check forms from 1,500 hours to 3,000 
hours in the NPRM (80 FR 81487). As this change is not included in the 
final rule, the burden hours for completing a source check remain 1,500 
total burden hours. The average number of burden hours for an LEA to 
complete the application was reduced from 10 hours to 9 hours due to 
system enhancements that have streamlined the process. This estimated 
change resulted in an overall decrease in burden hours of 1,264. The 
dollar amount of this change is estimated to be a decrease of $23,352.
    The revised burden for this information collection package is 
depicted in the following tables. Table 3 (80 FR 81489) remains 
unchanged, but is included here for reference.

    Table 1--Summary of Burden Hours To Submit a Complete Impact Aid
                           Application Package
------------------------------------------------------------------------
                                                             Estimated
                                           Total annual    total annual
                                           burden hours    burden hours
   By regulatory section or subsection     under current     under the
                                            regulations        final
                                                            regulations
------------------------------------------------------------------------
34 CFR 222.35, 34 CFR 222.50-52 IAP              139,140         137,876
 Application Tables 1-5.................
34 CFR 222.37, IAP Application IAP                 1,264             100
 Application Table 6....................
34 CFR 222.53 IAP Application Table 7...             217             217
34 CFR 222.141-143 IAP Application Table               5               5
 8......................................
Reporting Construction Expenditures.....              40              40
Housing Official Certification Form.....              13               5
Indian Policies and Procedures (IPPs)...               0             187
IPP Responses *.........................               0           1,040
                                         -------------------------------
    TOTAL...............................         140,679         139,470
Number of LEAs..........................           1,265           1,264
Average Hours Per LEA (total divided by            111.2           110.3
 number of LEAs)........................
------------------------------------------------------------------------
* Denotes changes directly associated with the final regulatory changes


     Table 2--Reporting Numbers of Federally-Connected Children on Tables 1-5 of the Impact Aid Application
----------------------------------------------------------------------------------------------------------------
                                    Current        Estimated
             Task                  estimated     number under    Average hours    Total hours      Explanation
                                    number        final rule
----------------------------------------------------------------------------------------------------------------
Parent-pupil surveys..........         500,000         500,000            0.25         125,000  Assumes 500,000
                                                                                                 federally-
                                                                                                 connected
                                                                                                 children
                                                                                                 identified
                                                                                                 through a
                                                                                                 survey form
                                                                                                 completed by a
                                                                                                 parent.
Source check with Federal                  500             500               3           1,500  Assumes 3 hours
 official to document children                                                                   to verify
 living on Federal property                                                                      information on
 (LEAs).                                                                                         a source check.
Collecting and organizing data           1,265           1,264               9          11,376  Assumes time to
 to report on Tables 1-5 in                                                                      complete and
 the Application (LEAs).                                                                         organize survey/
                                                                                                 source check
                                                                                                 data on
                                                                                                 federally-
                                                                                                 connected
                                                                                                 children
                                                                                                 averages nine
                                                                                                 hours
                               ---------------------------------------------------------------------------------
    Total Current.............  ..............  ..............  ..............         137,876  ................
    Total Previous............  ..............  ..............  ..............         139,140  ................
        Change................  ..............  ..............  ..............          -1,264  ................
----------------------------------------------------------------------------------------------------------------


  Table 3--Additional Reporting Tasks and Supplemental Information on Tables 6-10 of the Impact Aid Application
----------------------------------------------------------------------------------------------------------------
                                    Current        Estimated
             Task                  estimated     number under    Average hours    Total hours      Explanation
                                    number        final rule
----------------------------------------------------------------------------------------------------------------
Reporting enrollment and                 1,264             100               1             100  The final
 attendance data on Table 6                                                                      regulations
 (LEAs).*                                                                                        would reduce
                                                                                                 the number even
                                                                                                 further to
                                                                                                 approximately
                                                                                                 100 LEAs who
                                                                                                 will have a
                                                                                                 higher
                                                                                                 attendance rate
                                                                                                 than the State
                                                                                                 average.

[[Page 64739]]

 
Collecting and reporting                   869             868             .25             217  This assumes
 expenditure data for                                                                            that an average
 federally-connected children                                                                    of 868 LEAs
 with disabilities on Table                                                                      received a
 7(LEAs).                                                                                        payment for
                                                                                                 children with
                                                                                                 disabilities in
                                                                                                 the previous
                                                                                                 year and is
                                                                                                 required by law
                                                                                                 to report
                                                                                                 expenditures
                                                                                                 for children
                                                                                                 with
                                                                                                 disabilities
                                                                                                 for the prior
                                                                                                 year.
Reporting children educated in               5               5               1               5  Assumes LEAs
 federally-owned school                                                                          maintain data
 buildings on Table 8 (LEAs).                                                                    on children
                                                                                                 housed in the
                                                                                                 small number of
                                                                                                 schools owned
                                                                                                 by ED but
                                                                                                 operated by
                                                                                                 LEAs
Reporting expenditures of                  159             159            0.25              40  Assumes that the
 Section 7007 funds on Table                                                                     LEAs eligible
 10 (LEAs).                                                                                      to receive
                                                                                                 these funds
                                                                                                 have ready
                                                                                                 access to
                                                                                                 financial
                                                                                                 reports to
                                                                                                 retrieve and
                                                                                                 report these
                                                                                                 data.
Indian Policies and Procedures             625             625             0.3             187  The LEA does not
 (IPPs).                                                                                         have to collect
                                                                                                 any new
                                                                                                 information to
                                                                                                 meet this
                                                                                                 requirement.
IPP Response *................               0             800             1.3           1,040  This assumes
                                                                                                 some LEAs may
                                                                                                 have to respond
                                                                                                 to more than
                                                                                                 one tribe.
Contact Form for Housing                    10              10               0               0  The time
 Undergoing Renovation or                                                                        associated is
 Rebuilding.                                                                                     too small to
                                                                                                 calculate (<5
                                                                                                 minutes per
                                                                                                 applicant).
Housing Official Certification              10              10             .50               5  Amount of time
 Form.                                                                                           for the housing
                                                                                                 official to
                                                                                                 estimate the
                                                                                                 number of
                                                                                                 school-age
                                                                                                 children that
                                                                                                 would have
                                                                                                 resided in the
                                                                                                 housing had it
                                                                                                 not been
                                                                                                 unavailable due
                                                                                                 to renovation
                                                                                                 or rebuilding.
    Total Current.............  ..............  ..............  ..............           1,594  ................
    Total Previous............  ..............  ..............  ..............           1,529  ................
        Change................  ..............  ..............  ..............              65  ................
----------------------------------------------------------------------------------------------------------------
* Denotes changes directly associated with the final regulatory changes.


                              Table 4--Estimation of Annualized Cost to Applicants
----------------------------------------------------------------------------------------------------------------
                                                     Hours per                       Number of
                   Respondent                        response      Rate ($/hour)    respondents        Cost
----------------------------------------------------------------------------------------------------------------
Parent Respondents..............................             .25              10         500,000      $1,250,000
LEA Respondents.................................               9              15           1,264         170,640
                                                 ---------------------------------------------------------------
    Total Cost..................................  ..............  ..............  ..............       1,420,640
    Prior Cost Estimate.........................  ..............  ..............  ..............       1,443,992
        Cost Change.............................  ..............  ..............  ..............         -23,352
----------------------------------------------------------------------------------------------------------------

    The Department has also added a provision to Sec.  222.35(c) that 
allows LEAs to propose alternative methods of data collection and the 
Department's intention to allow for electronic data collection and 
submission. We anticipate that this will yield significant time savings 
for LEAs who elect to use these options. This savings cannot yet be 
quantified, but we expect to revise the burden hours and costs once we 
have more data.
    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 
collection of information in these final regulations at the end of the 
affected section of the regulations.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
[one of the program contact persons] 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 and the 
Code of Federal Regulations is available via the Federal Digital System 
at: 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 Portable Document Format (PDF). To use PDF you 
must have Adobe Acrobat Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit

[[Page 64740]]

your search to documents published by the Department.

(Catalog of Federal Domestic Assistance Number 84.041 Impact Aid)

List of Subjects in 34 CFR Part 222

    Administrative practice and procedure, Education of individuals 
with disabilities, Elementary and secondary education, Federally 
affected areas, Grant programs, education, Indians, education, 
Reporting and recordkeeping requirements.

    Dated: September 13, 2016.
Ann Whalen,
Senior Advisor to the Secretary, Delegated the Duties of the Assistant 
Secretary of Elementary and Secondary Education.

    For the reasons discussed in the preamble, the Assistant Secretary 
for Elementary and Secondary Education amends part 222 of title 34 of 
the Code of Federal Regulations as follows:

PART 222--IMPACT AID PROGRAM

0
1. The authority citation for part 222 continues to read as follows:

    Authority:  20 U.S.C. 7701-7714, unless otherwise noted.


0
2. Section 222.2(c) is amended:
0
A. In the definition of ``Membership'' by revising paragraph (3)(iv) 
and adding paragraph (3)(v).
0
B. By revising the definition of ``Parent employed on Federal 
property''.
    The revisions read as follows:


Sec.  222.2  What definitions apply to this part?

* * * * *
    (c) * * *
    Membership * * *
    (3) * * *
    (iv) Attend the schools of the applicant LEA under a tuition 
arrangement with another LEA that is responsible for providing them a 
free public education; or
    (v) Reside in a State other than the State in which the LEA is 
located, unless the student is covered by the provisions of--
    (A) Section 7010(c) of the Act; or
    (B) A formal State tuition or enrollment agreement.
* * * * *
    Parent employed on Federal property. (1) The term means:
    (i) An employee of the Federal government who reports to work on, 
or whose place of work is located on, Federal property, including a 
Federal employee who reports to an alternative duty station on the 
survey date, but whose regular duty station is on Federal property.

    Example 1:  Lauren, a Virginia resident, is an employee of the 
U.S. Department of Defense. Her physical duty station is in the 
Pentagon in Arlington, Virginia, and her children attend LEA A in 
Virginia. Lauren meets the definition of a ``parent employed on 
Federal property'' as she is both a Federal employee and her duty 
station is on eligible Federal property in the same State as LEA A. 
Thus LEA A may claim Lauren's children on its Impact Aid 
application.
    Example 2:  Alex, a Virginia resident, is an employee of the 
U.S. Department of Defense. His physical duty station is in the 
Pentagon in Arlington, Virginia, and his children attend LEA B in 
Virginia. On the survey date, Alex was teleworking from his home. 
For purposes of LEA B's Impact Aid application, Alex meets the 
definition of a ``parent employed on Federal property,'' as he is 
both a Federal employee and his duty station is on eligible Federal 
property in the same State as LEA B, even though Alex was at an 
alternative duty station on the survey date because he teleworked. 
LEA B may claim Alex's children on its Impact Aid application.
    Example 3:  Elroy is an employee of the U.S. Department of 
Education. His normal duty station is on eligible Federal property 
located in Washington, DC. Elroy's place of residence is in 
Virginia, and his children attend LEA C in Virginia. Elroy, a 
Federal employee, does not meet the definition of a ``parent 
employed on Federal property.'' The statute requires that the 
Federal property on which a parent is employed be in the same State 
as the LEA (ESEA section 7003(a)(1)(G)), and because the Federal 
property where Elroy works is not in the same State as LEA C, LEA C 
may not claim Elroy's children.

    (ii) A person not employed by the Federal government but who spends 
more than 50 percent of his or her working time on Federal property 
(whether as an employee or self-employed) when engaged in farming, 
grazing, lumbering, mining, or other operations that are authorized by 
the Federal government, through a lease or other arrangement, to be 
carried out entirely or partly on Federal property.

    Example 1:  Xavier, a dealer at a casino on eligible Indian 
lands in Utah, reports to work at the casino as his normal duty 
station and works his eight hour shift at the casino. Xavier's child 
attends school in LEA D in Utah. For purposes of Impact Aid, Xavier 
meets the definition of a ``parent employed on Federal property'' 
because, although Xavier is not a Federal employee, his duty station 
is the casino, which is located on an eligible Federal property 
within the same State as LEA D. LEA D may claim Xavier's children on 
its Impact Aid application.
    Example 2:  Becca works at a privately owned convenience store 
on leased property on a military installation in Maine. Becca's 
children attend school at a LEA E, a Maine public school district. 
On a daily basis, including on the survey date, Becca reports to 
work at the convenience store where she works her entire shift. 
Becca meets the definition of a ``parent employed on Federal 
property'' for LEA E because, although Becca is not a Federal 
employee, her duty station is the convenience store, which is 
located on an eligible Federal property within the same State as LEA 
E. LEA E may claim Becca's children on its Impact Aid application.
    Example 3:  Zoe leases Federal property in Massachusetts to grow 
lima beans. Zoe's daughter attends LEA F, a Massachusetts public 
school. On the survey date, Zoe has a valid lease agreement to carry 
out farming operations that are authorized by the Federal 
government. Zoe also has a crop of corn on an adjacent field that is 
not on Federal property. On the survey date, Zoe spent 75 percent of 
her day harvesting lima beans and 25 percent of her day harvesting 
corn. Because Zoe spent more than 50 percent of her day working on 
farming operations that are authorized by the Federal government on 
leased Federal property in the same State her daughter attends 
school, Zoe meets the definition of a ``parent employed on Federal 
property,'' and LEA F can claim her daughter on its Impact Aid 
application.
    Example 4:  Frank is a private contractor with an office on a 
military installation and an office on private property, both of 
which are located in Maryland. His time is split between the two 
offices. Frank's children attend public school in Maryland in LEA G. 
On the survey date, Frank reported to his office on the military 
installation. He spent 4 of his 8 hours at the office on the 
military installation and 4 hours at the privately owned office 
facility. Frank's children attend LEA G, a Maryland public school. 
Frank meets the definition of a ``parent employed on Federal 
property'' because he reported to work on the military installation 
and he spent at least 50 percent of his time on Federal property 
conducting operations that are authorized by the Federal government 
on eligible Federal property in the same State as LEA G. LEA G may 
claim Frank's children on its Impact Aid application.

    (2) Except as provided in paragraph (1)(ii) of this definition, the 
term does not include a person who is not employed by the Federal 
government and reports to work at a location not on Federal property, 
even though the individual provides services to operations or 
activities authorized to be carried out on Federal property.

    Example 1:  Maria delivers bread to the convenience store and 
the commissary, which are both eligible Federal properties located 
on a military installation in Florida. Maria's son attends school in 
LEA H, a Florida public school district. On a daily basis, including 
the survey date, Maria reports to a privately owned warehouse on 
private property to get her inventory for delivery. Maria is not a 
Federal employee and her duty station is the warehouse located on 
private property. She therefore does not meet the definition of a 
``parent employed on Federal property'' for purposes of Impact Aid. 
LEA H may not claim Maria's children on its Impact Aid application.
    Example 2:  Lorenzo is a construction worker who is working on 
an eligible Federal property in Arizona, but each day he reports to 
his construction office located on private

[[Page 64741]]

property to get his daily assignments and meet with the crew before 
going to the jobsite. Lorenzo's twins attend LEA I, in Arizona. 
Lorenzo is not a Federal employee and his duty station is the 
construction office and not the Federal property. Lorenzo therefore 
does not meet the definition of a ``parent employed on Federal 
property.'' LEA I may not claim Lorenzo's children on its Impact Aid 
application.
    Example 3:  Aubrey, a defense contractor, routinely reports to 
work at her duty station on private property in California. Aubrey's 
children attend LEA J in California. On the survey date, Aubrey 
attends an all-day meeting on a military installation. Aubrey is not 
a Federal employee and she does not normally report to work on 
eligible Federal property; as a result, Aubrey is not an eligible 
parent employed on Federal property, and LEA J cannot claim her 
children on its Impact Aid application.

(Authority: 20 U.S.C. 7703)

* * * * *


Sec.  222.3  [Amended]

0
3. Section 222.3 is amended in paragraph (b)(2) introductory text by 
removing the phrase ``September 30'' and adding in its place ``June 
30''.


Sec.  222.5  [Amended]

0
4. Section 222.5 is amended in paragraph (a)(2) by removing ``the end'' 
and adding in its place ``June 30''.

0
5. Section 222.22 is amended by revising paragraphs (b)(1) and (d) to 
read as follows:


Sec.  222.22  How does the Secretary treat compensation from Federal 
activities for purposes of determining eligibility and payments?

* * * * *
    (b) * * *
    (1) The LEA received revenue during the preceding fiscal year that 
is generated from activities in or on the eligible Federal property; 
and
* * * * *
    (d) For purposes of this section, the amount of revenue that an LEA 
receives during the previous fiscal year from activities conducted on 
Federal property includes payments received by any Federal agency due 
to activities on Federal property, including forestry, mining, and 
grazing, but does not include revenue from:
    (1) Payments received by the LEA from the Secretary of Defense to 
support--
    (i) The operation of a domestic dependent elementary or secondary 
school; or
    (ii) The provision of a free public education to dependents of 
members of the Armed Forces residing on or near a military 
installation;
    (2) Payments from the Department; or
    (3) Payments in Lieu of Taxes from the Department of Interior under 
31 U.S.C. 6901 et seq.
* * * * *

0
6. Section 222.23 is revised to read as follows:


Sec.  222.23  How are consolidated LEAs treated for the purposes of 
eligibility and payment under section 7002?

    (a) Eligibility. An LEA formed by the consolidation of one or more 
LEAs is eligible for section 7002 funds, notwithstanding section 
222.21(a)(1), if--
    (1) The consolidation occurred prior to fiscal year 1995 or after 
fiscal year 2005; and
    (2) At least one of the former LEAs included in the consolidation:
    (i) Was eligible for section 7002 funds in the fiscal year prior to 
the consolidation; and
    (ii) Currently contains Federal property that meets the 
requirements of Sec.  222.21(a) within the boundaries of the former LEA 
or LEAs.
    (b) Documentation required. In the first year of application 
following the consolidation, an LEA that meets the requirements of 
paragraph (a) of this section must submit evidence that it meets the 
requirements of paragraphs (a)(1) and (a)(2)(ii) of this section.
    (c) Basis for foundation payment. (1) The foundation payment for a 
consolidated district is based on the total section 7002 payment for 
the last fiscal year for which the former LEA received payment. When 
more than one former LEA qualifies under paragraph (a)(2) of this 
section, the payments for the last fiscal year for which the former 
LEAs received payment are added together to calculate the foundation 
basis.
    (2) Consolidated LEAs receive only a foundation payment and do not 
receive a payment from any remaining funds.

(Authority: 20 U.S.C. 7702(g))


0
7. Section 222.24 is added to read as follows:


Sec.  222.24  How does a local educational agency that has multiple tax 
rates for real property classifications derive a single real property 
tax rate?

    An LEA that has multiple tax rates for real property 
classifications derives a single tax rate for the purposes of 
determining its Section 7002 maximum payment by dividing the total 
revenues for current expenditures it received from local real property 
taxes by the total taxable value of real property located within the 
boundaries of the LEA. These data are from the fiscal year prior to the 
fiscal year in which the applicant seeks assistance.

(Authority: 20 U.S.C. 7702)


0
8. Section 222.30 is amended in the definition of ``Free public 
education'' by revising paragraph (2)(ii) to read as follows:


Sec.  222.30  What is ``free public education''?

* * * * *
    Free public education. * * *
    (2) * * *
    (ii) Federal funds, other than Impact Aid funds and charter school 
startup funds, do not provide a substantial portion of the educational 
program, in relation to other LEAs in the State, as determined by the 
Secretary.
* * * * *


Sec.  222.32  [Amended]

0
9. Section 222.32 is amended in paragraph (b) by adding the phrase 
``timely and complete'' after the first instance of ``its''.
0
10. Section 222.33 is amended by adding paragraph (c) to read as 
follows:


Sec.  222.33   When must an applicant make its membership count?

* * * * *
    (c) The data on the application resulting from the count in 
paragraph (b) of this section must be accurate and verifiable by the 
application deadline.
* * * * *

0
11. Section 222.35 is revised to read as follows:


Sec.  222.35  How does a local educational agency count the membership 
of its federally connected children?

    An applicant counts the membership of its federally connected 
children using one of the following methods:
    (a) Parent-pupil survey. An applicant may conduct a parent-pupil 
survey to count the membership of its federally connected children, 
which must be counted as of the survey date.
    (1) The applicant shall conduct a parent-pupil survey by providing 
a form to a parent of each pupil enrolled in the LEA to substantiate 
the pupil's place of residence and the parent's place of employment.
    (2) A parent-pupil survey form must include the following:
    (i) Pupil enrollment information (this information may also be 
obtained from school records), including--
    (A) Name of pupil;
    (B) Date of birth of the pupil; and
    (C) Name of public school and grade of the pupil.
    (ii) Pupil residence information, including:
    (A) The complete address of the pupil's residence, or other 
acceptable location information for that residence, such as a complete 
legal description, a

[[Page 64742]]

complete U.S. Geological Survey number, or complete property tract or 
parcel number, or acceptable certification by a Federal agency official 
with access to data or records to verify the location of the Federal 
property; and
    (B) If the pupil's residence is on Federal property, the name of 
the Federal facility.
    (3) If any of the following circumstances apply, the parent-pupil 
survey form must also include the following:
    (i) If the parent is employed on Federal property, except for a 
parent who is a member of the uniformed services on active duty, parent 
employment information, including--
    (A) Name (as it appears on the employer's payroll record) of the 
parent (mother, father, legal guardian or other person standing in loco 
parentis) who is employed on Federal property and with whom the pupil 
resides; and
    (B) Name of employer, name and complete address of the Federal 
property on which the parent is employed (or other acceptable location 
information, such as a complete legal description or acceptable 
certification by a Federal agency).
    (ii) If the parent is a member of the uniformed services on active 
duty, the name, rank, and branch of service of that parent.
    (iii) If the parent is both an official of, and accredited by a 
foreign government, and a foreign military officer, the name, rank, and 
country of service.
    (iv) If the parent is a civilian employed on a Federal vessel, the 
name of the vessel, hull number, homeport, and name of the controlling 
agency.
    (4)(i) Every parent-pupil survey form must include the signature of 
the parent supplying the information, except as provided in paragraph 
(a)(4)(ii) of this section, and the date of such signature, which must 
be on or after the survey date.
    (ii) An LEA may accept an unsigned parent-pupil survey form, or a 
parent-pupil survey form that is signed by a person other than a 
parent, only under unusual circumstances. In those instances, the 
parent-pupil survey form must show why the parent did not sign the 
survey form, and when, how, and from whom the residence and employment 
information was obtained. Unusual circumstances may include, but are 
not limited to:
    (A) A pupil who, on the survey date, resided with a person without 
full legal guardianship of the child while the pupil's parent or 
parents were deployed for military duty. In this case, the person with 
whom the child is residing may sign the parent-pupil survey form.
    (B) A pupil who, on the survey date, was a ward of the juvenile 
justice system. In this case, an administrator of the institution where 
the pupil was held on the survey date may sign the parent-pupil survey 
form.
    (C) A pupil who, on the survey date, was an emancipated youth may 
sign his or her own parent-pupil survey form.
    (D) A pupil who, on the survey date, was at least 18 years old but 
who was not past the 12th grade may sign his or her own parent-pupil 
survey form.
    (iii) The Department does not accept a parent-pupil survey form 
signed by an employee of the school district who is not the student's 
mother, father, legal guardian or other person standing in loco 
parentis.
    (b) Source check. A source check is a type of survey tool that 
groups children being claimed on the Impact Aid application by Federal 
property. This form is used in lieu of the parent-pupil survey form to 
substantiate a pupil's place of residence or parent's place of 
employment on the survey date.
    (1) The source check must include sufficient information to 
determine the eligibility of the Federal property and the individual 
children claimed on the form.
    (2) A source check may also include:
    (i) Certification by a parent's employer regarding the parent's 
place of employment;
    (ii) Certification by a military or other Federal housing official 
as to the residence of each pupil claimed;
    (iii) Certification by a military personnel official regarding the 
military active duty status of the parent of each pupil claimed as 
active duty uniformed services; or
    (iv) Certification by the Bureau of Indian Affairs (BIA) or 
authorized tribal official regarding the eligibility of Indian lands.
    (c) Another method approved by the Secretary.
    (Approved by the Office of Management and Budget under control 
number 1810-0036)

(Authority: 20 U.S.C. 7703)


0
12. Section 222.37 is revised to read as follows:


Sec.  222.37  How does the Secretary calculate the average daily 
attendance of federally connected children?

    (a) This section describes how the Secretary computes the ADA of 
federally connected children for each category in section 8003 to 
determine an applicant's payment.
    (b)(1) For purposes of this section, actual ADA means raw ADA data 
that have not been weighted or adjusted to reflect higher costs for 
specific types of students for purposes of distributing State aid for 
education.
    (2) If an LEA provides a program of free public summer school, 
attendance data for the summer session are included in the LEA's ADA 
figure in accordance with State law or practice.
    (3) An LEA's ADA count includes attendance data for children who do 
not attend the LEA's schools, but for whom it makes tuition 
arrangements with other educational entities.
    (4) Data are not counted for any child--
    (i) Who is not physically present at school for the daily minimum 
time period required by the State, unless the child is--
    (A) Participating via telecommunication or correspondence course 
programs that meet State standards; or
    (B) Being served by a State-approved homebound instruction program 
for the daily minimum time period appropriate for the child; or
    (ii) Attending the applicant's schools under a tuition arrangement 
with another LEA.
    (c) An LEA may determine its average daily attendance calculation 
in one of the following ways:
    (1) If an LEA is in a State that collects actual ADA data for 
purposes of distributing State aid for education, the Secretary 
calculates the ADA of that LEA's federally connected children for the 
current fiscal year payment as follows:
    (i) By dividing the ADA of all the LEA's children for the second 
preceding fiscal year by the LEA's total membership on its survey date 
for the second preceding fiscal year (or, in the case of an LEA that 
conducted two membership counts in the second preceding fiscal year, by 
the average of the LEA's total membership on the two survey dates); and
    (ii) By multiplying the figure determined in paragraph (c)(1)(i) of 
this section by the LEA's total membership of federally connected 
children in each subcategory described in section 7003 and claimed in 
the LEA's application for the current fiscal year payment.
    (2) An LEA may submit its total preceding year ADA data. The 
Secretary uses these data to calculate the ADA of the LEA's federally 
connected children by--
    (i) Dividing the LEA's preceding year's total ADA data by the 
preceding year's total membership data; and
    (ii) Multiplying the figure determined in paragraph (c)(2)(i) of 
this section by the LEA's total membership of federally connected 
children as described in paragraph (c)(1)(i) of this section.

[[Page 64743]]

    (3) An LEA may submit attendance data based on sampling conducted 
during the previous fiscal year.
    (i) The sampling must include attendance data for all children for 
at least 30 school days.
    (ii) The data must be collected during at least three periods 
evenly distributed throughout the school year.
    (iii) Each collection period must consist of at least five 
consecutive school days.
    (iv) The Secretary uses these data to calculate the ADA of the 
LEA's federally connected children by--
    (A) Determining the ADA of all children in the sample;
    (B) Dividing the figure obtained in paragraph (c)(3)(iv)(A) of this 
section by the LEA's total membership for the previous fiscal year; and
    (C) Multiplying the figure determined in paragraph (c)(3)(iv)(B) of 
this section by the LEA's total membership of federally connected 
children for the current fiscal year, as described in paragraph 
(c)(1)(i) of this section.
    (d) An SEA may submit data to calculate the average daily 
attendance calculation for the LEAs in that State in one of the 
following ways:
    (1) If the SEA distributes State aid for education based on data 
similar to attendance data, the SEA may request that the Secretary use 
those data to calculate the ADA of each LEA's federally connected 
children. If the Secretary determines that those data are, in effect, 
equivalent to attendance data, the Secretary allows use of the 
requested data and determines the method by which the ADA for all of 
the LEA's federally connected children will be calculated.
    (2) An SEA may submit data necessary for the Secretary to calculate 
a State average attendance ratio for all LEAs in the State by 
submitting the total ADA and total membership data for the State for 
each of the last three most recent fiscal years that ADA data were 
collected. The Secretary uses these data to calculate the ADA of the 
federally connected children for each LEA in the State by--
    (i)(A) Dividing the total ADA data by the total membership data for 
each of the three fiscal years and averaging the results; and
    (B) Multiplying the average determined in paragraph (d)(2)(i)(A) of 
this section by the LEA's total membership of federally connected 
children as described in paragraph (c)(1)(i) of this section.
    (e) The Secretary may calculate a State average attendance ratio in 
States with LEAs that would benefit from such calculation by using the 
methodology in paragraph (d)(2)(i) of this section.
    (Approved by the Office of Management and Budget under control 
number 1810-0036)

(Authority: 20 U.S.C. 7703, 7706, 7713)


0
13. Section 222.40 is amended as follows:
0
A. In paragraph (d)(1)(i) by adding the phrase ``or density'' after the 
word ``sparsity''.
0
B. By adding paragraph (d)(1)(iii).
    The addition reads as follows:


Sec.  222.40   What procedures does a State educational agency use for 
certain local educational agencies to determine generally comparable 
local educational agencies using additional factors, for local 
contribution rate purposes?

* * * * *
    (d) * * *
    (1) * * *
    (iii) If an SEA proposes to use one or more special additional 
factors to determine generally comparable LEAs, the SEA must submit, 
with its annual submission of generally comparable data to the 
Department, its rationale for selecting the additional factor or 
factors and describe how they affect the cost of education in the LEA.
* * * * *

0
14. Section 222.62 is amended by:
0
A. Redesignating paragraphs (a) and (b) and paragraphs (b) and (c), 
respectively.
0
B. Adding a new paragraph (a).
0
C. Removing the phrase ``an additional assistance payment under section 
8003(f)'' from newly redesignated paragraph (b) and adding in its place 
``a heavily impacted LEA payment''.
0
D. Removing the phrase ``an additional assistance payment under section 
8003(f)'' from newly redesignated paragraph (c) and adding in its place 
``see above and throughout the section''.
    The addition reads as follows:


Sec.  222.62  How are local educational agencies determined eligible 
under section 7003(b)(2)?

    (a) An applicant that wishes to be considered to receive a heavily 
impacted payment must submit the required information indicating tax 
rate eligibility under Sec. Sec.  222.63 or 222.64 with the annual 
section 7003 Impact Aid application. Final LEA tax rate eligibility 
must be verified by the SEA under the process described in Sec.  
222.73.
* * * * *

0
15. Section 222.91 is revised to read as follows:


Sec.  222.91  What requirements must a local educational agency meet to 
receive a payment under section 7003 of the Act for children residing 
on Indian lands?

    (a) To receive a payment under section 7003 of the Act for children 
residing on Indian lands, an LEA must--
    (1) Meet the application and eligibility requirements in section 
7003 and subparts A and C of these regulations;
    (2) Except as provided in paragraph (b) of this section, develop 
and implement policies and procedures in accordance with Sec.  222.94; 
and
    (3) Include in its application for payments under section 7003--
    (i) An assurance that the LEA established these policies and 
procedures in consultation with and based on information from tribal 
officials and parents of those children residing on Indian lands who 
are Indian children, except as provided in paragraph (b) of this 
section;
    (ii) An assurance that the LEA has provided a written response to 
the comments, concerns and recommendations received through the Indian 
policies and procedures consultation process, except as provided in 
paragraph (b) of this section; and
    (iii) Either a copy of the policies and procedures, or 
documentation that the LEA has received a waiver in accordance with the 
provisions of paragraph (b) of this section.
    (b) An LEA is not required to comply with Sec.  222.94 with respect 
to students from a tribe that has provided the LEA with a waiver that 
meets the requirements of this paragraph.
    (1) A waiver must contain a voluntary written statement from an 
appropriate tribal official or tribal governing body that--
    (i) The LEA need not comply with Sec.  222.94 because the tribe is 
satisfied with the LEA's provision of educational services to the 
tribe's students; and
    (ii) The tribe was provided a copy of the requirements in Sec.  
222.91 and Sec.  222.94, and understands the requirements that are 
being waived.
    (2) The LEA must submit the waiver at the time of application.
    (3) The LEA must obtain a waiver from each tribe that has Indian 
children living on Indian lands claimed by the LEA on its application 
under section 7003 of the Act. If the LEA only obtains waivers from 
some, but not all, applicable tribes, the LEA must comply with the 
requirements of Sec.  222.94 with respect to those tribes that did not 
agree to waive these requirements.


[[Page 64744]]


    (Approved by the Office of Management and Budget under control 
number 1810-0036)

(Authority: 20 U.S.C. 7703(a), 7704)


0
16. Section 222.94 is revised to read as follows:


Sec.  222.94  What are the responsibilities of the LEA with regard to 
Indian policies and procedures?

    (a) An LEA that is subject to the requirements of Sec.  222.91(a) 
must consult with and involve local tribal officials and parents of 
Indian children in the planning and development of:
    (1) Its Indian policies and procedures (IPPs), and
    (2) The LEA's general educational program and activities.
    (b) An LEA's IPPs must include a description of the specific 
procedures for how the LEA will:
    (1) Disseminate relevant applications, evaluations, program plans 
and information related to the LEA's education program and activities 
with sufficient advance notice to allow tribes and parents of Indian 
children the opportunity to review and make recommendations.
    (2) Provide an opportunity for tribes and parents of Indian 
children to provide their views on the LEA's educational program and 
activities, including recommendations on the needs of their children 
and on how the LEA may help those children realize the benefits of the 
LEA's education programs and activities. As part of this requirement, 
the LEA will--
    (i) Notify tribes and the parents of Indian children of the 
opportunity to submit comments and recommendations, considering the 
tribe's preference for method of communication, and
    (ii) Modify the method of and time for soliciting Indian views, if 
necessary, to ensure the maximum participation of tribes and parents of 
Indian children.
    (3) At least annually, assess the extent to which Indian children 
participate on an equal basis with non-Indian children in the LEA's 
education program and activities. As part of this requirement, the LEA 
will:
    (i) Share relevant information related to Indian children's 
participation in the LEA's education program and activities with tribes 
and parents of Indian children; and
    (ii) Allow tribes and parents of Indian children the opportunity 
and time to review and comment on whether Indian children participate 
on an equal basis with non-Indian children.
    (4) Modify the IPPs if necessary, based upon the results of any 
assessment or input described in paragraph (b) of this section.
    (5) Respond at least annually in writing to comments and 
recommendations made by tribes or parents of Indian children, and 
disseminate the responses to the tribe and parents of Indian children 
prior to the submission of the IPPs by the LEA.
    (6) Provide a copy of the IPPs annually to the affected tribe or 
tribes.
    (c)(1) An LEA that is subject to the requirements of Sec.  
222.91(a) must implement the IPPs described in paragraph (b) of this 
section.
    (2) Each LEA that has developed IPPs shall review those IPPs 
annually to ensure that they comply with the provisions of this 
section, and are implemented by the LEA in accordance with this 
section.
    (3) If an LEA determines, after input from the tribe and parents of 
Indian children, that its IPPs do not meet the requirements of this 
section, the LEA shall amend its IPPs to conform to those requirements 
within 90 days of its determination.
    (4) An LEA that amends its IPPs shall, within 30 days, send a copy 
of the amended IPPs to--
    (i) The Impact Aid Program Director for approval; and
    (ii) The affected tribe or tribes.

(Authority: 20 U.S.C. 7704)


0
17. Section 222.95 is amended:
0
A. In paragraph (c), by removing the number ``60'' and adding in its 
place ``90''.
0
B. In paragraph (d), by adding the phrase ``or part of the'' after the 
word ``all''.
0
C. By removing paragraphs (e), (f), and (g).

0
18. Section 222.161 is amended:
0
A. In the section heading, by removing ``section 8009'' and adding in 
its place ``section 7009''.
0
B. By revising paragraph (a)(5).
0
C. By adding paragraphs (a)(6) and (b)(3).
0
D. By revising paragraph (c).
    The additions and revisions read as follows:


Sec.  222.161   How is State aid treated under section 7009 of the Act?

    (a) * * *
    (5) Except as provided in paragraph (a)(6), a State may not take 
into consideration payments under the Act in making estimated or final 
State aid payments before its State aid program has been certified by 
the Secretary.
    (6)(i) If the Secretary has not made a determination under section 
7009 of the Act for a fiscal year, the State may request permission 
from the Secretary to make estimated or preliminary State aid payments 
for that fiscal year, that consider a portion of Impact Aid payments as 
local resources in accordance with this section.
    (ii) The State must include with its request an assurance that if 
the Secretary determines that the State does not meet the requirements 
of section 222.162 for that State fiscal year, the State must pay to 
each affected LEA, within 60 days of the Secretary's determination, the 
amount by which the State reduced State aid to the LEA.
    (iii) In determining whether to grant permission, the Secretary may 
consider factors including whether--
    (A) The Secretary certified the State under Sec.  222.162 in the 
prior State fiscal year; and
    (B) Substantially the same State aid program is in effect since the 
date of the last certification.
    (b) * * *
    (3) For a State that has not previously been certified by the 
Secretary under Sec.  222.162, or if the last certification was more 
than two years prior, the State submits projected data showing whether 
it meets the disparity standard in Sec.  222.162. The projected data 
must show the resulting amounts of State aid as if the State were 
certified to consider Impact Aid in making State aid payments.
    (c) Definitions. The following definition applies to this subpart:
    Current expenditures is defined in section 7013(4) of the Act. 
Additionally, for the purposes of this section it does not include 
expenditures of funds received by the agency under sections 7002 and 
7003(b) (including hold harmless payments calculated under section 
7003(e)) that are not taken into consideration under the State aid 
program and exceed the proportion of those funds that the State would 
be allowed to take into consideration under Sec.  222.162.
* * * * *

0
19. Section 222.162 is amended:
0
A. In paragraph (c)(2) introductory text, by removing the phrase ``on 
those bases'' in the first sentence and adding in its place ``using one 
of the methods in paragraph (d) of this section''.
0
B. By revising paragraph (d).
    The revision reads as follows:


Sec.  222.162   What disparity standard must a State meet in order to 
be certified and how are disparities in current expenditures or 
revenues per pupil measured?

* * * * *
    (d) Accounting for special cost differentials. In computing per-
pupil figures under paragraph (c) of this section, the State accounts 
for special cost differentials that meet the

[[Page 64745]]

requirements of paragraph (c)(2) of this section in one of four ways:
    (1) The inclusion method on a revenue basis. The State divides 
total revenues by a weighted pupil count that includes only those 
weights associated with the special cost differentials.
    (2) The inclusion method on an expenditure basis. The State divides 
total current expenditures by a weighted pupil count that includes only 
those weights associated with the special cost differentials.
    (3) The exclusion method on a revenue basis. The State subtracts 
revenues associated with the special cost differentials from total 
revenues, and divides this net amount by an unweighted pupil count.
    (4) The exclusion method on an expenditure basis. The State 
subtracts current expenditures from revenues associated with the 
special cost differentials from total current expenditures, and divides 
this net amount by an unweighted pupil count.
* * * * *

0
20. Section 222.164 is amended:
0
A. In the section heading, by removing ``section 8009'' and adding in 
its place ``section 7009''.
0
B. By revising paragraph (a)(2).
    The revision reads as follows:


Sec.  222.164   What procedures does the Secretary follow in making a 
determination under section 7009?

    (a) * * *
    (2) Whenever a proceeding under this subpart is initiated, the 
party initiating the proceeding shall provide either the State or all 
LEAs with a complete copy of the submission required in paragraph (b) 
of this section. Following receipt of the submission, the Secretary 
shall notify the State and all LEAs in the State of their right to 
request from the Secretary, within 30 days of the initiation of a 
proceeding, the opportunity to present their views to the Secretary 
before the Secretary makes a determination.
* * * * *
[FR Doc. 2016-22407 Filed 9-19-16; 8:45 am]
 BILLING CODE 4000-01-P