[Federal Register Volume 84, Number 229 (Wednesday, November 27, 2019)]
[Rules and Regulations]
[Pages 65300-65303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25819]


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DEPARTMENT OF EDUCATION

34 CFR Chapter II

[Docket ID ED-2019-OPEPD-0019]
RIN 1875-AA12


Final Priority for Discretionary Grant Programs

AGENCY: Department of Education.

ACTION: Final priority.

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SUMMARY: The Secretary of Education announces a priority for 
discretionary grant programs that supports alignment between the 
Department of Education's (the Department's) discretionary grant 
investments and the Administration's Opportunity Zones initiative, 
which aims to spur economic development and job creation in distressed 
communities.

DATES: This priority is effective December 27, 2019.

FOR FURTHER INFORMATION CONTACT: Allison Holte, U.S. Department of 
Education, 400 Maryland Avenue SW, Room 4W211, Washington, DC 20202. 
Telephone: (202) 205-7726.
    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: 
    Program Authority: 20 U.S.C. 1221e-3.
    We published a notice of proposed priority in the Federal Register 
on July 29, 2019 (84 FR 36504) (NPP). The NPP contained background 
information and our reasons for proposing the priority.
    There are no differences between the proposed priority and the 
final priority.
    Public Comment: In response to our invitation in the NPP, 11 
parties submitted comments on the proposed priority.
    We group major issues according to subject. Generally, we do not 
address comments that raised concerns not directly related to the 
proposed priority.

Analysis of Comments

    Comment: Two commenters expressed general support for the priority, 
and shared information about the needs of specific Qualified 
Opportunity Zones. A third commenter expressed support and recommended 
that we revise the language to prioritize applicants who propose to 
strengthen the workforce talent pipeline within the Qualified 
Opportunity Zone, promote partnerships with other local stakeholders, 
and build capacity among local leaders and practitioners.
    Discussion: We appreciate these comments and encourage all eligible 
organizations--located in or serving a Qualified Opportunity Zone--to 
apply for grants under competitions that use this priority in the 
future. This document does not solicit grants.
    In addition, we appreciate the commenter's suggestion to revise the 
priority to include a focus on specific policy goals. We agree that the 
commenter's suggested policies are important but decline to revise this 
priority to include them. Our intent for this priority is to drive 
grant funds toward Qualified Opportunity Zones and to encourage 
applicants to think creatively about how to make use of Qualified 
Opportunity Funds, where possible, to support their proposed projects. 
The goals and content of an applicant's proposed project will depend in 
large part on the statute and regulations governing the grant program 
to which it is applying, as well as any of the Secretary's Supplemental 
Priorities (83 FR 9096) we may choose to include in the grant 
competition. For that reason, including additional requirements in this 
priority is neither necessary nor appropriate.
    Changes: None.
    Comment: Several commenters raised concerns about how the 
Department would practically apply the priority in a grant competition. 
One commenter cautioned the Department not to require applicants to be 
physically located in a Qualified Opportunity Zone, because many 
organizations provide services in a Qualified Opportunity Zone but have 
offices in a nearby community. Another commenter expressed concern that 
the priority would not require applicants to explain the work they 
propose to do in a Qualified Opportunity Zone, where they would conduct 
their work, or why. A third commenter expressed general support for the 
broad Opportunity Zones initiative but urged the Department to exercise 
caution when determining whether to use the priority as an absolute, 
competitive preference, or invitational priority. The commenter 
recommended specifically that we not use the priority as an absolute 
priority, and only use it as a competitive preference priority after 
very careful consideration of its potential impact.
    Discussion: The priority's flexible structure is specifically 
designed to allow the Department to address, in the broader context of 
specific discretionary grant competitions in which the priority may be 
used, each of the concerns raised by the commenters. In particular, the 
Department may choose to use all or a subset of the provisions 
contained in the priority in any discretionary grant competition. For 
example, the Department may choose not to use paragraph (b) (for 
applicants that can demonstrate that they are physically located in a 
Qualified Opportunity Zone) in a grant competition if we determine that 
physical co-location of an applicant within a Qualified Opportunity 
Zone is not necessary for achieving the goals of that competition.
    In addition, while each of the subparts do not specifically require 
applicants to explain the work they propose to do, and paragraph (b) 
does not specifically require applicants to tell us where they will 
conduct their projects, we remind commenters that this priority will be 
used in the context of our discretionary grant programs. The activities 
an applicant proposes to carry out, either directly or through a 
contract or subgrant, in response to this priority would still be 
limited to those permitted by that grant program's statute and 
regulations. In addition to any applicable statutory and regulatory 
requirements, we include in each notice

[[Page 65301]]

inviting applications for new awards a set of selection criteria that 
applicants must address in order for peer reviewers to score their 
applications. We include these selection criteria to better understand 
the details of an applicant's proposal, including why it proposes the 
project in the first place. For these reasons, we do not think it is 
necessary to revise the priority in order to ensure that we award high-
quality grants.
    Finally, we agree with the commenter that the decision to include 
any priority--be it absolute, competitive preference, or invitational--
should be made judiciously. We intend to include this priority in a 
grant competition only after careful consideration.
    Changes: None.
    Comment: One commenter expressed concerns about the general 
structure of Qualified Opportunity Zones and Qualified Opportunity 
Funds, noting that investors are more likely to create a Qualified 
Opportunity Fund in areas with the highest potential return on 
investment, not necessarily the areas that are most distressed. The 
commenter also cited research that indicates that States did not always 
designate the most economically distressed census tracts as Opportunity 
Zones. Finally, the commenter cautioned that the proposed priority 
could distort the statutory intent of programs authorized by the 
Elementary and Secondary Education Act, as amended (ESEA), recommending 
that the Department instead focus funds on existing ESEA programs as 
authorized by Congress.
    Discussion: We recognize that some Qualified Opportunity Zones may 
be more attractive to investors than others. The priority includes 
three subparts that can be used separately or in combination, and only 
one of the subparts requires an applicant to demonstrate that its 
project will benefit from a Qualified Opportunity Fund. When deciding 
to use this priority in future grant competitions, we will carefully 
consider whether and how the priority fits appropriately within the 
existing statutory and regulatory framework of each program. In some 
cases, for example, it may be more appropriate to only focus on subpart 
(a) or (b) of the priority, which require that either the applicant's 
work is conducted in a Qualified Opportunity Zone or the applicant 
itself is located in a Qualified Opportunity Zone. For both subparts, 
whether the Qualified Opportunity Zone has received an investment from 
a Qualified Opportunity Fund is irrelevant.
    In addition, we remind the commenter that an applicant addressing 
this priority in a grant competition would still need to address all 
statutory and regulatory requirements for the program to which it is 
applying. Many of the Department's discretionary programs are targeted 
to high-need populations in some way. Therefore, even in cases where we 
determine that it is appropriate to use subpart (c) (which asks 
applicants to demonstrate that they have received or will receive an 
investment from a Qualified Opportunity Fund), we believe that grant 
funds will still benefit communities that need them most.
    We agree with the commenter that State governors had wide latitude 
in determining which census tracts to designate as Opportunity Zones. 
As a result, some Qualified Opportunity Zones are less economically 
distressed than others. Despite this fact, research shows that 
governors generally selected census tracts that are relatively 
disadvantaged compared to national averages and to averages among 
communities in eligible, non-designated census tracts. According to the 
Urban Institute's analysis of the 2012-2016 Census Bureau data, the 
average poverty rate in Qualified Opportunity Zones was 31.75 percent, 
compared to an average neighborhood poverty rate of 21.12 percent 
across all eligible non-designated census tracts and an average poverty 
rate of 16.6 percent nationwide. In addition, compared to all census 
tracts nationwide and to all eligible non-designated census tracts, 
Qualified Opportunity Zones had lower median household incomes, higher 
unemployment rates, and lower levels of educational attainment.\1\ 
Additionally, with over 8,700 census tracts designated as Qualified 
Opportunity Zones nationwide, significantly more distressed communities 
will benefit from Opportunity Zone status than under previous place-
based initiatives. For example, only 22 communities received the 
designation of ``Promise Zone,'' a place-based initiative created in 
2014.\2\
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    \1\ Brett Theodos, Brady Meixell, and Carl Hedman, ``Did States 
Maximize Their Opportunity Zones Selections?'' (Urban Institute), 
2018, available at: https://www.urban.org/sites/default/files/publication/98445/did_states_maximize_their_opportunity_zone_selections_7.pdf.
    \2\ See: https://www.hudexchange.info/programs/promise-zones/promise-zones-overview/.
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    Finally, we disagree with the commenter that use of this priority 
would distort the statutory purpose of ESEA programs. As discussed 
above, applicants addressing this priority in a grant competition would 
still be required to meet all statutory and regulatory requirements of 
the program to which they are applying, including any requirements 
concerning the demographics or location of the population to be served 
by the grant. For example, if a grant program using this priority also 
required that funds support projects in schools with a majority of 
students who receive free- or reduced-price lunch, grants would only 
support Qualified Opportunity Zones that also met those other 
requirements. We believe that including this priority in grant 
competitions may result in more grant funds going to Qualified 
Opportunity Zones; however, those grant funds still must be used for 
purposes that meet all applicable statutory and regulatory 
requirements.
    Changes: None.
    Comment: Two commenters expressed concern that this priority is 
unconstitutional because it violates 20 U.S.C. 1232a, which prohibits, 
among other things, Federal control over the curriculum, program of 
instruction, administration, or personnel of any educational 
institution, school, or school system.
    Discussion: This priority does not violate 20 U.S.C. 1232a because 
it does not establish any requirement involving Federal control over 
the curriculum, program of instruction, administration, or personnel of 
any educational institution, school, or school system. Moreover, any 
prospective applicant that does not wish to work in a Qualified 
Opportunity Zone, is not located in a Qualified Opportunity Zone, or 
does not wish to work with a Qualified Opportunity Fund, depending on 
how the priority is used in a given competition, may choose not to 
address the priority.
    Changes: None.
    Comment: One commenter supported the priority and suggested that 
the Department create and publicly post a list of elementary and 
secondary schools located in Qualified Opportunity Zones to aid 
applicants in preparing their applications.
    Discussion: We appreciate this suggestion and are exploring ways to 
assist potential applicants in aligning their projects with Qualified 
Opportunity Zones. We also note that the Treasury Department has 
created a website of Opportunity Zones Resources that includes a 
searchable map: https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx.
    Changes: None.

Final Priority

    Priority--Spurring Investment in Qualified Opportunity Zones.
    Under this priority, an applicant must demonstrate one or more of 
the following:

[[Page 65302]]

    (a) The area in which the applicant proposes to provide services 
overlaps with a Qualified Opportunity Zone, as designated by the 
Secretary of the Treasury under section 1400Z-1 of the Internal Revenue 
Code (IRC). An applicant must--
    (i) Provide the census tract number of the Qualified Opportunity 
Zone(s) in which it proposes to provide services; and
    (ii) Describe how the applicant will provide services in the 
Qualified Opportunity Zone(s).
    (b) The applicant is located in a Qualified Opportunity Zone. The 
applicant is located in a Qualified Opportunity Zone if the applicant 
has multiple locations, at least one of which is within a Qualified 
Opportunity Zone, or if the applicant's location overlaps with a 
Qualified Opportunity Zone. The applicant must provide the census tract 
number of the Qualified Opportunity Zone in which it is located.
    (c) The applicant has received, or will receive by a date specified 
by the Department, an investment, including access to real property, 
from a Qualified Opportunity Fund under section 1400Z-2 of the IRC for 
a purpose directly related to its proposed project. An applicant must--
    (i) Identify the Qualified Opportunity Fund from which it has 
received or will receive an investment; and
    (ii) Describe how the investment is or will be directly related to 
its proposed project.

Types of Priorities

    When inviting applications for a competition using one or more 
priorities, we designate the type of each priority as absolute, 
competitive preference, or invitational through a notice in the Federal 
Register. The effect of each type of priority follows:
    Absolute priority: Under an absolute priority, we consider only 
applications that meet the priority (34 CFR 75.105(c)(3)).
    Competitive preference priority: Under a competitive preference 
priority, we give competitive preference to an application by (1) 
awarding additional points, depending on the extent to which the 
application meets the priority (34 CFR 75.105(c)(2)(i)); or (2) 
selecting an application that meets the priority over an application of 
comparable merit that does not meet the priority (34 CFR 
75.105(c)(2)(ii)).
    Invitational priority: Under an invitational priority, we are 
particularly interested in applications that meet the priority. 
However, we do not give an application that meets the priority a 
preference over other applications (34 CFR 75.105(c)(1)).
    This document does not preclude us from proposing additional 
priorities, requirements, definitions, or selection criteria, subject 
to meeting applicable rulemaking requirements.

    Note: This document does not solicit applications. In any year 
in which we choose to use this priority, we invite applications 
through a notice in the Federal Register.

Executive Orders 12866, 13563, and 13771

Regulatory Impact Analysis

    Under Executive Order 12866, it must be determined 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 a significant regulatory action 
subject to review by OMB under section 3(f) of Executive Order 12866.
    Under Executive Order 13771, for each new rule that the Department 
proposes for notice and comment or otherwise promulgates that is a 
significant regulatory action under Executive Order 12866, and that 
imposes total costs greater than zero, it must identify two 
deregulatory actions. For FY 2020, any new incremental costs associated 
with a new regulation must be fully offset by the elimination of 
existing costs through deregulatory actions. Although this regulatory 
action is a significant regulatory action, the requirements of 
Executive Order 13771 do not apply because this regulatory action is a 
``transfer rule'' not covered by the Executive order.
    We have also reviewed this final regulatory action 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 this final priority only on a reasoned determination 
that its benefits justify its costs. In choosing among alternative 
regulatory approaches, we selected those approaches that maximize net 
benefits. Based on the analysis that follows, the Department believes 
that this regulatory action is consistent with the principles in 
Executive Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, and Tribal governments in the exercise of 
their governmental functions.
    In accordance with these Executive orders, the Department has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this

[[Page 65303]]

regulatory action. The potential costs are those resulting from 
statutory requirements and those we have determined as necessary for 
administering the Department's programs and activities.

Discussion of Potential Costs and Benefits

    The Department believes that this regulatory action does not impose 
significant costs on eligible entities, whose participation in 
discretionary grant programs is voluntary. Additionally, the benefits 
of the priority outweigh any associated costs because it would result 
in the Department's discretionary grant programs selecting high-quality 
applications to implement activities that are designed to increase 
education opportunities and improve education outcomes while also 
targeting investment in our Nation's most economically distressed 
communities.
    The Secretary believes that the costs imposed on applicants by the 
priority would be limited to paperwork burden related to preparing an 
application for a discretionary grant program that is using the 
priority in its competition. The priority would likely result in some 
Federal funds that would have been awarded to grantees in areas that 
are not designated as Qualified Opportunity Zones going instead to 
grantees in areas that have received that designation. We believe that 
the results of recently completed FY 2019 competitions provide some 
helpful descriptive data on the extent to which this priority may 
increase the number of applications from, and grantees ultimately 
funded in, Qualified Opportunity Zones. In FY 2019, the Department 
included a priority for projects in Qualified Opportunity Zones in nine 
competitions; five of these competitions included only an invitational 
priority and, in the remaining four competitions, programs created and 
used a program-specific absolute or competitive preference priority. In 
the five competitions that included only an invitational priority, 41 
percent of total applications and 47 percent of funded applications 
addressed the priority. In the four competitions that included a 
competitive preference or absolute priority, 53 percent of total 
applications and 60 percent of funded applications addressed the 
priority. Of the approximately $55 million awarded to new grantees in 
these four competitions, over $30 million went to applicants that 
addressed an absolute or competitive preference priority for projects 
in Qualified Opportunity Zones. While these data provide some 
information about the impact of including the priority announced in 
this NFP in future competitions, it is important to note that the 
universe of FY 2019 competitions that used the priority is small, 
unrepresentative of the Department's overall grant portfolio, and 
includes programs that made a relatively small number of awards. 
Further the awards to projects in Qualified Opportunity Zones did not 
change the total amount of awards made by the Department under these 
competitions.
    Regulatory Flexibility Act Certification: The Secretary certifies 
that the final priority will not have a significant economic impact on 
a substantial number of small entities. The U.S. Small Business 
Administration (SBA) Size Standards define proprietary institutions as 
small businesses if they are independently owned and operated, are not 
dominant in their field of operation, and have total annual revenue 
below $7,000,000. Nonprofit institutions are defined as small entities 
if they are independently owned and operated and not dominant in their 
field of operation. Public institutions are defined as small 
organizations if they are operated by a government overseeing a 
population below 50,000.
    The Secretary certifies that this regulatory action will not have a 
significant economic impact on small entities. The priority will be 
used in a limited number of the Department's discretionary grant 
competitions annually, would not change the basic eligibility 
requirements for those competitions, was designed to minimize the 
paperwork burden added to the normal application process, and would not 
impose any costs on small entities because the decision to apply for a 
discretionary grant is entirely voluntary. In the case of small 
entities that choose to apply for funding under a discretionary grant 
competition that uses the priority, the increased costs would be 
limited to the marginally increased paperwork burden of demonstrating 
an applicant's relationship to a Qualified Opportunity Zone, which 
generally involves identifying and reporting census tract numbers. For 
example, we estimate that it would take an entity applying for a 
discretionary grant under this priority less than one hour to identify 
the census tract number(s) for the area they intend to serve, or for 
their own location. The Department expects to provide resources in the 
coming months to further expedite this process for applicants. Further, 
any marginal increase in paperwork burden associated with the regular 
application process for small entities would be more than offset by the 
benefits of the priority, including the increased likelihood that small 
entities in or serving Qualified Opportunity Zones will be successful 
in competing for Federal education funds and that funded projects will 
improve educational opportunities and outcomes and thereby contribute 
materially to the success of other small entities in our Nation's most 
economically distressed communities.
    Intergovernmental Review: This program is subject to Executive 
Order 12372 and the regulations in 34 CFR part 79. One of the 
objectives of the Executive order is to foster an intergovernmental 
partnership and a strengthened federalism. The Executive order relies 
on processes developed by State and local governments for coordination 
and review of proposed Federal financial assistance.
    This document provides early notification of our specific plans and 
actions for this program.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other documents of the 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 your search to documents published 
by the Department.

    Dated: November 22, 2019.
Betsy DeVos,
Secretary of Education.
[FR Doc. 2019-25819 Filed 11-26-19; 8:45 am]
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