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SEC. 1113. ELIGIBLE SCHOOL ATTENDANCE AREAS.

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(a) DETERMINATION-

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(1) IN GENERAL- A local educational agency shall use funds received under this part only in eligible school attendance areas.

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(2) ELIGIBLE SCHOOL ATTENDANCE AREAS- For the purposes of this part —

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(A) the term school attendance area means, in relation to a particular school, the geographical area in which the children who are normally served by that school reside; and

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(B) the term eligible school attendance area means a school attendance area in which the percentage of children from low-income families is at least as high as the percentage of children from low-income families served by the local educational agency as a whole.

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(3) RANKING ORDER- If funds allocated in accordance with subsection (c) are insufficient to serve all eligible school attendance areas, a local educational agency shall —

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(A) annually rank, without regard to grade spans, such agencys eligible school attendance areas in which the concentration of children from low-income families exceeds 75 percent from highest to lowest according to the percentage of children from low-income families; and

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(B) serve such eligible school attendance areas in rank order.

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(4) REMAINING FUNDS- If funds remain after serving all eligible school attendance areas under paragraph (3), a local educational agency shall —

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(A) annually rank such agencys remaining eligible school attendance areas from highest to lowest either by grade span or for the entire local educational agency according to the percentage of children from low-income families; and

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(B) serve such eligible school attendance areas in rank order either within each grade-span grouping or within the local educational agency as a whole.

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(5) MEASURES- The local educational agency shall use the same measure of poverty, which measure shall be the number of children ages 5 through 17 in poverty counted in the most recent census data approved by the Secretary, the number of children eligible for free and reduced priced lunches under the Richard B. Russell National School Lunch Act, the number of children in families receiving assistance under the State program funded under part A of title IV of the Social Security Act, or the number of children eligible to receive medical assistance under the Medicaid program, or a composite of such indicators, with respect to all school attendance areas in the local educational agency —

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(A) to identify eligible school attendance areas;

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(B) to determine the ranking of each area; and

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(C) to determine allocations under subsection (c).

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(6) EXCEPTION- This subsection shall not apply to a local educational agency with a total enrollment of less than 1,000 children.

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(7) WAIVER FOR DESEGREGATION PLANS- The Secretary may approve a local educational agencys written request for a waiver of the requirements of subsections (a) and (c), and permit such agency to treat as eligible, and serve, any school that children attend with a State-ordered, court-ordered school desegregation plan or a plan that continues to be implemented in accordance with a State-ordered or court-ordered desegregation plan, if —

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(A) the number of economically disadvantaged children enrolled in the school is at least 25 percent of the schools total enrollment; and

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(B) the Secretary determines on the basis of a written request from such agency and in accordance with such criteria as the Secretary establishes, that approval of that request would further the purposes of this part.

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(b) LOCAL EDUCATIONAL AGENCY DISCRETION-

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(1) IN GENERAL- Notwithstanding subsection (a)(2), a local educational agency may —

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(A) designate as eligible any school attendance area or school in which at least 35 percent of the children are from low-income families;

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(B) use funds received under this part in a school that is not in an eligible school attendance area, if the percentage of children from low-income families enrolled in the school is equal to or greater than the percentage of such children in a participating school attendance area of such agency;

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(C) designate and serve a school attendance area or school that is not eligible under this section, but that was eligible and that was served in the preceding fiscal year, but only for 1 additional fiscal year; and

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(D) elect not to serve an eligible school attendance area or eligible school that has a higher percentage of children from low-income families if —

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(i) the school meets the comparability requirements of section 1120A(c);

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(ii) the school is receiving supplemental funds from other State or local sources that are spent according to the requirements of section 1114 or 1115; and

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(iii) the funds expended from such other sources equal or exceed the amount that would be provided under this part.

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(2) SPECIAL RULE- Notwithstanding paragraph (1)(D), the number of children attending private elementary schools and secondary schools who are to receive services, and the assistance such children are to receive under this part, shall be determined without regard to whether the public school attendance area in which such children reside is assisted under subparagraph (A).

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(c) ALLOCATIONS-

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(1) IN GENERAL- A local educational agency shall allocate funds received under this part to eligible school attendance areas or eligible schools, identified under subsections (a) and (b), in rank order, on the basis of the total number of children from low-income families in each area or school.

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(2) SPECIAL RULE-

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(A) IN GENERAL- Except as provided in subparagraph (B), the per-pupil amount of funds allocated to each school attendance area or school under paragraph (1) shall be at least 125 percent of the per-pupil amount of funds a local educational agency received for that year under the poverty criteria described by the local educational agency in the plan submitted under section 1112, except that this paragraph shall not apply to a local educational agency that only serves schools in which the percentage of such children is 35 percent or greater.

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(B) EXCEPTION- A local educational agency may reduce the amount of funds allocated under subparagraph (A) for a school attendance area or school by the amount of any supplemental State and local funds expended in that school attendance area or school for programs that meet the requirements of section 1114 or 1115.

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(3) RESERVATION- A local educational agency shall reserve such funds as are necessary under this part to provide services comparable to those provided to children in schools funded under this part to serve —

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(A) homeless children who do not attend participating schools, including providing educationally related support services to children in shelters and other locations where children may live;

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(B) children in local institutions for neglected children; and

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(C) if appropriate, children in local institutions for delinquent children, and neglected or delinquent children in community day school programs.

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(4) FINANCIAL INCENTIVES AND REWARDS RESERVATION- A local educational agency may reserve such funds as are necessary from those funds received by the local educational agency under title II, and not more than 5 percent of those funds received by the local educational agency under subpart 2, to provide financial incentives and rewards to teachers who serve in schools eligible under this section and identified for school improvement, corrective action, and restructuring under section 1116(b) for the purpose of attracting and retaining qualified and effective teachers.