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SEC. 1125A. EDUCATION FINANCE INCENTIVE GRANT PROGRAM.

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(a) GRANTS- From funds appropriated under subsection (f) the Secretary is authorized to make grants to States, from allotments under subsection (b), to carry out the programs and activities of this part.

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(b) DISTRIBUTION BASED UPON FISCAL EFFORT AND EQUITY-

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(1) IN GENERAL-

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(A) IN GENERAL- Except as provided in subparagraph (B), funds appropriated pursuant to subsection (f) shall be allotted to each State based upon the number of children counted under section 1124(c) in such State multiplied by the product of —

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(i) the amount in section 1124(a)(1)(B) for all States other than the Commonwealth of Puerto Rico, except that the amount determined under that subparagraph shall not be less that 34 percent or more than 46 percent of the average per pupil expenditure in the United States, and the amount in section 1124(a)(4) for the Commonwealth of Puerto Rico, except that the amount in section 1124(a)(4)(A)(ii) shall be 34 percent of the average per pupil expenditure in the United States; multiplied by

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(ii) such States effort factor described in paragraph (2); multiplied by

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(iii) 1.30 minus such States equity factor described in paragraph (3).

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(B) STATE MINIMUM- Notwithstanding any other provision of this section or section 1122, from the total amount available for any fiscal year to carry out this section, each State shall be allotted at least the lesser of —

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(i) 0.35 percent of total appropriations; or

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(ii) the average of —

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(I) 0.35 percent of the total amount available to carry out this section; and

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(II) 150 percent of the national average grant under this section per child described in section 1124(c), without application of a weighting factor, multiplied by the States total number of children described in section 1124(c), without application of a weighting factor.

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(2) EFFORT FACTOR-

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(A) IN GENERAL- Except as provided in subparagraph (B), the effort factor for a State shall be determined in accordance with the succeeding sentence, except that such factor shall not be less than 0.95 nor greater than 1.05. The effort factor determined under this sentence shall be a fraction the numerator of which is the product of the 3-year average per-pupil expenditure in the State multiplied by the 3-year average per capita income in the United States and the denominator of which is the product of the 3-year average per capita income in such State multiplied by the 3-year average per-pupil expenditure in the United States.

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(B) COMMONWEALTH OF PUERTO RICO- The effort factor for the Commonwealth of Puerto Rico shall be equal to the lowest effort factor calculated under subparagraph (A) for any State.

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(3) EQUITY FACTOR-

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(A) DETERMINATION-

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(i) IN GENERAL- Except as provided in subparagraph (B), the Secretary shall determine the equity factor under this section for each State in accordance with clause (ii).

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(ii) COMPUTATION-

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(I) IN GENERAL- For each State, the Secretary shall compute a weighted coefficient of variation for the per-pupil expenditures of local educational agencies in accordance with subclauses (II), (III), and (IV).

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(II) VARIATION- In computing coefficients of variation, the Secretary shall weigh the variation between per-pupil expenditures in each local educational agency and the average per-pupil expenditures in the State according to the number of pupils served by the local educational agency.

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(III) NUMBER OF PUPILS- In determining the number of pupils under this paragraph served by each local educational agency and in each State, the Secretary shall multiply the number of children counted under section 1124(c) by a factor of 1.4.

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(IV) ENROLLMENT REQUIREMENT- In computing coefficients of variation, the Secretary shall include only those local educational agencies with an enrollment of more than 200 students.

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(B) SPECIAL RULE- The equity factor for a State that meets the disparity standard described in section 222.162 of title 34, Code of Federal Regulations (as such section was in effect on the day preceding the date of enactment of the No Child Left Behind Act of 2001) or a State with only one local educational agency shall be not greater than 0.10.

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(c) USE OF FUNDS; ELIGIBILITY OF LOCAL EDUCATIONAL AGENCIES- All funds awarded to each State under this section shall be allocated to local educational agencies under the following provisions. Within local educational agencies, funds allocated under this section shall be distributed to schools on a basis consistent with section 1113, and may only be used to carry out activities under this part. A local educational agency in a State is eligible to receive a targeted grant under this section for any fiscal year if —

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(A) the number of children in the local educational agency counted under section 1124(c), before application of the weighted child count described in paragraph (3), is at least 10; and

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(B) if the number of children counted for grants under section 1124(c), before application of the weighted child count described in paragraph (3), is at least 5 percent of the total number of children aged 5 to 17 years, inclusive, in the school district of the local educational agency.

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For any fiscal year for which the Secretary allocates funds under this section on the basis of counties, funds made available as a result of applying this subsection shall be reallocated by the State educational agency to other eligible local educational agencies in the State in proportion to the distribution of other funds under this section.

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(d) ALLOCATION OF FUNDS TO ELIGIBLE LOCAL EDUCATIONAL AGENCIES- Funds received by States under this section shall be allocated within States to eligible local educational agencies on the basis of weighted child counts calculated in accordance with paragraph (1), (2), or (3), as appropriate for each State.

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(1) STATES WITH AN EQUITY FACTOR LESS THAN .10- In States with an equity factor less than .10, the weighted child counts referred to in subsection (d) shall be calculated as follows:

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(A) WEIGHTS FOR ALLOCATIONS TO COUNTIES-

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(i) IN GENERAL- For each fiscal year for which the Secretary uses county population data to calculate grants, the weighted child count used to determine a countys allocation under this section is the larger of the two amounts determined under clauses (ii) and (iii).

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(ii) BY PERCENTAGE OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) for that county who constitute not more than 15.00 percent, inclusive, of the countys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children who constitute more than 15.00 percent, but not more than 19.00 percent, of such population, multiplied by 1.75;

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(III) the number of such children who constitute more than 19.00 percent, but not more than 24.20 percent, of such population, multiplied by 2.5;

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(IV) the number of such children who constitute more than 24.20 percent, but not more than 29.20 percent, of such population, multiplied by 3.25; and

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(V) the number of such children who constitute more than 29.20 percent of such population, multiplied by 4.0.

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(iii) BY NUMBER OF CHILDREN- The amount referred to in clause (i) is determined by adding

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(I) the number of children determined under section 1124(c) who constitute not more than 2,311, inclusive, of the countys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children between 2,312 and 7,913, inclusive, in such population, multiplied by 1.5;

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(III) the number of such children between 7,914 and 23,917, inclusive, in such population, multiplied by 2.0;

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(IV) the number of such children between 23,918 and 93,810, inclusive, in such population, multiplied by 2.5; and

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(V) the number of such children in excess of 93,811 in such population, multiplied by 3.0.

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(B) WEIGHTS FOR ALLOCATIONS TO LOCAL EDUCATIONAL AGENCIES-

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(i) IN GENERAL- For each fiscal year for which the Secretary uses local educational agency data, the weighted child count used to determine a local educational agencys grant under this section is the larger of the two amounts determined under clauses (ii) and (iii).

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(ii) BY PERCENTAGE OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) for that local educational agency who constitute not more than 15.58 percent, inclusive, of the agencys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children who constitute more than 15.58 percent, but not more than 22.11 percent, of such population, multiplied by 1.75;

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(III) the number of such children who constitute more than 22.11 percent, but not more than 30.16 percent, of such population, multiplied by 2.5;

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(IV) the number of such children who constitute more than 30.16 percent, but not more than 38.24 percent, of such population, multiplied by 3.25; and

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(V) the number of such children who constitute more than 38.24 percent of such population, multiplied by 4.0.

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(iii) BY NUMBER OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) who constitute not more than 691, inclusive, of the agencys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children between 692 and 2,262, inclusive, in such population, multiplied by 1.5;

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(III) the number of such children between 2,263 and 7,851, inclusive, in such population, multiplied by 2.0;

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(IV) the number of such children between 7,852 and 35,514, inclusive, in such population, multiplied by 2.5; and

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(V) the number of such children in excess of 35,514 in such population, multiplied by 3.0.

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(2) STATES WITH AN EQUITY FACTOR GREATER THAN OR EQUAL TO .10 AND LESS THAN .20- In States with an equity factor greater than or equal to .10 and less than .20, the weighted child counts referred to in subsection (d) shall be calculated as follows:

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(A) WEIGHTS FOR ALLOCATIONS TO COUNTIES-

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(i) IN GENERAL- For each fiscal year for which the Secretary uses county population data to calculate grants, the weighted child count used to determine a countys allocation under this section is the larger of the two amounts determined under clauses (ii) and (iii).

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(ii) BY PERCENTAGE OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) for that county who constitute not more than 15.00 percent, inclusive, of the countys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children who constitute more than 15.00 percent, but not more than 19.00 percent, of such population, multiplied by 1.5;

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(III) the number of such children who constitute more than 19.00 percent, but not more than 24.20 percent, of such population, multiplied by 3.0;

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(IV) the number of such children who constitute more than 24.20 percent, but not more than 29.20 percent, of such population, multiplied by 4.5; and

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(V) the number of such children who constitute more than 29.20 percent of such population, multiplied by 6.0.

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(iii) BY NUMBER OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) who constitute not more than 2,311, inclusive, of the countys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children between 2,312 and 7,913, inclusive, in such population, multiplied by 1.5;

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(III) the number of such children between 7,914 and 23,917, inclusive, in such population, multiplied by 2.25;

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(IV) the number of such children between 23,918 and 93,810, inclusive, in such population, multiplied by 3.375; and

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(V) the number of such children in excess of 93,811 in such population, multiplied by 4.5.

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(B) WEIGHTS FOR ALLOCATIONS TO LOCAL EDUCATIONAL AGENCIES-

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(i) IN GENERAL- For each fiscal year for which the Secretary uses local educational agency data, the weighted child count used to determine a local educational agencys grant under this section is the larger of the two amounts determined under clauses (ii) and (iii).

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(ii) BY PERCENTAGE OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) for that local educational agency who constitute not more than 15.58 percent, inclusive, of the agencys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children who constitute more than 15.58 percent, but not more than 22.11 percent, of such population, multiplied by 1.5;

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(III) the number of such children who constitute more than 22.11 percent, but not more than 30.16 percent, of such population, multiplied by 3.0;

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(IV) the number of such children who constitute more than 30.16 percent, but not more than 38.24 percent, of such population, multiplied by 4.5; and

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(V) the number of such children who constitute more than 38.24 percent of such population, multiplied by 6.0.

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(iii) BY NUMBER OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) who constitute not more than 691, inclusive, of the agencys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children between 692 and 2,262, inclusive, in such population, multiplied by 1.5;

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(III) the number of such children between 2,263 and 7,851, inclusive, in such population, multiplied by 2.25;

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(IV) the number of such children between 7,852 and 35,514, inclusive, in such population, multiplied by 3.375; and

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(V) the number of such children in excess of 35,514 in such population, multiplied by 4.5.

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(3) STATES WITH AN EQUITY FACTOR GREATER THAN OR EQUAL TO .20- In States with an equity factor greater than or equal to .20, the weighted child counts referred to in subsection (d) shall be calculated as follows:

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(A) WEIGHTS FOR ALLOCATIONS TO COUNTIES-

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(i) IN GENERAL- For each fiscal year for which the Secretary uses county population data to calculate grants, the weighted child count used to determine a countys allocation under this section is the larger of the two amounts determined under clauses (ii) and (iii).

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(ii) BY PERCENTAGE OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) for that county who constitute not more than 15.00 percent, inclusive, of the countys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children who constitute more than 15.00 percent, but not more than 19.00 percent, of such population, multiplied by 2.0;

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(III) the number of such children who constitute more than 19.00 percent, but not more than 24.20 percent, of such population, multiplied by 4.0;

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(IV) the number of such children who constitute more than 24.20 percent, but not more than 29.20 percent, of such population, multiplied by 6.0; and

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(V) the number of such children who constitute more than 29.20 percent of such population, multiplied by 8.0.

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(iii) BY NUMBER OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) who constitute not more than 2,311, inclusive, of the countys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children between 2,312 and 7,913, inclusive, in such population, multiplied by 2.0;

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(III) the number of such children between 7,914 and 23,917, inclusive, in such population, multiplied by 3.0;

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(IV) the number of such children between 23,918 and 93,810, inclusive, in such population, multiplied by 4.5; and

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(V) the number of such children in excess of 93,811 in such population, multiplied by 6.0.

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(B) WEIGHTS FOR ALLOCATIONS TO LOCAL EDUCATIONAL AGENCIES-

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(i) IN GENERAL- For each fiscal year for which the Secretary uses local educational agency data, the weighted child count used to determine a local educational agencys grant under this section is the larger of the two amounts determined under clauses (ii) and (iii).

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(ii) BY PERCENTAGE OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) for that local educational agency who constitute not more than 15.58 percent, inclusive, of the agencys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children who constitute more than 15.58 percent, but not more than 22.11 percent, of such population, multiplied by 2.0;

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(III) the number of such children who constitute more than 22.11 percent, but not more than 30.16 percent, of such population, multiplied by 4.0;

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(IV) the number of such children who constitute more than 30.16 percent, but not more than 38.24 percent, of such population, multiplied by 6.0; and

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(V) the number of such children who constitute more than 38.24 percent of such population, multiplied by 8.0.

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(iii) BY NUMBER OF CHILDREN- The amount referred to in clause (i) is determined by adding —

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(I) the number of children determined under section 1124(c) who constitute not more than 691, inclusive, of the agencys total population aged 5 to 17, inclusive, multiplied by 1.0;

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(II) the number of such children between 692 and 2,262, inclusive, in such population, multiplied by 2.0;

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(III) the number of such children between 2,263 and 7,851, inclusive, in such population, multiplied by 3.0;

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(IV) the number of such children between 7,852 and 35,514, inclusive, in such population, multiplied by 4.5; and

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(V) the number of such children in excess of 35,514 in such population, multiplied by 6.0.

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(e) MAINTENANCE OF EFFORT-

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(1) IN GENERAL- Except as provided in paragraph (2), a State is entitled to receive its full allotment of funds under this section for any fiscal year if the Secretary finds that either the combined fiscal effort per student or the aggregate expenditures within the State with respect to the provision of free public education for the fiscal year preceding the fiscal year for which the determination is made was not less than 90 percent of such combined fiscal effort or aggregate expenditures for the second fiscal year preceding the fiscal year for which the determination is made.

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(2) REDUCTION OF FUNDS- The Secretary shall reduce the amount of funds awarded to any State under this section in any fiscal year in the exact proportion to which the State fails to meet the requirements of paragraph (1) by falling below 90 percent of both the fiscal effort per student and aggregate expenditures (using the measure most favorable to the State), and no such lesser amount shall be used for computing the effort required under paragraph (1) for subsequent years.

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(3) WAIVERS- The Secretary may waive, for 1 fiscal year only, the requirements of this subsection if the Secretary determines that such a waiver would be equitable due to exceptional or uncontrollable circumstances such as a natural disaster or a precipitous and unforeseen decline in the financial resources of the State.

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(f) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to carry out this section such sums as may be necessary for fiscal year 2002 and for each of the 5 succeeding fiscal years.

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(g) ADJUSTMENTS WHERE NECESSITATED BY APPROPRIATIONS-

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(1) IN GENERAL- If the sums available under this section for any fiscal year are insufficient to pay the full amounts that all local educational agencies in States are eligible to receive under this section for such year, the Secretary shall ratably reduce the allocations to such local educational agencies, subject to paragraphs (2) and (3).

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(2) ADDITIONAL FUNDS- If additional funds become available for making payments under this section for such fiscal year, allocations that were reduced under paragraph (1) shall be increased on the same basis as they were reduced.

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(3) HOLD-HARMLESS AMOUNTS- For each fiscal year, if sufficient funds are available, the amount made available to each local educational agency under this section shall be

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(A) not less than 95 percent of the amount made available for the preceding fiscal year if the number of children counted for grants under section 1124 is not less than 30 percent of the total number of children aged 5 to 17 years, inclusive, in the local educational agency;

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(B) not less than 90 percent of the amount made available for the preceding fiscal year if the percentage described in subparagraph (A) is between 15 percent and 30 percent; and

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(C) not less than 85 percent of the amount made available for the preceding fiscal year if the percentage described in subparagraph (A) is below 15 percent.

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(4) APPLICABILITY- Notwithstanding any other provision of law, the Secretary shall not take into consideration the hold-harmless provisions of this subsection for any fiscal year for purposes of calculating State or local allocations for the fiscal year under any program administered by the Secretary other than a program authorized under this part.