State-administered Programs

SUMMARY: The Secretary amends the Education Department General

Administrative Regulations (EDGAR) governing State-administered

programs. These final regulations are necessary to implement a recent

statutory change that affects all elementary and secondary education

programs administered by the United States Department of Education

(Department) under which the Secretary allocates funds to States on a

formula basis. The regulations will ensure that charter schools opening

for the first time or significantly expanding their enrollment receive

the funds for which they are eligible under these programs.

DATES: These regulations are effective January 21, 2000.

FOR FURTHER INFORMATION CONTACT: Leslie Hankerson, U.S. Department of

Education, 400 Maryland Avenue, SW., room 3C120, Washington, DC 20202-

6140. Telephone: (202) 205-8524. If you use a telecommunications device

for the deaf (TDD), you may call the Federal Information Relay Service

(FIRS) at 1-800-877-8339.

Individuals with disabilities may obtain this document in an

alternative format (e.g., Braille, large print, audiotape, or computer

diskette) on request to the contact person listed in the preceding

paragraph.

SUPPLEMENTARY INFORMATION: On May 18, 1999, the Secretary published in

the Federal Register (64 FR 27152) a notice of proposed rulemaking

(NPRM) proposing to revise sections in EDGAR governing State-

administered programs. These proposed amendments were designed to

ensure that charter schools opening for the first time or significantly

expanding their enrollment receive the funds for which they are

eligible under these programs.

Prior to publishing the NPRM, the Department took a number of steps

to consult with State and local officials regarding the statutory

provision that these final regulations implement, and the specific

measures the Secretary proposed to undertake to assist States and

localities in meeting their obligations under it. In December 1998, the

Department sent two letters to chief State school officers informing

them of changes to the Public Charter Schools Program (PCSP) as a

result of passage of the Charter School Expansion Act of 1998 (Act).

The second letter specifically highlighted the requirement in section

10306 of the Act that the Secretary and States take measures to ensure

that charter schools receive the Federal-to-State formula funds for

which they are eligible within five months of opening for the first

time or expanding their enrollment. In March 1999, Department officials

discussed the new provision and our plans for implementing it with

State and local officials, as well as charter school operators and

developers, at our national conference on charter schools.

Since publication of the NPRM, we have consulted with State

officials through an SEA chat room on the Department's internet web

site, and at several meetings, including two national Title I meetings.

In addition, we sent two letters to chief State school officers and

State program directors specifically requesting comments on the NPRM.

In the preamble to the NPRM, the Secretary discussed on pages 27152

and 27153 the major provisions in the proposed regulations. These

provisions would amend Part 76 of EDGAR by redesignating subpart H as

subpart I, and adding a new subpart H. The proposed provisions included

the following:

For covered programs in which States and local educational

agencies (LEAs) allocate funds by formula, a requirement that States

and LEAs implement procedures that ensure that each charter school

opening for the first time or significantly expanding its enrollment on

or before November 1 of an academic year receives the full amount of

funds for which it is eligible within five months of the date the

charter school opens or significantly expands its enrollment.

For each charter school opening or significantly expanding

its enrollment after November 1 but before February 1 of an academic

year, a requirement that States and LEAs implement procedures that

ensure that the charter school receives at least a pro rata portion of

the funds for which the charter school is eligible within five months

of the date the charter school opens or significantly expands its

enrollment.

For each charter school opening or significantly expanding

its enrollment on or after February 1, a provision permitting, but not

requiring, States and LEAs to implement procedures to provide the

charter school with a pro rata portion of the funds for which the

charter school is eligible under a covered program.

For covered programs in which States and LEAs award funds

through a competitive process, a requirement that States and LEAs

implement procedures that ensure that each eligible charter school

scheduled to open during the academic year has a full and fair

opportunity to compete to participate in the program.

A general prohibition against States and LEAs relying on

enrollment or eligibility data from a prior year in determining a

charter school's eligibility to receive funds under a covered program

during an academic year in which the charter school opens for the first

time or significantly expands its enrollment, even if allocations to

other LEAs or public schools are based on a prior year's data.

An exemption from the proposed regulations for SEAs and

LEAs that do not allocate funds by formula or hold competitions among

eligible applicants under a covered program.

These final regulations contain several significant changes from

the NPRM. These changes are fully explained in the ``Analysis of

Comments and Changes'' attached as an appendix to these final

regulations. The changes pertain to the meaning of the term significant

expansion of enrollment; the time period within which SEAs and LEAs are

required to make allocations to charter schools that open or expand

between November 1 and February 1; the entities that can provide the

required 120-day notice to an SEA or LEA; and the penalty for a charter

school's failure to comply with the 120-day notice requirement.

Analysis of Comments and Changes

In response to the Secretary's invitation in the NPRM, 14 parties

submitted comments on the proposed regulations. An analysis of the

comments and of the changes in the regulations since publication of the

NPRM is published as an appendix at the end of these final regulations.

We group major issues according to subject, with appropriate

sections of the regulations referenced in parentheses. Generally, we do

not address technical and other minor changes.

Paperwork Reduction Act of 1995

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

collections of information in these final regulations at the end of the

affected sections of the regulations.

[[Page 71965]]

Intergovernmental Review

Some of the programs that are affected by these final regulations

are subject to the requirements of Executive Order 12372 and the

regulations in 34 CFR Part 79. The objective of the Executive order is

to foster an intergovernmental partnership and a strengthened

federalism by relying on processes developed by State and local

governments for coordination and review of proposed Federal financial

assistance.

In accordance with this order, we intend this document to provide

early notification of the Department's specific plans and actions for

these programs.

Assessment of Educational Impact

In the NPRM, we requested comments on whether the proposed

regulations would require transmission of information that any other

agency or authority of the United States gathers or makes available.

Based on the response to the NPRM and on our review, we have determined

that these final regulations do not require transmission of information

that any other agency or authority of the United States gathers or

makes available.

Electronic Access to This Document

You may view this document, as well as all other Department of

Education documents published in the Federal Register, in text or Adobe

Portable Document Format (PDF) on the Internet at either of the

following sites:

http://ocfo.ed.gov/fedreg.htm

http://www.ed.gov/news.html

To use the PDF you must have the Adobe Acrobat Reader Program with

Search, which is available free at either of the previous sites. If you

have questions about using the PDF, call the U.S. Government Printing

Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC

area at (202) 512-1530.

Note: 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 on GPO Access at: http://

www.access.gpo.gov/nara/index.html

(Catalog of Federal Domestic Assistance Number does not apply.)

List of Subjects in 34 CFR Part 76

Administrative practice and procedure, Compliance, Eligibility,

Grant administration, Reporting and recordkeeping requirements.

Dated: December 16, 1999.

Richard W. Riley,

Secretary of Education.

For the reasons discussed in the preamble, the Secretary amends

part 76 of title 34 of the Code of Federal Regulations as follows:

PART 76--STATE-ADMINISTERED PROGRAMS

1. The authority citation for part 76 is revised to read as

follows:

Authority: 20 U.S.C. 1221e-3, 3474, 6511(a), and 8065a, unless

otherwise noted.

2. Subpart H of part 76 is redesignated as subpart I.

3. A new subpart H is added to part 76 to read as follows:

Subpart H--How Does a State or Local Educational Agency Allocate

Funds to Charter Schools?

General

76.785 What is the purpose of this subpart?

76.786 What entities are governed by this subpart?

76.787 What definitions apply to this subpart?

Responsibilities for Notice and Information

76.788 What are a charter school LEA's responsibilities under this

subpart?

76.789 What are an SEA's responsibilities under this subpart?

Allocation of Funds by State Educational Agencies

76.791 On what basis does an SEA determine whether a charter school

LEA that opens or significantly expands its enrollment is eligible

to receive funds under a covered program?

76.792 How does an SEA allocate funds to eligible charter school

LEAs under a covered program in which the SEA awards subgrants on a

formula basis?

76.793 When is an SEA required to allocate funds to a charter

school LEA under this subpart?

76.794 How does an SEA allocate funds to charter school LEAs under

a covered program in which the SEA awards subgrants on a

discretionary basis?

Adjustments

76.796 What are the consequences of an SEA allocating more or fewer

funds to a charter school LEA under a covered program than the

amount for which the charter school LEA is eligible when the charter

school LEA actually opens or significantly expands its enrollment?

76.797 When is an SEA required to make adjustments to allocations

under this subpart?

Applicability of This Subpart to Local Educational Agencies

76.799 Do the requirements in this subpart apply to LEAs?

Subpart H--How Does a State or Local Educational Agency Allocate

Funds to Charter Schools?

General

Sec. 76.785 What is the purpose of this subpart?

The regulations in this subpart implement section 10306 of the

Elementary and Secondary Education Act of 1965 (ESEA), which requires

States to take measures to ensure that each charter school in the State

receives the funds for which it is eligible under a covered program

during its first year of operation and during subsequent years in which

the charter school expands its enrollment.

(Authority: 20 U.S.C. 8065a)

Sec. 76.786 What entities are governed by this subpart?

The regulations in this subpart apply to--

(a) State educational agencies (SEAs) and local educational

agencies (LEAs) that fund charter schools under a covered program,

including SEAs and LEAs located in States that do not participate in

the Department's Public Charter Schools Program;

(b) State agencies that are not SEAs, if they are responsible for

administering a covered program. State agencies that are not SEAs must

comply with the provisions in this subpart that are applicable to SEAs;

and

(c) Charter schools that are scheduled to open or significantly

expand their enrollment during the academic year and wish to

participate in a covered program.

(Authority: 20 U.S.C. 8065a)

Sec. 76.787 What definitions apply to this subpart?

For purposes of this subpart--

Academic year means the regular school year (as defined by State

law, policy, or practice) and for which the State allocates funds under

a covered program.

Charter school has the same meaning as provided in title X, part C

of the ESEA.

Charter school LEA means a charter school that is treated as a

local educational agency for purposes of the applicable covered

program.

Covered program means an elementary or secondary education program

administered by the Department under which the Secretary allocates

funds to States on a formula basis, except that the term does not

include a program or portion of a program under which an SEA awards

subgrants on a discretionary, noncompetitive basis.

[[Page 71966]]

Local educational agency has the same meaning for each covered

program as provided in the authorizing statute for the program.

Significant expansion of enrollment means a substantial increase in

the number of students attending a charter school due to a significant

event that is unlikely to occur on a regular basis, such as the

addition of one or more grades or educational programs in major

curriculum areas. The term also includes any other expansion of

enrollment that the SEA determines to be significant.

(Authority: 20 U.S.C. 8065a)

Reponsibilities for Notice and Information

Sec. 76.788 What are a charter school LEA's responsibilities under

this subpart?

(a) Notice. At least 120 days before the date a charter school LEA

is scheduled to open or significantly expand its enrollment, the

charter school LEA or its authorized public chartering agency must

provide its SEA with written notification of that date.

(b) Information. (1) In order to receive funds, a charter school

LEA must provide to the SEA any available data or information that the

SEA may reasonably require to assist the SEA in estimating the amount

of funds the charter school LEA may be eligible to receive under a

covered program.

(2)(i) Once a charter school LEA has opened or significantly

expanded its enrollment, the charter school LEA must provide actual

enrollment and eligibility data to the SEA at a time the SEA may

reasonably require.

(ii) An SEA is not required to provide funds to a charter school

LEA until the charter school LEA provides the SEA with the required

actual enrollment and eligibility data.

(c) Compliance. Except as provided in Sec. 76.791(a), or the

authorizing statute or implementing regulations for the applicable

covered program, a charter school LEA must establish its eligibility

and comply with all applicable program requirements on the same basis

as other LEAs.

(Approved by the Office of Management and Budget under control

number 1810-0623)

(Authority: 20 U.S.C. 8065a)

Sec. 76.789 What are an SEA's responsibilities under this subpart?

(a) Information. Upon receiving notice under Sec. 76.788(a) of the

date a charter school LEA is scheduled to open or significantly expand

its enrollment, an SEA must provide the charter school LEA with timely

and meaningful information about each covered program in which the

charter school LEA may be eligible to participate, including notice of

any upcoming competitions under the program.

(b) Allocation of Funds. (1) An SEA must allocate funds under a

covered program in accordance with this subpart to any charter school

LEA that--

(i) Opens for the first time or significantly expands its

enrollment during an academic year for which the State awards funds by

formula or through a competition under the program;

(ii) In accordance with Sec. 76.791(a), establishes its eligibility

and complies with all applicable program requirements; and

(iii) Meets the requirements of Sec. 76.788(a).

(2) In order to meet the requirements of this subpart, an SEA may

allocate funds to, or reserve funds for, an eligible charter school LEA

based on reasonable estimates of projected enrollment at the charter

school LEA.

(3)(i) The failure of an eligible charter school LEA or its

authorized public chartering agency to provide notice to its SEA in

accordance with Sec. 76.788(a) relieves the SEA of any obligation to

allocate funds to the charter school within five months.

(ii) Except as provided in Sec. 76.792(c), an SEA that receives

less than 120 days' actual notice of the date an eligible charter

school LEA is scheduled to open or significantly expand its enrollment

must allocate funds to the charter school LEA on or before the date the

SEA allocates funds to LEAs under the applicable covered program for

the succeeding academic year.

(iii) The SEA may provide funds to the charter school LEA from the

SEA's allocation under the applicable covered program for the academic

year in which the charter school LEA opened or significantly expanded

its enrollment, or from the SEA's allocation under the program for the

succeeding academic year.

(Approved by the Office of Management and Budget under control

number 1810-0623)

(Authority: 20 U.S.C. 8065a)

Allocation of Funds by State Educational Agencies

Sec. 76.791 On what basis does an SEA determine whether a charter

school LEA that opens or significantly expands its enrollment is

eligible to receive funds under a covered program?

(a) For purposes of this subpart, an SEA must determine whether a

charter school LEA is eligible to receive funds under a covered program

based on actual enrollment or other eligibility data for the charter

school LEA on or after the date the charter school LEA opens or

significantly expands its enrollment.

(b) For the year the charter school LEA opens or significantly

expands its enrollment, the eligibility determination may not be based

on enrollment or eligibility data from a prior year, even if the SEA

makes eligibility determinations for other LEAs under the program based

on enrollment or eligibility data from a prior year.

(Authority: 20 U.S.C. 8065a)

Sec. 76.792 How does an SEA allocate funds to eligible charter school

LEAs under a covered program in which the SEA awards subgrants on a

formula basis?

(a) For each eligible charter school LEA that opens or

significantly expands its enrollment on or before November 1 of an

academic year, the SEA must implement procedures that ensure that the

charter school LEA receives the proportionate amount of funds for which

the charter school LEA is eligible under each covered program.

(b) For each eligible charter school LEA that opens or

significantly expands its enrollment after November 1 but before

February 1 of an academic year, the SEA must implement procedures that

ensure that the charter school LEA receives at least a pro rata portion

of the proportionate amount of funds for which the charter school LEA

is eligible under each covered program. The pro rata amount must be

based on the number of months or days during the academic year the

charter school LEA will participate in the program as compared to the

total number of months or days in the academic year.

(c) For each eligible charter school LEA that opens or

significantly expands its enrollment on or after February 1 of an

academic year, the SEA may implement procedures to provide the charter

school LEA with a pro rata portion of the proportionate amount of funds

for which the charter school LEA is eligible under each covered

program.

(Authority: 20 U.S.C. 8065a)

Sec. 76.793 When is an SEA required to allocate funds to a charter

school LEA under this subpart?

Except as provided in Secs. 76.788(b) and 76.789(b)(3):

(a) For each eligible charter school LEA that opens or

significantly expands its enrollment on or before November 1 of an

academic year, the SEA must allocate funds to the charter school LEA

within five months of the date the charter school LEA opens or

significantly expands its enrollment; and

[[Page 71967]]

(b)(1) For each eligible charter school LEA that opens or

significantly expands its enrollment after November 1, but before

February 1 of an academic year, the SEA must allocate funds to the

charter school LEA on or before the date the SEA allocates funds to

LEAs under the applicable covered program for the succeeding academic

year.

(2) The SEA may provide funds to the charter school LEA from the

SEA's allocation under the program for the academic year in which the

charter school LEA opened or significantly expanded its enrollment, or

from the SEA's allocation under the program for the succeeding academic

year.

(Authority: 20 U.S.C. 8065a)

Sec. 76.794 How does an SEA allocate funds to charter school LEAs

under a covered program in which the SEA awards subgrants on a

discretionary basis?

(a) Competitive programs. (1) For covered programs in which the SEA

awards subgrants on a competitive basis, the SEA must provide each

eligible charter school LEA in the State that is scheduled to open on

or before the closing date of any competition under the program a full

and fair opportunity to apply to participate in the program.

(2) An SEA is not required to delay the competitive process in

order to allow a charter school LEA that has not yet opened or

significantly expanded its enrollment to compete for funds under a

covered program.

(b) Noncompetitive discretionary programs. The requirements in this

subpart do not apply to discretionary programs or portions of programs

under which the SEA does not award subgrants through a competition.

(Authority: 20 U.S.C. 8065a)

Adjustments

Sec. 76.796 What are the consequences of an SEA allocating more or

fewer funds to a charter school LEA under a covered program than the

amount for which the charter school LEA is eligible when the charter

school LEA actually opens or significantly expands its enrollment?

(a) An SEA that allocates more or fewer funds to a charter school

LEA than the amount for which the charter school LEA is eligible, based

on actual enrollment or eligibility data when the charter school LEA

opens or significantly expands its enrollment, must make appropriate

adjustments to the amount of funds allocated to the charter school LEA

as well as to other LEAs under the applicable program.

(b) Any adjustments to allocations to charter school LEAs under

this subpart must be based on actual enrollment or other eligibility

data for the charter school LEA on or after the date the charter school

LEA first opens or significantly expands its enrollment, even if

allocations or adjustments to allocations to other LEAs in the State

are based on enrollment or eligibility data from a prior year.

(Authority: 20 U.S.C. 8065a)

Sec. 76.797 When is an SEA required to make adjustments to allocations

under this subpart?

(a) The SEA must make any necessary adjustments to allocations

under a covered program on or before the date the SEA allocates funds

to LEAs under the program for the succeeding academic year.

(b) In allocating funds to a charter school LEA based on

adjustments made in accordance with paragraph (a) of this section, the

SEA may use funds from the SEA's allocation under the applicable

covered program for the academic year in which the charter school LEA

opened or significantly expanded its enrollment, or from the SEA's

allocation under the program for the succeeding academic year.

(Authority: 20 U.S.C. 8065a)

Applicability of This Subpart to Local Educational Agencies

Sec. 76.799 Do the requirements in this subpart apply to LEAs?

(a) Each LEA that is responsible for funding a charter school under

a covered program must comply with the requirements in this subpart on

the same basis as SEAs are required to comply with the requirements in

this subpart.

(b) In applying the requirements in this subpart (except for

Secs. 76.785, 76.786, and 76.787) to LEAs, references to SEA (or

State), charter school LEA, and LEA must be read as references to LEA,

charter school, and public school, respectively.

(Authority: 20 U.S.C. 8065a)

Appendix to the Preamble--Analysis of Comments and Changes

Note: The following appendix will not appear in the Code of

Federal Regulations.

Need for Final Regulations

Comments: Five commenters expressed strong support for the

issuance of final regulations in order to ensure that charter

schools opening for the first time or significantly expanding their

enrollment receive the Federal-to-State formula funds for which they

are eligible in a timely fashion. Two commenters objected to the

issuance of final regulations as premature and inconsistent with the

Department's regulatory principles. These commenters recommended

that the Secretary issue the proposed regulations as nonregulatory

guidance to determine whether final regulations are absolutely

necessary.

Discussion: The Secretary believes that these final regulations

are necessary to ensure that charter schools opening for the first

time or significantly expanding their enrollment receive the funds

for which they are eligible under the covered programs in accordance

with the requirements of section 10306 of the Act. A number of State

and local officials as well as charter school operators have raised

questions about the proper interpretation of section 10306 of the

Act, and have requested guidance from the Department regarding

implementation of the provision. Due to a number of factors,

including the importance of the statutory requirement and the high

level of uncertainty regarding its interpretation, the Secretary

believes that final regulations are necessary to ensure a uniform

interpretation of the law among States. Also, consistent with the

Department's Principles for Regulating, the provisions in these

final regulations are intended to allow SEAs and LEAs maximum

flexibility to develop procedures that will enable them to comply

with the statutory requirement in a manner that minimizes any

disruption in State and local administration of the covered

programs.

Changes: None.

Need for Nonregulatory Guidance

Comments: Six commenters recommended that the Secretary issue

nonregulatory guidance to assist States in implementing these final

regulations. Three commenters specifically requested guidance on the

effect of the regulations on State administration of funds under

Part B of the Individuals with Disabilities Education Act (IDEA),

including the funding formulas in the Grants to States Program and

the Preschool Grants Program.

Discussion: The Secretary agrees that the issuance of

nonregulatory guidance would be useful to assist States in

implementing these final regulations. Accordingly, within the next

several months, we intend to issue guidance that will address

specific implementation issues relating to the various covered

programs, including allocation issues under Part B of IDEA and Title

I, Part A (Title I) of the Elementary and Secondary Education Act of

1965 (ESEA). For a discussion of the effect of these final

regulations on Part B of IDEA, see ``Allocation of Funds'' in this

``Analysis of Comments and Changes.''

Changes: None.

Information Collection Requirements

Comments: One commenter requested that the Secretary describe in

the final regulations the specific types of information SEAs and

LEAs will be expected to collect under the regulations.

Discussion: The two provisions in these regulations that impose

information collection requirements on SEAs, LEAs, and charter

schools are Secs. 76.788 and 76.789(a). Section 76.788 requires new

and expanding charter schools to notify their SEA or LEA of the date

the charter school is scheduled to open or expand, and to provide

the SEA or LEA with eligibility and enrollment data.

[[Page 71968]]

Under Sec. 76.789(a), SEAs and LEAs must provide timely and

meaningful information to new and expanding charter schools.

In light of the potential administrative burden that compliance

with the statutory requirement may place on States and localities,

we believe it is important to allow States and LEAs as much

flexibility as possible in determining the specific information they

will need to collect from and provide to charter schools, and in

developing the necessary procedures for transferring that

information. We believe it would be counterproductive to include any

additional specifications for the collection of information in these

final regulations.

Changes: None.

Definition of Academic Year (Sec. 76.787)

Comment: One commenter recommended that the Secretary define

academic year in the final regulations.

Discussion: We agree that defining academic year in these final

regulations is useful, and considered several factors in crafting

the definition. First, while all State laws require a minimum number

of days that school districts must provide academic instruction,

most States give their districts discretion to establish the actual

opening dates and calendar of the school year. In a few cases,

States establish the school calendar year for its LEAs. In either

case, the opening dates of the school or academic year typically

range from mid-August to mid-September. Another important factor

that is incorporated into the definition is the use of the term

academic year as a placeholder reference for the fiscal year or

budget period for which a State allocates funds under a covered

program.

Changes: We have revised Sec. 76.787 to add a definition for the

term academic year. The definition preserves State and local

flexibility in establishing an academic year calendar, but

references the fiscal period for which the State allocates funds

under a covered program.

Definition of Charter School LEA (Sec. 76.787)

Comments: Two commenters objected to the definition of charter

school LEA set forth in the proposed regulations because it would

allow charter schools to be treated as an LEA for purposes of some

covered programs but not others. These commenters expressed concern

that charter schools will manipulate the system by claiming to be an

LEA or a public school within an LEA for different programs,

depending on whether the charter school deems it to be convenient.

One commenter recommended that the definition of charter school LEA

be based on State law.

Discussion: We disagree that allowing a charter school to be

treated as an LEA for purposes of some covered programs and a public

school within an LEA for purposes of other covered programs will

lead to widespread manipulation of the system by charter schools.

Each of the Federal statutes governing the covered programs defines

LEA for purposes of the programs authorized under the statute.

Because these definitions are broad and rely heavily on State law,

the Secretary generally will defer to the State on the question of

whether a charter school is an LEA or a public school within an LEA.

As a general rule, however, a charter school cannot be an LEA

and a public school within an LEA under the same Federal definition.

Title XIV of the ESEA defines LEA for purposes of programs

authorized under the ESEA. Because both the Title I Program and the

Safe and Drug-Free Schools and Communities Program are authorized

under the ESEA, for example, a charter school could not be an LEA

for purposes of Title I and a school within an LEA for purposes of

Safe and Drug-Free Schools. Likewise, because the Carl D. Perkins

Vocational and Technical Education Act of 1998 (Perkins III) adopts

the ESEA definition of LEA, a charter school could not be treated

differently for purposes of ESEA programs and programs authorized

under Perkins III.

IDEA, on the other hand, contains its own definition of LEA.

Therefore, it is conceivable that a charter school could be treated

as an LEA for purposes of ESEA and Perkins III programs, and a

public school within an LEA for purposes of programs authorized

under Part B of IDEA. The charter school would have to be treated

consistently, however, under the Preschool Grants Program and the

Grants to States Program, since both of these programs are

authorized under Part B of IDEA.

One possible exception to the general rule that a charter school

cannot be treated as an LEA and a public school within an LEA under

different covered programs that rely on the same Federal definition

of LEA, is where a State law provision specifically authorizes

charter schools to elect to be treated as an LEA or a public school

within an LEA for purposes of a particular program. In such a case,

the Secretary generally will defer to State law.

Changes: None.

Definition of Significant Expansion of Enrollment (Sec. 76.787)

Comments: Six commenters requested that the Secretary include in

the final regulations a definition for significant expansion of

enrollment in order to avoid unnecessary conflict between States and

charter schools. Two of these commenters recommended that the term

be defined based on congressional intent and the Secretary's

considerations in the preamble to the proposed regulations. One

commenter opposed defining the term in the final regulations but

suggested, instead, that the final regulations include a provision

specifically authorizing States to define the term.

Discussion: We agree that defining significant expansion of

enrollment in these final regulations is necessary to clarify a

major component of the regulations. Consistent with the overall

intent of these final regulations, however, we believe that the term

should be defined in a manner that gives meaning to the statutory

provision upon which these regulations are based, while allowing

States maximum flexibility in implementing the statutory and

regulatory requirements. The requirements in these final regulations

are not triggered by minor increases in enrollment caused by normal

turnover. Rather, these regulations apply to substantial increases

in enrollment that are caused by significant, or abnormal, events.

A charter school for the performing arts, for example, may offer

two educational programs that focus on music and art. If the charter

school were to add a third educational program in dance, and the

addition of that educational program resulted in a substantial

increase in the number of students attending the charter school,

then the SEA or LEA serving the charter school would be required to

comply with these final regulations when providing funds to the

charter school under a covered program. It is not enough for a

charter school to experience a significant event, but the event must

also result in a substantial increase in the number of students

attending the charter school.

Changes: We have revised Sec. 76.787 to define the term

significant expansion of enrollment. The definition is similar to

the definition set forth in the preamble to the proposed

regulations, but is broader in that it focuses on substantial

increases in a charter school's overall enrollment without regard to

student eligibility for program funds. In addition, SEAs are given

flexibility to treat any expansion of enrollment as significant.

120-Day Notice Requirement (Sec. 76.788(a))

Comments: One commenter supported the 120-day notice

requirement, but recommended that charter schools also be required

to provide auditable enrollment information to the State or LEA at

the time the charter school provides the notice. Another commenter

opposed the 120-day notice requirement because of the delay that

many charter schools encounter in receiving approval of their

charters. This commenter recommended that the regulations be revised

to require charter schools to notify the State or LEA of the date

the charter school is scheduled to open or expand 60 days before the

charter school opens or expands, or within 30 days of the date the

charter school receives its charter.

Discussion: We believe that it is unreasonable to expect a

charter school that has not yet opened or expanded to be able to

provide auditable enrollment information to its SEA or LEA. It is

not unreasonable, however, to expect a charter school to know, at

least 120 days in advance, the date the charter school anticipates

opening or expanding. Most successful charter schools will spend at

least 120 days planning prior to opening for the first time or

significantly expanding their enrollment. Because SEAs and LEAs may

be required to reserve a portion of funds under each covered program

for eligible charter schools that open or expand during the academic

year, SEAs and LEAs will need to know as early as possible the

number of charter schools that are scheduled to open or expand.

Moreover, these final regulations do not preclude a prospective

charter school from notifying its SEA or LEA of the date the charter

school is scheduled to open, pending final approval of its charter.

Changes: None.

[[Page 71969]]

Penalty for Charter School's Failure to Provide Notice

(Sec. 76.789(b)(3))

Comments: One commenter objected to the language in the proposed

regulations that would allow an entity other than the charter school

to notify the State or LEA of the date the charter school is

scheduled to open or expand. A second commenter recommended that the

regulations be revised to require a charter school that fails to

meet the 120-day notice requirement to wait for the next grant cycle

to receive funds under the applicable covered program.

Discussion: We agree that the charter school should bear primary

responsibility for notifying the SEA or LEA of the date the charter

school is scheduled to open or expand. Allowing an unspecified

number of entities other than the charter school to place the SEA or

LEA on notice could lead to unnecessary conflict between SEAs and

LEAs and charter schools. In some cases, however, it may be more

efficient for the responsible authorized public chartering agency to

notify the SEA or LEA of the scheduled opening or expansion dates

for its charter schools, rather than require each charter school to

provide the notice individually.

We also agree that SEAs and LEAs should not be required to meet

the five-month funding requirement with respect to charter schools

that open or expand on or before November 1, if the charter school

fails to comply with the 120-day notice requirement. As stated

above, SEAs and LEAs will need to know as early as possible the

number of charter schools that may be eligible to receive funds

under a covered program in order to ensure that the funds are

available for the charter school when it actually opens or expands.

Changes: We have revised Sec. 76.788(a) to specify that a

charter school or its authorized public chartering agency must

notify the SEA or LEA of the date the charter school is scheduled to

open or expand. We have revised proposed Sec. 76.788(a)(2)

(Sec. 76.789(b)(3) in these final regulations) further to specify

the time period within which SEAs and LEAs must provide funds to

charter schools that open or expand before November 1, but fail to

provide 120 days' notice. Finally, we have revised Sec. 76.789 to

delete the reference to notice provided through some means other

than Sec. 76.788(a).

Estimates of Projected Enrollment (Secs. 76.788(b)(1) and 76.789(b)(2))

Comments: One commenter recommended that the regulations require

States and LEAs to rely on reasonable and objective data in

estimating the amount of funds to reserve for charter schools under

a covered program, and specifically authorize SEAs and LEAs to

gather the data or require the charter school to provide it. Another

commenter proposed that the final regulations include a new

provision requiring estimates of projected enrollment to be based on

the characteristics of the currently enrolled population, previous

year enrolled population, or existing applications for enrollment at

the charter school. Several commenters expressed opposition to the

use of assumed proportionality (i.e., surrounding LEAs'

proportionate demographic characteristics) in projecting enrollment

at a charter school that is scheduled to open or expand. Another

commenter objected to the use of the term ``available'' in the

provision requiring charter schools to provide to the SEA or LEA any

available data or information that the SEA or LEA may reasonably

require to assist it in estimating the amount of funds to reserve

for the charter school. This commenter stated that SEAs and LEAs

should be able to collect any data that they may reasonably require.

Discussion: Section 76.789(b)(2) authorizes an SEA or LEA to

reserve an appropriate amount of funds or make an initial allocation

to eligible charter schools based on projected data. Accordingly,

Sec. 76.788(b)(1) requires a charter school to provide its SEA or

LEA with any ``available'' data or information that the SEA may

reasonably require to make these projections.

We agree that any data upon which an SEA or LEA relies to

estimate the amount of funds to reserve for a new or expanding

charter school should be reasonable. We believe that adoption of the

remaining suggestions in the comments, however, would add

unnecessary prescription to these final regulations. It is important

to understand that these provisions concern only projected data that

would be used until actual data are available. Under Sec. 76.796,

any allocations based on projected data that are inaccurate must be

adjusted. Obviously, an SEA or LEA would want any projected data it

uses to be as accurate as possible in order to reduce the need to

make adjustments. Although these provisions require the new or

expanding charter school to provide any available data to its SEA or

LEA, there is nothing in these final regulations that would preclude

an SEA or LEA from collecting the data itself.

It should also be noted that SEAs and LEAs are not required to

use projected data. Rather, the SEA or LEA could reserve funds off

the top of its total allocation and wait until actual data are

available before making any allocations to charter schools.

Changes: We have revised Sec. 76.789(b)(2) to require any

estimates of a charter school's projected enrollment to be

reasonable.

Actual Enrollment and Eligibility Data (Sec. 76.788(b)(2))

Comments: One commenter recommended that charter schools be

required to provide the SEA or LEA with actual enrollment and

eligibility data within 60 days of opening or expanding.

Discussion: Section 76.788(b)(2) requires a charter school to

provide actual enrollment and eligibility data to the SEA or LEA at

a time the SEA or LEA may reasonably require. We do not believe it

would be appropriate to prescribe a specific period in the

regulations for submitting the data. In many instances, 60 days

would be unnecessarily long and might create difficulties for SEAs

and LEAs in making funds available to eligible charter schools

within five months. In other instances, depending on the specific

circumstances, 60 days may not be sufficiently long. We believe

these final regulations appropriately provide flexibility to each

SEA and LEA to set a reasonable timeframe for collecting actual

enrollment and eligibility data from charter schools.

Changes: None.

Timely and Meaningful Information (Sec. 76.789)

Comments: One commenter recommended that the Secretary define

timely and meaningful information in the final regulations, while

another commenter requested clarification of the meaning of the term

in either the regulations or nonregulatory guidance.

Discussion: Section 76.789 requires SEAs and LEAs to provide

charter schools with timely and meaningful information about each

covered program in which the charter school may be eligible to

participate, including notice of any upcoming competitions. We have

refrained from defining timely and meaningful information in these

final regulations because we do not believe that a single definition

can comprehensively address all covered programs. Essentially, this

provision requires SEAs and LEAs to provide charter schools with the

information they reasonably need to know in order to make an

informed decision about whether to apply to participate in a

particular covered program, and the steps they need to take to do

so. For example, for each covered program, we would expect an SEA to

provide basic program information, such as the program's purpose,

target population, eligibility requirements, application packages,

dates of any competitions, copies of the statute, relevant

regulations and guidance, etc. In terms of timing, the SEA should

provide the information as early as possible to afford the charter

school a genuine opportunity to apply to participate in the

applicable covered program.

Changes: None.

Eligibility (Secs. 76.788(c) and 76.789(b)(1)(ii))

Comments: Several commenters recommended that the Secretary

clarify that charter schools must meet the same program and

eligibility requirements as other LEAs and public schools in order

to receive funds under an applicable covered program, and that the

proposed regulations would not require a State or LEA to provide

funds to charter schools if the State or LEA does not provide funds

to other LEAs and public schools under the program. Two of these

comments were made with specific reference to Title I and Part B of

IDEA.

Discussion: Based on section 10306 of the Act, which these

regulations implement, and its legislative history, it is clear that

charter schools must receive the proportionate amount of funds for

which they are eligible under the covered programs. In the absence

of statutory or other regulatory language to the contrary, these

final regulations should not be interpreted to afford any special

rights or privileges to charter schools with regard to program

eligibility. Thus, an SEA or LEA is not required to comply with

these final regulations with respect to a new or expanding charter

school that does not meet the eligibility and other program

requirements of the applicable covered program. In determining a

charter school's eligibility to receive funds under a covered

program during an academic year in which

[[Page 71970]]

the charter school opens for the first time or significantly expands

its enrollment, however, SEAs and LEAs may not rely on enrollment or

eligibility data from a prior year, even if allocations to other

LEAs or public schools are based on a prior year's data.

Nor do these final regulations require an SEA or LEA to provide

funds to an eligible charter school if the SEA or LEA does not

provide funds to other eligible LEAs or public schools under the

program. Under Title I, for example, an LEA may choose to provide

funds or services to eligible public schools in its district. If the

LEA opts to provide services, rather than funds, to the Title I-

eligible public schools in its district, these regulations would not

require the LEA to provide funds to new or expanding charter

schools. For a discussion of whether these final regulations require

LEAs to provide funds to new and expanding charter schools under

Part B of IDEA if the LEA does not provide funds to other eligible

public schools, see ``Allocation of Funds'' in this ``Analysis of

Comments and Changes.''

Changes: We have revised proposed Secs. 76.788(b)(1)(ii) and

76.790(a)(2) (Secs. 76.788(c) and 76.789(b)(1)(ii), respectively, in

these final regulations) to clarify that a charter school must

establish its eligibility and comply with all applicable program

requirements in order to receive funds under these final

regulations.

Date on Which a Charter School Opens or Expands (Secs. 76.792-76.793)

Comments: Two commenters expressed support for the provisions in

the regulations that require States and LEAs to provide funds to

charter schools that open or expand prior to February 1. One of

these commenters noted that its State law requires charter schools

to open between August 15 and September 15. Another commenter

recommended that the regulations be revised either to eliminate any

requirement that States provide funding to charter schools that open

after November 1, or to give States more flexibility in providing

funds to charter schools that open after that date. Another

commenter stated that the pro rata calculation should be flexible

enough to allow States to use days rather than months.

Discussion: We agree that February 1 is a reasonable cut-off

date for States to be required to provide some funding to eligible

charter schools under the covered programs. Because these final

regulations require States to provide only a pro rata portion of

funds to eligible charter schools that open or expand between

November 1 and February 1, charter schools will have an incentive to

open or expand before November 1, thereby easing the potential

administrative burden on States.

On the other hand, some charter schools may be unable to open or

expand prior to November 1. While it would be unfair to require

these charter schools to forgo entirely the funds for which they are

otherwise eligible under a covered program, States should be given

additional flexibility in providing funds to the charter schools.

Such flexibility will ease further the potential administrative

burden that funding charter schools opening or expanding late in the

academic year poses for States and local school districts.

Changes: We have revised Sec. 76.792(b) to allow States to use

days to calculate the pro rata allocation for charter schools that

open or expand between November 1 and February 1 of an academic

year. We have also revised Sec. 76.793 to require SEAs and LEAs to

provide funds to charter schools that open or expand on or before

November 1 within five months, and to give SEAs and LEAs additional

flexibility in providing funds to charter schools that open after

November 1. Specifically, for charter schools that open or expand

between November 1 and February 1, we have added a new paragraph

requiring SEAs and LEAs to provide funds to those charter schools on

or before the date the SEA or LEA provides funds to LEAs and public

schools under the program for the succeeding academic year.

Comments: One commenter stated that the final regulations should

apply only to charter schools that have actually opened or

significantly expanded their enrollment, rather than to charter

schools that are scheduled to open or expand.

Discussion: Many States and LEAs make allocations under the

covered programs, particularly Title I and Part B of IDEA, in the

spring or summer preceding the academic year for which the

allocations are made. Therefore, in order to give meaning to section

10306 of the Act, which these final regulations implement, and

ensure that funds are available for charter schools that open or

expand during the academic year, it may be necessary for SEAs and

LEAs to reserve a portion of funds under a particular covered

program. In the absence of some advance notification to the SEA or

LEA of a charter school's plans to open or expand, the SEA or LEA

would have no way of knowing whether to reserve funds, or the amount

of funds to reserve, for a charter school. Likewise, while it may be

appropriate in some cases, a charter school should not be required

to wait until after it opens to receive information about upcoming

application deadlines or ongoing competitions under the covered

programs in which the charter school is eligible to apply to

participate.

On the other hand, it is important to note that these final

regulations do not require SEAs or LEAs to provide any funds to

charter schools before the charter school actually opens or

significantly expands its enrollment. Under Sec. 76.789(b)(2), for

example, SEAs and LEAs may either allocate funds to or reserve funds

for charter schools based on estimates of projected enrollment.

Moreover, Sec. 76.788(b)(2)(ii) specifically states that an SEA or

LEA is not required to provide funds to a charter school that fails

to provide the enrollment or eligibility data the SEA or LEA

reasonably requires. Thus, although an SEA or LEA may provide funds

to a charter school before the charter school actually opens or

expands, nothing in these final regulations requires them to do so.

Changes: We have revised Sec. 76.792 to clarify further that

SEAs and LEAs are not required to provide any funds to a charter

school that has not yet opened or expanded.

Use of Term Full Amount of Funds (Sec. 76.792)

Comments: One commenter recommended that the Secretary replace

the term full amount of funds in Sec. 76.792(a) of the regulations

with the term commensurate share of funds in order to eliminate any

ambiguity that use of the former term may cause. This commenter and

a second commenter also stated that the Secretary should define or

clarify the meaning of the term commensurate share.

Discussion: The intent of these final regulations is to require

SEAs and LEAs to provide to each eligible charter school the amount

of funds the charter school would receive under each program's

statutory allocation formula if the charter school is included in

the SEA or LEA's initial allocation. Under many of the covered

programs, LEAs and public schools receive the proportionate amount

of funds for which they are eligible, based on the total amount of

funds that are available under the program and the program's

statutory allocation formula.

These regulations are not intended to guarantee each charter

school a particular funding level, or entitlement, that may be

conditional based upon the appropriation level for any covered

program. We agree that use of the term full amount does not convey

this intent clearly, but are concerned that the term commensurate

share may lack clarity as well. We believe that the term

proportionate amount best conveys the intent of these final

regulations. Changes: We have replaced the term full amount of funds

in Sec. 76.792(a) with the term proportionate amount of funds. We

have also inserted the term proportionate amount of funds in

Secs. 76.792(b) and 76.792(c) to clarify further the purpose of

these final regulations as discussed above.

Allocation of Funds (Secs. 76.792-76.794)

Comments: One commenter stated that the final regulations should

clarify that SEAs and LEAs are not required to send 100 percent of

the funds for which a charter school is eligible to the charter

school within the time periods specified in the regulations, but

that they are required only to ensure that the appropriate amount of

funds flow to the charter school. We believe the commenter meant

that the SEA or LEA is not required to make one lump sum payment to

the charter school at the beginning of the grant period.

Discussion: The commenter is correct in that these final

regulations do not require SEAs and LEAs to send 100 percent of the

funds for which a charter school is eligible to the charter school

within the prescribed time periods. Department regulations prohibit

recipients of Federal funds from earning excess interest on those

funds. Therefore, when awarding subgrants under the covered

programs, SEAs and LEAs are generally required only to ensure that

the appropriate amount of grant funds are made available for draw

down by the subgrant recipient--in this case, the charter school.

The subgrant recipient, in turn, draws down funds on an as needed

basis. Thus, while SEAs and LEAs are not actually required to send

funds to the charter school, they are required to ensure that the

proportionate

[[Page 71971]]

amount of funds for which the charter school is eligible is made

available to the charter school within the time periods specified in

these final regulations.

Changes: None.

Comments: One commenter requested that language be included in

the final regulations specifically authorizing States to use non-

Federal funds to supplement allocations to LEAs. Although this

comment was made with specific reference to Part B of IDEA, the

discussion that follows is applicable to all of the covered

programs.

Discussion: States must follow applicable program requirements

when allocating funds to LEAs under a covered program. While an SEA

may use non-Federal funds to supplement LEA allocations that are

reduced as a result of the SEA's compliance with section 10306 of

the Act and these final regulations, the State may not substitute

non-Federal funds for Federal funds when awarding subgrants under a

covered program.

Changes: None.

Comments: One commenter requested that the Secretary revise the

regulations to make the provisions governing competitive

discretionary grant programs applicable to noncompetitive

discretionary grant programs, so that prospective charter school

applicants that fail to meet the application deadline for either

type of discretionary grant program would be required to wait for

the next grant cycle in order to receive funds under the program.

Discussion: Under Sec. 76.794(b), SEAs and LEAs are completely

exempt from the requirements of these final regulations when

allocating funds under noncompetitive discretionary programs.

Therefore, as a practical matter, SEAs and LEAs could require any

school, including new and expanding charter schools, that fail to

meet the application deadline to wait until the next grant cycle to

apply for funds under these programs. Two of the covered programs

under which SEAs or LEAs have total discretion either to provide

services directly or award funds to subgrantees on a noncompetitive

basis are Migrant Education and Neglected and Delinquent Children.

In addition, a number of programs, such as Part B of IDEA and Safe

and Drug-Free Schools, require SEAs to allocate a majority of funds

on a formula basis, but also allow a portion of funds to be

distributed on a discretionary basis. For these programs, the SEA

would not be required to comply with these final regulations when

distributing the discretionary portion of the funds on a

noncompetitive basis. If the SEA distributes the discretionary

portion of the funds on a competitive basis, Sec. 76.794(a) would

apply.

As stated in the preamble to the NPRM, the Secretary encourages

SEAs and LEAs to consider charter schools on the same basis as other

LEAs and public schools when providing funds on a discretionary, but

noncompetitive, basis. Nevertheless, it is not the intent of these

regulations to restrict in any way the discretionary authority of

SEAs and LEAs with respect to these funds.

Changes: We have revised the definition of covered program in

Sec. 76.787 to clarify that noncompetitive discretionary programs

are not covered by these final regulations, even though funds are

allocated to the State on a formula basis. We have also revised

Sec. 76.794(b) accordingly.

Comments: One commenter requested guidance on how LEAs can meet

the requirements of these final regulations when allocating funds to

new or expanded charter schools under Part B of IDEA.

Discussion: There is nothing in section 10306 of the Act, these

final regulations, or the IDEA Amendments of 1997 that would compel

an LEA to make allocations of Part B funds to charter schools that

are public schools of that LEA, if the LEA does not make allocations

of such funds to its other schools. Under section 613(a)(5) of IDEA,

if an LEA provides Part B funds or services to public schools of the

LEA, it must provide those funds or services in the same manner to

charter schools that are public schools of the LEA. Likewise, if the

LEA has eligibility criteria that its public schools must meet in

order to receive Part B funds and the charter school meets those

criteria, the LEA must provide Part B funds to the new or expanded

charter school in the same manner that the LEA provides such funds

to its other public schools. If an LEA allocates Part B funds to its

public schools on a formula basis, in accordance with Sec. 76.791 of

these final regulations, the eligibility determination for the new

or expanded charter school may not be based on enrollment or

eligibility data from a prior year. In addition, funding allocations

made on a formula basis must be made within the time periods

specified in Sec. 76.793 of these final regulations.

As stated in the Office of Special Education Programs (OSEP)

Memorandum 99-12, if an LEA provides Part B funds to charter schools

that are public schools within the LEA, a State can require that

allocations of Part B funds be transferred from the LEA where the

child was previously served and counted, or would have been served,

to the LEA that distributes Part B funds to the charter school where

the child is attending. In addition, the State can require that the

funds be transferred from the public school of the LEA where the

child was previously served and counted, or would have been served,

to the charter school of the same LEA where the child is attending.

Changes: None.

Comments: One commenter requested guidance on how SEAs can meet

the requirements of these final regulations when providing funds to

new or expanded charter school LEAs under the current formula in the

IDEA Preschool Grants Program and the permanent formula that will

become effective for the IDEA Grants to States program when the

appropriation for that program exceeds $4,924,672,200.

Discussion: Under the formula at sections 611(g)(2)(B) and

619(g)(1) of Part B of IDEA, the State allocation to each eligible

LEA is the total of three amounts--the base payment, the population

payment, and the poverty payment. The base payment is the amount the

LEA would have received for the base year had the State allocated 75

percent of its award to the local level (for the Grants to States

Program, the base year is the fiscal year preceding the first fiscal

year in which the amount appropriated for the program is more than

$4,924,672,200; for the Preschool Grants Program, the base year is

Federal fiscal year 1997). Therefore, the amount of Part B funds

that a State must use to make base payments is set at 75 percent of

the State's base year grant, and remains the same for each

subsequent fiscal year. Federal regulations at 34 CFR 300.712(b)(2)

and 34 CFR 301.31(b) provide information on when base payments must

be adjusted. Because of section 10306 of the Act and these final

regulations, base payments must also be adjusted when a charter

school experiences a significant expansion of enrollment as defined

in Sec. 76.787 of these final regulations.

When calculating base payments for new or expanded charter

school LEAs, States must use the method described in 34 CFR

300.712(b)(2)(i) and 34 CFR 301.31(b)(1). Thus, if a charter school

LEA opens for the first time or significantly expands its

enrollment, the State must divide the base allocation for LEAs that

would have been responsible for serving children with disabilities

now being served by the charter school LEA, among the charter school

LEA and affected LEAs based on the relative numbers of children with

disabilities currently provided special education by each of the

LEAs. Once the base payment for affected LEAs and the charter school

LEA is calculated using the method described above, the State may

use its State set-aside funds to supplement the subgrant of an LEA

whose base payment is decreased as a result of having its base

allocation divided. However, supplements provided for this purpose

do not change the amount of the base payment the LEA is entitled to

receive, and the SEA is not required to continue to provide these

supplemental funds in future years.

The population payment (85 percent of the remaining flow-through

funds after the base payments are made) is an amount based on the

eligible agency's relative numbers of children enrolled in public

and private elementary and secondary schools within the LEA's

jurisdiction. The population payment should be allocated to new or

expanded charter schools based on the number of elementary and

secondary school children enrolled in the charter school. Under

Sec. 76.791 of these final regulations, the State may not rely on

enrollment data from a prior year in calculating the new or expanded

charter school's population payment, even if population payments to

other LEAs are based on a prior year's enrollment data.

The poverty payment (15 percent of the remaining flow through

funds after the base payments are made) is an amount based on the

eligible agency's relative numbers of children living in poverty, as

determined by the SEA. The poverty factor chosen must be applied

uniformly to all eligible subgrantees. For example, if the State

uses aggregate data on children who are eligible for free or

reduced-price meals under the United States Department of

Agriculture's National School Lunch Program, this data must be

applied to the new or expanded charter school LEA to determine its

poverty payment. Under Sec. 76.791, the State may not rely on

enrollment or eligibility data from a prior year in calculating the

new or expanded charter school LEA's poverty payment, even

[[Page 71972]]

if poverty payments to other LEAs are based on data from a prior

year.

Section 76.790(b)(2) of these final regulations provides the SEA

with flexibility to allocate funds to eligible charter school LEAs

based on reasonable estimates of projected enrollment at the charter

school LEA. Under Sec. 76.796, the SEA would be required to make

appropriate adjustments to the subgrants of the new or expanded

charter school LEA and affected LEAs based on actual enrollment and

eligibility data. Under Sec. 76.797(a), any required adjustments

would have to be made on or before the date the SEA allocates funds

to LEAs for the succeeding academic year.

The requirements in section 10306 of the Act and these final

regulations apply only when a State or LEA allocates funds under a

covered program to a charter school during its first year of

operation or during subsequent years when the charter school

significantly expands its enrollment. In all other years, an SEA or

LEA allocates Part B funds to charter schools in the same manner as

it allocates funds to other eligible LEAs and public schools. The

only entities that are eligible to receive Part B funds under IDEA

are entities that are established as LEAs under State law and those

charter schools that are public schools of an LEA where that LEA

distributes Part B funds to its other public schools.

Changes: None.

Comments: One commenter requested guidance on how an SEA or LEA

reallocates funds if a charter school closes. Although this comment

was made with specific reference to Part B of IDEA, the discussion

that follows is applicable to all of the covered programs.

Discussion: Neither section 10306 of the Act nor these final

regulations prescribe closeout or reallocation procedures for SEAs

or LEAs to follow if and when a charter school closes. Therefore, as

a general rule, if a charter school that has received funds in

accordance with these final regulations closes, SEAs and LEAs should

follow the same procedures that are used to close out subgrants and

reallocate funds for other eligible entities under the applicable

program.

Changes: None.

Adjustments (Secs. 76.796-76.797)

Comments: Three commenters expressed support for the requirement

in the proposed regulations that States and LEAs make adjustments to

allocations to charter schools based on actual enrollment and

eligibility data. One of these commenters recommended that the

regulations include a provision specifically authorizing charter

schools to challenge the amount of the SEA or LEA's allocation,

while another commenter recommended that the regulations prescribe

additional remedies for States to recover overpayments. A fourth

commenter opposed any requirement that States make adjustments for

underpayments to charter schools, and a fifth commenter recommended

that the Secretary delete the provision authorizing States and LEAs

to make adjustments to allocations in the succeeding year. The fifth

commenter questioned the usefulness of Sec. 76.797, in light of the

ability of States to recover overpayments from charter schools

through offset of subsequent allocations.

Discussion: If an SEA or LEA has allocated more or fewer funds

to a charter school than the amount for which the charter school is

eligible based on actual enrollment or eligibility data, Sec. 76.796

requires the SEA or LEA to make appropriate adjustments. The purpose

of this provision is to ensure that charter schools receive the

amount of funds they are eligible to receive--no more and no less.

Accordingly, it requires SEAs and LEAs to make adjustments to

charter school allocations for both overpayments and underpayments,

as well as appropriate adjustments to the allocations of other LEAs

and public schools. For example, if projected enrollment data result

in an SEA allocating too few funds to a charter school LEA, the SEA

would be required to adjust upward the charter school LEA's

allocation when actual enrollment data are available. Similarly, if

the SEA reserves more funds off the top of its total allocation than

are needed to make allocations to eligible charter school LEAs, the

SEA must return the excess funds to its other LEAs in proportion to

their initial allocations. Our nonregulatory guidance will provide

program-specific examples of how adjustments can be made.

If a charter school LEA believes its allocation under a covered

program is inaccurate, it, like any other LEA, may appeal to the SEA

under section 432(a) of the General Education Provisions Act.

Moreover, nothing in Sec. 76.796 is intended to limit the remedies

otherwise available by law to SEAs or LEAs to recoup overpayments of

funds.

Section 76.797 requires SEAs and LEAs to make any necessary

adjustments on or before the date the SEA or LEA allocates funds to

LEAs for the succeeding academic year. In other words, an SEA may

make adjustments immediately, when it makes the next year's

allocations, or anytime in between. This provision affords SEAs and

LEAs flexibility to make adjustments when it is most convenient,

provided those adjustments are made no later than when the SEA or

LEA provides funds to LEAs and public schools for the succeeding

academic year.

Changes: None.

Applicability of Provisions to LEAs (Sec. 76.799)

Comments: One commenter stated that the regulations should be

expanded to address LEA-specific circumstances.

Discussion: Section 76.799(a) specifies that LEAs that are

responsible for funding charter schools under a covered program are

subject to the same requirements as SEAs. In Sec. 76.799(b), we also

explain that the terms LEA, charter school, and public school should

be read in place of the terms SEA (or State), charter school LEA,

and LEA, respectively, in these regulations to accomplish the

requirement. When these substitute references are applied, these

regulations already instruct LEAs on their responsibilities to new

and expanding charter schools when allocating funds under the

covered programs. Within the next several months, the Department

also expects to issue nonregulatory guidance that will provide

additional program-specific guidance for SEAs, LEAs, and charter

schools.

Finally, as noted in the preamble to the NPRM, States are

directly responsible for ensuring that LEAs meet the requirements of

section 10306 of the Act and these final regulations. Accordingly,

the Department expects that some SEAs may also provide guidance to

LEAs on these matters. The Secretary believes that all of these

measures are a satisfactory means of providing the expanded LEA-

specific guidance that the commenter seeks, and that further

regulations on this issue are unnecessary at this time.

Changes: None.

[FR Doc. 99-33119 Filed 12-21-99; 8:45 am]

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