Title I-Improving the Academic Achievement of the Disadvantaged-Supplement Not Supplant, 61148-61159 [2016-20989]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 81, Number 172 (Tuesday, September 6, 2016)]
[Proposed Rules]
[Pages 61148-61159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20989]


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DEPARTMENT OF EDUCATION

34 CFR Part 200

RIN 1810-AB33
[Docket ID ED-2016-OESE-0056]


Title I--Improving the Academic Achievement of the 
Disadvantaged--Supplement Not Supplant

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to establish regulations governing 
programs administered under title I, part A of the Elementary and 
Secondary Education Act of 1965 (ESEA), as amended by the Every Student 
Succeeds Act (ESSA). These proposed regulations are needed to implement 
recent changes made by the ESSA to the supplement not supplant 
requirement of title I, part A of the ESEA. Unless otherwise specified, 
references to the ESEA mean the ESEA, as amended by the ESSA.

DATES: We must receive your comments on or before November 7, 2016.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``How to use Regulations.gov.''
     Postal Mail, Commercial Delivery, or Hand Delivery: If you 
mail or deliver your comments about these proposed regulations, address 
them to James Butler, U.S. Department of Education, 400 Maryland Avenue 
SW., Room 3W246, Washington, DC 20202.
    Privacy Note: The Department's policy is to make all comments 
received from members of the public available for public viewing in 
their entirety on the Federal eRulemaking Portal at 
www.regulations.gov. Therefore, commenters should be careful to include 
in their comments only information that they wish to make publicly 
available.

[[Page 61149]]


FOR FURTHER INFORMATION CONTACT: James Butler, U.S. Department of 
Education, 400 Maryland Avenue SW., Room 3W246, Washington, DC 20202. 
Telephone: (202) 260-9737 or by email: james.butler@ed.gov.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

    Purpose of This Regulatory Action: On December 10, 2015, President 
Barack Obama signed the ESSA into law. The ESSA reauthorizes the ESEA, 
which provides Federal funds to improve elementary and secondary 
education in the Nation's public schools. ESSA builds on the ESEA's 
legacy as a civil rights law and seeks to ensure every child, 
regardless of race, national origin, socioeconomic status, background, 
or zip code, receives the support needed to succeed in school.
    As the statute affirms, the purpose of title I, part A of the ESEA 
is to ``provide all children significant opportunity to receive a fair, 
equitable, and high-quality education, and to close educational 
achievement gaps.'' \1\ The requirement that title I, part A funds 
supplement State and local funds, and not supplant them, is a 
longstanding provision of ESEA intended to ensure that Federal funds 
provide the additional educational resources that students and teachers 
in high-poverty schools need to succeed. Consequently, if title I 
schools do not receive their fair share of State and local dollars 
before title I dollars are added, title I, part A funds do not serve 
their intended purpose of providing additional educational resources. 
In this situation, instead of providing the extra, supplemental funding 
needed to serve disadvantaged students, they simply compensate for 
shortfalls in the State and local funds that title I schools receive. 
Failure to ensure compliance with the supplement not supplant 
provisions in the law hurts students in title I schools, who are among 
those most in need of additional support. This principle is fundamental 
to the law and to its legacy as a civil rights law.
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    \1\ Section 1001 of the ESEA.
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    Data show that approximately 90 percent of local educational 
agencies (LEAs) provide each title I school as much per pupil as the 
average of non-title I schools in the LEA. However, in hundreds of LEAs 
across the country, title I schools are receiving, on average, hundreds 
of thousands of dollars less in State and local funding than the 
average non-Title I school. These are critical funds that could be 
spent on, for example, wrap-around services, high-quality preschool, 
access to advanced coursework, or incentive pay for educators who 
choose to work in high-need schools. The general requirement that title 
I, part A funds supplement and do not supplant State and local funds 
has been part of title I, part A of the ESEA since 1970. This 
requirement in the law is intended to provide disadvantaged students 
with additional resources over and above what they receive through 
State and local funding streams for education. The requirement arose 
from the findings of a landmark report published in 1969 with support 
from the National Association for the Advancement of Colored People 
(NAACP) Legal Defense and Education Fund titled: Title I of ESEA: Is it 
Helping Poor Children?.\2\ That report revealed case after case of 
egregious misuses of title I funds by States and LEAs, including one 
example from Mississippi where a superintendent averred in Federal 
court that the highest per-pupil expenditure for schools serving black 
students in the district was about half of the lowest per-pupil 
expenditure in schools attended primarily by white students. Due in 
large measure to the findings from this report, the supplement not 
supplant provisions for title I, part A were added to the law during 
the 1970 reauthorization of the ESEA. However, in the years subsequent 
to the inclusion of this critical safeguard, LEAs struggled with ways 
to demonstrate compliance with the provision in the statute and 
oftentimes relied on burdensome practices that worked against the 
intended purpose of title I funding.
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    \2\ https://files.eric.ed.gov/fulltext/ED036600.pdf.
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    The ESSA presents a significant, positive improvement in this 
respect, as it changed the manner in which an LEA must comply with this 
requirement. Prior to the passage of the ESSA, the statute lacked a 
clear standard for how to demonstrate compliance with the supplement 
not supplant requirement. Most LEAs met the requirement by 
demonstrating that each cost or service paid for using title I, part A 
funds was supplemental. This burdensome practice often limited local 
education officials' ability to spend title I funds in ways that would 
best meet the needs of low-achieving students. For example, an LEA 
often pulled students out of their regular classroom to provide 
remedial services in order to clearly demonstrate that they were 
supplemental, regardless of whether this was in the best interest of 
the students receiving those services.
    The new ESSA statutory language focuses not on costs and services, 
but on funds. Specifically, section 1118(b) of the ESEA requires that 
an LEA ``demonstrate that the methodology used to allocate State and 
local funds to each [title I school] ensures that such school receives 
all of the State and local funds it would otherwise receive if it were 
not receiving assistance under [title I].''
    Importantly, States and LEAs need not shift resources among schools 
in order to comply with this provision, but instead may elect to 
provide additional State and local educational funding to title I 
schools to ensure compliance with the supplement not supplant provision 
of the law.
    This is the first time that the supplement not supplant requirement 
contains a statutory directive regarding how an LEA must demonstrate 
compliance with the requirement. For this reason, the Department 
proposes these regulations to provide clarity about how LEAs can 
demonstrate that the distribution of State and local funds satisfies 
the funds-based compliance test introduced in the law.
    At the same time, the ESSA prohibits the Secretary from prescribing 
the specific methodology an LEA uses to allocate State and local funds 
to each school, and the proposed regulations would not establish such a 
specific methodology. Instead, they would clarify that an LEA must 
publish its methodology for allocating State and local funds and 
clarify how the LEA can make the demonstration required by this section 
of the ESEA and ensure that funds under title I, part A are used to 
supplement, and not supplant, State and local funds, while also 
providing the flexibility needed to implement the requirement in a 
meaningful way. The proposed regulations reflect input provided by 
negotiators during negotiated rulemaking and feedback received from the 
public subsequent to the final negotiated rulemaking session, while 
also building upon the non-regulatory guidance the Department issued in 
2015 on the supplement not supplant requirement as applied to 
schoolwide title I, part A programs, which can be accessed at: https://www2.ed.gov/policy/elsec/guid/eseatitleiswguidance.pdf.
    Summary of the Major Provisions of This Regulatory Action: For the 
title I, part A program, we propose new regulations governing 
supplement not supplant that would:
     Restate the general requirement under section 1118(b)(1) 
that a State

[[Page 61150]]

educational agency (SEA) or an LEA use title I, part A funds only to 
supplement, and not supplant, State and local funds.
     Incorporate the requirement under section 1118(b)(2) of 
the ESEA that an LEA must demonstrate that the methodology used to 
allocate State and local funds to each title I school ensures that such 
school receives all of the State and local funds it would otherwise 
receive if it were not a title I school.
     Clarify that an LEA may demonstrate compliance with the 
preceding requirement under the ESEA in a number of ways.
     Provide numerous flexibilities to ensure that an LEA can 
implement the requirement in a way that reflects local needs, 
circumstances, and decision-making.
     Clarify the implementation timeline for the proposed 
regulations.
    Costs and Benefits: Although the Department estimates approximately 
90 percent of LEAs already meet the requirements of this proposed 
regulation through the special rule, some LEAs would need to increase 
funding for some title I schools either by increasing total funding or 
by redirecting funding within the LEA. Given that some LEAs would need 
to increase funding for some title I schools, this regulation meets the 
test for economic significance, as explained in the Regulatory Impact 
Analysis section of this document, which describes costs, transfers, 
and benefits of the proposed regulations. We further believe that the 
proposed regulations would provide a significant benefit by promoting 
transparency in State and local education spending, and by simplifying 
and clarifying the test for compliance with the supplement not supplant 
requirement in the ESEA, which is designed to ensure that Federal 
education funds provided through the title I, part A program meet their 
statutory purpose. Please refer to the Regulatory Impact Analysis 
section of this document for a more detailed discussion of costs and 
benefits. Consistent with Executive Order 12866, the Office of 
Management and Budget has determined that this action is economically 
significant.
    Invitation to Comment: We invite you to submit comments regarding 
these proposed regulations. To ensure that your comments have maximum 
effect in developing the final regulations, we urge you to identify 
clearly the specific section or sections of the proposed regulations 
that each of your comments addresses and to arrange your comments in 
the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirement of reducing regulatory burden that might result from these 
proposed regulations. Please let us know of any further ways we could 
reduce potential costs or increase potential benefits while preserving 
the effective and efficient administration of the Department's programs 
and activities.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations by accessing Regulations.gov. 
You may also inspect the comments in person in 3W246, 400 Maryland Ave. 
SW., Washington, DC, between 8:30 a.m. and 4:00 p.m., Washington, DC 
time, Monday through Friday of each week except Federal holidays. 
Please contact the person listed under FOR FURTHER INFORMATION CONTACT.
    Particular Issues for Comment: We request comments from the public 
on any issues related to these proposed regulations. However, we 
particularly request the public to comment on, and provide additional 
information regarding, the following issue. Please provide a detailed 
rationale for your response.
     Whether we should expand the flexibility available to an 
LEA that chooses to use the special rule, including to expand the 
categories of expenditures that disproportionately affect the amount of 
State and local funds allocated on average for non-title I schools, as 
contemplated in Sec.  200.72(b)(1)(iii)(C).
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of accommodation or auxiliary 
aid, please contact the person listed under FOR FURTHER INFORMATION 
CONTACT.

Background

Public Participation

    On December 22, 2015, the Department published a request for 
information in the Federal Register soliciting advice and 
recommendations from the public on the implementation of title I of the 
ESEA. We received 369 comments. We also held two public meetings with 
stakeholders--one on January 11, 2016, in Washington, DC and one on 
January 19, 2016, in Los Angeles, California--at which we heard from 
over 100 speakers regarding the development of regulations, guidance, 
and technical assistance related to the implementation of title I. In 
addition, Department staff have held more than 200 meetings with 
education stakeholders and leaders across the country to hear about 
areas of interest and concern regarding implementation of the new law.

Negotiated Rulemaking

    Section 1601(b) of the ESEA requires the Secretary, before 
publishing proposed regulations for programs authorized by title I, 
part A of the ESEA, to obtain public involvement in the development of 
the proposed regulations. After obtaining advice and recommendations 
from individuals and representatives of groups involved in, or affected 
by, the proposed regulations, the Secretary must subject any proposed 
regulations related to standards or assessments under section 
1111(b)(2) of the ESEA, as well as the requirement under section 
1118(b) that funds under part A be used to supplement, and not 
supplant, State and local funds, to a negotiated rulemaking process.
    On February 4, 2016, the Department published a notice in the 
Federal Register (81 FR 5969) announcing our intent to establish a 
negotiated rulemaking committee to develop proposed regulations to 
implement certain changes made to the ESEA by the ESSA. We announced 
our intent to establish a negotiating committee to prepare proposed 
regulations related to the requirement under section 1118(b) of the 
ESEA that title I, part A funds be used to supplement, and not 
supplant, non-Federal funds, specifically:
    (i) Regarding the methodology an LEA uses to allocate State and 
local funds to each title I school to ensure compliance with the 
supplement not supplant requirement; and
    (ii) The timeline for compliance.
    The committee met in three sessions to develop proposed 
regulations, which also included proposals related to assessments under 
section 1111(b)(2) of the ESEA: Session 1, March 21-23, 2016; session 
2, April 6-8, 2016; and session 3, April 18-19, 2016.
    The committee included the following members:
    Tony Evers and Marcus Cheeks, representing State administrators and 
State boards of education.
    Alvin Wilbanks, Derrick Chau, and Thomas Ahart (alternate), 
representing local administrators and local boards of education.

[[Page 61151]]

    Aaron Payment and Leslie Harper (alternate), representing tribal 
leadership.
    Lisa Mack and Rita Pin-Ahrens, representing parents and students, 
including historically underserved students.
    Audrey Jackson, Ryan Ruelas, and Mary Cathryn Ricker (alternate), 
representing teachers.
    Lara Evangelista and Aqueelha James, representing principals.
    Eric Parker and Richard Pohlman (alternate), representing other 
school leaders, including charter school leaders.
    Lynn Goss and Regina Goings (alternate), representing 
paraprofessionals.
    Delia Pompa, Ron Hager, Liz King (alternate), and Janel George 
(alternate), representing the civil rights community, including 
representatives of students with disabilities, English learners, and 
other historically underserved students.
    Kerri Briggs, representing the business community.
    Patrick Rooney and Ary Amerikaner (alternate), representing the 
U.S. Department of Education.
    The committee's protocol provided that it would operate by 
consensus, which meant unanimous agreement; that is, without dissent by 
any voting member. During its meetings, the committee reviewed and 
discussed drafts of proposed regulations. At the final meeting in April 
2016, the committee did not reach consensus on the proposed regulations 
relating to the requirement under section 1118(b) of the ESEA that 
title I, part A funds be used to supplement, and not supplant, State 
and local funds.
    Because consensus was not reached, the Department may use 
regulatory language developed during the negotiations as the basis for 
the proposed regulations, or develop new regulatory language for all or 
a portion of the proposed regulations; and all parties who participated 
or were represented in the negotiated rulemaking, as well as all 
members of the public, may comment freely on the proposed regulations. 
In addition, as required under section 1601(c)(1) of the ESEA, on 
August 12, 2016, the Department submitted the proposed regulations to 
the Committee on Health, Education, Labor, and Pensions of the Senate, 
and the Committee on Education and the Workforce in the House of 
Representatives for a 15 business-day comment period. The Department 
will include and seek to address comments received from Congress in the 
public rulemaking record for these regulations. Further information on 
the negotiated rulemaking process may be found at: https://www2.ed.gov/policy/elsec/leg/essa/.

Proposed Regulations

    The Secretary proposes new regulations in 34 CFR part 200 to 
implement programs under title I, part A of the ESEA. We discuss 
substantive issues under the sections of the proposed regulations to 
which they pertain.
Section 200.72 Supplement Not Supplant
    Statute: Section 1118(b) of the ESEA requires that an SEA and LEA 
use the funds that each receives under part A of title I only to 
supplement, and not supplant, the funds made available from State and 
local sources for the education of students in title I schools.
    According to the statutory language of the ESEA, to meet the 
supplement not supplant requirement an LEA must demonstrate that the 
methodology it selects for allocating State and local funds results in 
each title I school receiving all of the State and local funds that it 
would otherwise receive if it were not receiving title I funds. The 
statute also clarifies that an LEA is not required to: (1) Identify 
that an individual cost or service supported with funds it receives 
under title I, part A is supplemental; or (2) provide services through 
a particular instructional method or in a particular instructional 
setting. Further, the statute specifically prohibits the Department 
from prescribing the specific methodology that an LEA must use to 
allocate State and local funds.
    Section 1118(b)(5) establishes December 10, 2017, as the deadline 
by which an LEA must demonstrate to its SEA compliance with the 
supplement not supplant requirement. Before December 10, 2017, an LEA 
may continue to use its existing method for complying with the 
supplement not supplant requirement.
    Current Regulations: None.
    Proposed Regulations: The proposed regulations would incorporate 
new statutory provisions and clarify the basic responsibilities an SEA 
or LEA has in ensuring that the funds received under title I, part A 
are used only to supplement, and not to supplant, State and local funds 
that are made available to support the education of students in title I 
schools.
    Proposed Sec.  200.72(a)(1)(i) would incorporate the statutory 
requirement that an SEA or LEA must use title I, part A funds only to 
supplement State and local funds that would, in the absence of title I, 
part A funds, be made available for the education of students in title 
I schools. Proposed Sec.  200.72(a)(1)(ii) would establish that an SEA 
or LEA may not use title I, part A funds to supplant State and local 
funds.
    Proposed Sec.  200.72(a)(2)(i) would make clear that an LEA is not 
required to identify an individual cost or service supported with funds 
under title I, part A as supplemental, and proposed Sec.  
200.72(a)(2)(ii) would clarify that an LEA is not required to use title 
I, part A funds to provide services through a particular instructional 
method or in a particular instructional setting.
    Proposed Sec.  200.72(b)(1)(i) would clarify that an LEA must 
demonstrate annually to its SEA that the methodology it uses to 
allocate State and local funds to each title I school ensures that each 
title I school receives all of the State and local funds that it would 
receive if it were a non-title I school. Under the proposed 
regulations, an SEA must establish the time and form for the annual LEA 
demonstration. Also, an LEA would need to publish its methodology in a 
manner easily accessible to the public.
    Proposed Sec.  200.72(b)(1)(ii) would clarify that an LEA must 
allocate almost all State and local education funds to all of its 
public schools--regardless of title I status--in a way that meets one 
of the following tests: (A) The actual distribution of funds is based 
on the characteristics of students in each school, providing more 
funding for students with characteristics associated with educational 
disadvantage including students living in poverty, English learners, 
students with disabilities, and other such subgroups of students chosen 
by the LEA; (B) the actual distribution of funds is based on a 
districtwide formula for allocation of personnel and non-personnel 
resources, provided that the total amount going to each title I school 
is at least equal to the sum of the amount of personnel costs expected 
based on the districtwide average salary for each category of school 
personnel and the average district-wide per pupil expenditure for non-
personnel costs; or (C) the distribution of funds through any other 
approach that meets a funds-based compliance test established by the 
SEA that is as rigorous as (A) or (B) and is approved through Federal 
peer review that relies on peers such as professionals with expertise 
in school finance, State and local education officials, and individuals 
who represent the interests of special populations of students. An SEA 
would not be required to establish such a test. Moreover, an LEA would 
not be required to use the SEA's test if the LEA complies with one

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of the other two options or the special rule discussed below.
    To meet one of these tests, an LEA may create a specific funding 
methodology to best address its local context and need. Under any 
methodology, an LEA may exclude certain funding used for districtwide 
activities, as provided in proposed Sec.  200.72(b)(2)(iv), provided 
that each title I school receives a share of those activities equal to 
or greater than the share it would otherwise receive if it were not a 
title I school. For example, an LEA might exclude State or local funds 
used for districtwide administrative costs, to implement a districtwide 
summer school or preschool program, or personnel providing districtwide 
services such as curriculum development or data analysis.
    In addition, proposed Sec.  200.72(b)(1)(iii) establishes a 
``special rule'' that an LEA may use to meet the compliance test, 
rather than using one of the three options described above. Recent 
school-level expenditure data from the 2013-2014 school year show that 
approximately 90 percent of LEAs currently would meet the special rule. 
However, in approximately 1,500 LEAs, 5,750 title I schools spend 
significantly less State and local funding than non-title I schools in 
the same grade span (e.g., high schools or elementary schools) in the 
same LEA. Each year, these title I schools receive hundreds of 
thousands of dollars less in State and local funding than their non-
title I counterparts in the same LEA--$440,000 per year, on average, or 
a median of roughly $200,000 per year.\3\ These data suggest that in 
thousands of schools serving high-need students, title I, part A funds 
are being used, at least in part, to make up for underfunding at the 
State and local level, rather than providing truly supplemental 
funds.\4\
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    \3\ These estimates are based on U.S. Department of Education 
(Department) analyses of data from the 2013-2014 Civil Rights Data 
Collection, and calculated in a manner consistent with the ``special 
rule'' provision of the regulations proposed in this notice. 
Accordingly, the 90 percent figure includes in the denominator 
districts to which the supplement not supplant compliance test would 
not apply (e.g., districts with all title I schools or no title I 
schools). A public-use version of the collection can be found here.
    \4\ This practice did not per se result in non-compliance with 
the supplement not supplant requirement in section 1120A(b) of the 
ESEA, as amended by the No Child Left Behind Act of 2001, which did 
not contain statutory provisions relating to how LEAs must 
demonstrate compliance with the supplement not supplant requirement. 
In the absence of that clarity, the Department relied on a set of 
presumptions of supplanting for monitoring and enforcement purposes. 
However, these presumptions are no longer relevant because the new 
supplement not supplant requirement under section 1118(b) of the 
ESEA for the first time clarifies that compliance relies on an LEA's 
methodology for allocating State and local funds and discourages the 
use of past and onerous practices by prohibiting LEAs from being 
required to demonstrate that an individual cost or service is 
supplemental.
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    Under the ``special rule'' option, the LEA simply would 
demonstrate, regardless of the methodology it uses to allocate State 
and local funds to title I schools, that it spends an amount of State 
and local funds on a per-pupil basis in each title I school that is 
equal to or greater than the average per-pupil amount spent in non-
title I schools, using data reported under section 1111(h)(1)(C)(x) of 
the ESEA. The proposed special rule also would allow for de minimis 
variations in annual expenditures, such that an LEA would be in 
compliance with the special rule provision if the amount it spends per 
pupil in each title I school is no more than 5 percent below the 
average amount it spends per pupil in non-title I schools. In addition, 
proposed Sec.  200.72(b)(1)(iii)(B) would allow an LEA using the 
special rule provision to exclude from the calculation of its per-pupil 
spending funds spent in a school that enrolls fewer than 100 students, 
while proposed Sec.  200.72(b)(1)(iii)(C) would allow such an LEA to 
comply using the special rule provision if a non-title I school serving 
high proportions of students with disabilities, English learners, or 
students from low-income families has higher per-pupil expenditures due 
to serving those students and disproportionately affects the average 
amount of State and local funds spent in non-title I schools in the LEA 
or grade span.
    Proposed Sec.  200.72(b)(2) provides flexibilities that an LEA may 
use in demonstrating compliance with the ESEA's supplement not supplant 
requirement. Specifically:
     Proposed Sec.  200.72(b)(2)(i) would establish that an LEA 
may comply with the supplement not supplant requirement on a 
districtwide or grade-span basis (e.g., high schools, elementary 
schools).
     Proposed Sec.  200.72(b)(2)(ii) would exempt an LEA from 
complying with the supplement not supplant requirement if it serves 
only a single school or in any grade span in which it serves only a 
single school.
     Proposed Sec.  200.72(b)(2)(iii) would clarify that, 
consistent with section 1118(d) of the ESEA, an LEA may exclude from 
its demonstration of compliance supplemental State and local funds 
expended in any school--including a non-title I school--for programs 
that meet the intent and purposes of title I, part A (e.g., a State-
funded program providing additional services only for students most at 
risk of not meeting challenging State academic standards).
     Proposed Sec.  200.72(b)(2)(iv) would allow an LEA that 
spends State or local funds for certain districtwide activities to 
exclude those funds from its demonstration of compliance, provided that 
each title I school receives a share of those activities equal to or 
greater than it would otherwise receive if it were not a title I school 
and that the LEA distributes to schools under paragraph (b)(1) almost 
all of the State and local funds available to it. It would further 
clarify that districtwide activities may include, for example, 
districtwide administrative costs, districtwide programs such as summer 
school or preschool, and personnel providing districtwide services such 
as curriculum development or data analyses but may not include 
personnel or non-personnel resources associated with an individual 
school.
    Proposed Sec.  200.72(b)(3)(i) would clarify the timeline for 
meeting the new compliance test required by the ESEA. By December 10, 
2017, an LEA would be required to either (1) demonstrate to its SEA 
that its current methodology for allocating State and local funds meets 
the new supplement not supplant requirement, or (2) provide to its SEA 
a plan describing how it would meet that requirement no later than the 
2019-2020 school year.
    Proposed Sec.  200.72(b)(3)(ii) would clarify that, during the 
transition to the new title I, part A supplement not supplant 
requirement under the ESEA, an LEA would be able to use either (1) the 
methodology it will use to comply with the new supplement not supplant 
requirement, or (2) the methodology it used for complying with the 
requirement as it existed prior to enactment of the ESSA.
    Proposed Sec.  200.72(b)(4) would clarify that nothing in the 
proposed regulation shall be construed to require the forced or 
involuntary transfer of school personnel. It would further clarify 
that, consistent with section 1605 of the ESEA, the proposed regulation 
would not require equalized per-pupil spending for a State, LEA, or 
school. It would make clear that nothing in the proposed regulations 
would require an LEA to adopt a specific methodology to allocate State 
and local funds to comply with the supplement not supplant requirement. 
Finally, proposed Sec.  200.72(b)(4) would make clear that nothing in 
the proposed regulations would alter or otherwise affect the rights, 
remedies, and procedures

[[Page 61153]]

afforded to school or LEA employees under Federal, State, or local laws 
(including applicable regulations or court orders) or under the terms 
of collective bargaining agreements, memoranda of understanding, or 
other agreements between such employers and their employees.
    Reasons: We propose these regulations to implement the changes made 
by the ESSA to the supplement not supplant requirement of title I, part 
A of the ESEA. The proposed regulations would ensure that title I funds 
are used to fulfill their statutory purpose--that is, to ``provide all 
children significant opportunity to receive a fair, equitable, and 
high-quality education, and to close educational achievement gaps''--
instead of making up for inequitable allocations of State and local 
funding to title I schools. The proposed regulations also would provide 
LEAs the flexibility necessary to implement this requirement in a 
manner that accounts for local needs and circumstances while respecting 
the core purpose of the statute. Finally, the proposed regulations 
would clarify that previous burdensome compliance tests--related to 
justifying individual expenditures of title I funds--are no longer 
required.
    While section 1118(b) of the ESEA establishes that, to comply with 
the supplement not supplant requirement, an LEA must demonstrate that 
it uses a methodology to allocate State and local funds that ensures 
that each title I school receives the same amount of those funds as it 
would if it were not receiving title I funding, the statute does not 
indicate how an LEA is to make this demonstration. Some stakeholders, 
including some members of the negotiating committee, expressed an 
interest in clear requirements so that LEAs know exactly how they are 
expected to comply, and so that auditors are not forced to make ad hoc 
decisions on what constitutes an appropriate demonstration of 
compliance with the statute that could vary significantly from LEA to 
LEA and potentially have an unfair impact on students, schools, and 
LEAs. Some stakeholders expressed support for the Department's proposal 
during the negotiated rulemaking process that would have required that 
an LEA receiving title I funds demonstrate that each title I school 
spend at least as much per pupil in State and local funding as the 
average spent in non-title I schools in the LEA. However, other 
negotiators expressed strong concern that this may not be the only 
appropriate test of compliance with the supplement not supplant 
requirement. Many of those who expressed such concern also expressed 
support for the examples in the supplement not supplant section of the 
Department's 2015 non-regulatory guidance on schoolwide title I, part A 
programs, from which we drew in the development of this proposed rule. 
Some negotiators also expressed support for using a proposed rule to 
simply ensure transparency regarding an LEA's methodology for 
allocating State and local funds. Finally, some negotiators recommended 
not regulating on this provision of the law at all.
    The proposed regulations would require transparency in how an LEA 
allocates State and local funds, and would provide LEAs with three 
distinct options to demonstrate compliance with the requirement, 
including the two options outlined in the 2015 schoolwide program 
guidance as well as an SEA-developed funds-based compliance test that 
would be approved through a Federal peer review process. The first two 
options would allow for the demonstration of compliance through funds-
based methodologies that direct resources to all public schools in an 
LEA on the basis of student characteristics or through the allocation 
of staffing and supplies. The third option was added in order to 
maximize flexibility for innovative approaches, consistent with the 
funds-based requirement established by the ESSA, that ensure LEAs are 
using title I funds to supplement State and local funds.
    The proposed regulations would require that an LEA distribute 
almost all State and local funds through one of the three 
methodologies. This recognizes that some portion of State and local 
funding may not be allocated through general formulas because it is 
used for districtwide activities under proposed Sec.  200.72(b)(2)(iv).
    The proposed regulations would also provide an LEA the choice of 
complying with the supplement not supplant requirement via a ``special 
rule'' instead of one of the three options described above. The special 
rule builds upon the Department's proposal from negotiated rulemaking. 
During the negotiated rulemaking process, the negotiators raised 
important considerations about special circumstances that would require 
flexibility when implementing the special rule of the proposed 
regulations. To address these concerns, proposed Sec.  
200.72(b)(1)(iii) would:
     Provide that the special rule is met if the amount an LEA 
spends per pupil in each title I school is no more than 5 percent below 
the average amount it spends in non-title I schools, which would enable 
LEAs to develop and implement a methodology consistent with the 
supplement not supplant requirement while allowing for small and 
unpredictable shifts in costs from year to year;
     Allow an LEA electing to use the special rule to exclude 
the costs of educating students in schools that enroll fewer than 100 
students. Data collected by the Department indicate that schools that 
educate between 1 and 49 students spend about 60 percent more per 
student than the national average, and schools that educate 50 to 99 
students spend about 45 percent more than the national average; \5\ and
---------------------------------------------------------------------------

    \5\ These data are based on Department analyses of data from the 
2013-2014 Civil Rights Data Collection.
---------------------------------------------------------------------------

     Provide an opportunity for an LEA to comply with the 
special rule if the average per-pupil expenditures in non-title I 
schools is disproportionately impacted by a school serving a high 
proportion of students with disabilities, English learners, or students 
from low-income families. This opportunity is designed to ensure that 
an LEA may continue providing such additional support in a school that 
serves a disproportionate proportion of these high-need students and is 
not receiving title I funds.
    The negotiators also identified possible complexities in LEA 
funding systems that merit additional flexibility. Consequently, all of 
the options provided in proposed Sec.  200.72(b)(1)(ii) as well as the 
special rule provision in proposed Sec.  200.72(b)(1)(iii) include 
flexibilities in Sec.  200.72(b)(2) that would:
     Allow an LEA to demonstrate compliance on a districtwide 
or grade-span basis, because the costs of operating a high school 
frequently differ from the costs of operating an elementary school;
     Exempt an LEA with a single school or a single school per 
grade span from the requirement;
     Consistent with section 1118(d) of the ESEA, allow an LEA 
to exclude supplemental State or local funds spent for programs that 
are consistent with the intent and purposes of title I, part A (e.g., a 
State-funded program providing additional services only for students 
most at risk of not meeting State standards) from its demonstration of 
compliance with the ESEA's supplement not supplant requirement; and
     Allow an LEA to exclude funds used for districtwide 
activities from its demonstration of compliance, provided that the LEA 
ensures that each title I school receives an equal or greater share of 
those districtwide activities as it would receive if it were a non-
title I

[[Page 61154]]

school and the LEA distributes to schools under paragraph (b)(1) almost 
all of the State and local funds available to it.
    The Department acknowledges that, in some LEAs, compliance with the 
new supplement not supplant requirement under the ESEA will require 
shifts in spending and budgeting practices, and that making these 
shifts may not be possible before December 10, 2017. Therefore, the 
proposed regulations would allow an LEA unable to comply by December 
10, 2017, to provide and implement a plan to come into compliance by 
the 2019-2020 school year.
    Finally, the Department includes four rules of construction. The 
first would clarify that these regulations should not be construed to 
require the forced or involuntary transfer of any school personnel. We 
encourage an LEA to consider all available options to meet the 
supplement not supplant requirement under the ESEA, including, for 
example, improving working conditions in high-poverty and hard-to-staff 
schools to attract the best and best-paid educators, providing 
additional compensation or some other incentive to educators in high-
poverty and hard-to-staff schools, and increasing wrap-around services 
or other resources in high-poverty and hard-to-staff schools, such as 
school counselors, school-based health providers, extended learning 
time, or high-quality preschool opportunities. Whichever strategies an 
LEA chooses, the Department encourages the LEA to comply with this 
requirement through increasing funding focused on high-poverty, hard-
to-staff schools.
    The second rule of construction would clarify that the proposed 
regulations do not require equalized spending per-pupil for a State, 
LEA, or school. The proposed regulations contemplate variations in per-
pupil spending across schools--for example, an LEA taking advantage of 
the special rule provision would likely have (1) variation in spending 
among title I schools, so long as each was above the average per pupil 
expenditures for non-title I schools, (2) variation in spending among 
non-title I schools, which would be averaged to determine the average 
per pupil expenditures in non-title I schools, (3) variation in 
spending across grade-spans, and (4) higher spending in very small 
schools that are exempted from the calculations altogether. Similarly, 
an LEA choosing to use a weighted student funding formula would have 
variation across schools depending on the characteristics of each 
school's student population. And an LEA choosing to allocate personnel 
and non-personnel resources is likely to have wide variation in 
spending depending upon the specifics of the district's formula (e.g., 
whether the formula allocates varied numbers of staff per student in 
elementary schools compared to high schools; whether the formula 
``counts'' students with disabilities as ``1.2'' students or ``1.4'' 
students). The rule of construction would clarify that an LEA is not 
limited to formulations that would require spending identical sums of 
money per pupil in each school. The third rule of construction would 
make clear that nothing in the proposed regulations would require an 
LEA to adopt a specific methodology to allocate State and local funds 
to comply with the supplement not supplant requirement in violation of 
section 1118(b)(4) of the ESEA.
    The fourth rule of construction would clarify that nothing in the 
proposed regulations would alter or otherwise affect the rights, 
remedies, and procedures afforded to school or LEA employees under 
Federal, State, or local laws (including applicable regulations or 
court orders) or under the terms of collective bargaining agreements, 
memoranda of understanding, or other agreements between such employers 
and their employees.

Executive Orders 12866 and 13563

Regulatory Impact Analysis
    Under Executive Order 12866, the Office of Management and Budget 
must determine whether this regulatory action is ``significant'' and, 
therefore, subject to the requirements of the Executive order and 
subject to review by the Office of Management and Budget (OMB). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This proposed regulatory action is an economically significant 
regulatory action subject to review by OMB under section 3(f)(1) of 
Executive Order 12866. This determination is based on the Department's 
estimate that LEAs currently not able to demonstrate compliance with 
the supplement not supplant requirements of the proposed rule may have 
to transfer approximately $800 million in existing State and local 
education funds to demonstrate such compliance. This potential transfer 
is deemed an economically significant transfer under section 3(f)(1) of 
Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''

[[Page 61155]]

    We are issuing these proposed regulations only on a reasoned 
determination that their benefits would justify their costs. In 
choosing among alternative regulatory approaches, we selected those 
approaches that maximize net benefits. Based on the analysis that 
follows, the Department believes that these proposed regulations are 
consistent with the principles in Executive Order 13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    In accordance with both Executive orders, we have assessed the 
potential costs and benefits, both quantitative and qualitative, of 
this regulatory action and have determined that the benefits would 
justify the costs.
    The potential costs associated with the proposed regulations are 
those resulting from statutory requirements and those we have 
determined as necessary for administering these programs effectively 
and efficiently. The proposed regulations would implement new statutory 
requirements in the ESEA related to demonstrating compliance with the 
longstanding supplement not supplant requirement. More specifically, 
under the ESEA, an LEA must ``demonstrate that the methodology used to 
allocate State and local funds for each [title I school] ensures that 
such school receives all of the State and local funds it would 
otherwise receive if it were not receiving assistance under [title I, 
part A].'' The proposed regulations would not require a specific 
methodology for allocating funds, but would require that the 
methodology selected and used by each LEA results in an actual 
distribution of funds consistent with the statutory requirement that 
each school participating in title I, part A receives all of the State 
and local funds it would otherwise receive if it were not a title I 
school, while also providing flexibility designed to accommodate local 
circumstances that might reasonably affect an LEA's ability to meet the 
supplement not supplant requirement.
    The Department estimates that at least 90 percent of LEAs would 
comply with the proposed regulations without any change in current 
allocation practices.\6\ These LEAs would be able to demonstrate 
compliance through the special rule option, which allows an LEA to 
choose any methodology that results in the LEA spending an amount of 
State and local funds per pupil in each title I school that is equal to 
or greater than the average amount of State and local funds spent per 
pupil in non-title I schools, using per-pupil expenditure data they 
will be required to collect and report under section 1111(h)(1)(C)(x) 
of the ESEA. In general, the Department believes that the flexibility 
afforded to LEAs by the proposed regulations in demonstrating 
compliance with the title I, part A supplement not supplant requirement 
would minimize the administrative costs and burdens of complying with 
the proposed regulations. The Department also believes that, once fully 
implemented, the proposed regulations would be significantly less 
burdensome and costly in comparison to the requirements of current law, 
which often involve detailed tracking and documentation of individual 
education expenditures.
---------------------------------------------------------------------------

    \6\ These estimates are based on Department analyses of data 
from the 2013-2014 Civil Rights Data Collection, and are calculated 
in a manner consistent with the special rule provisions of the 
regulations proposed in this notice.
---------------------------------------------------------------------------

    The proposed regulations would not require the expenditure of 
additional State or local funds in title I schools; rather, an LEA 
could meet one of the proposed compliance tests through the 
reallocation of existing State and local resources. For example, the 
Department estimates that the approximately 1,500 LEAs currently 
spending, on average, more State and local funds in their non-title I 
schools than their title I schools would need to transfer approximately 
$800 million in State and local education funds to their title I 
schools in order to meet the special rule in the proposed regulations. 
The average percentage of State and local dollars that would need to be 
reallocated by affected LEAs is estimated to be 1 percent. We note that 
the total dollars that would be required to be redistributed under the 
proposed regulations represent just over one-tenth of one percent of 
the more than $600 billion that State and local communities spend 
annually on public elementary and secondary education.
    Instead of transferring funds, affected LEAs and the States in 
which they are located may elect to increase State and local 
expenditures to meet the supplement not supplant requirement of the 
proposed regulations. If all affected LEAs do this, the total 
additional funding required is estimated to be approximately $2.2 
billion, or an increment of roughly one-third of one percent over 
current State and local spending on public elementary and secondary 
schools. The Department notes that while the proposed regulations would 
not require the expenditure of additional State or local funds to 
demonstrate compliance, doing so would ensure additional support for 
students and teachers in title I schools consistent with the supplement 
not supplant requirement, while avoiding any reduction in financial 
support for students and teachers in non-title I schools.
    The Department does not have sufficient data to support detailed 
estimates of the impact of using either the districtwide pupil 
characteristics formula test or the districtwide personnel and non-
personnel resource formula test to demonstrate compliance with the 
proposed supplement not supplant requirement. However, the Department 
believes that under either approach, the total amount of existing funds 
that affected LEAs would have to transfer, or the additional 
expenditure of State or local funds that would be required, would be 
similar to the estimates provided for the special rule, based on 
estimating the differences in funding between each title I school and 
the districtwide average funding. Similarly, the Department cannot 
provide an estimate of the impact of any State-determined option for 
compliance, but also believes that the total amount of existing funds 
that affected districts would have to transfer, or the additional 
expenditure of State or local funds that would be required, would be 
similar under this option, given that any such State-determined option 
must be ``as rigorous'' as the other options.
    States and LEAs would incur certain administrative costs under the 
proposed regulations. For example, while it is difficult to predict the 
number of States that would elect to develop their own, alternative 
compliance tests, the Department estimates that 15 States would incur 
additional one-time costs of developing or adopting and submitting an 
alternative funds-based compliance test for Federal peer review and 
approval that then could be used by LEAs to demonstrate compliance with 
the proposed supplement not supplant requirements. The Department 
further estimates that these 15 States would need, on average, 48 hours 
to prepare and submit such an alternative funds-based compliance test 
for peer review. At $40 per hour, the average cost per State would be 
$1,920, resulting in a total cost across the estimated 15 States of 
$28,800. We expect that States generally would use Federal education 
program funds they reserve for State administration under title I, part 
A to cover these one-time costs.
    The Department also estimates that the approximately 1,500 LEAs 
that we estimate currently would not comply with the special rule in 
the proposed regulations would need, on average, 24 hours to develop or 
adopt an alternative

[[Page 61156]]

funds-based compliance test consistent with one of the options in the 
proposed regulations. We further estimate that, assuming a $35 hourly 
cost, these LEAs would spend an average of $840 to develop or adopt a 
test for demonstrating compliance with the proposed supplement not 
supplant regulations, for a total estimated cost across 1,500 LEAs of 
$1,260,000. As under the State example, we anticipate that most LEAs 
would use a portion of Federal program funds received under title I, 
part A to pay these one-time development costs.
    The Department also believes that for most LEAs, adjusting 
allocations of State and local education resources to demonstrate 
compliance with the proposed regulations generally would not entail 
significant new administrative burden because such adjustments could be 
accomplished through their normal annual budget processes. However, we 
estimate that approximately one third of LEAs that currently would not 
comply with the proposed special rule would need to transfer more than 
1 percent of State and local funds in order to demonstrate compliance 
with the proposed regulations, and that these 500 LEAs would need to 
(1) develop multi-year plans for meeting their selected compliance 
tests and (2) integrate these plans into their annual budget processes. 
The Department estimates that these 500 LEAs would need, on average, 28 
hours at a cost of $35 per hour to develop and integrate these plans 
into their annual budget processes, for a total estimated cost of 
$490,000. We note that there is likely substantial variation around the 
28-hour average, with some LEAs potentially requiring significantly 
more time to develop and implement their compliance plans.
    The estimated administrative costs of the proposed regulations, 
which total less than $2 million for States and LEAs, are a small 
fraction of the more than $15 billion provided by the title I, part A 
program. Moreover, these costs are outweighed by the fact that for the 
vast majority of LEAs (i.e., the more than 90 percent of LEAs that are 
likely to already comply through the special rule), demonstrating 
compliance with the proposed regulations would be significantly less 
complex and burdensome than the supplement not supplant requirements of 
current law, which typically have involved detailed tracking of 
education expenditures in order to demonstrate that Federal title I 
funds are not supplanting State or local funds. Thousands of LEAs no 
longer would incur the annual costs of tracking, reporting, and 
auditing individual education expenditures that are the predominant 
practice for complying with supplement not supplant under current law. 
For all of these reasons, we believe the proposed regulations generally 
would not impose significant costs on either States or LEAs, and that 
for the minority of LEAs that do experience additional, mostly one-time 
implementation costs, such costs would be substantially offset by 
reduced administrative burdens once the proposed regulations are fully 
implemented.
    Equally important, the proposed regulations would provide a 
significant benefit for the vast majority of LEAs by simplifying and 
clarifying the test for compliance with the supplement not supplant 
requirement in the ESEA while ensuring that Federal education funds 
provided through the title I, part A program meet their statutory 
purpose of providing students in high-poverty schools the extra 
resources they need to meet challenging State academic standards.
Clarity of the Regulations
    Executive Order 12866 and the Presidential memorandum ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following:
     Are the requirements in the proposed regulations clearly 
stated?
     Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
     Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec.  '' and a numbered heading; for example, 
Sec.  200.72 Supplement Not Supplant.)
     Could the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in 
making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section.
Regulatory Flexibility Act Certification
    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. Under the U.S. Small Business Administration's Size 
Standards, small entities include small governmental jurisdictions such 
as cities, towns, or school districts (LEAs) with a population of less 
than 50,000. Although the majority of LEAs that receive ESEA funds 
qualify as small entities under this definition, the proposed 
regulations would not have a significant economic impact on these small 
LEAs because they would not require the expenditure of additional State 
and local education funds, only that existing State and local funding 
be allocated fairly to all schools, including both title I and non-
title I schools. The Department believes the benefits of this proposed 
regulatory action would outweigh the burdens on these small LEAs of 
complying with the proposed regulations. In particular, the proposed 
regulations would clarify the supplement not supplant requirements in 
the ESEA while ensuring that Federal education funds meet their 
statutory purpose. The proposed regulations recognize the circumstances 
that small LEAs might face with respect to supplement not supplant 
requirements, allowing an LEA that uses the ``special rule'' option to 
exclude from the calculation of its average per-pupil spending funds 
spent in a school that enrolls fewer than 100 students. The Secretary 
invites comments from small LEAs as to whether they believe the 
proposed regulations would have a significant economic impact on them 
and, if so, requests evidence to support that belief.
Paperwork Reduction Act of 1995
    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: the public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    Proposed Sec.  200.72(b)(1)(i)(A) and Sec.  200.72(b)(1)(ii)(C) 
contains an

[[Page 61157]]

information collection requirements. Under the PRA, the Department has 
submitted a copy of these sections to OMB for its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of law, 
no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number.
    In the final regulations, we will display the control number 
assigned by OMB to any information collection requirements proposed in 
this NPRM and adopted in the final regulations.
    Proposed Sec.  200.72(b)(1)(i)(A) would require each LEA to 
annually publish its methodology for allocating State and local funds 
in a manner easily accessible to the public. We estimate that during 
the three year period for which we seek information collection 
approval, 14,000 LEAs would devote five hours to publishing a 
methodology for allocating State and local funds. Therefore, we 
estimate for this section a total burden over three years for all 
respondents would be 70,000 hours, resulting in an average annual 
burden of 23,333 hours.
    Proposed Sec.  200.72(b)(1)(ii)(C) would allow States to--at their 
discretion--submit an alternate funds-based compliance test for Federal 
peer review that then could be used by LEAs to demonstrate compliance 
with the proposed supplement not supplant requirements. We estimate 
over the three year period for which we seek information collection 
approval, 15 States would choose to submit an alternate funds-based 
compliance test for Federal peer review, and that each State would 
devote 48 hours to preparing and submitting the alternate funds-based 
compliance test. Therefore, we anticipate the total burden over three 
years for all respondents would be 720 hours, resulting in an average 
annual burden of 240 hours for this section. In total, we estimate a 
burden of 23,573 hours for this proposed regulation.

                                            Collection of Information
----------------------------------------------------------------------------------------------------------------
                                                                                   OMB Control No. and estimated
          Regulatory section                     Information collection                       burden
----------------------------------------------------------------------------------------------------------------
Sec.   200.72(b)(1)(i)(A).............  This proposed regulatory provision would  OMB 1810-NEW. We estimate this
                                         require each LEA to annually publish      would require 23,333 burden
                                         its methodology for allocating State      hours.
                                         and local funds.
Sec.   200.72(b)(1)(ii)(C)............  This proposed regulatory provision would  OMB 1810-NEW. We estimate this
                                         allow States to submit an alternate       would require 240 burden
                                         funds-based compliance test for Federal   hours.
                                         peer review.
----------------------------------------------------------------------------------------------------------------

    If you want to comment on the proposed information collection 
requirements, please send your comments to the Office of Information 
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S. 
Department of Education. Send these comments by email to 
OIRA_DOCKET@omb.eop.gov or by fax to (202) 395-6974. You may also send 
a copy of these comments to the Department contact named in the 
ADDRESSES section of this preamble.
    We have prepared an Information Collection Request (ICR) for this 
collection. In preparing your comments you may want to review the ICR, 
which is available at www.reginfo.gov. Click on Information Collection 
Review. This proposed collection is identified as proposed collection 
1810-NEW.
    We consider your comments on this proposed collection of 
information in--
     Deciding whether the proposed collection is necessary for 
the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collection, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, to ensure that OMB gives your comments full consideration, 
it is important that OMB receives your comments by October 6, 2016. 
This does not affect the deadline for your comments to us on the 
proposed regulations.
Intergovernmental Review
    This program is not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.
Federalism
    Executive Order 13132 requires us to ensure meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. Although we do not believe the proposed regulations would 
have federalism implications, we encourage State and local elected 
officials to review and provide comments on these proposed regulations.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., Braille, large print, 
audiotape, or compact disc) on request to the person listed under FOR 
FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Portable Document Format (PDF). To use PDF you 
must have Adobe Acrobat Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

List of Subjects in 34 CFR Part 200

    Education of disadvantaged, Elementary and secondary education,

[[Page 61158]]

Grant programs--education, Indians--education, Infants and children, 
Juvenile delinquency, Migrant labor, Private schools, Reporting and 
recordkeeping requirements.

    Dated: August 26, 2016.
John B. King, Jr.,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary proposes 
to amend part 200 of title 34 of the Code of Federal Regulations as 
follows:

PART 200--TITLE I--IMPROVING THE ACADEMIC ACHIEVEMENT OF THE 
DISADVANTAGED

0
1. The authority citation for part 200 continues to read as follows:

    Authority:  20 U.S.C. 6301-6576 (unless otherwise noted).

0
2. Section 200.72 is revised to read as follows:


Sec.  200.72  Supplement not supplant.

    (a) In general. (1) An SEA or LEA--
    (i) Must use title I, part A funds only to supplement the funds 
that would, in the absence of the title I, part A funds, be made 
available from State and local sources for the education of students 
participating in title I programs; and
    (ii) May not use title I, part A funds to supplant the funds from 
State and local sources.
    (2) An LEA is not required under this section to--
    (i) Identify that an individual cost or service supported with 
title I, part A funds is supplemental; or
    (ii) Provide services with title I, part A funds through a 
particular instructional method or in a particular instructional 
setting.
    (b) Compliance--(1) Annual demonstration--(i) In general. To comply 
with paragraph (a) of this section, an LEA must annually--
    (A) Publish its methodology for allocating State and local funds in 
a format and language, to the extent practicable, that parents and the 
public can understand; and
    (B) Demonstrate, at such time and in such form as the SEA may 
reasonably require, that the methodology it uses to allocate State and 
local funds to each title I school ensures that the school receives all 
of the State and local funds it would otherwise receive if it were not 
a title I school.
    (ii) LEA options. In order to demonstrate that an LEA meets this 
requirement, the LEA must distribute almost all State and local funds 
available to the LEA in a way that meets one of the following tests:
    (A) Distribution of State and local funds based on characteristics 
of students. An LEA distributes State and local funds to its schools 
according to a consistent districtwide per-pupil formula based on the 
characteristics of students in each school, such that--
    (1) Students with characteristics associated with educational 
disadvantage, including students living in poverty, English learners, 
students with disabilities, and other such groups of students the LEA 
determines are associated with educational disadvantage, generate 
additional funding for their school; and
    (2) Each title I school receives for its use all of the funds to 
which it is entitled under the formula.
    (B) Distribution of State and local funds based on personnel and 
non-personnel resources. An LEA distributes State and local funds to 
its schools based on a consistent districtwide personnel and non-
personnel resource formula such that each Title I school receives for 
its use an amount of actual State and local funds at least equivalent 
to the sum of--
    (1) The average districtwide salary for each category of school 
personnel (e.g., teachers, principals, librarians, school counselors), 
multiplied by the number of school personnel in each category assigned 
by the districtwide formula to the school; and
    (2) The average districtwide per-pupil expenditure for non-
personnel resources, multiplied by the number of students in the 
school.
    (C) Distribution of State and local funds based on an SEA-
established compliance test. (1) An LEA distributes State and local 
funds in a manner chosen by the LEA that--
    (i) Is applied consistently districtwide; and
    (ii) Meets a funds-based compliance test established by the SEA 
that is as rigorous as the approaches described in paragraph 
(b)(1)(ii)(A) or (B) of this section and has been approved through a 
Federal peer review process that relies upon peers such as 
professionals with expertise in school finance, State education 
officials, local education officials, and individuals who represent the 
interests of special populations of students. An SEA is not required to 
establish such a test; nor is an LEA required to use such a test if the 
LEA complies with paragraphs (b)(1)(ii)(A) or (B) or (b)(1)(iii) of 
this section.
    (2) A funds-based compliance test that is ``as rigorous as the 
approaches described in paragraph (b)(1)(ii)(A) or (B)'' is one that 
results in substantially similar amounts of State and local funding for 
title I schools in the district as would the use of approaches 
described in paragraph (b)(1)(ii)(A) or (B), as determined by a Federal 
peer review process.
    (iii) Special Rule. Notwithstanding paragraph (b)(1)(ii) of this 
section, an LEA may distribute State and local funds using any 
methodology that results in the LEA spending an amount of State and 
local funds per pupil in each title I school that is equal to or 
greater than the average amount of State and local funds spent per 
pupil in non-title I schools, as reported under section 
1111(h)(1)(C)(x) of the ESEA.
    (A) De minimis annual variation. An LEA may be considered in 
compliance with the special rule in paragraph (b)(1)(iii) of this 
section in a specific year if the amount of State and local funds each 
title I school receives is no more than 5 percent less than the average 
amount received by non-title I schools in that year.
    (B) Schools with fewer than 100 students. In demonstrating 
compliance with the special rule in paragraph (b)(1)(iii) of this 
section, an LEA may exclude from its calculations any school that 
enrolls fewer than 100 students.
    (C) Demonstrating compliance. An LEA may demonstrate compliance 
with the special rule in paragraph (b)(1)(iii) of this section if it 
demonstrates to the SEA that--
    (1) One or more non-title I schools in the LEA receive additional 
funding to serve a high proportion of students with disabilities, 
English learners, or students from low-income families and these 
additional expenditures disproportionately affect the amount of State 
and local funds allocated, on average, to non-title I schools in the 
LEA or in a particular grade span within the LEA; and
    (2) Absent such school or schools, the LEA would be in compliance.
    (2) Flexibilities. (i) An LEA may demonstrate compliance with 
paragraph (b)(1) of this section on a districtwide or a grade-span 
basis.
    (ii) An LEA is not required to meet the requirements in paragraph 
(b)(1) of this section--
    (A) If it has a single school; or
    (B) In any grade span in which it has a single school.
    (iii) For purposes of demonstrating compliance under paragraph 
(b)(1) of this section, an LEA may exclude supplemental State or local 
funds expended for programs that meet the intent and purposes of title 
I, part A.
    (iv)(A) To the extent that an LEA spends State or local funds for 
districtwide activities, the LEA may exclude those funds from its 
demonstration of compliance with paragraph (b)(1) of this section, 
provided that each title I school receives

[[Page 61159]]

a share of those activities equal to or greater than the share it would 
otherwise receive if it were not a title I school, and the LEA 
distributes to schools under paragraph (b)(1) of this section almost 
all of the State and local funds available to it for current 
expenditures as defined in section 8101(12) of the ESEA.
    (B) Districtwide activities--
    (1) May include, for example, districtwide administrative costs, 
districtwide programs such as summer school or preschool, and personnel 
providing districtwide services such as curriculum development or data 
analyses; but
    (2) May not include personnel or non-personnel resources associated 
with an individual school.
    (3) Transition timeline. (i) No later than December 10, 2017, an 
LEA must--
    (A) Demonstrate to the SEA that it has a methodology for allocating 
State and local funds to schools that meets the requirements in 
paragraph (b) of this section that the LEA will use no later than the 
2018-2019 school year; or
    (B) Submit a plan to the SEA for how it will fully implement a 
methodology that meets the requirements in paragraph (b) of this 
section beginning no later than the 2019-2020 school year.
    (ii) Prior to either the 2018-2019 or 2019-2020 school year, as 
applicable under paragraph (b)(3)(i) of this section, an LEA may use 
either--
    (A) The method of compliance it will use to comply with paragraph 
(b) of this section; or
    (B) The method of compliance it used for complying with the 
applicable title I supplement not supplant requirement in effect on 
December 9, 2015.
    (4) Rules of construction. (i) Nothing in this section shall be 
construed to require the forced or involuntary transfer of any school 
personnel.
    (ii)(A) Nothing in this section shall be construed to require 
equalized spending per pupil for a State, LEA, or school.
    (B) Equalized spending per pupil means equal expenditures per pupil 
as reported under section 1111(h)(1)(C)(x) of the ESEA.
    (iii) Nothing in this section requires an LEA to adopt a specific 
methodology to allocate State and local funds to comply with the 
supplement not supplant requirement.
    (iv) Nothing in this section shall be construed to alter or 
otherwise affect the rights, remedies, and procedures afforded to 
school or LEA employees under Federal, State, or local laws (including 
applicable regulations or court orders) or under the terms of 
collective bargaining agreements, memoranda of understanding, or other 
agreements between such employers and their employees.

(Authority: 20 U.S.C. 6321(b) and (d))

[FR Doc. 2016-20989 Filed 9-2-16; 8:45 am]
 BILLING CODE 4000-01-P