July 28, 2000

Ms. Rebecca Walk, Director

Special Programs Unit

Wyoming Department of Education

Hathaway Building, Second floor

2300 Capitol Avenue

Cheyenne, Wyoming 82002-0050

Dear Ms. Walk:

We appreciated meeting with you on May 2, 2000 to discuss your
correspondence of August 11, 1999, requesting assistance with
implementation of the Preschool Grants formula under section 619 of the
Individuals with Disabilities Education Act (IDEA). As you know, the
IDEA Amendments of 1997 made significant changes in how Preschool Grant
(section 619) funds are distributed to States and to local educational
agencies. The new formula in section 619 of IDEA became effective
beginning with Federal fiscal year (FFY) 1998 Preschool Grant funds that
became available on July 1, 1998.

Procedures for State educational agencies (SEAs) to allocate Section 619
funds to eligible local educational agencies are found at 34 C FR
§§301.30-301.32 (copy enclosed). \"Local educational agency\" (LEA) is
defined at 34 CFR §300.18, and includes educational service agencies
(including entities that meet the definition of *intermediate
educational unit* in section 602(23) of IDEA as in effect prior to June
4, 1997). State allocations to each eligible LEA are no longer based on
child count; rather, allocations are the total of three amounts:

\(1\) *The base payment* is the amount the LEA would have received under
section 619 for FFY 1997 had the State allocated 75% of its FFY 1997
award to the local level. The regulations at 34 CFR §301.31(b) provide
information on the circumstances when base payments should be adjusted.

\(2\) The *population payment* (85% 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 agency\'s jurisdiction.
Notice that this is not the preschool-aged population in the local
educational agency, nor is it related to disability. States must use the
best data available on the numbers of children enrolled in public and
private elementary and secondary schools.

\(3\) The *poverty payment* (15% 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 State educational agency. The poverty factor chosen must be
applied uniformly to all eligible subgrantees.

In addition, the new formula for distributing Grants to States (section
611) funds to States and to LEAs became effective beginning with FFY
2000 Grants to States funds that became available on July 1, 2000.
Procedures for SEAs to allocate section 611 funds to LEAs are found at
34 CFR §300.712(b). Each LEA will receive a base allocation consisting
of the amount of Grants to States funds that the LEA would have received
for FFY 1999 had the SEA distributed 75% of its FFY 1999 award to LEAs.
Population and poverty payments are distributed as described in (2) and
(3) above. As in the Preschool Grant program, the new formula will
affect the amount of section 611 funds that the Department of Health,
Division of Developmental Disabilities (DDD) receives under the Grants
to States program.

According to your letter, under Wyoming\'s state statute, the DDD has
been deemed an intermediate educational unit responsible for the
provision of services to preschool children with disabilities aged 3
through 5. DDD then contracts with fourteen regional developmental
preschool centers to provide these services. Five-year-old children with
disabilities enrolled in kindergarten attend local elementary schools
and receive services through the school district. Under Article 7,
section 21-2-705 of the Wyoming Education Code, at least ninety-five
percent of section 619 funds must be distributed pro rata to the DDD and
school districts based on the number of preschool children with
disabilities served. Since this provision is inconsistent with IDEA,
Wyoming must amend this section of its state statute to be consistent
with the requirements of section 619(g)(1) of IDEA, as amended,
described above for distributing funds to LEAs.

You have asked whether Wyoming must distribute section 619 funds to the
fourteen regional developmental preschool centers in accordance with the
formula in section 619(g)(1) of IDEA. Because DDD fits within the
definition of LEA at 34 CFR 300.18 and has established its eligibility
under section 613, the State must distribute section 619 funds to DDD in
accordance with the formula at 34 CFR 301.30-301.32. The State also must
distribute section 619 funds in accordance with the formula to school
districts that provide services to five-year old children with
disabilities (or other eligible children ages 3 through 5). However, the
regional preschool centers are not designated as elementary schools and
are not affiliated with local educational agencies. Because DDD
contracts with the centers and the centers are not eligible subgrantees,
DDD is not required to distribute section 619 funds to these centers
based on a formula. DDD can therefore continue to distribute section 619
funds to the centers based on a child count.

We discussed the impact of the new formula on the DDD, which serves
approximately 80% of the eligible preschool children with disabilities
in Wyoming. Under the new formula in IDEA, once the base payments are
distributed, LEAs receive population and poverty payments, which are
based on the relative numbers of children enrolled in elementary and
secondary schools and the relative numbers of children living in
poverty. It is our understanding that the DDD is not currently eligible
for any portion of the population payment because the children served in
the DDD are not currently considered by Wyoming to be in elementary
school. If the five-year-old children at the DDD are considered enrolled
in a kindergarten program in an elementary school under Wyoming State
law, the DDD would be eligible for a population payment based on those
five-year olds. If three and four-year-old children served by the DDD
are likewise considered to be in elementary school, the DDD would be
eligible for a population payment based on those three and
four-year-olds.

Because school districts can count the number of children in elementary
and secondary schools living in poverty and the DDD can only count the
number of children living in poverty that it serves, school districts
will generally receive a larger share of the poverty payment. As time
goes on and a larger portion of section 619 funds is distributed based
on population and poverty, the situation for the DDD will become worse.
Please note that this will also be the same for section 611 funds. At
the meeting, we discussed options that Wyoming could utilize that would
be consistent with section 619(g)(1 ) and would result in more section
619 funds being distributed to the DDD.

One option is to change the definition of elementary school under State
law. State law at section 21-13-101(a)(iv) defines elementary school as
\"a school consisting of kindergarten through grade five\...\" As
discussed above, the population payment is distributed based on the
relative numbers of children enrolled in public and private elementary
and secondary schools within the agency\'s jurisdiction. It appears that
under State law the children served by the DDD are not enrolled in
elementary school. If you select this option, you should consult with
your State Attorney General\'s office about how to include
preschool-aged children within the State\'s definition of elementary
school, including whether any statutory changes are necessary. You
should note that, even with this change, the DDD will only be able to
count elementary and secondary school children within its jurisdiction,
which, as it is currently configured, is limited to the children it
serves. As a result, DDD would receive a smaller percentage of the
population payment than LEAs that include elementary and secondary
schools. Poverty payments are not linked to elementary and secondary
public and private school enrollment figures. Poverty payments must be
made to eligible agencies in accordance with their relative numbers of
children living in poverty, as determined by the State educational
agency. The poverty factor chosen by the SEA must be applied on a
uniform basis across all eligible agencies. [See]{.underline} 34 CFR
§301.31(c)(2) and (3). Because DDD is an eligible subgrantee, DDD should
be included in the State\'s distribution procedures for poverty
payments.

Under section 619(d)(1) of IDEA, States may retain funds for State-level
activities up to an amount equal to 25 percent of the amount they
received for FFY 1997 under the Preschool grants program, adjusted
upward each year by the lesser of the percentage increase, if any, in
the State\'s allocation or the rate of inflation. Funds that are used
for State-level activities are not required to be distributed to LEAs
based on the formula described above. The remaining section 619 funds
(funds that are not retained for State-level activities) must be
distributed to LEAs based on the formula in 34 CFR §301.31. Under
current Wyoming law, 95% of section 619 funds must be distributed to
LEAs. Only 5% of section 619 funds are retained for State-level
activities. As noted above, this provision of the law must be amended to
make it consistent with IDEA 97. If when it amends the law, Wyoming
chooses to retain the maximum amount possible for State-level
activities, the State would have a larger amount of State set-aside
funds than it does under the current State law. Because the State has
discretion to determine the manner in which its State set-aside funds
are allocated, it could provide its section 619 or section 611 State
set-aside funds to the DDD.

Under the new formula for allocating section 619 and section 611 funds
to LEAs, regardless of which of the above options you select, school
districts will likely continue to receive disproportionately more funds
than the DDD. Therefore, another solution may be to shift responsibility
for providing services to preschool children with disabilities to the
school districts. A school district that receives section 619 and
section 611 funds could then contract with the DDD or the regional
preschool centers to provide the services.

Finally, in the August 11, 1999 letter and in the meeting, you stated
that FFY 1998 Section 619 funds were allocated on a child count basis in
accordance with State statute, Article 7, section 21-2-705, rather than
the IDEA 97 formula requirements. We appreciate your willingness to work
with OSEP to resolve this error. Wyoming must make appropriate
adjustments to the federal fiscal year 1998 Preschool grant allocations
to ensure that each eligible entity receives the amount of Preschool
grant funds to which it was entitled in FFY 1998 under section 619(g).
Therefore, Wyoming must calculate the amount of section 619 funds each
eligible entity was entitled to receive in FFY 1998 based on the formula
in 34 CFR 301.30-301.32 discussed above and determine what, if any,
adjustments need to be made. In order to minimize any disruptions,
Wyoming may make adjustments for FFY 1998 funds any time before
September 30, 2000 (the date when FFY 1998 funds expire under the
Tydings Amendment). Wyoming may use any available FFY 1998 or 1999 carry
over funds or make upwards or downwards adjustments to the eligible
entity\'s FFY 2000 subgrant (assuming allocation to LEAs are made by
September 30, 2000). In order to assist you, we have attached a chart
that describes how Wyoming\'s FFY\
1998 award was calculated including the maximum set-aside amount and the
amount that must be flowed through to LEAs.

Please contact the OSEP Wyoming State contact, Ms. Claudia Brewster at
(202) 205-5578; the Preschool Grants Coordinator, Ms. Nancy Treusch, at
(202) 205-9097; or Ms. JoLeta Reynolds at (202) 205-5507 if you need
further assistance with this process.

We look forward to working with you in the near future.

Sincerely,

signed Kenneth R. Warlick/pg

Kenneth R. Warlick

Director

Office of Special Education Programs

Enclosure