GUIDANCE

## **STATE EDUCATIONAL AGENCY PROCEDURES FOR ADJUSTING BASIC, CONCENTRATION, TARGETED, AND EDUCATION FINANCE INCENTIVE GRANT ALLOCATIONS DETERMINED BY THE**

**U.S. DEPARTMENT OF EDUCATION**

![](media/image1.png)

U.S. Department of Education

Office of Elementary and Secondary Education

May 23, 2003

STATE EDUCATIONAL AGENCY PROCEDURES FOR

ADJUSTING BASIC, CONCENTRATION, TARGETED, AND EDUCATION FINANCE
INCENTIVE GRANT ALLOCATIONS DETERMINED BY THE DEPARTMENT OF EDUCATION

**INTRODUCTION**

Title I, Part A of the Elementary and Secondary Education Act (ESEA), as
amended by the No Child Left Behind Act of 2001, continues the
requirement that the Department of Education (ED) calculate Basic,
Concentration, Targeted, and Education Finance Incentive Grant
allocations to local educational agencies (LEAs). In calculating Title I
allocations, we use a list of LEAs provided by the Census Bureau, which
is based on census maps that are generally two years old. We determine
the eligibility of each LEA for Basic, Concentration, Targeted, and
Education Finance Incentive Grants and calculate allocations using the
number of "formula children" ages 5 through 17 years counted under
section 1124(c) of Title I. The data used for allocation purposes
include Census Bureau estimates of the number of children living in
poverty. We also use annually collected counts of children ages 5
through 17 years in families above poverty receiving Temporary
Assistance for Needy Families (TANF) and in foster homes as reported by
the Department of Health and Human Services, and children living in
institutions for neglected children as reported by each State to ED. In
addition, ED has created an LEA record for each State that contains
counts of all the children living in local institutions for delinquent
children or adult correctional facilities. The State educational agency
(SEA) distributes funds that ED allocates to this \"LEA\" to eligible
LEAs under Part D, Subpart 2 of Title I.

Because the Department's list of LEAs does not match the current
universe of LEAs for many States, SEAs must adjust ED's Title I, Part A
allocations to account for LEA boundary changes and for newly created
eligible LEAs, such as charter schools, that are not included in the
Department's calculations. In addition, SEAs must adjust ED's
allocations in order to (1) reserve funds for school improvement
activities, State administration, and the State academic achievement
awards program, and (2) allow, in the case of several States, for the
use of alternative data to redistribute ED-determined allocations among
LEAs with fewer than 20,000 residents.

Sections 200.70 through 200.75 and §200.100 of the final regulations
published on December 2, 2002 address the basic rules that an SEA must
follow in adjusting ED-determined LEA allocations. This guidance
elaborates on these rules by providing guidance and examples of how SEAs
adjust ED-determined Basic, Concentration, Targeted, and Education
Finance Incentive Grant allocations to account for the existence of
eligible LEAs that were not included in our LEA calculations and to make
final grants to LEAs. The guidance addresses the following issues:

-   Determining numbers of Title I formula children and the eligibility
    of LEAs not on the Census Bureau's list of LEAs that ED uses to
    determine LEA allocations. (Step 1)

-   Establishing allocations for all eligible LEAs (including those not
    on the Census list) within the State. (Step 2)

-   Reserving funds for school improvement activities, State
    administration, and the State academic achievement awards program
    and adjusting allocations to reflect "hold-harmless" requirements.
    (Steps 3 and 4)

This guidance further outlines several special procedures to follow with
regard to---

-   How States adjust formula counts and allocations when they do not
    have the information necessary to track children transferring from
    an LEA on the Census list to a special LEA not on the Census list;

-   How States may use alternative data for "small" LEAs (those with
    fewer than 20,000 total residents) to determine eligibility and to
    redistribute ED-determined Basic, Concentration, Targeted, and
    Education Finance Incentive Grant allocations among its small LEAs;
    and

-   How small States in which the number of formula children make up
    less than 0.25 percent of the national total may allocate
    Concentration Grants to LEAs.

    The chart on the next page outlines the general steps an SEA follows
    when adjusting ED's Basic, Concentration, Targeted, and Education
    Finance Incentive Grant allocations.

**OUTLINE OF STEPS TO ADJUST ED\'s BASIC, CONCENTRATION, TARGETED, AND
EDUCATION FINANCE INCENTIVE GRANT ALLOCATIONS**

**Special Procedures**

**STEP 1**

**Adjust formula**

**counts**

**STEP 2**

**Adjust ED-**

**determined**

**allocations based**

**on adjusted**

**formula counts**

**STEP 3**

**Add initial**

**adjusted allocations**

**for all Title I,**

**Part A formulas**

**STEP 4**

**Reserve funds for**

**school improvement,**

**State administration,**

**& State academic**

**achievement awards**

**program**

SEA PROCEDURES FOR ADJUSTING BASIC, CONCENTRATION, TARGETED, AND
EDUCATION FINANCE INCENTIVE GRANT ALLOCATIONS DETERMINED BY THE
DEPARTMENT OF EDUCATION

**STEP 1: Adjust formula counts**

Under this step the SEA estimates the number of formula children and
determines eligibility for each LEA not on the Census list that falls
into one of the three categories outlined below.

1.  [A new LEA created as a result of a consolidation]{.underline}: In
    the case of an LEA not on the Census list (from here on referred to
    as a "new LEA") that results from the consolidation of two or more
    LEAs (from here on referred to as "sending LEAs"), each of which is
    on the Census list, and that are (1) serving similar grade spans;
    or (2) serving complementary grade spans (e.g., a unified LEA
    created from one or more elementary LEAs and one or more secondary
    LEAs):

-   The number of formula children in the new LEA = the sum of the total
    number of formula children in the sending LEAs that make up the new
    LEA. \[See Example 1: Column 5\]

-   The 5-17 population of the new LEA = the sum of the total 5-17
    populations of the sending LEAs that make up the new LEA. \[Example
    1: Column 6\]

-   The SEA calculates the percentage of children who are formula
    children in the new LEA \[Example 1: Column 5/Column 6\]

The results determine whether each new LEA is eligible to receive a
Basic, Concentration, Targeted, or Education Finance Incentive Grant.

![](media/image2.wmf)

2.  [A new LEA that is created from parts of LEAs on the Census
    list]{.underline}: For this situation, the SEA uses the following
    procedures to\--

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(a) Determine the number and percentage of formula children in the new
    LEA.

-   The number of formula children in the new LEA = the sum of the
    formula children transferring to the new LEA from each sending LEA.
    \[See Example 2: Column 4\]

-   The 5-17 population of the new LEA = the sum of the 5-17 population
    transferring to the new LEA from each sending LEA. \[Example 2:
    Column 7\]

-   The SEA calculates the percentage of children who are formula
    children in the new LEA. \[Example 2: Column 4/Column 7\]

(b) Adjust the number and percentage of formula children in each sending
    LEA.

-   The SEA reduces the number of formula children by the number
    transferring to the new LEA. \[Example 2: Column 5\]

-   The SEA reduces the total of 5-17 year olds by the number
    transferring to the new LEA. \[Example 2: Column 8\]

-   The SEA recalculates the percentage of children who are formula
    children in each sending LEA. \[Example 2: Column 5/Column 8\]

    The results determine whether the new LEA is eligible and whether
    each affected sending LEA continues to be eligible to receive a
    Basic, Concentration, Targeted, or Education Finance Incentive
    Grant. In Example 2, all of LEAs 1 and 3 and part of LEA 2
    consolidate to form a new LEA.

    ![](media/image3.wmf)

3.  [Charter schools and other types of special LEAs]{.underline}: For
    each LEA not on the Census list (for instance, a charter school that
    has the legal status of an LEA, a regional vocational/technical
    school LEA, or another type of special LEA, from here on referred to
    as a "special LEA"), the SEA obtains a count of the formula children
    and children 5-17 for the special LEA and subtracts these counts
    from each sending LEA.

> NOTE: Because Census poverty data are not available for special LEAs,
> the SEA must derive an estimate of Census poverty children for each
> special LEA and determine from which LEAs these children came. To do
> that, the SEA may use an alternative poverty data source, so long as
> these alternative data are available for both the sending and special
> LEAs.

(a) For each special LEA:

-   The special LEA reports to the SEA its total 5-17 enrollment and
    identifies the LEAs from which those children came.

-   The special LEA reports to the SEA a count of low-income children,
    using alternative poverty data that are from the same time period as
    the count of the special LEA's 5-17 population.

-   The SEA uses the total 5-17 population and the number of low-income
    children in the special LEA to derive an estimate of Census poverty
    children in each special LEA.

-   The SEA adds any other formula children reported as enrolled in the
    special LEA to determine the total number of formula children in the
    special LEA.

-   The SEA calculates the percentage of children who are formula
    children in the special LEA.

(b) For each sending LEA:

-   The SEA reduces the total 5-17 population by the number transferring
    to the special LEA.

-   The SEA reduces the number of Census poverty children in each
    sending LEA by the estimate of Census poverty children who
    transferred from that LEA to a special LEA (determined in (a)
    above).

-   The SEA adds its count of any other formula children who continue to
    reside in the sending LEA to determine a revised total of formula
    children in the sending LEA.

-   The SEA recalculates the percentage of children who are formula
    children in the sending LEA.

> The results determine Basic, Concentration, Targeted, and Education
> Finance Incentive Grants eligibility for each special LEA and each
> affected sending LEA.
>
> The following examples illustrate how an SEA makes this determination
> for special LEAs and for affected sending LEAs.

-   Examples 3 & 4: determining the number of formula children and
    eligibility for special LEAs that draw their children solely from a
    single sending LEA.

-   Examples 5 & 6: determining the number of formula children and
    eligibility for special LEAs that draw children from several sending
    LEAs.

![](media/image4.wmf)

![](media/image5.wmf)

![](media/image6.wmf)

![](media/image7.wmf)

###### STEP 2: Adjust initial allocations based on adjusted formula counts

In this step the SEA adjusts ED-determined Basic, Concentration,
Targeted, and Education Finance Incentive Grant allocations for every
eligible LEA in the State based on the adjusted formula counts
determined in Step 1.

1.  For each LEA receiving an ED allocation that is unaffected by
    boundary changes or the creation of special LEAs, the initial
    allocation continues to be the ED allocation at this stage in the
    process. The SEA makes no adjustments at this time.

2.  For each LEA that sends children to an LEA not on the Census list,
    the SEA adjusts the ED- determined allocation as follows:

-   The SEA determines an initial amount per formula child for each
    sending LEA on the Census list contributing formula children to an
    LEA not on the Census list by dividing the total allocation from ED
    by the total number of formula children in the sending LEA (using ED
    data).

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-   The SEA reduces the ED allocation for each sending LEA on the Census
    list by an amount equal to the number of formula children
    transferring from such an LEA multiplied by the LEA's allocation per
    formula child determined above.

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-   Any amounts for Basic, Targeted, and Education Finance Incentive
    Grants remaining in sending LEAs no longer eligible for these grants
    revert to the SEA and are part of the funds available to reserve for
    school improvement, State administration, and the State academic
    achievement awards program in Step 4.

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-   Any amounts for a Concentration Grant remaining in a sending LEA
    that is no longer eligible for a Concentration Grant but that
    received a Concentration Grant within the past four years remain
    with that LEA.

3.  For each LEA not on the Census list, the SEA determines the amount
    transferring from the sending LEAs as follows:

-   The amount transferring to each LEA not on the Census list equals
    the sum of the allocations subtracted from each sending LEA
    contributing formula children to the receiving LEA. That is, the
    amount an LEA not on the Census list receives is the sum of the
    amounts that have followed the formula children from LEAs that are
    on the Census list.

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-   Any amounts for Basic, Targeted, and Education Finance Incentive
    Grants transferring to LEAs that are ineligible to receive funding
    for those programs revert to the SEA and are part of the funds
    available to reserve for school improvement, State administration,
    and the State academic achievement awards program (as described in
    Step 4).

-   Any amounts, for a Concentration Grant transferring to an LEA not on
    the Census that is ineligible to receive a Concentration Grant but
    that received one within the last four years, revert to the SEA and
    are part of the funds available to reserve for school improvement,
    State administration, and the State academic awards program. (See
    the discussion of the hold-harmless provision on page 27 for an
    interpretation of what the term "last four years" means.)

    Examples 7-9 illustrate how the SEA adjusts initial ED allocations
    to account for consolidations and the creation of special LEAs. Once
    the SEA completes this process, it will have a list of all LEAs
    eligible for Basic, Concentration, Targeted, and Education Finance
    Incentive Grants and an initial allocation for each LEA.

![](media/image8.wmf)

![](media/image9.wmf)

![](media/image10.wmf)

**SPECIAL PROCEDURES**

1.  **States that do not have the information to track children
    transferring from sending LEAs to special LEAs**

If an SEA does not have the necessary information to track children
transferring from sending LEAs to special LEAs, the SEA may use a
different method (discussed below) to determine Basic, Concentration,
Targeted, and Education Finance Incentive Grant allocations.

A.  Example 10 illustrates how the SEA determines the number of formula
    children and eligibility for each special LEA.

-   The SEA identifies an alternative poverty factor (e.g., Free and
    Reduced Price Lunch) available in total for the State and for each
    special LEA.

-   The SEA develops an equating factor for the State that represents
    the following proportion:

> Total number of Census poverty children in the State
>
> Total number of poverty children in the State using the alternative
> poverty factor

-   The SEA multiplies the equating factor by the number of poverty
    children (calculated using the alternative poverty factor) reported
    by the special LEA to obtain an estimate of the number of Census
    poverty children in the special LEA.

-   The SEA determines the total number of formula children in each
    special LEA by adding together the estimated number of Census
    poverty children and all other formula children enrolled in the
    special LEA.

-   The SEA uses the total number of formula children and the reported
    enrollment ages 5 through 17 in each special LEA to calculate the
    percentage of formula children in the special LEA. NOTE: in this
    method, the number and percentage of Census formula children in the
    other LEAs in the State are unchanged because the State has no data
    on the number of children transferring to the special LEA.

-   The SEA determines Basic, Concentration, Targeted, and Education
    Finance Incentive Grant eligibility for each special LEA.

![](media/image11.wmf)

B.  Example 11 illustrates how the SEA, using this special procedure,
    determines Basic Grant allocations for special LEAs.

-   The SEA divides the number of formula children in all eligible
    special LEAs by the total number of formula children for the State
    to determine the percentage of the State's total formula children
    enrolled in all special LEAs.

[\_\_\_Total formula children in all eligible special
LEAs\_\_]{.underline}

Total formula children in all eligible LEAs in the State

-   The SEA reduces the allocations to all LEAs on the Census list by
    the percentage just determined. The total amount taken from the
    eligible LEAs on the Census list becomes the amount reserved to make
    initial Basic Grant allocations to the special LEAs.

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-   The SEA determines the allocation for each eligible special LEA by
    multiplying the total amount reserved by the proportion of formula
    children enrolled by each special LEA.

> In Example 11, the SEA first divides the formula count in Special LEA
> 1 by the total count for all eligible special LEAs to determine
> Special LEA 1's share of formula children. The SEA then multiplies
> that share by the total amount reserved to determine Special LEA 1's
> Basic Grant allocation. The SEA repeats this process for Special LEA
> 2.

![](media/image12.wmf)

C.  Example 12 illustrates how the SEA, using this special procedure,
    determines Concentration Grant allocations for special LEAs.

-   The SEA creates a list of all LEAs eligible to receive a
    Concentration Grant (including LEAs that fail to meet the
    eligibility thresholds but received a Concentration Grant allocation
    within the last four years. (See the discussion of the hold-harmless
    provision on page 27 for an interpretation of what the term "last
    four years" means.) The list includes LEAs on the Census list, new
    LEAs, and special LEAs.

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-   The SEA divides the number of formula children in all special LEAs
    on the list just created by the total number of formula children in
    all LEAs on that list to determine the percentage of the State's
    total formula children enrolled in all special LEAs.

[Total formula children in all special LEAs on the list]{.underline}

Total formula children in all LEAs on the list

-   The SEA reduces the allocation to all LEAs on the Census list by the
    percentage just determined. The total amount taken from the LEAs on
    the Census list becomes the amount reserved to make initial
    Concentration Grant allocations to the special LEAs.

> The SEA determines the Concentration Grant allocation for each special
> LEA by multiplying the total amount reserved by that LEA's proportion
> of the formula children enrolled in all special LEAs in the State.

![](media/image13.wmf)

2.  **States using an alternative method approved by ED under §200.74 to
    redistribute allocations to LEAs serving fewer than 20,000 total
    residents**

Sections 1124(a)(2) (B), 1124A(a)(4)(c), and 1125(d) of Title I permit
an SEA to combine the allocations that ED determined under each of the
formulas for LEAs with fewer than 20,000 total residents (\"small\"
LEAs) and use an alternative method approved by ED to redetermine each
small LEA's eligibility and redistribute funds among those LEAs based on
those alternative data. Section 200.74 of the regulations applies this
alternative data provision to Education Finance Incentive Grants. This
provision does not affect the allocations for \"large\" LEAs (those with
a total population of 20,000 or more). The allocations for these large
LEAs would be the allocations that ED has determined, subject to
adjustments needed to account for boundary changes and the creation of
new LEAs and funds an SEA reserves for school improvement, State
administration, and the State academic achievement awards program
discussed in Steps 3 and 4.

> The SEA identifies LEAs in the State serving a total population of
> fewer than 20,000 residents (hereinafter referred to as "small" LEAs)
> and the total allocation available for distribution to those small
> LEAs using alternative data approved by ED.

A.  LEAs serving fewer than 20,000 residents are those meeting one of
    the following criteria:

-   Every LEA on the Census list identified by ED as serving fewer than
    20,000 residents. (Note that for purposes of this provision, ED
    considers the LEA record in its allocation tables containing the
    Part D, subpart 2 allocation to be a large LEA not subject to
    adjustment as a small LEA.)

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-   Special LEAs receiving a Basic, Concentration, Targeted, or
    Education Finance Incentive Grant based on the procedures outlined
    in Steps 1 and 2 of this guidance.

-   Any LEA resulting from a consolidation and not on the Census list
    that the SEA determines serves fewer than 20,000 residents.

B.  The SEA determines the amount of Basic, Concentration, Targeted, and
    Education Finance Incentive Grants available for allocation to small
    LEAs by summing the ED- determined allocations for each LEA serving
    fewer than 20,000 residents.

C.  Using the alternative poverty data approved by ED, the SEA
    determines the number of formula children ages 5 through 17
    (including neglected children) for each small LEA. The SEA also
    establishes the total number of children ages 5 through 17 children
    for each small LEA. These alternative poverty data form the basis
    for determining an LEA's eligibility for Basic, Concentration,
    Targeted, and Education Finance Incentive Grants and are used to
    redistribute initial allocations for all eligible small LEAs using
    the funds determined in 2B. NOTE: Poverty data and population data
    used to determine formula children percentages must be consistent
    with respect to the time period they cover.

####### Basic Grants

A.  

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(1) **Eligibility:** The SEA determines that a small LEA is eligible for
    a Basic Grant, if (using the approved alternative poverty data
    source) it has at least 10 formula children **and** the number of
    those children is greater than 2 percent of its total 5-17
    population.

(2) **Allocation:** The SEA redistributes the total Basic Grant funds
    available to eligible small LEAs as follows:

-   The SEA determines the total number of formula children in all
    eligible small LEAs based on the alternative data used.

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-   The SEA divides the amount available for small LEAs determined in
    Step 2B by the total number of formula children in all small LEAs to
    determine a Basic Grant amount per formula child.

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-   The SEA multiplies the amount per formula child by the number of
    formula children in each eligible small LEA to determine the LEA's
    Basic Grant allocation.

(3) **Hold-harmless calculation:** The SEA ensures that each eligible
    small LEA in the State (whether on the Census list or not) receives
    a percentage of the amount allocated to it in the preceding year
    based on the criteria outlined in the following table:

+-----------------------------------------+----------------------------+
| LEA's Number of Title I Formula         | Percentage Guarantee of    |
| Children as a Percentage of its Total   |                            |
| Population Ages 5 through 17            | Prior-Year Allocation ^1^  |
+-----------------------------------------+----------------------------+
| 30 percent or more                      | 95                         |
+-----------------------------------------+----------------------------+
| 15 percent or more but less than 30     | 90                         |
| percent                                 |                            |
+-----------------------------------------+----------------------------+
| Less than 15 percent                    | 85                         |
+-----------------------------------------+----------------------------+

> ^1^ The hold-harmless amount for an LEA is its preceding year's
> allocation multiplied by the appropriate percentage.

-   If an eligible small LEA's Basic Grant allocation determined under
    the previous step is less than its prior-year hold-harmless amount,
    the SEA proportionately reduces the Basic Grant allocations for
    small LEAs in the State that are above their hold-harmless amounts
    until no small LEA in the State falls below its hold-harmless
    allocation.

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-   If the total allocation available for redistribution to small LEAs
    is not sufficient to bring every eligible small LEA up to its
    hold-harmless amount, the SEA proportionately reduces every eligible
    small LEA to the amount available.

> NOTE: None of these adjustments can affect allocations to LEAs serving
> 20,000 or more residents or the ED-determined allocation for Part D,
> subpart 2.

D.  **Concentration Grants**

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(1) **Eligibility:** The SEA determines that a small LEA is eligible for
    a Concentration Grant if it\--

-   Is eligible for a Basic Grant; and

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-   Has more than 6,500 formula children (using the approved alternative
    poverty data source) **or** the number of those children exceeds 15
    percent of the total 5-17 population.

> \(2\) **Allocation:** The SEA redistributes the total Concentration
> Grant funds available to eligible small LEAs as follows:

-   The SEA determines the total number of formula children in all
    eligible small LEAs based on the alternative data used.

-   The SEA divides the amount available for small LEAs by the total
    number of formula children in all small LEAs to determine a
    Concentration Grant amount per formula child.

-   The SEA multiplies the amount per formula child by the number of
    formula children in each small LEA to determine the LEA's
    Concentration Grant allocation.

> \(3\) **Hold-harmless calculation:** The SEA ensures that each small
> LEA (whether on the Census list or not) receives, as appropriate, 85,
> 90, or 95 percent of the Concentration Grant amount allocated to it in
> the preceding year. (See table on page 26.) Note that the statute
> requires that an LEA not meeting the eligibility thresholds for
> Concentration Grants receives its hold-harmless amount for four
> consecutive years. Thus, an LEA not receiving a Concentration Grant
> allocation in the process described in step 2 above because it did not
> have enough formula children to qualify could receive a percent of its
> prior year's allocation depending on its formula child rate if the LEA
> met the Concentration Grant eligibility threshold at any time during
> the past four years. EXAMPLE: An LEA that was last eligible for a
> Concentration Grant in school year (SY) 1998-99 but was not eligible
> in SY 1999-2000, SY 2000-2001, SY 2001-2002, and SY 2002-2003 will
> still receive its hold-harmless amount in SY 2002-2003. If that LEA,
> however, fails to meet the Concentration Grant eligibility thresholds
> for the next year (SY 2003-2004), it will no longer be eligible for
> the hold-harmless guarantee.

-   If a small LEA's Concentration Grant allocation determined under the
    previous step is less than its hold-harmless amount, the SEA
    proportionately reduces the Concentration Grant allocations for
    small LEAs in the State that received more than their hold-harmless
    amount until no small LEA in the State falls below its hold-harmless
    allocation.

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-   If the total Concentration Grant allocation available for
    redistribution to small LEAs is not sufficient to bring every small
    LEA up to its hold-harmless amount, the SEA proportionately reduces
    the Concentration Grant for every small LEA to the amount available.

> NOTE: None of these adjustments can affect allocations to LEAs serving
> 20,000 or more residents or the ED-determined allocation for Part D,
> subpart 2.

E.  **Targeted and Education Finance Incentive Grants**

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(1) **Eligibility:** The SEA determines that a small LEA is eligible for
    a Targeted Grant and an Education Finance Incentive Grant, if (based
    on a formula count that incorporates the alternative poverty data
    approved by ED and used for Basic Grant purposes) it has at least 10
    formula children **and** the number of those children is at least 5
    percent of its total 5-17 population.

(2) **Weighted formula counts:** Using the alternative data approved by
    ED, the SEA applies the LEA weights provided in section 1125(c)(2)
    and 1125A(d)(1)(B) of the Title I statute as follows:

> **Targeted Grants**

+-----------------------------------------------+----------------------+
| Formula Count                                 | ######## Weight      |
|                                               |                      |
| [as % of 5-17 Population]{.underline}         |                      |
+-----------------------------------------------+----------------------+
| 0 -- 15.58%                                   | 1.0                  |
|                                               |                      |
| \>15.58% up to 22.11%                         | 1.75                 |
|                                               |                      |
| \>22.11% up to 30.16 %                        | 2.5                  |
|                                               |                      |
| \>30.16% up to 38.24%                         | 3.25                 |
|                                               |                      |
| \>38.24%                                      | 4.0                  |
+-----------------------------------------------+----------------------+
| ######## No. of Formula Children              |                      |
+-----------------------------------------------+----------------------+
| 1 -- 691                                      | 1.0                  |
|                                               |                      |
| 692 -- 2,262                                  | 1.5                  |
|                                               |                      |
| 2,263 -- 7,851                                | 2.0                  |
|                                               |                      |
| 7,852 -- 35,514                               | 2.5                  |
|                                               |                      |
| 35,515 or more                                | 3.0                  |
+-----------------------------------------------+----------------------+

**Education Finance Incentive Grants (EFIG)**

States with an Equity Factor of Less Than 0.1

+-----------------------------------------------+----------------------+
| Formula Count                                 | ######## Weight      |
|                                               |                      |
| [as % of 5-17 Population]{.underline}         |                      |
+-----------------------------------------------+----------------------+
| 0 -- 15.58%                                   | 1.0                  |
|                                               |                      |
| \>15.58% up to 22.11%                         | 1.75                 |
|                                               |                      |
| \>22.11% up to 30.16 %                        | 2.5                  |
|                                               |                      |
| \>30.16% up to 38.24%                         | 3.25                 |
|                                               |                      |
| \>38.24%                                      | 4.0                  |
+-----------------------------------------------+----------------------+
| ######## No. of Formula Children              |                      |
+-----------------------------------------------+----------------------+
| 1 -- 691                                      | 1.0                  |
|                                               |                      |
| 692 -- 2,262                                  | 1.5                  |
|                                               |                      |
| 2,263 -- 7,851                                | 2.0                  |
|                                               |                      |
| 7,852 -- 35,514                               | 2.5                  |
|                                               |                      |
| 35,515 or more                                | 3.0                  |
+-----------------------------------------------+----------------------+

States with an Equity Factor Greater Than or Equal to 0 .1 and Less Than
0.2

+-----------------------------------------------+----------------------+
| Formula Count                                 | ######## Weight      |
|                                               |                      |
| [as % of 5-17 Population]{.underline}         |                      |
+-----------------------------------------------+----------------------+
| 0 -- 15.58%                                   | 1.0                  |
|                                               |                      |
| \>15.58% up to 22.11%                         | 1.5                  |
|                                               |                      |
| \>22.11% up to 30.16 %                        | 3.0                  |
|                                               |                      |
| \>30.16% up to 38.24%                         | 4.5                  |
|                                               |                      |
| \>38.24%                                      | 6.0                  |
+-----------------------------------------------+----------------------+
| ######## No. of Formula Children              |                      |
+-----------------------------------------------+----------------------+
| 1 -- 691                                      | 1.0                  |
|                                               |                      |
| 692 -- 2,262                                  | 1.5                  |
|                                               |                      |
| 2,263 -- 7,851                                | 2.25                 |
|                                               |                      |
| 7,852 -- 35,514                               | 3.375                |
|                                               |                      |
| 35,515 or more                                | 4.5                  |
+-----------------------------------------------+----------------------+

States with an Equity Factor Greater Than 0.2

+-----------------------------------------------+----------------------+
| Formula Count                                 | ######## Weight      |
|                                               |                      |
| [as % of 5-17 Population]{.underline}         |                      |
+-----------------------------------------------+----------------------+
| 0 -- 15.58%                                   | 1.0                  |
|                                               |                      |
| \>15.58% up to 22.11%                         | 2.0                  |
|                                               |                      |
| \>22.11% up to 30.16 %                        | 4.0                  |
|                                               |                      |
| \>30.16% up to 38.24%                         | 6.0                  |
|                                               |                      |
| \>38.24%                                      | 8.0                  |
+-----------------------------------------------+----------------------+
| ######## No. of Formula Children              |                      |
+-----------------------------------------------+----------------------+
| 1 -- 691                                      | 1.0                  |
|                                               |                      |
| 692 -- 2,262                                  | 2.0                  |
|                                               |                      |
| 2,263 -- 7,851                                | 3.0                  |
|                                               |                      |
| 7,852 -- 35,514                               | 4.5                  |
|                                               |                      |
| 35,515 or more                                | 6.0                  |
+-----------------------------------------------+----------------------+

> In applying the weights for Targeted Grants and EFIG, the SEA uses the
> percentage or number that generates the highest weighted count. The
> SEA also applies the weights in steps, so that only children above
> each threshold receive the higher weight.

(3) **Allocation:** The SEA redistributes the total available for
    Targeted Grants and EFIG separately to eligible small LEAs as
    follows:

-   The SEA determines the total number of weighted formula children in
    all eligible small LEAs based on the alternative data used.

-   The SEA divides the amount available for small LEAs by the total
    number of weighted formula children in all small LEAs to determine a
    Targeted Grant amount and an EFIG amount per weighted formula child.

-   The SEA multiplies the amount per weighted formula child by the
    weighted number of formula children in each small LEA to determine a
    small LEA's Targeted Grant and EFIG allocations.

(4) **Hold-harmless calculation:** The SEA ensures that each eligible
    small LEA (whether on the Census list or not) receives, as
    appropriate, 85, 90, or 95 percent of the Targeted and EFIG amount
    allocated to it in the preceding year. (See table on page 26.) The
    number of formula children used to determine the hold-harmless
    percentage is based on the formula count using the alternative data,
    without applying the Targeted and EFIG weights.

-   If an eligible small LEA's Targeted Grant or EFIG allocation
    determined under the previous step is less than its hold-harmless
    amount, then the SEA reduces the Targeted or EFIG allocations for
    small LEAs in the State that receive more than their hold-harmless
    amount until no small LEA in the State falls below its hold-harmless
    allocation.

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-   If the total allocation available for redistribution to small LEAs
    under Targeted Grants or EFIG is not sufficient to bring every
    eligible small LEA up to its hold-harmless amount, then the SEA
    proportionately reduces every eligible small LEA to the amount
    available.

> Note that because SY 2002-03 is the first year that Targeted Grants
> and EFIG were funded, there are no prior-year amounts against which to
> determine a hold-harmless amount. Thus, the hold-harmless provision
> has no effect on SY 2002-03 allocations.

3.  **Allocation of Concentration grant funds to LEAs in States where
    the number of children ED used in the formula to calculate Title I
    allocations makes up less than 0.25 percent of the national total
    formula count**

For certain States (Alaska, Delaware, New Hampshire, Vermont, and
Wyoming) in which the number of formula children counted under section
1124(c) of the Title I statute was less than 0.25 percent of the
national total on January 8, 2002, the SEA may allocate Concentration
Grant funds\--

-   In accordance with the procedures outlined in Steps 1 and 2; or

-   To LEAs in which the number or percentage of formula children
    exceeds the statewide average number or percentage of those
    children, without regard to ED's LEA allocations, as follows:

######### Identify Eligible LEAs

A.  Identify as eligible those LEAs in which either the number or
    percentage of formula children exceeds the average number or
    percentage of those children in the State.

> [Note]{.underline}: If a State is using an alternative method approved
> by ED to distribute Basic Grants to small LEAs with less than 20,000
> total residents, the SEA must determine LEA Concentration Grant
> eligibility and allocations based on the approved alternative method.

##### Distribute the State Allocation Among Eligible LEAs

B.  Add the count of formula children for all eligible LEAs identified
    in Step A.

C.  Divide the Concentration Grant amount made available to the State by
    the total number of formula children in Step B to determine an
    amount per child.

D.  Multiply the amount per formula child by the number of formula
    children in each eligible LEA to determine its Concentration Grant
    allocation.

#### Calculate Hold-Harmless

E.  Ensure that each LEA (whether on the Census list or not) receives,
    as appropriate, 85, 90, or 95 percent of the Concentration Grant
    amount allocated to it in the preceding year. (See table on page
    26.) Note that the statute provides that an LEA not meeting the
    eligibility thresholds for Concentration Grants is guaranteed its
    hold-harmless amount for four consecutive years. If an LEA\'s
    allocation under the previous step is less than its hold-harmless
    amount, proportionately reduce the Concentration Grant allocations
    of the LEAs in the State (including the Ed-determined allocation for
    the Part D, Subpart 2) above their hold-harmless amounts to bring up
    the allocations of LEAs that are, at this stage, below their
    hold-harmless amounts. Repeat this process as necessary until no LEA
    in the State falls below its hold-harmless amount.

> If the State's total allocation for Concentration Grants is not
> sufficient to bring each LEA eligible for the hold-harmless protection
> up to its hold-harmless amount, then the SEA proportionately reduces
> every LEA to the amount available.

**STEP 3: Add adjusted allocations determined in Steps 1 and 2 for all
of the Title I, Part A formulas**

At this point in the process, the SEA adds the adjusted LEA allocations
determined after completing Steps 1 and 2 for Basic, Concentration,
Targeted, and Education Finance Incentive Grants. The SEA uses the sum
of these adjusted allocations as the basis for reserving funds from each
LEA for school improvement, State administration, and the State academic
achievement awards program as outlined in Step 4.

**STEP 4: Reserve funds for school improvement, State administration,
and State academic achievement awards program**

**School improvement:** Section 1003 of ESEA requires that, for fiscal
years (FY) 2002 and 2003, each SEA reserve 2 percent of the amount
received from ED under Title I, Part A for school improvement activities
authorized in sections 1116 and 1117 of Title I. The percentage reserved
increases to four percent for FY 2004 and beyond. When reserving funds
for this purpose, an SEA must ensure that no LEA receives less in total
under Title I, Part A than the amount allocated to it in the prior year.
An SEA must suballocate not less than 95 percent of the funds reserved
for school improvement to LEAs in accordance with criteria specified in
section 1003(c) of ESEA.

**State administration:** Section 1004 authorizes an SEA to reserve for
State administration up to one percent from funds allocated to the State
under Title I, Part A (Grants to LEAs), Part C (Migrant Education), and
Part D, Subpart 1 (State Agency Neglected or Delinquent Program). The
one percent reservation is a maximum. An SEA may reserve less than one
percent from each of Parts A, C, and D (Subpart 1). Moreover, an SEA
does not need to reserve the same percentage from each part.

If the amount calculated as available to be reserved for State
administration through this process totals less than \$400,000, an SEA
may reserve up to \$400,000. [^1] In any State reserving \$400,000 for
State administration, the SEA is no longer required to reserve funds
proportionately from each of Parts A, C, and D (Subpart 1) and may, for
example, take the reserve entirely out of Title I, Part A funds.
However, in reserving \$400,000, an SEA cannot reserve more funds for
State administration from Part C or Part D (Subpart 1) than it would
have, had it reserved proportionate funds from Parts A, C, and D
(Subpart 1). The following table illustrates how an SEA could reserve
the \$400,000 maximum set aside for State administration:

Reservation Based on \$400,000 Maximum

+-----------------------+-------+---------+---+---------+-------------+
| Program               | State | Reserve |   | Reserve | Reserve     |
|                       | Alloc | Taken   |   | Taken   | Taken       |
|                       | ation | P       |   | Only    | Disprop     |
|                       |       | roporti |   | from    | ortionately |
|                       |       | onately |   | Part A  | from Parts  |
|                       |       | from    |   | AL      | C and D     |
|                       |       | Parts   |   | LOWABLE |             |
|                       |       | A, C,   |   |         | NOT         |
|                       |       | and D   |   |         | ALLOWABLE   |
|                       |       | AL      |   |         |             |
|                       |       | LOWABLE |   |         |             |
+-----------------------+-------+---------+---+---------+-------------+
| Part A, LEA Grants    | 32,79 | 349,738 |   | 400,000 | 330,000     |
|                       | 5,992 |         |   |         |             |
+-----------------------+-------+---------+---+---------+-------------+
| Part C, Migrant       | 4,57  | 48,759  | \ | 0       | 60,000      |
| Program               | 2,256 |         | * |         |             |
+-----------------------+-------+---------+---+---------+-------------+
| Part D, Subpart 1,    | 14    | 1,503   | \ | 0       | 10,000      |
| State Agency N or D   | 0,920 |         | * |         |             |
| Program               |       |         |   |         |             |
+-----------------------+-------+---------+---+---------+-------------+
| Total                 | 37,50 | 400,000 |   | 400,000 | 400,000     |
|                       | 9,168 |         |   |         |             |
+-----------------------+-------+---------+---+---------+-------------+

\* The amount of funds reserved from Part C and Part D, Subpart 1 cannot
exceed the amount shown.

Section 1004 of ESEA further provides that if the sum of the amount
allocated to all States under Title I, Part A, Part C, and Part D,
Subpart 1 exceeds \$14,000,000,000, an SEA may not reserve more than one
percent of the amount the State would receive if \$14,000,000,000 had
been allocated among States under those parts. ED will provide further
guidance should this situation occur.

**State academic achievement awards program:** Under section
1117(c)(2)(A) of Title I, an SEA may reserve up to 5 percent of the
Title I, Part A amount a State received in excess of its prior year
amount for the State academic achievement awards program required under
section 1117(b)(1).

In reserving funds for school improvement, State administration, and the
State academic achievement awards program, the SEA follows the
procedures outlined below in the order shown:

1.  **School improvement**

    A.  Based on the total amounts determined after completing Step 3 of
        this guidance, determine which LEAs received more Title I, Part
        A funds compared to their final allocations received in the
        prior year. Only those LEAs in which the Step 3 amounts are
        greater than the final allocation received in the prior year are
        subject to the 2 percent (4 percent after FY 2003) reserve.

    B.  Ratably reduce the Title I, Part A allocations of the LEAs
        identified in the step above while ensuring that none receives
        less than the amount allocated to it by the SEA in the prior
        year.

If the amount available after completing Step 3 is not enough for the
SEA to take the full percentage reserve for school improvement and still
ensure that no LEA receive less than the Title I, Part A amount
allocated to it in the prior year, then the SEA must reduce the
percentage it reserves for school improvement activities.

2.  **State administration and State academic achievement awards
    program**

    A.  After reserving funds for school improvement activities, reserve
        the appropriate amount for State administration and the State
        academic achievement awards program.

    B.  Ratably reduce the LEA allocations to account for funds reserved
        for State administration and State academic achievement awards
        program. After ratably reducing each LEA's allocation the SEA
        has two options:

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(1) End the process at this point. An LEA's allocation after completing
    this step becomes the final allocation even if that results in an
    LEA receiving less than 85, 90, or 95 percent of the total Title I,
    Part A amount allocated to it in the prior year.

(2) If an LEA's total Title I, Part A allocation is less than its
    hold-harmless amount, proportionately reduce the allocations of the
    LEAs in the State (including the allocation for Part D, Subpart 2)
    that are above their hold-harmless amounts to bring up the
    allocations of LEAs below their hold-harmless amounts. Repeat this
    process as necessary until no LEA in the State falls below its
    hold-harmless amount.

Note that, although an SEA must first ensure that no LEA receives less
than its prior-year Title I, Part A amount when reserving funds for
school improvement, the SEA may reduce that same LEA's Title I, Part A
allocation to an amount that is less than its prior year allocation when
reserving funds for State administration and the State academic
achievement awards programs.

[^1]: For an Outlying Area, if the amount available to be reserved is
    less than \$50,000, the statute authorizes it to reserve up to
    \$50,000 for State administration activities.