SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Children's Classroom Trust Fund 
Act.''

SEC. 2. PURPOSE.

    The purposes of this title are--
            (1) to dedicate a substantial portion of the on-budget 
        surplus to enhancing the education system in the nation;
            (2) to promote excellence in elementary and secondary 
        education programs in the Nation;
            (3) to increase parental involvement in the education of 
        their children;
            (4) to boost student achievement in academic subjects to 
        high levels;
            (5) to improve basic skills instruction, and to increase 
        teacher performance and accountability;
            (6) to return the responsibility and control for education 
        to parents, teachers, schools, and local communities;
            (7) to increase direct education funding to local schools; 
        and
            (8) to give States and communities maximum freedom in 
        determining how to boost academic achievement and implement 
        education reforms.

SEC. 3. DEFINITIONS.

    In this title:
    (a) Local Educational Agency.--The term ``local educational 
agency'' has the meaning given the term in section 14101 of the 
Elementary and Secondary Education Act of 1965 (20 U.S.C. 8801).
    (b) Secretary.--The term ``Secretary'' means the Secretary of 
Education.
    (c) On-Budget Surplus.--For purposes of this section, the on-
budget, non-Medicare part A surplus for that fiscal year, shall be 
determined by combining the on-budget surplus and the Medicare part A 
surplus as set forth in the ``Budget and Economic Outlook'' as reported 
by the Congressional Budget Office in January of the year preceding the 
concurrent resolution on the budget pursuant to section 301(a)(3) for 
that fiscal year.

SEC. 4. ESTABLISHMENT OF TRUST FUND.

    (a) In General.--There is established in the Treasury of the United 
States a fund to be known as the Children's Classroom Trust Fund (in 
this title referred to as the ``Trust Fund''), consisting of such 
amounts as provided for in subsection (b). Amounts in the accounts of 
the Trust Fund shall remain available until expended for the purposes 
established by this Act.
    (b) Transfer to Fund of Amounts Specified.--At the beginning of 
each Fiscal Year, the Secretary of the Treasury shall transfer to the 
Children's Classroom Trust Fund, for each fiscal year 2001 through 
2010, the amount equivalent to eleven percent of the on-budget, non-
Medicare part A surplus for that fiscal year. In the case of a fiscal 
year in which there is no on-budget surplus, exclusive of Medicare Part 
A surpluses, there shall be no transfers to the Trust Fund under this 
section.
    (c) Expenditures From Trust Fund.--Amounts in the accounts of the 
Trust Fund are available to the Secretary for making payments under 
section 5.
    (d) Point of Order.--
            (1) It shall not be in order in the House of 
        Representatives or the Senate to consider any bill, joint 
        resolution, amendment, motion, or conference report if--
                    (A) the enactment of that bill or resolution as 
                reported;
                    (B) the adoption and enactment of that amendment; 
                or
                    (C) the enactment of that bill or resolution in the 
                form recommended in that conference report, would 
reduce the amount of the Children's Classroom Trust Fund for any 
purposes other than those established in Section 5 of this legislation.
            (2) Waiver.--Subsection (d)(1) of this section may be 
        waived or suspended in the Senate only by the affirmative vote 
        of three-fifths of the Members, duly chosen and sworn.

SEC. 5. DIRECT AWARDS TO LOCAL EDUCATIONAL AGENCIES.

    (a) Direct Awards.--The Secretary shall make direct awards to local 
educational agencies from the Children's Classroom Trust Fund in 
amounts determined under subsection (b) to enable the local educational 
agencies to support programs or activities, for kindergarten through 
grade 12 students, that the local educational agencies deem 
appropriate.
    (b) Determination of Awards Amount.--
            (1) Per child amount.--The Secretary, using the information 
        provided under subsection (c), shall determine a per child 
        amount for a year by dividing the total amount appropriated 
        under section 5 for the year, by the average daily attendance 
        of kindergarten through grade 12 students in all States for the 
        preceding year.
            (2) Local educational agency award.--The Secretary, using 
        the information provided under subsection (c), shall determine 
        the amount to be provided to each local educational agency 
        under this section for a year by multiplying--
                    (A) the per child amount determined under paragraph 
                (1) for the year; by
                    (B) the average daily attendance of kindergarten 
                through grade 12 students that are served by the local 
                educational agency for the preceding year.
    (c) Census Determination.--
            (1) In general.--Not later than December 1 of each year, 
        each local educational agency shall conduct a census to 
        determine the average daily attendance of kindergarten through 
        grade 12 students served by the local educational agency.
            (2) Submission.--Not later than March 1 of each year, each 
        local educational agency shall submit the number described in 
        paragraph (1) to the Secretary.
            (3) Penalty.--If the Secretary determines that a local 
        educational agency has knowingly submitted false information 
        under paragraph (1) for the purpose of gaining additional funds 
        under this section, then the local educational agency shall be 
        fined an amount equal to twice the difference between the 
        amount the local educational agency received under this 
        section, and the correct amount the local educational agency 
        would have received under this section if the agency had 
        submitted accurate information under paragraph (1).
    (d) Disbursal.--The Secretary shall disburse the amount awarded to 
a local educational agency under this title for a fiscal year not later 
than July 1 of each year.

SEC. 6. REQUIREMENTS FOR FAILING LOCAL EDUCATIONAL AGENCIES.

    (a) In General.--In the case of a failing local educational agency 
receiving funds under section 4 for a fiscal year, such failing local 
educational agency shall use such award only for purposes directly 
related to improving elementary school and secondary school students' 
academic performance consistent with subsection (d).
    (b) Title I Funding.--
            (1) In general.--Notwithstanding any other provision of 
        law, funds provided to a failing local educational agency under 
        title I of the Elementary and Secondary Education Act of 1965 
        (20 U.S.C. 6301 et seq.) shall be spent in accordance with this 
        section.
            (2) Applicability provision.--The provisions of parts A, B, 
        C, and D of title I of the Elementary and Secondary Education 
        Act of 1965 shall not apply to a failing local educational 
        agency other than the allocation and allotment provisions under 
        part A of such title.
    (c) Failing Local Agency Plan.--
            (1) Plan required.--Each failing local educational agency 
        shall submit a plan to the Secretary at such time and in such 
        manner as the Secretary may require. A plan submitted under 
        this subsection--
                    (A) shall describe the activities to be funded by 
                the failing local educational agency under subsections 
                (a) and (b) consistent with subsection (d); and
                    (B) may request an exemption from the uses of funds 
                restrictions under subsection (d) for elementary 
schools and secondary schools served by the failing local educational 
agency that met the State's performance-based accreditation or 
categorization standards for the previous fiscal year.
            (2) Plan approval.--The Secretary shall approve a plan 
        submitted under paragraph (1) if the plan meets the 
        requirements described in paragraph (1).
            (3) Plan dissemination.--Each failing local educational 
        agency having a plan approved under paragraph (2) shall widely 
        disseminate such plan, throughout the area served by such 
        agency, and post the plan publicly, including on the Internet.
  (d) Uses of Funds.--Each failing local educational agency having a 
plan approved under subsection (c)(2) for a fiscal year may use the 
award provided under section 103(a) and funds provided under title I of 
the Elementary and Secondary Education Act of 1965 (2) U.S.C. 6301 et 
seq.) for such fiscal year only for the following activities:
            (1) To recruit, retain, and reward high-quality teachers.
            (2) To focus on teaching basic educational skills.
            (3) To provide remedial instruction in core academic 
        subjects that are assessed by standards set by the State 
        educational agency or local educational agency.
            (4) To fund mentoring programs for elementary school and 
        secondary school students who need assistance in reading, 
        writing, or arithmetic.
            (5) To use proven methods of instruction, such as phonics, 
        that are based upon reliable research.
            (6) To provide for extended day learning.
            (7) To ensure that parents of elementary school and 
        secondary school students realize that parents play a 
        significant role in their child's educational success, and to 
        encourage parents to become active in their child's education; 
        and
            (8) To provide any other activity that a local educational 
        agency proposes, and the Secretary approves, as an activity 
        that relates directly to improving students' academic 
        performance.
    (e) Annual Report.--
            (1) Report.--A failing local educational agency shall 
        annually submit a report to the Secretary describing--
                    (A) the use of funds under this section; and
                    (B) the annual performance of all children served 
                by the failing local educational agency as measured by 
                its State's performance-based accreditation or 
                categorization standards.
            (2) Privacy.--The report required under this section shall 
        not contain any information, such as names, addresses, or 
        grades, that might be used to identify the children whose 
        performance is described in the report.
            (3) Dissemination.--A failing local educational agency 
        shall widely disseminate the report submitted under paragraph 
        (1) throughout the area served by such agency, and post the 
        report publicly, including on the Internet, so that parents and 
        others in the community can account for Federal education 
        funding under this title.
    (f) Meeting Standards.--
            (1) In general.--If, for 2 consecutive fiscal years after a 
        failing local educational agency is required to use funds in 
        accordance with subsection (d), such local educational agency 
        succeeds in meeting its State's performance-based accreditation 
        or categorization standards, then the provisions of this 
        section shall cease to apply to such local educational agency.
            (2) Bonus awards.--
                    (A) In general.--A local educational agency 
                described in paragraph (1) may receive a bonus award 
                from amounts appropriated under subparagraph (C), to 
                use for purposes such as rewarding elementary school 
                and secondary school teachers and principals who 
                improved student performance, and for professional 
                development opportunities for such teachers and 
                principals.
                    (B) Distribution.--A local educational agency 
                receiving a bonus award under this paragraph shall 
                determine how to distribute the award to individual 
                elementary schools and secondary schools. An elementary 
                school or a secondary school receiving such an award 
                shall determine how such award shall be spent.
                    (C) Funding of bonus awards.--Of the amounts 
                transferred to the Trust Under section 3(b); the 
                Secondary shall set aside no more than 5 percent of the 
                total amount to be used for bonus awards.
    (g) Penalty.--If a failing local educational agency spends funds 
subject to the use of funds restrictions described in subsection (d) in 
a manner inconsistent with subsection (d) for a fiscal year, then the 
Secretary shall reduce the funds such agency receives under section 
103(a) for the succeeding fiscal year by an amount equal to the amount 
spent improperly by such agency.

SEC. 7. AUDIT.

    (a) In General.--The Secretary may conduct audits of the 
expenditures of local educational agencies under this Act to ensure 
that the funds made available under this Act are used in accordance 
with this Act.
    (b) Sanctions and Penalties.--If the Secretary determines that the 
funds made available under section 4 were not used in accordance with 
this Act, the Secretary may use the enforcement provisions available to 
the Secretary under part D of the General Education Provisions Act (20 
U.S.C. 1234 et seq.).
Directs the Secretary of Education to make direct awards from the Trust Fund, based on average daily attendance, to enable local educational agencies ( LEAs) to support programs or activities appropriate for kindergarten through grade 12 students.
Requires failing LEAs to use such awards, as well as funds provided for disadvantaged students under title I the Elementary and Secondary Education Act of 1965, only for specified authorized uses directly related to improving elementary school and secondary school students' academic performance. Requires plans and reports by failing LEAs. Allows failing LEAs that meet State performance-based accreditation or categorization standards for two consecutive fiscal years to: (1) cease being subject to special requirements under this Act; and (2) receive bonus awards, which may be used for rewards and professional development opportunities for teachers and principals who improved student performance.
Children's Classroom Trust Fund Act