A bill to amend title XXI of the Social Security Act to reduce funding shortfalls for the State Children's Health Insurance Program (SCHIP) for fiscal year 2007.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fiscal Accountability, Integrity, 
and Responsibility in SCHIP Act of 2006'' or the ``FAIR-SCHIP Act of 
2006''.

SEC. 2. FUNDING OF THE SCHIP ALLOTMENT SHORTFALLS FOR FISCAL YEAR 2007.

    (a) In General.--Section 2104 of the Social Security Act (42 U.S.C. 
1397dd) is amended by adding at the end the following new subsection:
    ``(h) Special Rules To Address Fiscal Year 2007 Shortfalls.--
            ``(1) Initial down payment on shortfall for fiscal year 
        2007.--The provisions of subsection (d) shall apply with 
        respect to fiscal year 2007 in the same manner as they apply to 
        fiscal year 2006, except that, for purposes of this paragraph--
                    ``(A) any reference to `fiscal year 2006', 
                `December 16, 2005', `2005', `2004', `September 30, 
                2006' and `October 1, 2006' shall be deemed a reference 
                to `fiscal year 2007', `December 16, 2006', `2006', 
                `2005', `September 30, 2007' and `October 1, 2007' 
                respectively;
                    ``(B) there shall be substituted for the dollar 
                amount specified in subsection (d)(1), and shall be 
                treated as the amount appropriated under such 
                subsection, $450,000,000;
                    ``(C) paragraphs (3)(B) and (4) of subsection (d) 
                shall not apply (and paragraph (4) of this subsection 
                shall apply in lieu of paragraph (4) of such 
                subsection);
                    ``(D) if the dollar amount specified in 
                subparagraph (B) is not at least equal to the total of 
                the shortfalls described in subsection (d)(2) (as 
                applied under this paragraph), the amounts under 
                subsection (d)(3) (as applied under this paragraph) 
                shall be ratably reduced.
            ``(2) Funding remainder of shortfall for fiscal year 2007 
        through redistribution of certain unused fiscal year 2005 
        allotments.--
                    ``(A) In general.--Subject to subparagraph (C), the 
                Secretary shall provide for a redistribution under 
                subsection (f) from amounts made available for 
                redistribution under paragraph (3), to each shortfall 
                State described in subparagraph (B) that is one of the 
                50 States or District of Columbia, such amount as the 
                Secretary determines will eliminate the estimated 
                shortfall described in such subparagraph for the State.
                    ``(B) Shortfall state described.--For purposes of 
                this paragraph, a shortfall State described in this 
                subparagraph is a State with a State child health plan 
                approved under this title for which the Secretary 
                estimates, on the basis of the most recent data 
                available to the Secretary as of March 31, 2007, that 
                the projected expenditures under such plan for such 
                State for fiscal year 2007 will exceed the sum of--
                            ``(i) the amount of the State's allotments 
                        for each of fiscal years 2005 and 2006 that 
                        will not be expended by the end of fiscal year 
                        2006;
                            ``(ii) the amount, if any, that is to be 
                        redistributed to the State during fiscal year 
                        2007 in accordance with subsection (f) (other 
                        than under this paragraph);
                            ``(iii) the amount of the State's allotment 
                        for fiscal year 2007; and
                            ``(iv) the amount of any additional 
                        allotment to the State under paragraph (1).
                    ``(C) Proration rule.--If the amounts available for 
                redistribution under paragraph (3) are less than the 
                total amounts computed under subparagraph (A), the 
                amount computed under subparagraph (A) for each 
                shortfall State shall be reduced proportionally.
            ``(3) Treatment of certain states with fiscal year 2005 
        allotments unexpended at the end of the first half of fiscal 
        year 2007.--
                    ``(A) Identification of states.--The Secretary--
                            ``(i) shall identify those States that 
                        received an allotment for fiscal year 2005 
                        under subsection (b) which have not expended 
                        all of such allotment by March 31, 2007; and
                            ``(ii) for each such State shall 
                        determine--
                                    ``(I) the portion of such allotment 
                                that was not so expended by such date; 
                                and
                                    ``(II) whether the State is a 
                                described in subparagraph (B).
                    ``(B) States with funds in excess of 200 percent of 
                need.--A State described in this subparagraph is a 
                State for which the Secretary determines, as of March 
                31, 2007, the total of all available allotments under 
                this title as of such date, is at least equal to 200 
                percent of the total projected expenditures under this 
                title for the State for fiscal year 2007.
                    ``(C) Redistribution and limitation on 
                availability.--
                            ``(i) Application to portion of unused 
                        allotments for certain states.--In the case of 
                        a State identified under subparagraph (A)(i) 
                        that is also described in subparagraph (B), 
                        notwithstanding subsection (e), the percentage 
                        specified by the Secretary in clause (ii) of 
                        the amount described in subparagraph (A)(ii)(I) 
                        shall not be available for expenditure on or 
                        after April 1, 2007.
                            ``(ii) Percentage specified.--The Secretary 
                        shall specify a percentage which--
                                    ``(I) does not exceed 75 percent; 
                                and
                                    ``(II) when applied under clause 
                                (i) results in the total of the amounts 
                                under such clause equaling the total of 
                                the amounts under paragraph (2)(A).
            ``(4) Use of additional allotment.--Additional allotments 
        provided under this subsection are only available for amounts 
        expended under a State plan approved under this title for child 
        health assistance for targeted low-income children or child 
        health assistance or other health benefits coverage for 
        pregnant women.
            ``(5) Retrospective adjustment.--The Secretary may adjust 
        the determinations made under paragraphs (2) and (3) as 
        necessary on the basis of the amounts reported by States not 
        later than November 30, 2007, on CMS Form 64 or CMS Form 21, as 
        the case may be and as approved by the Secretary, but in no 
        case may the percentage specified in paragraph (3)(C)(ii) 
        exceed 75 percent.
            ``(6) 1-year availability; no redistribution of unexpended 
        additional allotments.--
                    ``(A) In general.--Notwithstanding subsections (e) 
                and (f), amounts allotted or redistributed to a State 
                pursuant to this subsection for fiscal year 2007 shall 
                only remain available for expenditure by the State 
                through September 30, 2007, and any amounts of such 
                allotments or redistributions that remain unexpended as 
                of such date, shall not be subject to redistribution 
                under subsection (f). Nothing in the preceding sentence 
                shall be construed as limiting the ability of the 
                Secretary to adjust the determinations made under 
                paragraphs (2) and (3) in accordance with paragraph 
                (5).
                    ``(B) Reversion upon termination of retrospective 
                adjustment period.--Any amounts of such allotments or 
                redistributions that remain unexpended as of September 
                30, 2007, shall revert to the Treasury on December 31, 
                2007.''.
    (b) Extending Authority for Qualifying States To Use Certain Funds 
for Medicaid Expenditures.--Section 2105(g)(1)(A) of such Act (42 
U.S.C. 1397ee(g)(1)(A)) is amended by striking ``or 2005'' and 
inserting ``2005, 2006, or 2007''.

Summary: Fiscal Accountability, Integrity, and Responsibility in SCHIP Act of 2006, or FAIR-SCHIP Act of 2006 - Amends title XXI (SCHIP) to set forth special rules to fund the FY2007 SCHIP allotment shortfalls, including through a redistribution of certain unused FY2005 allotments. Extends authority for qualifying states to use certain funds for Medicaid expenditures.