To amend title VIII of the Elementary and Secondary Education Act of 1965 regarding impact aid payments, and for other purposes.

SECTION 1. IMPACT AID.

    (a) Hold-Harmless Amounts for Payments Relating to Federal 
Acquisition of Real Property.--Section 8002 of the Elementary and 
Secondary Education Act of 1965 (20 U.S.C. 7702) is amended by adding 
at the end the following new subsections:
    ``(g) Former Districts.--
            ``(1) In general.--Where the school district of any local 
        educational agency described in paragraph (2) is formed at any 
        time after 1938 by the consolidation of two or more former 
        school districts, such agency may elect (at any time such 
        agency files an application under section 8005) for any fiscal 
        year to have (A) the eligibility of such local educational 
        agency, and (B) the amount which such agency shall be eligible 
        to receive, determined under this section only with respect to 
        such of the former school districts comprising such 
        consolidated school districts as such agency shall designate in 
        such election.
            ``(2) Eligible local educational agencies.--A local 
        educational agency referred to in paragraph (1) is any local 
        educational agency that, for fiscal year 1994 or any preceding 
        fiscal year, applied for and was determined eligible under 
        section 2(c) of the Act of September 30, 1950 (Public Law 874, 
        81st Congress) as such section was in effect on September 30, 
        1994.
    ``(h) Hold-Harmless Amounts.--
            ``(1) In general.--Except as provided in paragraph (2)(A), 
        the total amount that the Secretary shall pay a local 
        educational agency under subsection (b)--
                    ``(A) for fiscal year 1995 shall not be less than 
                85 percent of the amount such agency received for 
                fiscal year 1994 under section 2 of the Act of 
                September 30, 1950 (Public Law 874, 81st Congress) as 
                such section was in effect on September 30, 1994; or
                    ``(B) for fiscal year 1996 shall not be less than 
                85 percent of the amount such agency received for 
                fiscal year 1995 under subsection (b).
            ``(2) Ratable reductions.--(A)(i) If necessary in order to 
        make payments to local educational agencies in accordance with 
        paragraph (1) for any fiscal year, the Secretary first shall 
        ratably reduce payments under subsection (b) for such year to 
        local educational agencies that do not receive a payment under 
        this subsection for such year.
            ``(ii) If additional funds become available for making 
        payments under subsection (b) for such year, then payments that 
        were reduced under clause (i) shall be increased on the same 
        basis as such payments were reduced.
            ``(B)(i) If the sums made available under this title for 
        any fiscal year are insufficient to pay the full amounts that 
        all local educational agencies in all States are eligible to 
        receive under paragraph (1) after the application of 
        subparagraph (A) for such year, then the Secretary shall 
        ratably reduce payments under paragraph (1) to all such 
        agencies for such year.
            ``(ii) If additional funds become available for making 
        payments under paragraph (1) for such fiscal year, then 
        payments that were reduced under clause (i) shall be increased 
        on the same basis as such payments were reduced.''.
    (b) Computation of Payment.--Paragraph (3) of section 8003(a) of 
such Act (20 U.S.C. 7703(a)) is amended by striking ``and such'' and 
inserting ``, or such''.
    (c) Payments for Eligible Federally Connected Children.--Subsection 
(f) of section 8003 of such Act (20 U.S.C. 7703) is amended--
            (1) in paragraph (2)--
                    (A) in the matter preceding clause (i) of 
                subparagraph (A), by striking ``only if such agency'' 
                and inserting ``if such agency is eligible for a 
                supplementary payment in accordance with subparagraph 
                (B) or such agency''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) A local educational agency shall only be 
                eligible to receive additional assistance under
                 this subsection if the Secretary determines that--
                            ``(i) such agency is exercising due 
                        diligence in availing itself of State and other 
                        financial assistance; and
                            ``(ii) the eligibility of such agency under 
                        State law for State aid with respect to the 
                        free public education of children described in 
                        subsection (a)(1) and the amount of such aid 
                        are determined on a basis no less favorable to 
                        such agency than the basis used in determining 
                        the eligibility of local educational agencies 
                        for State aid, and the amount of such aid, with 
                        respect to the free public education of other 
                        children in the State.''; and
            (2) in paragraph (3)--
                    (A) in subparagraph (A)--
                            (i) in the matter preceding clause (i), by 
                        inserting ``(other than any amount received 
                        under paragraph (2)(B))'' after ``subsection'';
                            (ii) in subclause (I) of clause (i), by 
                        striking ``or the average per-pupil expenditure 
                        of all the States'';
                            (iii) by amending clause (ii) to read as 
                        follows:
                            ``(ii) The Secretary shall next multiply 
                        the amount determined under clause (i) by the 
                        total number of students in average daily 
                        attendance at the schools of the local 
                        educational agency.''; and
                            (iv) by amending clause (iii) to read as 
                        follows:
                            ``(iii) The Secretary shall next subtract 
                        from the amount determined under clause (ii) 
                        all funds available to the local educational 
                        agency for current expenditures, but shall not 
                        so subtract funds provided--
                                    ``(I) under this Act; or
                                    ``(II) by any department or agency 
                                of the Federal Government (other than 
                                the Department) that are used for 
                                capital expenses.''; and
                    (B) by amending subparagraph (B) to read as 
                follows:
                    ``(B) Special rule.--With respect to payments under 
                this subsection for a fiscal year for a local 
                educational agency described in clause (ii) or (iii) of 
                paragraph (2)(A), the maximum amount of payments under 
                this subsection shall be equal to--
                            ``(i) the product of--
                                    ``(I) the average per-pupil 
                                expenditure in all States multiplied by 
                                0.7, except that such amount may not 
                                exceed 125 percent of the average per-
                                pupil expenditure in all local 
                                educational agencies in the State; 
                                multiplied by
                                    ``(II) the number of students 
                                described in subparagraph (A) or (B) of 
                                subsection (a)(1) for such agency; 
                                minus
                            ``(ii) the amount of payments such agency 
                        receives under subsections (b) and (d) for such 
                        year.''.
    (d) Current Year Data.--Paragraph (4) of section 8003(f) of such 
Act (20 U.S.C. 7703(f)) is amended to read as follows:
            ``(4) Current year data.--For purposes of providing 
        assistance under this subsection the Secretary--
                    ``(A) shall use student and revenue data from the 
                fiscal year for which the local educational agency is 
                applying for assistance under this subsection; and
                    ``(B) shall derive the per-pupil expenditure amount 
                for such year for the local educational agency's 
                comparable school districts by increasing or decreasing 
                the per pupil expenditure data for the second fiscal 
                year preceding the fiscal year for which the 
                determination is made by the same percentage increase 
                or decrease reflected between the per pupil expenditure 
                data for the fourth fiscal year preceding the fiscal 
                year for which the determination is made and the per 
                pupil expenditure data for such second year.''.
    (e) Special Rule for 1994 Payments.--The Secretary shall not 
consider any payment to a local educational agency by the Department of 
Defense, that is available to such agency for current expenditures and 
used for capital expenses, as funds available to such agency for 
purposes of making a determination for fiscal year 1994 under section 
3(d)(2)(B)(i) of the Act of September 30, 1950 (Public Law 874, 81st 
Congress) (as such Act was in effect on September 30, 1994).
    (f) Applications for Increased Payments.--
            (1) In general.--Notwithstanding any other provision of 
        law, the Bonesteel-Fairfax School District Number 26-5, South 
        Dakota, and the Wagner Community School District Number 11-4, 
        South Dakota, shall be eligible to apply for payment for fiscal 
        year 1994 under section 3(d)(2)(B) of the Act of September 30, 
        1950 (Public Law 874, 81st Congress) (as such section was in 
        effect on September 30, 1994).
            (2) Application.--In order to be eligible to receive a 
        payment described in subsection (a), a school district 
        described in such subsection shall apply for such payment 
        within 30 days after the date of enactment of this Act.
            (3) Construction.--Nothing in this section shall be 
        construed to require a local educational agency that received a 
        payment under section 3(d)(2)(B) of the Act of September 30, 
        1950 (Public Law 874, 81st Congress) (as such section was in 
        effect on September 30, 1994) for fiscal year 1994 to return 
        such payment or a portion of such payment to the Federal 
        Government.

Summary: Amends the Elementary and Secondary Education Act of 1965 regarding impact aid payments. Provides hold-harmless payment amounts for impact-aid payments relating to Federal acquisition of real property. Provides that no eligible local educational agency shall receive less than 85 percent of the preceding year's amount in such a payment for any fiscal year. Provides for ratable reductions and increases in certain types of impact-aid payments in specified circumstances. Revises provisions which authorize funding for heavily-impacted school districts, with respect to computation of payment, payments for eligible federally-connected children, and current year data. Directs the Secretary of Education, as a special rule for 1994 supplemental payments, not to consider any payment to a local educational agency by the Department of Defense that is available to such agency for current expenditures and used for capital expenses in determinations under specified Federal impact aid law. Allows two specified school districts in South Dakota to claim eligibility as heavily-impacted districts for the current year, by allowing them to amend their applications for increased payments.