# American Recovery and Reinvestment Act of 2009/Division A/Title XIV

TITLE XIV—State Fiscal Stabilization Fund

## DEPARTMENT OF EDUCATION
### State Fiscal Stabilization Fund

    For necessary expenses for a State Fiscal Stabilization Fund, $53,600,000,000, which shall be administered by the Department of Education.

## GENERAL PROVISIONS—THIS TITLE
### SEC. 14001. ALLOCATIONS.

    (a) Outlying Areas.—
       From the amount appropriated to carry out this title, the Secretary of Education shall first allocate up to one-half of 1 percent to the outlying areas on the basis of their respective needs, as determined by the Secretary, in consultation with the Secretary of the Interior, for activities consistent with this title under such terms and conditions as the Secretary may determine.
    (b) Administration and Oversight.—
       The Secretary may, in addition, reserve up to $14,000,000 for administration and oversight of this title, including for program evaluation.
    (c) Reservation for Additional Programs.—
       After reserving funds under subsections (a) and (b), the Secretary shall reserve $5,000,000,000 for grants under sections 14006 and 14007.
    (d) State Allocations.—
       After carrying out subsections (a), (b), and (c), the Secretary shall allocate the remaining funds made available to carry out this title to the States as follows:
       (1) 61 percent on the basis of their relative population of individuals aged 5 through 24.
       (2) 39 percent on the basis of their relative total population.
    (e) State Grants.—
       From funds allocated under subsection (d), the Secretary shall make grants to the Governor of each State.
    (f) Reallocation.—
       The Governor shall return to the Secretary any funds received under subsection (e) that the Governor does not award as subgrants or otherwise commit within two years of receiving such funds, and the Secretary shall reallocate such funds to the remaining States in accordance with subsection (d).

### SEC. 14002. STATE USES OF FUNDS.

    (a) Education Fund.—
       (1) In general.—
          For each fiscal year, the Governor shall use 81.8 percent of the State's allocation under section 14001(d) for the support of elementary, secondary, and postsecondary education and, as applicable, early childhood education programs and services.
       (2) Restoring state support for education.—
          (A) In general.—
             The Governor shall first use the funds described in paragraph (1)—
             (i) to provide the amount of funds, through the State's primary elementary and secondary funding formulae, that is needed—
                (I) to restore, in each of fiscal years 2009, 2010, and 2011, the level of State support provided through such formulae to the greater of the fiscal year 2008 or fiscal year 2009 level; and
                (II) where applicable, to allow existing State formulae increases to support elementary and secondary education for fiscal years 2010 and 2011 to be implemented and allow funding for phasing in State equity and adequacy adjustments, if such increases were enacted pursuant to State law prior to October 1, 2008.
             (ii) to provide, in each of fiscal years 2009, 2010, and 2011, the amount of funds to public institutions of higher education in the State that is needed to restore State support for such institutions (excluding tuition and fees paid by students) to the greater of the fiscal year 2008 or fiscal year 2009 level.
          (B) Shortfall.—
             If the Governor determines that the amount of funds available under paragraph (1) is insufficient to support, in each of fiscal years 2009, 2010, and 2011, public elementary, secondary, and higher education at the levels described in clauses (i) and (ii) of subparagraph (A), the Governor shall allocate those funds between those clauses in proportion to the relative shortfall in State support for the education sectors described in those clauses.
          (C) Fiscal year.—
             For purposes of this paragraph, the term "fiscal year" shall have the meaning given such term under State law.
       (3) Subgrants to improve basic programs operated by local educational agencies.—
          After carrying out paragraph (2), the Governor shall use any funds remaining under paragraph (1) to provide local educational agencies in the State with subgrants based on their relative shares of funding under part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311 et seq.) for the most recent year for which data are available.
    (b) Other Government Services.—
       (1) In general.—
          The Governor shall use 18.2 percent of the State's allocation under section 14001 for public safety and other government services, which may include assistance for elementary and secondary education and public institutions of higher education, and for modernization, renovation, or repair of public school facilities and institutions of higher education facilities, including modernization, renovation, and repairs that are consistent with a recognized green building rating system.
       (2) Availability to all institutions of higher education.—
          A Governor shall not consider the type or mission of an institution of higher education, and shall consider any institution for funding for modernization, renovation, and repairs within the State that—
          (A) qualifies as an institution of higher education, as defined in subsection 14013(3); and
          (B) continues to be eligible to participate in the programs under title IV of the Higher Education Act of 1965.
    (c) Rule of Construction.—
       Nothing in this section shall allow a local educational agency to engage in school modernization, renovation, or repair that is inconsistent with State law.

### SEC. 14003. USES OF FUNDS BY LOCAL EDUCATIONAL AGENCIES.

    (a) In General.—
       A local educational agency that receives funds under this title may use the funds for any activity authorized by the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) ("ESEA"), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ("IDEA"), the Adult and Family Literacy Act (20 U.S.C. 1400 et seq.), or the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ("the Perkins Act") or for modernization, renovation, or repair of public school facilities, including modernization, renovation, and repairs that are consistent with a recognized green building rating system.
    (b) Prohibition.—
       A local educational agency may not use funds received under this title for—
       (1) payment of maintenance costs;
       (2) stadiums or other facilities primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public;
       (3) purchase or upgrade of vehicles; or
       (4) improvement of stand-alone facilities whose purpose is not the education of children, including central office administration or operations or logistical support facilities.
    (c) Rule of Construction.—
       Nothing in this section shall allow a local educational agency to engage in school modernization, renovation, or repair that is inconsistent with State law.

### SEC. 14004. USES OF FUNDS BY INSTITUTIONS OF HIGHER EDUCATION.

    (a) In General.—
       A public institution of higher education that receives funds under this title shall use the funds for education and general expenditures, and in such a way as to mitigate the need to raise tuition and fees for in-State students, or for modernization, renovation, or repair of institution of higher education facilities that are primarily used for instruction, research, or student housing, including modernization, renovation, and repairs that are consistent with a recognized green building rating system.
    (b) Prohibition.—
       An institution of higher education may not use funds received under this title to increase its endowment.
    (c) Additional Prohibition.—
       No funds awarded under this title may be used for—
       (1) the maintenance of systems, equipment, or facilities;
       (2) modernization, renovation, or repair of stadiums or other facilities primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public; or
       (3) modernization, renovation, or repair of facilities—
          (A) used for sectarian instruction or religious worship; or
          (B) in which a substantial portion of the functions of the facilities are subsumed in a religious mission.

### SEC. 14005. STATE APPLICATIONS.

    (a) In General.—
       The Governor of a State desiring to receive an allocation under section 14001 shall submit an application at such time, in such manner, and containing such information as the Secretary may reasonably require.
    (b) Application.—
       In such application, the Governor shall—
       (1) include the assurances described in subsection (d);
       (2) provide baseline data that demonstrates the State's current status in each of the areas described in such assurances; and
       (3) describe how the State intends to use its allocation, including whether the State will use such allocation to meet maintenance of effort requirements under the ESEA and IDEA and, in such cases, what amount will be used to meet such requirements.
    (c) Incentive Grant Application.—
       The Governor of a State seeking a grant under section 14006 shall—
       (1) submit an application for consideration;
       (2) describe the status of the State's progress in each of the areas described in subsection (d), and the strategies the State is employing to help ensure that students in the subgroups described in section 1111(b)(2)(C)(v)(II) of the ESEA (20 U.S.C. 6311(b)(2)(C)(v)(II)) who have not met the State's proficiency targets continue making progress toward meeting the State's student academic achievement standards;
       (3) describe the achievement and graduation rates (as described in section 1111(b)(2)(C)(vi) of the ESEA (20 U.S.C. 6311(b)(2)(C)(vi)) and as clarified in section 200.19(b)(1) of title 34, Code of Federal Regulations) of public elementary and secondary school students in the State, and the strategies the State is employing to help ensure that all subgroups of students identified in section 1111(b)(2) of the ESEA (20 U.S.C. 6311(b)(2)) in the State continue making progress toward meeting the State's student academic achievement standards;
       (4) describe how the State would use its grant funding to improve student academic achievement in the State, including how it will allocate the funds to give priority to high-need local educational agencies; and
       (5) include a plan for evaluating the State's progress in closing achievement gaps.
    (d) Assurances.—
       An application under subsection (b) shall include the following assurances:
       (1) Maintenance of effort.—
          (A) Elementary and secondary education.—
             The State will, in each of fiscal years 2009, 2010, and 2011, maintain State support for elementary and secondary education at least at the level of such support in fiscal year 2006.
          (B) Higher education.—
             The State will, in each of fiscal years 2009, 2010, and 2011, maintain State support for public institutions of higher education (not including support for capital projects or for research and development or tuition and fees paid by students) at least at the level of such support in fiscal year 2006.
       (2) Achieving equity in teacher distribution.—
          The State will take actions to improve teacher effectiveness and comply with section 1111(b)(8)(C) of the ESEA (20 U.S.C. 6311(b)(8)(C)) in order to address inequities in the distribution of highly qualified teachers between high- and low-poverty schools, and to ensure that low-income and minority children are not taught at higher rates than other children by inexperienced, unqualified, or out-of-field teachers.
       (3) Improving collection and use of data.—
          The State will establish a longitudinal data system that includes the elements described in section 6401(e)(2)(D) of the America COMPETES Act (20 U.S.C. 9871).
       (4) Standards and assessments.—
          The State—
          (A) will enhance the quality of the academic assessments it administers pursuant to section 1111(b)(3) of the ESEA (20 U.S.C. 6311(b)(3)) through activities such as those described in section 6112(a) of such Act (20 U.S.C. 7301a(a));
          (B) will comply with the requirements of paragraphs (3)(C)(ix) and (6) of section 1111(b) of the ESEA (20 U.S.C. 6311(b)) and section 612(a)(16) of the IDEA (20 U.S.C. 1412(a)(16)) related to the inclusion of children with disabilities and limited English proficient students in State assessments, the development of valid and reliable assessments for those students, and the provision of accommodations that enable their participation in State assessments; and
          (C) will take steps to improve State academic content standards and student academic achievement standards consistent with section 6401(e)(1)(9)(A)(ii) of the America COMPETES Act.
       (5) Supporting struggling schools.—
          The State will ensure compliance with the requirements of section 1116(a)(7)(C)(iv) and section 1116(a)(8)(B) of the ESEA with respect to schools identified under such sections.

### SEC. 14006. STATE INCENTIVE GRANTS.

    (a) In General.—
       (1) Reservation.—
          From the total amount reserved under section 14001(c) that is not used for section 14007, the Secretary may reserve up to 1 percent for technical assistance to States to assist them in meeting the objectives of paragraphs (2), (3), (4), and (5) of section 14005(d).
       (2) Remainder.—
          Of the remaining funds, the Secretary shall, in fiscal year 2010, make grants to States that have made significant progress in meeting the objectives of paragraphs (2), (3), (4), and (5) of section 14005(d).
    (b) Basis for Grants.—
       The Secretary shall determine which States receive grants under this section, and the amount of those grants, on the basis of information provided in State applications under section 14005 and such other criteria as the Secretary determines appropriate, which may include a State's need for assistance to help meet the objective of paragraphs (2), (3), (4), and (5) of section 14005(d).
    (c) Subgrants to Local Educational Agencies.—
       Each State receiving a grant under this section shall use at least 50 percent of the grant to provide local educational agencies in the State with subgrants based on their relative shares of funding under part A of title I of the ESEA (20 U.S.C. 6311 et seq.) for the most recent year.

### SEC. 14007. INNOVATION FUND.

    (a) In General.—
       (1) Eligible entities.—
          For the purposes of this section, the term "eligible entity" means—
          (A) a local educational agency; or
          (B) a partnership between a nonprofit organization and—
             (i) one or more local educational agencies; or
             (ii) a consortium of schools.
       (2) Program established.—
          From the total amount reserved under section 14001(c), the Secretary may reserve up to $650,000,000 to establish an Innovation Fund, which shall consist of academic achievement awards that recognize eligible entities that meet the requirements described in subsection (b).
       (3) Basis for awards.—
          The Secretary shall make awards to eligible entities that have made significant gains in closing the achievement gap as described in subsection (b)(1)—
          (A) to allow such eligible entities to expand their work and serve as models for best practices;
          (B) to allow such eligible entities to work in partnership with the private sector and the philanthropic community; and
          (C) to identify and document best practices that can be shared, and taken to scale based on demonstrated success.
    (b) Eligibility.—
       To be eligible for such an award, an eligible entity shall—
       (1) have significantly closed the achievement gaps between groups of students described in section 1111(b)(2) of the ESEA (20 U.S.C. 6311(b)(2));
       (2) have exceeded the State's annual measurable objectives consistent with such section 1111(b)(2) for 2 or more consecutive years or have demonstrated success in significantly increasing student academic achievement for all groups of students described in such section through another measure, such as measures described in section 1111(c)(2) of the ESEA;
       (3) have made significant improvement in other areas, such as graduation rates or increased recruitment and placement of high-quality teachers and school leaders, as demonstrated with meaningful data; and
       (4) demonstrate that they have established partnerships with the private sector, which may include philanthropic organizations, and that the private sector will provide matching funds in order to help bring results to scale.
    (c) Special Rule.—
       In the case of an eligible entity that includes a nonprofit organization, the eligible entity shall be considered to have met the eligibility requirements of paragraphs (1), (2), (3) of subsection (b) if such nonprofit organization has a record of meeting such requirements.

### SEC. 14008. STATE REPORTS.

    For each year of the program under this title, a State receiving funds under this title shall submit a report to the Secretary, at such time and in such manner as the Secretary may require, that describes—
       (1) the uses of funds provided under this title within the State;
       (2) how the State distributed the funds it received under this title;
       (3) the number of jobs that the Governor estimates were saved or created with funds the State received under this title;
       (4) tax increases that the Governor estimates were averted because of the availability of funds from this title;
       (5) the State's progress in reducing inequities in the distribution of highly qualified teachers, in implementing a State longitudinal data system, and in developing and implementing valid and reliable assessments for limited English proficient students and children with disabilities;
       (6) the tuition and fee increases for in-State students imposed by public institutions of higher education in the State during the period of availability of funds under this title, and a description of any actions taken by the State to limit those increases;
       (7) the extent to which public institutions of higher education maintained, increased, or decreased enrollment of in-State students, including students eligible for Pell Grants or other need-based financial assistance; and
       (8) a description of each modernization, renovation and repair project funded, which shall include the amounts awarded and project costs.

### SEC. 14009. EVALUATION.

    The Comptroller General of the United States shall conduct evaluations of the programs under sections 14006 and 14007 which shall include, but not be limited to, the criteria used for the awards made, the States selected for awards, award amounts, how each State used the award received, and the impact of this funding on the progress made toward closing achievement gaps.

### SEC. 14010. SECRETARY'S REPORT TO CONGRESS.

    The Secretary shall submit a report to the Committee on Education and Labor of the House of Representatives, the Committee on Health, Education, Labor, and Pensions of the Senate, and the Committees on Appropriations of the House of Representatives and of the Senate, not less than 6 months following the submission of State reports, that evaluates the information provided in the State reports under section 14008 and the information required by section 14005(b)(3) including State-by-State information.

### SEC. 14011. PROHIBITION ON PROVISION OF CERTAIN ASSISTANCE.

    No recipient of funds under this title shall use such funds to provide financial assistance to students to attend private elementary or secondary schools.

### SEC. 14012. FISCAL RELIEF.

    (a) In General.—
       For the purpose of relieving fiscal burdens on States and local educational agencies that have experienced a precipitous decline in financial resources, the Secretary of Education may waive or modify any requirement of this title relating to maintaining fiscal effort.
    (b) Duration.—
       A waiver or modification under this section shall be for any of fiscal year 2009, fiscal year 2010, or fiscal year 2011, as determined by the Secretary.
    (c) Criteria.—
       The Secretary shall not grant a waiver or modification under this section unless the Secretary determines that the State or local educational agency receiving such waiver or modification will not provide for elementary and secondary education, for the fiscal year under consideration, a smaller percentage of the total revenues available to the State or local educational agency than the amount provided for such purpose in the preceding fiscal year.
    (d) Maintenance of Effort.—
       Upon prior approval from the Secretary, a State or local educational agency that receives funds under this title may treat any portion of such funds that is used for elementary, secondary, or postsecondary education as non-Federal funds for the purpose of any requirement to maintain fiscal effort under any other program, including part C of the Individuals with Disabilities Education Act (20 U.S.C. 1431 et seq.), administered by the Secretary.
    (e) Subsequent Level of Effort.—
       Notwithstanding (d), the level of effort required by a State or local educational agency for the following fiscal year shall not be reduced.

### SEC. 14013. DEFINITIONS.

    Except as otherwise provided in this title, as used in this title—
       (1) the terms "elementary education" and "secondary education" have the meaning given such terms under State law;
       (2) the term "high-need local educational agency" means a local educational agency—
          (A) that serves not fewer than 10,000 children from families with incomes below the poverty line; or
          (B) for which not less than 20 percent of the children served by the agency are from families with incomes below the poverty line;
       (3) the term "institution of higher education" has the meaning given such term in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001);
       (4) the term "Secretary" means the Secretary of Education;
       (5) the term "State" means each of the 50 States, the District of Columbia, and the Commonwealth of Puerto Rico; and
       (6) any other term used that is defined in section 9101 of the ESEA (20 U.S.C. 7801) shall have the meaning given the term in such section.