57324 Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 

■ 2. Add § 334.285 to read as follows: 

§ 334.285 York River and the Naval 

Weapons Station Yorktown-Cheatham 

Annex, Yorktown, Virginia; danger zone. 

(a) The area. The waters within an 

area beginning at mean high water on 

the shore at the facility located at 

latitude 37°17′33.10′′ N, longitude 

76°36′19.06′′ W; then northeast to a 

point in the York River at latitude 

37°18′36.65′′ N, longitude 76°34′39.01′′ 

W; thence south, southeast to latitude 

37°17′59.37′′ N, longitude 76°34′13.65′′ 

W; then southwest to a point on the 

shore located at latitude 37°17′26.75′′ N, 

longitude 76°36′14.89′′ W. 

(b) The regulations. (1) Vessels and 

persons may transient this area at any 

time. No vessel or persons shall anchor, 

fish or conduct any waterborne 

activities within the danger zone 

established in accordance with this 

regulation any time live firing exercises 

are being conducted. 

(2) Anytime live firing is being 

conducted, the person or persons in 

charge shall display a red flag from a 

conspicuous location along the shore to 

signify the range is active and post 

lookouts to ensure the safety of all 

vessels passing through the area. At 

night, red lights will be displayed in 

lieu of flags. No firing activities shall be 

conducted when the visibility is less 

that the maximum range of the weapons 

being used at the facility. 

(3) Recreational and commercial 

activities may be conducted in this area 

anytime the range is inactive. 

(c) Enforcement. The regulations in 

this section shall be enforced by the 

Commander, Naval Weapons Station, 

Yorktown, or such agencies as he or she 

may designate. 

Dated: September 10, 2013. 

Approved: 

James R. Hannon, 

Chief, Operations and Regulatory, Directorate 

of Civil Works. 

[FR Doc. 2013–22614 Filed 9–17–13; 8:45 am] 

BILLING CODE 3720–58–P 

DEPARTMENT OF EDUCATION 

34 CFR Part 300 

[DOCKET ID ED–2012–OSERS–0020] 

RIN 1820–AB65 

Assistance to States for the Education 

of Children With Disabilities 

AGENCY: Office of Special Education and 

Rehabilitative Services, Department of 

Education. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Secretary proposes to 

amend regulations under Part B of the 

Individuals with Disabilities Education 

Act (IDEA or Act). These regulations 

govern the Assistance to States for the 

Education of Children with Disabilities 

program. The Secretary seeks public 

comment on proposed amendments to 

the regulation regarding local 

maintenance of effort to clarify existing 

policy and make other related changes 

regarding: The compliance standard; the 

eligibility standard; the level of effort 

required of a local educational agency 

(LEA) in the year after it fails to 

maintain effort under the IDEA; and the 

consequence for a failure to maintain 

local effort. The Secretary also seeks 

comment on whether States and LEAs 

or other interested parties think these 

proposed amendments will be helpful 

in increasing understanding of, and 

ensuring compliance with, the current 

local maintenance of effort 

requirements. Specifically, the Secretary 

seeks comment from States and LEAs to 

identify where they are experiencing the 

most problems in implementing the 

maintenance of effort requirements. 

DATES: We must receive your comments 

on or before December 2, 2013. 

ADDRESSES: Submit your comments 

through the Federal eRulemaking Portal 

or via postal mail, commercial delivery, 

or hand delivery. We will not accept 

comments by fax or by email. Please 

submit your comments only one time, in 

order to ensure that we do not receive 

duplicate copies. In addition, please 

include the Docket ID at the top of your 

comments. 

• Federal eRulemaking Portal: Go to 

www.regulations.gov to submit your 

comments electronically. Information 

on using Regulations.gov, including 

instructions for accessing agency 

documents, submitting comments, and 

viewing the docket is available on the 

site under ‘‘Are you new to the site?’’ 

• Postal Mail, Commercial Delivery, 

or Hand Delivery: 

If you mail or deliver your comments 

about these proposed regulations, 

address them to Mary Louise Dirrigl, 

U.S. Department of Education, 400 

Maryland Avenue SW., room 5103, 

Potomac Center Plaza, Washington, DC 

20202–2600. 

Privacy Note: The Department’s 

policy is to make all comments received 

from members of the public available for 

public viewing in their entirety on the 

Federal eRulemaking Portal at 

www.regulations.gov. Therefore, 

commenters should be careful to 

include in their comments only 

information that they wish to make 

publicly available. 

FOR FURTHER INFORMATION CONTACT: 

Mary Louise Dirrigl, U.S. Department of 

Education, 400 Maryland Avenue SW., 

room 5103, Potomac Center Plaza, 

Washington, DC 20202–2600. 

Telephone: (202) 245–7605. 

If you use a telecommunications 

device for the deaf (TDD) or a text 

telephone (TTY), call the Federal Relay 

Service (FRS), toll free, at 1–800–877– 

8339. 

SUPPLEMENTARY INFORMATION: 

Invitation To Comment 

We invite you to submit comments 

regarding these proposed regulations. 

To ensure that your comments have 

maximum effect in developing the final 

regulations, we urge you to begin with 

any general comments and then to 

identify clearly the specific section or 

sections of the proposed regulations that 

your comments address and to arrange 

your comments in the same order as the 

proposed regulations. 

We invite you to assist us in 

complying with the specific 

requirements of Executive Orders 12866 

and 13563 and their overall requirement 

of reducing regulatory burden that 

might result from these proposed 

regulations. Please let us know of any 

further ways we could reduce potential 

costs or increase potential benefits 

while preserving the effective and 

efficient administration of the IDEA Part 

B program. 

During and after the comment period, 

you may inspect all public comments 

about these proposed regulations by 

accessing Regulations.gov. You also may 

inspect the comments in person in room 

5104, Potomac Center Plaza, 550 12th 

Street, SW., Washington, DC, between 

the hours of 8:30 a.m. and 4:00 p.m., 

Washington, DC time, Monday through 

Friday of each week except Federal 

holidays. 

Please contact the person listed under 

FOR FURTHER INFORMATION CONTACT. 

Assistance to Individuals With 

Disabilities in Reviewing the 

Rulemaking Record 

On request, we will provide an 

appropriate accommodation or auxiliary 

aid to an individual with a disability 

who needs assistance to review the 

comments or other documents in the 

public rulemaking record for these 

proposed regulations. If you want to 

schedule an appointment for this type of 

accommodation or auxiliary aid, please 

contact the person listed under FOR

FURTHER INFORMATION CONTACT. 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 57325 

Background 

34 CFR Part 300 (Part B) 

The regulations in 34 CFR part 300 

implement Part B of the IDEA. Under 

Part B, the Department provides grants 

to States, outlying areas, and freely 

associated States, as well as funds to the 

Department of the Interior, to assist 

them in providing special education and 

related services to children with 

disabilities. There are four key purposes 

of the Part B regulations: (1) To ensure 

that all children with disabilities have 

available to them a free appropriate 

public education (FAPE) that 

emphasizes special education and 

related services designed to meet their 

unique needs and prepare them for 

further education, employment, and 

independent living; (2) to ensure that 

the rights of children with disabilities 

and their parents are protected; (3) to 

assist States, localities, educational 

service agencies, and Federal agencies 

in providing for the education of all 

children with disabilities; and (4) to 

assess and ensure the effectiveness of 

efforts to educate children with 

disabilities. 

Part B funding is intended to assist 

States and LEAs in meeting their 

financial obligation to provide special 

education and related services to 

eligible children with disabilities. In 

order to receive funds, States must 

apply to the Secretary, and LEAs must 

apply to their States. The statute and its 

regulations impose conditions on Part B 

grants, including a maintenance of State 

financial support provision and a 

maintenance of effort (MOE) provision 

for LEAs. This NPRM focuses only on 

proposed amendments to the LEA MOE 

provision. 

The LEA MOE Requirement 

Under section 613(a)(2)(A)(iii) of the 

IDEA, except as provided in section 

613(a)(2)(B) and (C), Part B funds 

provided to an LEA must not be used to 

reduce the level of expenditures for the 

education of children with disabilities 

made by the LEA below the level of 

those expenditures for the preceding 

fiscal year. This provision is repeated in 

the Part B regulations in § 300.203(a). 

Standard for Determining LEA 

Eligibility. The regulations expand on 

the statutory requirement by adding an 

LEA MOE standard that State 

educational agencies (SEAs) must apply 

when determining whether an LEA is 

eligible for Part B funds. The eligibility 

standard is in § 300.203(b). Under this 

provision, the SEA must determine 

whether the LEA has budgeted for the 

education of children with disabilities 

at least the same total or per capita 

amount of local, or State and local, 

funds as it spent during the most recent 

prior year for which there is information 

available. In other words, the standard 

for determining eligibility for funds 

described in § 300.203(b) generally 

compares the amount budgeted for the 

year for which the LEA is applying for 

Part B funds to the amount expended in 

the most recent prior year for which 

data are available. 

If an LEA has been meeting the MOE 

standard with State and local funds and 

in a subsequent year will not be able to 

budget at least as much in State and 

local funds as it spent in the most recent 

prior year for which data are available, 

the LEA must budget at least as much 

in local funds as it spent in local funds 

when the LEA last met the MOE 

standard using local funds only. 

(§ 300.203(b)(2)) 

Using an LEA’s budget as the measure 

of eligibility is necessary because LEAs 

apply for, and SEAs generally determine 

their eligibility for, Part B funding for 

the upcoming school year (SY) in the 

spring or early summer of the current 

year, well before expenditure data for 

that current year are available. 

Auditing and Compliance Standard. 

SEAs use a different standard when 

determining whether an LEA complied 

with the requirement to maintain effort. 

When an SEA examines an LEA’s 

compliance with the MOE requirement, 

such as in an audit or compliance 

review, the amount of local, or State and 

local, funds expended for the education 

of children with disabilities in a year 

generally determines the level of fiscal 

‘‘effort’’ that an LEA must maintain in 

the following year. (See § 300.203(a).) 

Exceptions to the MOE Requirements. 

Under section 613(a)(2)(B) and (C) of the 

IDEA, certain exceptions and 

adjustments to the basic MOE 

requirements apply. Under section 

613(a)(2)(B) and its implementing 

regulations in § 300.204 (exceptions for 

local changes), an LEA may reduce its 

required level of expenditures because 

of the voluntary departure of special 

education personnel, a decrease in the 

enrollment of children with disabilities, 

the termination of the obligation of the 

agency to provide an exceptionally 

costly program of special education to a 

child with a disability, or the 

termination of costly expenditures for 

long-term purchases, such as the 

acquisition of equipment or the 

construction of school facilities. 

Under section 613(a)(2)(C) and its 

implementing regulations in § 300.205 

(Federal increase), an LEA may adjust 

its expenditures in fiscal years when the 

Part B, section 611 allocation received 

by the LEA exceeds the amount the LEA 

received for the previous fiscal year. In 

those years, under the conditions 

specified in section 613(a)(2)(C)(ii), (iii), 

and (iv), the LEA may reduce its 

required level of expenditures by not 

more than 50 percent of the amount by 

which the LEA’s current Part B section 

611 grant exceeds its Part B section 611 

grant in the prior year. If, when 

reviewed retrospectively, and after 

making allowances for any of the 

exceptions and adjustments described 

in section 613(a)(2)(B) and (C), the LEA 

maintained or exceeded its level of 

local, or State and local, expenditures 

for the education of children with 

disabilities from year to year, either in 

total or per capita, then the LEA has met 

the MOE requirement. 

The following chart and explanations 

illustrate how an LEA could meet local 

MOE under current §§ 300.203 through 

300.205 over a period of years: 

Numbers are dollars in 10,000s 

budgeted and expended for the 

education of children with disabilities 

(* Denotes how the LEA met the MOE 

requirement, i.e., through local funds or 

State and local funds) 

HOW AN LEA MEETS LOCAL MOE OVER A PERIOD OF YEARS

Fiscal year 

(actual expenditures) Local funds State funds State and local funds 

Reductions in Expenditures pursuant to § 300.204 or 

§ 300.205 

Covering SY 2006–2007 ........ * 110 190 300 

Covering SY 2007–2008 ........ 70 210 * 280 20 reduction permissible under § 300.204(a). 

Covering SY 2008–2009 ........ 40 230 * 270 10 reduction permissible under § 300.204(c). 

Covering SY 2009–2010 ........ 40 240 * 280 

Covering SY 2010–2011 ........ 60 220 * 280 

Covering SY 2011–2012 ........ * 80 150 230 

Covering SY 2012–2013 ........ * 75 160 235 5 reduction permissible under § 300.205. 


emcdonald on DSK67QTVN1PROD with PROPOSALS
57326 Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 

SY2006–2007: Assumes 110 is the 

amount of local funds expended in the 

prior year. 

SY2007–2008: The LEA met MOE 

based on the combination of State and 

local funds, after a reduction of 20 

permissible under § 300.204(a) based on 

voluntary departures of special 

education personnel. The LEA did not 

meet MOE based on local funds only. 

SY2008–2009: The LEA met MOE 

based on the combination of State and 

local funds, after a reduction of 10 

permissible under § 300.204(c) because 

the LEA was no longer responsible for 

a particularly costly program of special 

education to a child who moved out of 

the jurisdiction. The LEA did not meet 

MOE based on local funds only. 

SY2009–2010: The LEA met MOE 

based on the combination of State and 

local funds. The LEA did not meet MOE 

based on local funds only, because the 

comparison is to the last year the LEA 

met MOE based on local funds only (06– 

07), less any reductions taken under 

§§ 300.204 (exceptions for local 

changes) and 300.205 (Federal increase). 

SY2010–2011: The LEA met MOE 

based on the combination of State and 

local funds. The LEA did not meet MOE 

based on local funds only, because the 

comparison is to the last year the LEA 

met MOE based on local funds only 

(2006–2007), less any reductions taken 

under §§ 300.204 (exceptions for local 

changes) and 300.205 (Federal increase). 

SY2011–2012: The LEA met MOE 

based on local funds only (the last year 

the LEA met MOE based on local funds 

only, 2006–2007, less reductions taken 

in 2007–2008 and 2008–2009 permitted 

under § 300.204 (exceptions for local 

changes)), but the LEA did not meet 

MOE based on the combination of State 

and local funds. 

SY2012–2013: The LEA met MOE 

based on local funds only (the last year 

the LEA met MOE based on local funds 

only, 2011–2012, less a reduction 

permitted under § 300.205 (Federal 

increase)). 

Significant Proposed Regulations 

Summary of proposed changes. We 

are proposing in this NPRM to amend 

current § 300.203 by— 

(1) Clarifying the compliance 

standard. We propose to— 

• Revise the heading of § 300.203(a) 

to clarify that this section addresses the 

compliance standard an SEA must use 

when determining whether an LEA has 

complied with the requirement to 

maintain effort; 

• Add language to § 300.203(a) to 

clarify how an LEA meets the standard 

in any fiscal year, based on a 

combination of State and local funds or 

local funds only; and 

• Add language to § 300.203(a) to 

specify how an LEA meets the standard 

in any fiscal year based on local funds 

only if the LEA has not previously met 

the MOE compliance standard based on 

local funds only; 

(2) Clarifying the eligibility standard. 

We propose to— 

• Revise the heading of § 300.203(b) 

to clarify that this section addresses the 

eligibility standard an SEA must use 

when determining whether an LEA is 

eligible for Part B funds; 

• Revise 300.203(b)(1) to replace the 

phrase ‘‘most recent prior year’’ with the 

phrase ‘‘most recent fiscal year’’ to 

conform with the remaining changes 

proposed in this section; 

• Revise the language in 

§ 300.203(b)(2) to clarify that if an LEA 

relies on local funds only to meet the 

eligibility standard in § 300.203(b)(1)(i), 

the LEA must budget at least as much 

in local funds for the education of 

children with disabilities, either in total 

or per capita, as the amount it spent in 

local funds for that purpose in the most 

recent fiscal year for which information 

is available and for which the LEA met 

the MOE compliance standard based on 

local funds only, even if the LEA also 

met the MOE compliance standard 

based on State and local funds; 

• Add language to § 300.203(b) to 

specify that if an LEA relies on local 

funds only to meet the eligibility 

standard in § 300.203(b)(1)(i) and has 

not previously met the MOE compliance 

standard based on local funds only, the 

LEA must budget at least as much in 

local funds for the education of children 

with disabilities, either in total or per 

capita, as the amount it spent in local 

funds for that purpose in the most 

recent fiscal year for which information 

is available; and 

• Move current § 300.203(b)(3) to 

§ 300.203(a) and to modify the language 

because current § 300.203(b)(3) 

addresses the compliance standard, not 

the eligibility standard; 

(3) Specifying the MOE requirements 

for an LEA that fails to maintain effort 

in a prior year. We propose to specify 

in § 300.203(c) that when an LEA fails 

to maintain its level of expenditures 

required by § 300.203(a), the level of 

expenditures required in any fiscal year 

beginning on or after July 1, 2014, is the 

amount that would have been required 

in the absence of that failure and not the 

LEA’s reduced level of expenditures; 

and 

(4) Specifying the consequences for an 

LEA’s failure to maintain effort. We 

propose in § 300.203(d) the consequence 

for an LEA that fails to maintain its level 

of expenditures for the education of 

children with disabilities. The SEA 

would be liable in a recovery action 

under 20 U.S.C. 1234a to return to the 

Department, using non-Federal funds, 

an amount equal to the amount by 

which the LEA failed to maintain its 

level of expenditures. 

The economic downturn in recent 

years has hurt many State and local 

treasuries and generated a number of 

questions about the application of the 

Part B LEA MOE requirements. The 

Department has provided guidance to 

States and LEAs about the LEA MOE 

provisions in Part B, through multiple 

means such as policy letters, webinars, 

and conference presentations. However, 

the Department continues to receive 

questions on these complex 

requirements. 

Through fiscal monitoring and 

reviewing audit findings, the Office of 

Special Education Programs (OSEP) has 

found that a significant lack of 

understanding regarding the local MOE 

requirements persists. For example, 

through our fiscal monitoring OSEP has 

determined that many SEAs have not 

allowed LEAs to use all four 

comparisons (State and local total or per 

capita or local only total or per capita) 

to demonstrate compliance with the 

LEA MOE requirements. This could 

result in an SEA making a finding of 

noncompliance and returning funds to 

the Department without giving LEAs the 

opportunity to demonstrate compliance 

using all four comparisons. Other States 

are not applying the exceptions in 

§ 300.204 correctly or are not applying 

them at all. Finally, some States have 

not understood the difference between 

the eligibility standard and the 

compliance standard and may only be 

evaluating the eligibility standard and 

never determining actual LEA 

compliance with the LEA MOE 

provisions. As noted previously, the 

Secretary seeks comment from States 

and LEAs to identify where they are 

experiencing the most problems in 

implementing the maintenance of effort 

requirements and whether these 

proposed regulations will help to 

address those problems. 

Many parties expressed concern about 

our June 16, 2011, response to a 

question from Dr. Bill East about what 

level of expenditures an LEA must 

maintain in a year following a year in 

which the LEA fails to maintain its 

required level of expenditures, and the 

consequence for an LEA’s failure to 

maintain effort in the prior year. 

After further review, and as indicated 

in our April 4, 2012, letter to Ms. 

Kathleen Boundy (www2.ed.gov/policy/ 

speced/guid/idea/memosdcltrs/osep-04- 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 57327 

04-2012.pdf), we have withdrawn our 

interpretation as expressed in the letter 

to Dr. East. 

In the letter to Ms. Boundy, we noted 

that 

LEAs, at a minimum, should not reduce 

their level of financial support for the 

education of children with disabilities, 

except as permitted in section 613(a)(2)(B) 

and (C), so that they can continue to meet 

their obligations to provide the special 

education and related services that children 

with disabilities need to receive a free 

appropriate public education. 

In order to ensure that all parties 

involved in implementing, monitoring, 

and auditing LEA compliance with 

MOE requirements understand the rules 

to apply, we are instituting this 

regulatory action. We are proposing to 

amend the regulations to clarify: (1) The 

compliance standard; (2) the eligibility 

standard; (3) the level of financial 

support required in a subsequent year if 

an LEA fails to maintain effort; and (4) 

the consequences for failure to maintain 

effort. 

Compliance standard. The 

Department continues to receive 

questions on the compliance standard in 

current § 300.203(a). This section states 

that except as provided in §§ 300.204 

(exceptions for local changes) and 

300.205 (Federal increase), funds 

provided to an LEA under Part B of the 

IDEA must not be used to reduce the 

level of expenditures for the education 

of children with disabilities made by the 

LEA from local funds below the level of 

those expenditures for the preceding 

fiscal year. 

This does not conform to the 

eligibility standard in § 300.203(b). The 

eligibility standard provides an SEA 

flexibility for the purpose of 

determining if an LEA meets the 

eligibility standard by allowing an LEA 

to budget for the education of children 

with disabilities at least the same total 

or per capita amount from either the 

combination of State and local funds or 

local funds only as the LEA spent for 

that purpose from the same source for 

the most recent prior year for which 

information was available. Therefore, 

we are proposing to clarify in 

§ 300.203(a)(2)(i) that an SEA may 

determine that an LEA meets the 

compliance standard if the LEA does 

not reduce the amount of State and local 

funds expended for the education of 

children with disabilities, either in total 

or per capita, below the amount of State 

and local funds expended for that 

purpose in the preceding fiscal year, 

except as provided in §§ 300.204 

(exceptions for local changes) and 

300.205 (Federal increase). 

In addition, under the eligibility 

standard in current § 300.203(b)(2), if an 

LEA relies on local funds to establish 

eligibility, the fiscal year that 

determines the amount of local funds 

the LEA must budget for the education 

of children with disabilities is the most 

recent fiscal year for which information 

is available and in which the LEA 

established compliance using local 

funds only. We are proposing to clarify 

in § 300.203(a)(2)(ii) that an SEA may 

determine that an LEA meets the 

compliance standard if the LEA does 

not reduce the amount of local funds 

expended for the education of children 

with disabilities, either in total or per 

capita, below the amount of local funds 

expended for that purpose in the most 

recent fiscal year for which the LEA met 

the MOE compliance standard based on 

local funds only, even if the LEA also 

met the MOE compliance standard 

based on State and local funds, except 

as provided in §§ 300.204 (exceptions 

for local changes) and 300.205 (Federal 

increase). 

This provision is consistent with the 

purpose of the local MOE provision, 

which is to support the continuation of 

at least a certain level of local 

expenditures for the education of 

children with disabilities. This 

provision would clarify that an LEA 

does not meet the compliance standard 

if the amount of local funds expended 

in a fiscal year for the education of 

children with disabilities is the same as 

the amount of local funds expended for 

that purpose in the preceding fiscal 

year, if the LEA did not meet the MOE 

compliance standard based on local 

funds only in the preceding fiscal year. 

This ensures that if an LEA met MOE in 

year one based on local funds only, and 

decreased the amount of local funds it 

expended as State funding increased in 

year two, the LEA could not 

demonstrate that it met MOE based on 

local funds only in year three by using 

the preceding fiscal year (year two), the 

fiscal year in which it decreased the 

amount of local funds it expended, as 

the comparison year. 

For example, in year one an LEA met 

MOE based on local funds. In year two, 

the LEA decreased the amount of local 

funds it expended, and, because State 

funding increased, the LEA met MOE 

based on State and local funds. In year 

three, the LEA meets MOE based on 

local funds only by spending the 

amount of local funds it expended in 

year one; it cannot use year two (the 

preceding fiscal year) as the comparison 

year because the amount of local funds 

expended that year was less than the 

amount of local funds expended in year 

one. 

Thus, comparing the amount of local 

funds expended for the education of 

children with disabilities to a fiscal year 

in which an LEA met the compliance 

standard based on local funds only, 

rather than the preceding fiscal year, 

means in this situation the comparison 

year is the year in which the LEA 

expended the highest amount of local 

funds. 

In addition, under the proposed 

regulations, an LEA may not use as a 

comparison year a year in which the 

LEA met the compliance standard based 

on local funds (and not State and local 

funds) and in an intervening year 

increased the amount of local funds 

expended and met the compliance 

standard based on local funds and State 

and local funds. For example, in year 

one an LEA met MOE based on local 

funds. In year two, the LEA increased 

the amount of local funds it expended 

and met MOE based on local funds, and, 

because State funding also increased, it 

also met MOE based on State and local 

funds. In year three, the LEA meets 

MOE based on local funds only by 

spending the amount of local funds it 

expended in year two; it cannot use year 

one as a comparison year because the 

amount of local funds expended in that 

year was less than the amount of local 

funds expended in year two. Thus, 

comparing the amount of local funds 

expended for the education of children 

with disabilities to a fiscal year in 

which an LEA met the compliance 

standard based on local funds only, 

even if the LEA also met the MOE 

compliance standard based on State and 

local funds, means in this situation the 

comparison year is the year in which 

the LEA expended the highest amount 

of local funds. We understand that 

because of fluctuations in the amount of 

State and local funds LEAs receive for 

the education of children with 

disabilities, there may not be an 

approach that would in every instance 

result in the comparison year being the 

year in which the LEA expended the 

highest amount of local funds. However, 

we believe that using the most recent 

fiscal year in which an LEA met the 

compliance standard based on local 

funds only, even if the LEA also met the 

MOE compliance standard based on 

State and local funds, is most likely to 

result in the comparison year being the 

year in which the LEA expended the 

highest amount of local funds. 

On May 20, 2013, the Department’s 

Office of Inspector General (OIG) issued 

an Alert Memorandum related to the 

administration of LEA MOE 

requirements by the California 

Department of Education (CDE). (See 

www2.ed.gov/about/offices/list/oig/


emcdonald on DSK67QTVN1PROD with PROPOSALS
57328 Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 

auditreports/fy2013/l09n0004.pdf.) The 

OIG found two instances in which CDE 

allowed LEAs that had not previously 

demonstrated compliance based on 

local funds only to demonstrate MOE 

compliance by comparing their fiscal 

year 2009–2010 local only expenditures 

to fiscal year 2006–2007 local only 

expenditures. We agreed with the OIG 

that in this situation, the LEAs should 

not have been permitted to demonstrate 

MOE compliance by comparing their 

fiscal year 2009–2010 local only 

expenditures to fiscal year 2006–2007 

local only expenditures. 

We recognize that the current 

regulations do not address the situation 

where an LEA has not previously 

demonstrated compliance based on 

local funds only. Both the statutory and 

regulatory LEA MOE provisions set out 

two comparison years for the purpose of 

LEA MOE compliance—the preceding 

fiscal year or, if the LEA relies on local 

funds only, the most recent fiscal year 

the LEA met the MOE compliance 

standard based on local funds only. 

Given the OIG’s recommendation that 

the Department revise the local MOE 

regulation as needed and the fact that 

this situation is not addressed in the 

current regulations, we are proposing to 

add language to § 300.203(a)(2)(iii) to 

specify that the comparison year that 

applies when determining compliance if 

an LEA has not previously met MOE 

based on local funds only is the 

preceding fiscal year. 

Because current § 300.203(b)(3) 

addresses the compliance standard and 

not the eligibility standard, we are also 

proposing to modify the language and 

move that section to proposed 

§ 300.203(a), which would address the 

compliance standard. 

Eligibility standard. Under current 

§ 300.203(b)(2), an LEA that relies on 

local funds to establish eligibility must 

ensure that the amount of local funds it 

budgets for the education of children 

with disabilities in that year is at least 

the same, either in total or per capita, as 

the amount it spent for that purpose in 

the most recent fiscal year for which 

information is available and the 

standard in paragraph (b)(1)(i) of this 

section was used to establish its 

compliance with this section. 

The Department has received 

questions that indicate the language 

‘‘the standard in paragraph (b)(1)(i) of 

this section was used to establish its 

compliance with this section’’ has 

created some confusion. Therefore, we 

are proposing to revise § 300.203(b)(2) to 

clarify that the comparison year is the 

most recent fiscal year for which 

information is available and the LEA 

met the MOE compliance standard 

using local funds only, even if the LEA 

also met the MOE compliance standard 

based on State and local funds. We are 

also proposing to add language to 

§ 300.203(b)(3) to specify that the 

comparison year that applies when 

determining eligibility if an LEA has not 

previously met MOE based on local 

funds only is the most recent fiscal year 

for which information is available. 

Level of effort required in a 

subsequent year. The Department 

believes that when an LEA fails to 

maintain its required level of 

expenditures, the level of expenditures 

required in future years should be the 

amount that would have been required 

in the absence of that failure and not the 

LEA’s actual expenditures in the year it 

failed to meet the MOE requirement. 

This interpretation is based on careful 

consideration of the statutory language, 

structure, and purpose. 

The statute is silent on the precise 

question of the level of effort required 

if an LEA fails to meet MOE in a prior 

year. In contrast, section 613(a)(2)(B) 

and (C) of the IDEA describes in detail 

two sets of conditions under which an 

LEA lawfully may reduce its 

expenditures. In light of the precision 

with which these exceptions and 

adjustments are spelled out, it would be 

anomalous for Congress to permit 

LEAs—through silence—to reduce the 

required level of expenditures. The 

absence of an exception in the statute 

for failure of an LEA to meet the local 

MOE requirement in the prior year 

strongly supports the position that such 

a failure does not reduce the level of 

effort required in future years. In light 

of the detail with which other 

exceptions are laid out in the statute, we 

believe that the Act’s silence on the 

level of expenditures required in the 

year after an LEA has failed to comply 

with the LEA MOE requirement does 

not reflect an intent by Congress to 

permit LEAs to take advantage of a 

violation of the Act. 

With regard to the State maintenance 

of State financial support required in 

section 612(a)(18) of the Act, the IDEA 

makes clear that, if effort is not 

maintained in a particular year, the 

financial support required in future 

years ‘‘shall be the amount that would 

have been required in the absence of 

that failure and not the reduced level of 

the State’s support.’’ 20 U.S.C. 

1412(a)(18)(D). Although similar 

language pertaining to LEAs is not 

contained in section 613, had Congress 

intended the phrase ‘‘for the preceding 

fiscal year’’ to carry a different meaning 

when applied to LEAs, we believe it 

would have stated that intention clearly. 

Rather, it is likely that Congress did not 

feel compelled to restate in section 613 

what it already had made obvious in the 

preceding section. 

Furthermore, allowing an LEA to 

reduce spending on the education of 

children with disabilities by failing to 

comply with a statutory requirement is 

inconsistent with the purpose of the 

local MOE requirement, which is to 

support a continuation of at least a 

certain level of local expenditures for 

the education of children with 

disabilities. Permitting an LEA to lower 

its required level of effort based on a 

past year’s failure to comply with the 

requirement conflicts in a fundamental 

way with that purpose and provides a 

financial incentive for LEAs not to 

maintain their fiscal efforts. We do not 

believe that the statute contemplates 

that an LEA should be permitted a 

future financial benefit from a current 

failure to comply with the LEA MOE 

requirement. 

We also believe that if an LEA were 

permitted to reduce expenditures for the 

education of children with disabilities 

for reasons not specifically stated in the 

exceptions in section 613(a)(2)(B) and 

(C) of the Act, services for children with 

disabilities would likely suffer. This 

result would be contrary to the overall 

purpose of the IDEA, which is ‘‘to 

ensure that all children with disabilities 

have available to them a free 

appropriate public education’’ (20 

U.S.C. 1401(d)). 

The adjustments and exceptions that 

are built into the IDEA in section 

613(a)(2)(B) and (C) provide sufficient 

protection to LEAs faced with changed 

circumstances, and they also help to 

ensure that sufficient funding will be 

available in the future to provide 

appropriate services to children with 

disabilities. Additionally, under 

§ 300.203(b), an LEA is given the benefit 

of the most favorable of four 

comparisons in calculating the required 

maintenance of effort level. An SEA 

must determine that an LEA meets the 

MOE standard if, after taking into 

account the adjustments and exceptions 

described previously, the LEA 

maintained (or exceeded) its level of 

local, or State and local, expenditures 

for the education of children with 

disabilities from year to year, either in 

total or per capita. 

For all of these reasons, we believe 

that the position expressed in the April 

4, 2012, letter correctly interprets the 

statutory obligation of LEAs to maintain 

effort. Therefore, we are proposing to 

add a provision that if, for any fiscal 

year, an LEA fails to maintain effort, the 

level of effort required of the LEA in a 

subsequent fiscal year is the amount 

that would have been required in the 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 57329 

1The required level of effort for budgeting 

purposes does not include any reductions that 

could be taken in the budget year under §§ 300.204 

and 300.205. 

2As determined under proposed §§300.203(b) 

and current 300.205. 

absence of that failure and not the LEA’s 

reduced level of expenditures. We are 

proposing to specify that this provision 

would apply to any fiscal year 

beginning on or after July 1, 2014, the 

beginning of the first grant award period 

after the date these regulations could 

take effect. 

Under the proposed regulations, in 

order to be eligible to receive a grant 

under IDEA Part B, LEAs will need to 

budget as much or more State and local 

funds in the upcoming fiscal year as 

they expended in the most recent fiscal 

year for which data are available. If 

LEAs do not meet that test, they must 

budget as much or more local funds in 

the upcoming fiscal year as they 

expended in the most recent fiscal year 

for which data are available and in 

which they met the MOE compliance 

requirement based on local funds only, 

even if the LEA also met the MOE 

compliance standard based on State and 

local funds. 

Thus, if an LEA did not maintain 

effort in 2012–2013, and will meet the 

MOE requirement based on the 

combination of State and local funds in 

2014–2015, the LEA must budget for 

2014–2015 the amount that it should 

have expended in 2012–2013 rather 

than its actual 2012–2013 expenditures. 

Similarly, when determining an LEA’s 

eligibility based on expenditures in 

2013–2014, if an LEA did not maintain 

effort in 2013–2014 and will meet MOE 

in 2015–2016 based on the combination 

of State and local funds, the State must 

compare the LEA’s amount budgeted for 

2015–2016 to the amount the LEA 

should have expended in 2013–2014 

rather than its actual expenditures. If an 

LEA will not be able to meet the MOE 

requirement based on State and local 

funds but did not maintain effort in the 

last year it established eligibility based 

on meeting MOE with local funds only, 

the LEA must budget for the upcoming 

fiscal year the amount of its 

expenditures for the last year that it met 

the MOE requirement based on local 

funds only. States will need to carefully 

review LEA applications, and compare 

amounts budgeted to amounts expended 

in prior years, to ensure that their LEAs 

meet the eligibility requirement. 

In addition, States will need to 

monitor and audit their LEAs to ensure 

that they expended as much or more 

State and local funds in the next fiscal 

year as they did in the prior year, less 

any reductions permitted by §§ 300.204 

(exceptions for local changes) and 

300.205 (Federal increase). For example, 

if an LEA failed to maintain effort in 

2013–2014, the level of effort that a 

State must audit against when 

considering the combination of State 

and local funds for 2014–2015 is the 

level of effort the LEA should have met 

in 2013–2014, less any 2014–2015 

reductions permitted by §§ 300.204 

(exceptions for local changes) and 

300.205 (Federal increase). Similarly, 

when an SEA considers an LEA’s 

compliance with MOE based on local 

funds only for 2014–2015, the level of 

effort required is the LEA’s required 

level of effort in the most recent fiscal 

year in which the LEA met MOE based 

on local funds only, even if the LEA also 

met the MOE compliance standard 

based on State and local funds, less any 

intervening reductions permitted by 

§§ 300.204 (exceptions for local 

changes) and 300.205 (Federal increase). 

The following charts illustrate how to 

identify the level of effort required of an 

LEA consistent with this interpretation 

for both eligibility determinations and 

auditing and compliance purposes. 

ELIGIBILITY DETERMINATIONS BASED ON STATE AND LOCAL FUNDS

Budget year (planned expenditures) Met/did not meet MOE Level of effort to be budgeted 

(either total or per capita) 1

2014–2015 Budget (Assumes most recent fiscal 

year for which data are available is 2012– 

2013).

Met MOE in 2012–2013 ................................... 2012–2013 actual expenditures. 

Did not meet MOE in 2012–2013 .................... 2011–2012 actual expenditures less any reductions in 2012–2013 permitted under 

§§ 300.204 and 300.205. 

2015–2016 Budget (Assumes most recent fiscal 

year for which data are available is 2013– 

2014).

Met MOE in 2013–2014 ................................... 2013–2014 actual expenditures. 

Did not meet MOE in 2013–2014 .................... 2012–2013 actual expenditures less any reductions in 2013–2014 permitted under 

§§ 300.204 and 300.205. 

2016–2017 Budget (Assumes most recent fiscal 

year for which data are available is 2014– 

2015).

Met MOE in 2014–2015 ................................... 2014–2015 actual expenditures. 

Did not meet MOE in 2014–2015 .................... Level of effort required to meet MOE in 2014– 

2015.2


emcdonald on DSK67QTVN1PROD with PROPOSALS
57330 Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 

3The required level of effort for budgeting 

purposes does not include any reductions that 

could be taken in the budget year under §§300.204 

and 300.205. 

4As determined under proposed §300.203(b) and 

current §§300.204 and 300.205. 

AUDITING AND COMPLIANCE ANALYSIS BASED ON STATE AND LOCAL FUNDS

Fiscal year (actual expenditures) Met/Did not meet MOE Required level of effort 

(either total or per capita) 

Covering school year 2013–2014 ...................... N/A ................................................................... 2012–2013 actual expenditures less any reductions in 2013–2014 permitted under 

§§ 300.204 and 300.205. 

Covering school year 2014–2015 ...................... Met MOE in 2013–2014 ................................... 2013–2014 actual expenditures less any reductions in 2014–2015 permitted under 

§§ 300.204 and 300.205. 

Did not meet MOE in 2013–2014 .................... Level of effort required to meet MOE in 2013– 

2014, less any reductions in 2014–2015 

permitted under §§ 300.204 and 300.205. 

Covering school year 2015–2016 ...................... Met MOE in 2014–2015 ................................... 2014–2015 actual expenditures less any reductions in 2015–2016 permitted under 

§§ 300.204 and 300.205. 

Did not meet MOE in 2014–2015 .................... Level of effort required to meet MOE in 2014– 

2015 less any reductions in 2015–2016 permitted under §§ 300.204 and 300.205. 

ELIGIBILITY DETERMINATIONS BASED ON LOCAL FUNDS ONLY

Budget year (planned expenditures) Met/did not meet MOE Level of effort to be budgeted 3

(either total or per capita) 

2014–2015 Budget (Assumes most recent fiscal 

year for which data are available and LEA 

eligibility was established based on meeting 

MOE with local funds only is 2012–2013).

Met MOE in 2012–2013 ................................... 2012–2013 actual expenditures. 

Did not meet MOE in 2012–2013 .................... Actual expenditures from the last year the 

LEA met MOE based on local funds only, 

even if the LEA also met MOE based on 

State and local funds, less any reductions 

in intervening years permitted under 

§§ 300.204 and 300.205. 

2015–2016 Budget (Assumes most recent fiscal 

year for which data are available and LEA 

eligibility was established based on meeting 

MOE with local funds only is 2013–2014).

Met MOE in 2013–2014 ................................... 2013–2014 actual expenditures. 

Did not meet MOE in 2013–2014 .................... Actual expenditures from the last year LEA 

met MOE based on local funds only, even if 

the LEA also met MOE based on State and 

local funds, less any reductions in intervening years permitted under §§ 300.204 

and 300.205. 

2016–2017 Budget (Assumes most recent fiscal 

year for which data are available and LEA 

eligibility was established based on meeting 

MOE with local funds only is 2014–2015).

Met MOE in 2014–2015 ................................... 2014–2015 actual expenditures. 

Did not meet MOE in 2014–2015 .................... Level of effort required to meet MOE in 2014– 

2015.4


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 57331 

AUDITING AND COMPLIANCE ANALYSIS BASED ON LOCAL FUNDS ONLY

Fiscal year 

(actual expenditures) Met/Did not meet MOE Required level of effort (either total or per capita) 

2013–2014 .......................................................... N/A ................................................................... Actual expenditures from the last year LEA 

met MOE based on local funds only, even if 

the LEA also met MOE based on State and 

local funds, less any reductions in intervening years permitted under §§ 300.204 

and 300.205. 

2014–2015 .......................................................... Met MOE based on local funds only in 2013– 

2014.

Actual expenditures from 2013–2014 less any 

reductions in intervening years permitted 

under §§ 300.204 and 300.205. 

Did not meet MOE based on local funds only 

in 2013–2014.

Level of effort required to meet MOE in the 

last year the LEA met MOE with local funds 

only, even if the LEA also met MOE based 

on State and local funds, less any reductions in intervening years permitted under 

§§ 300.204 and 300.205. 

2015–2016 .......................................................... Met MOE based on local funds only in 2014– 

2015.

Actual expenditures from 2014–2015 less any 

reductions in intervening years permitted 

under §§ 300.204 and 300.205. 

Did not meet MOE based on local funds only 

in 2014–2015.

Level of effort required to meet MOE in the 

last year that LEA met MOE based on local 

funds only, even if the LEA also met MOE 

based on State and local funds, less any 

reductions in intervening years permitted 

under §§ 300.204 and 300.205. 

Consequences for Failure to Maintain 

Effort. We also are proposing to add a 

provision regarding the consequence if 

an LEA fails to maintain its level of 

expenditures for the education of 

children with disabilities. The provision 

would specify, consistent with longstanding Department practice, that the 

SEA is liable in a recovery action under 

20 U.S.C. 1234a to pay the Department, 

from non-Federal funds or funds for 

which accountability to the Federal 

government is not required, the 

difference between the amount of local, 

or State and local, funds the LEA should 

have expended and the amount that it 

did expend. 20 U.S.C. 1234a describes 

the method the Department uses to 

recover misused funds. 

Under 20 U.S.C. 1234b(a), if a 

recipient of Department funds is 

determined to have made an 

unallowable expenditure or to have 

otherwise failed to discharge its 

responsibility to account properly for 

funds, the recipient is required to return 

an amount that is proportionate to the 

harm to the Federal interest. The 

addition of this provision to current 

§ 300.203 will not change the law in this 

area. However, it is important to add 

this provision to the regulations in order 

to highlight the importance of the LEA 

MOE requirement and the significance 

of the remedies for a failure to comply. 

This addition should increase focus on, 

and, through heightened attention and 

monitoring by States, compliance with 

the LEA MOE requirement. 

Although not necessary to address in 

the regulation, it is worthwhile to point 

out that if an SEA is required to pay the 

Department based on an LEA’s failure to 

comply with the LEA MOE requirement, 

the SEA may then seek to recoup from 

the LEA, from non-Federal funds or 

funds for which accountability to the 

Federal Government is not required, the 

amount by which the LEA did not 

maintain effort. Whether the SEA seeks 

recovery of those funds from the LEA is 

a matter of State discretion. 

Executive Orders 12866 and 13563 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether this 

regulatory action is ‘‘significant’’ and, 

therefore, subject to the requirements of 

the Executive Order and subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as an action likely to 

result in a rule that may— 

(1) Have an annual effect on the 

economy of $100 million or more or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); 

(2) Create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

stated in the Executive order. 

The proposed amendment is a 

significant regulatory action subject to 

review by OMB under section 3(f)(4) of 

Executive Order 12866. 

We have also reviewed these 

regulations under Executive Order 

13563, which supplements and 

explicitly reaffirms the principles, 

structures, and definitions governing 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, Executive Order 

13563 requires that an agency— 

(1) Propose or adopt regulations only 

upon a reasoned determination that 

their benefits justify their costs 

(recognizing that some benefits and 

costs are difficult to quantify); 

(2) Tailor its regulations to impose the 

least burden on society, consistent with 

obtaining regulatory objectives and, 

taking into account—among other things 

and to the extent practicable—the costs 

of cumulative regulations; 


emcdonald on DSK67QTVN1PROD with PROPOSALS
57332 Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 

(3) In choosing among alternative 

regulatory approaches, select those 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety, 

and other advantages; distributive 

impacts; and equity); 

(4) To the extent feasible, specify 

performance objectives, rather than the 

behavior or manner of compliance a 

regulated entity must adopt; and 

(5) Identify and assess available 

alternatives to direct regulation, 

including economic incentives—such as 

user fees or marketable permits—to 

encourage the desired behavior, or 

provide information that enables the 

public to make informed choices. 

Executive Order 13563 also requires an 

agency ‘‘to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible.’’ The Office of 

Information and Regulatory Affairs of 

OMB has emphasized that these 

techniques may include ‘‘identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes.’’ 

We are issuing these proposed 

regulations only upon a reasoned 

determination that their benefits would 

justify their costs. In choosing among 

alternative regulatory approaches, we 

selected those approaches that 

maximize net benefits. Based on the 

analysis that follows, the Department 

believes that these proposed regulations 

are consistent with the principles in 

Executive Order 13563. 

We also have determined that this 

regulatory action would not unduly 

interfere with State, local, and tribal 

governments in the exercise of their 

governmental functions. 

Potential Costs and Benefits 

In accordance with both Executive 

orders, the Department has assessed the 

potential costs and benefits of this 

regulatory action. In conducting this 

analysis, the Department examined the 

extent to which the changes made by 

these proposed regulations would add 

to or reduce the costs to States, LEAs, 

and others, as compared to the costs of 

implementing the current Part B 

program regulations. Based on the 

following analysis, the Secretary has 

concluded that the proposed changes 

could result in reduced costs for States 

and LEAs to the extent that increased 

understanding of LEA MOE 

requirements and use of all four tests to 

demonstrate LEAs met MOE would 

result in States making fewer 

repayments to the Department and 

seeking fewer recoveries from LEAs. 

However, there is also potential for 

additional costs for States, and 

potentially LEAs to the extent LEAs are 

required to increase expenditures in the 

year following a failure to meet the LEA 

MOE provisions under Part B of the Act 

or in the event that a State or LEA 

incorrectly calculated MOE in a 

previous year due to confusion. The 

Secretary believes that the benefits of 

ensuring that adequate resources are 

available to provide FAPE for children 

with disabilities are likely to outweigh 

any costs to LEAs that violated the local 

MOE requirements in the previous year 

and do not plan to restore funding in the 

subsequent year to the level they should 

have maintained in the prior year. 

Section 300.203 

The effect of the proposed changes on 

LEAs would depend on: (1) The degree 

of misunderstanding on the part of 

States and LEAs about the eligibility 

and compliance standards and the 

flexibility that the LEAs have in meeting 

one of four tests; and (2) the likelihood 

that LEAs would violate the MOE 

requirement in one or more years and 

seek to maintain funding at the reduced 

level in subsequent years. One possible 

source of information that could be used 

to estimate the effect of the proposed 

changes on LEAs would be data on 

previous findings of LEA violations. 

However, the Department has limited 

information on LEA violations. States 

are responsible for monitoring LEA 

compliance with MOE requirements and 

resolving any audit findings in this area, 

but States are not required to report the 

number of LEAs that violated MOE 

requirements, the basis of the violations, 

or the amount of funding involved. 

Other sources of information on the 

likely effects of the proposed changes 

are audit reports and OSEP’s fiscal 

monitoring of States regarding the 

implementation of the current 

regulations. 

OSEP’s fiscal monitoring, in 

conjunction with OIG’s audit findings 

and reports, have identified a number of 

problems with State administration of 

the LEA MOE requirements under the 

current regulations, suggesting that 

there is confusion about the MOE 

requirements and a lack of clarity in the 

existing regulations. Specifically, OSEP 

has found that at least 40 percent of 

States have policies and procedures that 

are not consistent with how States 

should determine eligibility or 

compliance in relation to the LEA MOE 

requirements. Most notably, it appears 

that some States have not allowed LEAs 

to use all four tests to demonstrate that 

they have met the MOE requirements for 

purposes of eligibility or compliance 

determinations, including the test that 

allows the LEA to demonstrate it met 

the MOE requirement on the basis of 

only local funds. There is also some 

indication that States may have used an 

inappropriate comparison year when 

States have allowed LEAs to make a 

local-to-local comparison. 

In years when States did not allow the 

LEAs to use all four tests to demonstrate 

they met MOE, it is possible that LEAs 

budgeted for, and expended, more than 

they would have if both States and LEAs 

had understood they had flexibility to 

use all four tests. In these instances, the 

clarification made in the proposed 

regulations could result in a reduction 

in future expenditures on the part of 

LEAs. Additionally, in instances in 

which States did not appropriately 

allow the LEAs to use all four tests in 

meeting MOE, the State may have 

sought to recover funds from LEAs or 

made unnecessary repayments to the 

Department. Clarifying that all four tests 

may be used for MOE determinations 

could result in States making fewer 

repayments to the Department and 

seeking fewer recoveries from LEAs. 

Alternatively, in those cases in which 

States may be allowing LEAs to use an 

incorrect comparison year in 

implementing the test for local-only 

funds, the change in the regulations that 

clarifies the comparison year may result 

in increased expenditures for LEAs. For 

example, in its May 20, 2013 Alert 

Memorandum, the OIG raised concerns 

about the comparison years used by the 

State of California in determining LEA 

MOE compliance. According to that 

memorandum, the State used an 

incorrect comparison year when 

determining that two LEAs met MOE 

requirements using the local-only test. 

Specifically, California allowed the 

LEAs that had never relied on local 

funds only to meet the MOE 

requirement to use a comparison year 

from three years earlier, instead of 

requiring a comparison of local-only 

expenditures to the previous fiscal year. 

In this case, the clarification made by 

the proposed regulations would require 

increased LEA expenditures. We do not 

know the extent to which the use by 

States and LEAs of incorrect comparison 

years has permitted lower expenditures 

than would be required under the 

proposed changes, or, alternatively, the 

extent to which using the incorrect 

comparison year has resulted in higher 

expenditures than would be required 

under the proposed regulations. 

However, in general, the findings in 

fiscal monitoring demonstrating that 

States are providing less flexibility to 

LEAs than is allowable under the law 

suggest that the clarifications included 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 57333 

5 Data are available online at www.ideadata.org/ 

PartBMaintenance_asp (Table 8 LEA-level files, 

revised 2/29/12, Accessed 5/15/12). 

in these proposed regulations could 

reduce costs for both LEAs and States. 

The regulations also specifically 

address the level of expenditures 

required by an LEA in the years 

following a year in which an LEA 

violated the MOE requirements. 

Specifically, the proposed regulations 

clarify that, in a year following a year 

in which the LEA failed to meet MOE, 

the required level of expenditures is the 

level of expenditures in the last year in 

which the LEA met the MOE 

requirements, not the reduced level of 

expenditures in the preceding year. 

We believe that this clarification in 

the regulations will improve State 

administration of the program, is 

consistent with the intent of the IDEA, 

and is in the best interest of children 

with disabilities. We do not expect the 

change to have a significant impact on 

LEA expenditures in the near term 

because of what we know about the 

extent of LEA violations and the 

likelihood of future violations. 

However, the change would eliminate 

the risk we have under the current 

regulations that State policy would 

permit LEAs that reduce spending in 

violation of the MOE requirements to 

maintain the reduced level of 

expenditures in subsequent years. 

The Department typically learns of an 

LEA violation in conjunction with its 

review of audit findings. In the 

relatively few instances in which the 

Department has issued program 

determination letters to States 

concerning audit findings about LEA 

failure to maintain the appropriate level 

of effort, most of the findings concerned 

the absence of an effective State system 

for monitoring LEA MOE, rather than 

identifying MOE violations. Since 2004, 

the only program determination letter 

that identified specific questioned costs 

for LEA failure to meet MOE involved 

Oklahoma. In December 2006, the 

Department issued a program 

determination letter to the Oklahoma 

SEA seeking recovery of $583,943.29 

expended under Part B of the IDEA due 

to audit findings that 76 LEAs had not 

met their required level of effort for the 

receipt of Federal fiscal Year (FFY) 2003 

funds. In SY 2009–2010, Oklahoma 

reported having 532 LEAs; accordingly, 

76 LEAs represented 14 percent of the 

State’s LEAs affected by these audit 

findings. After reviewing additional 

materials provided by the State that 

supported the application of the MOE 

exceptions in § 300.204 (exceptions for 

local changes), the Department reduced 

the amount of its determination to 

$289,501.76. The final claim against 

Oklahoma was settled at $217,126.32. 

We also searched the Federal Audit 

Clearinghouse for information about 

single audits of Federal awards 

conducted by States or private 

accounting firms of LEAs that expend 

$500,000 or more in a year in Federal 

award funds as required by the Office of 

Management and Budget’s (OMB) 

Circular A–133. The Federal Audit 

Clearinghouse is located at the 

following link: www.census.gov/econ/ 

overview/go1400.html. We searched for 

audit findings in response to area ‘‘G’’ 

of the compliance supplement to OMB 

Circular A–133, which relates to 

‘‘Matching, Level of Effort, and 

Earmarking,’’ for audits related to Code 

of Federal Domestic Assistance 84.027 

(funds awarded under section 611 of the 

IDEA). Single audits of Federal awards 

are not available for all LEAs through 

the Federal Audit Clearinghouse, but 

there is information on single audits for 

9,024 LEAs for FY 2009, which 

represents approximately 60 percent of 

LEAs. 

Our search identified 25 audits that 

contained findings related to section G 

of the compliance supplement, four of 

which were accompanied by audit 

reports that included questioned costs 

related to failure to achieve the required 

MOE. Only two of the four audits 

specified amounts of questioned costs, 

for $10,428 and $153,621.53, 

respectively. Although one cannot 

assume that these findings represent all 

violations of the LEA MOE requirement, 

both the small number and size of 

questioned costs related to failure to 

meet this requirement suggest that LEA 

MOE violations are not extensive. Audit 

findings for fiscal years 2007, 2008, 

2010, and 2011 (to the extent available) 

were generally consistent with the 

findings for 2009. 

Another source of information for 

estimating the likelihood of future MOE 

violations are data on the extent to 

which LEAs have reduced expenditures 

pursuant to the new flexibility provided 

in the 2004 amendments to the IDEA. 

Under section 613(a)(2)(C), for any fiscal 

year in which an LEA receives an 

allocation under section 611(f) that 

exceeds its allocation for the previous 

fiscal year, an LEA may reduce the level 

of expenditures otherwise required to 

meet the MOE requirement by not more 

than 50 percent of the amount of the 

increased allocation. Since May 2011, 

States have been reporting the amount 

each LEA received in an IDEA subgrant 

under section 611 or section 619, 

whether the State had determined that 

the LEA or educational service agency 

(ESA) had met the requirements of Part 

B of IDEA, and whether each LEA or 

ESA had reduced its expenditures 

pursuant to § 300.205.5

The data we have collected to date 

include reductions taken in the year in 

which LEAs were most likely to make 

reductions because of the availability of 

an additional $11.3 billion for formula 

grant awards under the Grants to States 

program provided under the American 

Recovery and Reinvestment Act of 2009 

(ARRA). Since these additional funds 

increased the annual allocation to most 

LEAs in FFY 2009 relative to FFY 2008, 

LEAs meeting conditions established by 

the State and the Department were 

permitted to reduce the level of support 

they would otherwise be required to 

provide during SY 2009–2010 by up to 

50 percent of the amount of the 

increase. 

Of the 14,936 LEAs that received 

allocations under section 611 in FFY 

2008 and FFY 2009, States reported that 

12,061 received increased allocations 

under section 611 and met other 

conditions such that they were eligible 

to reduce their level of effort. Notably, 

only 4,237 LEAs (or 36 percent) 

reported that they reduced their level of 

effort. If they met the conditions, LEAs 

were permitted to reduce effort by up to 

50 percent of the increase in their 

allocation, but they typically reduced 

spending only by 38 percent. 

Larger LEAs were more likely to 

reduce expenditures than LEAs in 

general. For the 100 largest LEAs, based 

on their FFY 2008 allocations under 

section 611, 31 of the 51 LEAs that were 

eligible to reduce expenditures actually 

did so and these LEAs reduced 

expenditures by an average of 73 

percent of the allowable amount. 

Of the 4,237 LEAs overall that 

reported reducing expenditures, only 32 

had been determined to have not met 

the requirements of Part B of the IDEA 

and may have violated the MOE 

requirements, unless one of the 

exceptions to the MOE requirements in 

§ 300.204 (exceptions for local changes) 

were applicable. The combined amount 

of MOE reductions for these LEAs was 

$19,304,506, with a median reduction of 

$745. One of these LEAs reported a 

reduction of $18,358,631, which 

represents 41 percent of the increase in 

that LEA’s allocation from the previous 

year; but the reductions that were taken 

by the remaining LEAs were relatively 

small. 

The combined amount by which 

eligible LEAs in the 50 States, 

Washington, DC, and Puerto Rico could 

have reduced their level of effort in SY 


emcdonald on DSK67QTVN1PROD with PROPOSALS
57334 Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 

2009–2010 was $5.6 billion, but the 

combined amount of actual reduction 

was only 27 percent of that amount or 

$1.5 billion. Because most LEAs did not 

reduce expenditures when they had a 

legitimate opportunity to do so and 

thereby reduce the level of effort 

required in future years, it is reasonable 

to assume that a smaller number of 

LEAs would undertake reductions that 

constitute violations of the MOE 

requirements. We believe it is highly 

unlikely that the 4,205 LEAs that met 

the requirements of section 613(a)(2)(C) 

of the Act and reduced their level of 

effort would seek further reductions that 

would violate the MOE requirements 

since they legitimately lowered their 

own required level of effort when they 

made those previous reductions. 

Based on available audit findings and 

data, the Department believes that LEAs 

generally are unlikely to reduce 

expenditures in violation of the MOE 

requirements. Moreover, we believe that 

the requirement that LEAs provide 

FAPE for all eligible children with 

disabilities provides another critical 

protection against unwarranted 

reductions of expenditures to support 

special education and related services 

for children with disabilities. However, 

to ensure that State policy and 

administration of the MOE requirements 

is consistent with the Department’s 

position on the required level of future 

expenditures in cases of LEA violations, 

we think it is critical to change the 

regulations, as we have proposed, to 

clearly articulate the Department’s 

interpretation of the law in this regard. 

Clarity of the Regulations 

Executive Order 12866 and the 

Presidential memorandum ‘‘Plain 

Language in Government Writing’’ 

require each agency to write regulations 

that are easy to understand. 

The Secretary invites comments on 

how to make these proposed regulations 

easier to understand, including answers 

to questions such as the following: 

• Are the requirements in the 

proposed regulations clearly stated? 

• Do the proposed regulations contain 

technical terms or other wording that 

interferes with their clarity? 

• Does the format of the proposed 

regulations (use of headings, 

paragraphing, etc.) aid or reduce their 

clarity? 

• Would the proposed regulations be 

easier to understand if we divided them 

into more (but shorter) sections? (A 

‘‘section’’ is preceded by the symbol 

‘‘§ ’’ and a numbered heading; for 

example, § 300.203 Maintenance of 

effort.) 

• Could the description of the 

proposed regulations in the 

SUPPLEMENTARY INFORMATION section of 

this preamble be more helpful in 

making the proposed regulations easier 

to understand? If so, how? 

• What else could we do to make the 

proposed regulations easier to 

understand? 

To send any comments that concern 

how the Department could make these 

proposed regulations easier to 

understand see the instructions in the 

ADDRESSES section. 

Regulatory Flexibility Act Certification 

The Secretary certifies that these 

proposed regulations would not have a 

significant economic impact on a 

substantial number of small entities. 

The U.S. Small Business 

Administration (SBA) Size Standards 

define ‘‘small entities’’ as for-profit or 

nonprofit institutions with total annual 

revenue below $7,000,000 or, if they are 

institutions controlled by small 

governmental jurisdictions (that are 

comprised of cities, counties, towns, 

townships, villages, school districts, or 

special districts), with a population of 

less than 50,000. These proposed 

regulations would affect all local 

educational agencies, including the 

estimated 12,358 LEAs that meet the 

definition of small entities. However, 

we have determined that the proposed 

regulations would not have a significant 

economic impact on these small 

entities. This regulatory action would 

have the effect of increasing costs for 

small LEAs that have either violated the 

local MOE requirements and are not 

seeking to restore funding in the 

subsequent year to the level they should 

have maintained in the prior year or 

incorrectly calculated MOE in a 

previous year due to confusion. 

However, this regulation could also 

potentially decrease the costs for small 

LEAs to the extent that increased 

understanding of LEA MOE 

requirements and use of all four tests to 

demonstrate LEAs met MOE would 

result in States making fewer 

repayments to the Department and 

seeking fewer recoveries from LEAs. 

Based on the limited information 

available, the Secretary does not believe 

that the effect would be significant. We 

do not have any evidence that LEAs 

generally are likely to violate the MOE 

requirements and we have no reason to 

believe that small LEAs are more likely 

to violate the local MOE requirements 

than larger LEAs. There are no increased 

costs associated with this regulatory 

action for LEAs that do not violate the 

MOE requirement. 

Paperwork Reduction Act of 1995 

Under the Paperwork Reduction Act 

of 1995 (44 U.S.C. 3501–3520), we have 

assessed the potential information 

collections in these proposed 

regulations that would be subject to 

review by OMB (Report on IDEA Part B 

Maintenance of Effort Reduction 

(§ 300.205(a)) and Coordinated Early 

Intervening Services (§ 300.226)) 

(Information Collection 1820–0689). In 

conducting this analysis, the 

Department examined the extent to 

which the amended regulations would 

add information collection requirements 

for public agencies. Based on this 

analysis, the Secretary has concluded 

that these amendments to the Part B 

regulations would not impose 

additional information collection 

requirements. 

Intergovernmental Review 

This program is subject to Executive 

Order 12372 and the regulations in 34 

CFR part 79. One of the objectives of the 

Executive order is to foster an 

intergovernmental partnership and a 

strengthened federalism. The Executive 

order relies on processes developed by 

State and local governments for 

coordination and review of proposed 

Federal financial assistance. 

This document provides early 

notification of the Department’s specific 

plans and actions for this program. 

Assessment of Educational Impact 

In accordance with section 411 of the 

General Education Provisions Act, 20 

U.S.C. 1221e–4, the Secretary 

particularly requests comments on 

whether these proposed regulations 

would require transmission of 

information that any other agency or 

authority of the United States gathers or 

makes available. 

Accessible Format: Individuals with 

disabilities can obtain this document in 

an accessible format (e.g., braille, large 

print, audiotape, or compact disc) on 

request to the person listed under FOR

FURTHER INFORMATION CONTACT. 

Electronic Access to this Document: 

The official version of this document is 

the document published in the Federal 

Register. Free Internet access to the 

official edition of the Federal Register 

and the Code of Federal Regulations is 

available via the Federal Digital System 

at: www.gpo.gov/fdsys. At this site you 

can view this document, as well as all 

other documents of this Department 

published in the Federal Register, in 

text or Adobe Portable Document 

Format (PDF). To use PDF you must 

have Adobe Acrobat Reader, which is 

available free at the site. 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 181 / Wednesday, September 18, 2013 / Proposed Rules 57335 

You may also access documents of the 

Department published in the Federal 

Register by using the article search 

feature at: www.federalregister.gov. 

Specifically, through the advanced 

search feature at this site, you can limit 

your search to documents published by 

the Department. 

(Catalog of Federal Domestic Assistance 

Number 84.027, Assistance to States for 

Education of Children with Disabilities) 

List of Subjects in 34 CFR Part 300 

Administrative practice and 

procedure, Education of individuals 

with disabilities, Elementary and 

secondary education, Equal educational 

opportunity, Grant programs— 

education, Privacy, Private schools, 

Reporting and recordkeeping 

requirements. 

Dated: September 13, 2013. 

Arne Duncan, 

Secretary of Education. 

For the reasons discussed in the 

preamble, the Secretary proposes to 

amend 34 CFR part 300 as follows: 

PART 300—ASSISTANCE TO STATES 

FOR THE EDUCATION OF CHILDREN 

WITH DISABILITIES 

■ 1. The authority citation for part 300 

continues to read as follows: 

Authority: 20 U.S.C. 1221e–3, 1406, 1411– 

1419, unless otherwise noted. 

■ 2. Section 300.203 is revised to read 

as follows: 

§ 300.203 Maintenance of effort. 

(a) Compliance standard. (1) Except 

as provided in §§ 300.204 and 300.205, 

funds provided to an LEA under Part B 

of the Act must not be used to reduce 

the level of expenditures for the 

education of children with disabilities 

made by the LEA from local funds 

below the level of those expenditures 

for the preceding fiscal year. 

(2) An LEA meets this standard if it 

does not— 

(i) Reduce the level of expenditures 

for the education of children with 

disabilities made by the LEA from State 

and local funds, either in total or per 

capita, below the level of those 

expenditures for the preceding fiscal 

year, except as provided in §§ 300.204 

and 300.205; 

(ii) Reduce the level of expenditures 

for the education of children with 

disabilities made by the LEA from local 

funds, either in total or per capita, 

below the level of those expenditures 

for the most recent fiscal year for which 

the LEA met the MOE compliance 

standard based on local funds only, 

even if the LEA also met the MOE 

compliance standard based on State and 

local funds, except as provided in 

§§ 300.204 and 300.205; or 

(iii) Reduce the level of expenditures 

for the education of children with 

disabilities made by the LEA from local 

funds, either in total or per capita, 

below the level of those expenditures 

for the preceding fiscal year if the LEA 

has not previously met the MOE 

compliance standard based on local 

funds only, except as provided in 

§§ 300.204 and 300.205. 

(3) Expenditures made from funds 

provided by the Federal Government for 

which the SEA is required to account to 

the Federal Government or for which 

the LEA is required to account to the 

Federal Government directly or through 

the SEA may not be considered in 

determining whether an LEA meets the 

standard in this paragraph. 

(b) Eligibility standard. (1) Except as 

provided in paragraph (b)(2) of this 

section, the SEA must determine that an 

LEA complies with paragraph (a) of this 

section for purposes of establishing the 

LEA’s eligibility for an award for a fiscal 

year if the LEA budgets, for the 

education of children with disabilities, 

at least the same total or per capita 

amount from either of the following 

sources as the LEA spent for that 

purpose from the same source for the 

most recent fiscal year for which 

information is available: 

(i) Local funds only. 

(ii) The combination of State and local 

funds. 

(2) An LEA that relies on paragraph 

(b)(1)(i) of this section for any fiscal year 

must ensure that the amount of local 

funds it budgets for the education of 

children with disabilities in that year is 

at least the same, either in total or per 

capita, as the amount it spent for that 

purpose in the most recent fiscal year 

for which information is available and 

the LEA met the MOE compliance 

standard based on local funds only, 

even if the LEA also met the MOE 

compliance standard based on State and 

local funds. 

(3) An LEA that relies on paragraph 

(b)(1)(i) of this section for any fiscal year 

and has not previously met the MOE 

compliance standard based on local 

funds only must ensure that the amount 

of local funds it budgets for the 

education of children with disabilities 

in that year is at least the same, either 

in total or per capita, as the amount it 

spent from local funds for that purpose 

in the most recent fiscal year for which 

information is available. 

(c) Subsequent years. If, for any fiscal 

year, an LEA fails to meet the 

requirement of paragraph (a) of this 

section, the level of expenditures 

required of the LEA for any fiscal year 

beginning on or after July 1, 2014 under 

paragraphs (a) and (b) of this section is 

the amount that would have been 

required in the absence of that failure 

and not the LEA’s reduced level of 

expenditures. 

(d) Consequence of failure to 

maintain effort. If an LEA fails to 

maintain its level of expenditures for 

the education of children with 

disabilities in accordance with 

paragraph (a) of this section, the SEA is 

liable in a recovery action under 20 

U.S.C. 1234a to return to the 

Department, using non-Federal funds, 

an amount equal to the amount by 

which the LEA failed to maintain its 

level of expenditures in accordance 

with paragraph (a) of this section. 

(Approved by the Office of Management and 

Budget under control number 1820–0600) 

(Authority: 20 U.S.C. 1413(a)(2)(A)) 

[FR Doc. 2013–22668 Filed 9–17–13; 8:45 am] 

BILLING CODE 4000–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R07–OAR–2013–0511; FRL–9901–00– 

Region 7] 

Approval and Promulgation of 

Implementation Plans; State of 

Missouri; Conformity of General 

Federal Actions to State 

Implementation Plans 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA proposes to approve the 

State Implementation Plan (SIP) 

revision submitted by the state of 

Missouri on August 12, 2011. This 

revision proposes to update the state 

general conformity rule in its entirety to 

bring it into compliance with the 

Federal general conformity rule which 

was updated in the Federal Register on 

April 5, 2010. General conformity 

regulations prohibit Federal agencies 

from taking actions that may cause or 

contribute to violations of the National 

Ambient Air Quality Standards 

(NAAQS). This rule applies to nonattainment and maintenance areas of the 

state. The revision to Missouri’s rule 

does not have an adverse affect on air 

quality. EPA’s approval of this SIP 

revision is being done in accordance 

with the requirements of the Clean Air 

Act (CAA). 


emcdonald on DSK67QTVN1PROD with PROPOSALS