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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3007 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 3007

           To provide fiscal assistance to local governments.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             June 23, 2009

Mr. Kanjorski introduced the following bill; which was referred to the 
              Committee on Oversight and Government Reform

_______________________________________________________________________

                                 A BILL

 
           To provide fiscal assistance to local governments.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

                TITLE I--ALLOCATION AND PAYMENT OF FUNDS

SEC. 101. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Local Fiscal 
Assistance Act of 2009''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

                TITLE I--ALLOCATION AND PAYMENT OF FUNDS

Sec. 101. Short title; table of contents.
Sec. 102. Payments to local governments.
Sec. 103. Use of funds by local governments for priority expenditures.
Sec. 104. Creation of trust fund; appropriations.
Sec. 105. Allocation among States.
Sec. 106. Entitlements of local governments.
Sec. 107. Definitions and special rules for application of allocation 
                            formulas.
                  TITLE II--ADMINISTRATIVE PROVISIONS

Sec. 201. Reports on use of funds; publication.
Sec. 202. Miscellaneous provisions.
Sec. 203. Definitions.

SEC. 102. PAYMENTS TO LOCAL GOVERNMENTS.

    (a) In General.--Except as otherwise provided in this Act, the 
Secretary shall, for each entitlement period, pay out of the Trust Fund 
to each unit of local government a total amount equal to the 
entitlement of such unit determined under section 106 for such period.
    (b) Installments.--In the case of entitlement periods ending after 
the date of the enactment of this Act, such payments shall be made in 
installments, but not less often than once for each quarter, and, in 
the case of quarters ending after the date of the enactment of this 
Act, shall be paid not later than 5 days after the close of each 
quarter. Such payments for any entitlement period may be initially made 
on the basis of estimates. Proper adjustment shall be made in the 
amount of any payment to a unit of local government to the extent that 
the payments previously made to such government under this title were 
in excess of or less than the amounts required to be paid.

SEC. 103. USE OF FUNDS BY LOCAL GOVERNMENTS FOR PRIORITY EXPENDITURES.

    (a) In General.--Funds received by units of local government under 
this title may be used only for priority expenditures. For purposes of 
this Act, the term ``priority expenditures'' means only--
            (1) ordinary and necessary maintenance and operating 
        expenses for--
                    (A) public safety (including law enforcement, fire 
                protection, and building code enforcement);
                    (B) environmental protection (including sewage 
                disposal, sanitation, and pollution abatement);
                    (C) public transportation (including transit 
                systems and streets and roads);
                    (D) health;
                    (E) recreation;
                    (F) libraries;
                    (G) social services for the poor or aged; and
                    (H) financial administration; and
            (2) ordinary and necessary capital expenditures authorized 
        by law.
    (b) Certificates by Local Governments.--The Secretary is authorized 
to accept a certification by the chief executive officer of a unit of 
local government that the unit of local government has used the funds 
received by it under this title for an entitlement period only for 
priority expenditures, unless he determines that such certification is 
not sufficiently reliable to enable him to carry out his duties under 
this title.

SEC. 104. CREATION OF TRUST FUND; APPROPRIATIONS.

    (a) Trust Fund.--
            (1) In general.--There is hereby established on the books 
        of the Treasury of the United States a trust fund to be known 
        as the ``Local Government Fiscal Assistance Trust Fund'' 
        (referred to in this title as the ``Trust Fund''). The Trust 
        Fund shall remain available without fiscal year limitation and 
        shall consist of such amounts as may be appropriated to it and 
        deposited in it as provided in subsection (b). Except as 
        provided in this Act, amounts in the Trust Fund may be used 
        only for the payments to local governments provided by this 
        title.
            (2) Trustee.--The Secretary of the Treasury shall be the 
        trustee of the Trust Fund and shall report to the Congress not 
        later than March 1 of each year on the operation and status of 
        the Trust Fund during the preceding fiscal year.
    (b) Appropriations.--
            (1) In general.--There is appropriated to the Trust Fund, 
        out of amounts in the general fund of the Treasury attributable 
        to the collections of the Federal individual income taxes not 
        otherwise appropriated--
                    (A) for the period beginning on the date of the 
                enactment of this Act, and ending September 30, 2009, 
                $30,000,000,000;
                    (B) for fiscal year 2010, $30,000,000,000; and
                    (C) for fiscal year 2011, $30,000,000,000.
            (2) Deposits.--Amounts appropriated by paragraph (1) for 
        any fiscal year or other period shall be deposited in the Trust 
        Fund on the later of (A) the first day of such year or period, 
        or (B) the day after the date of enactment of this Act.
    (c) Transfers From Trust Fund to General Fund.--The Secretary shall 
from time to time transfer from the Trust Fund to the general fund of 
the Treasury any moneys in the Trust Fund which he determines will not 
be needed to make payments to units of local government under this 
title.

SEC. 105. ALLOCATION AMONG STATES.

    (a) In General.--There shall be allocated to each State for each 
entitlement period, out of amounts appropriated under section 104(b)(1) 
for that entitlement period, an amount which bears the same ratio to 
the amount appropriated under that section for that period as the 
amount allocable to that State under subsection (b) bears to the sum of 
the amounts allocable to all States under subsection (b).
    (b) Determination of Allocable Amount.--
            (1) In general.--For purposes of subsection (a), the amount 
        allocable to a State under this subsection for any entitlement 
        period shall be determined under paragraph (2).
            (2) Three factor formula.--For purposes of paragraph (1), 
        the amount allocable to a State under this paragraph for any 
        entitlement period is the amount which bears the same ratio to 
        $20,000,000,000 as--
                    (A) the population of that State, multiplied by the 
                general tax effort factor of that State, multiplied by 
                the relative income factor of that State, bears to
                    (B) the sum of the products determined under 
                subparagraph (A) for all States.

SEC. 106. ENTITLEMENTS OF LOCAL GOVERNMENTS.

    (a) Allocation Among County Areas.--The amount to be allocated to 
the units of local government within a State for any entitlement period 
shall be allocated among the county areas located in that State so that 
each county area will receive an amount which bears the same ratio to 
the total amount to be allocated to the units of local government 
within that State as--
            (1) the population of that county area, multiplied by the 
        general tax effort factor of that county area, multiplied by 
        the relative income factor of that county area, bears to
            (2) the sum of the products determined under paragraph (1) 
        for all county areas within that State.
    (b) Allocation to County Governments, Municipalities, Townships, 
etc.--
            (1) County governments.--The county government shall be 
        allocated that portion of the amount allocated to the county 
        area for the entitlement period under subsection (a) which 
        bears the same ratio to such amount as the adjusted taxes of 
        the county government bear to the adjusted taxes of the county 
        government and all other units of local government located in 
        the county area.
            (2) Other units of local government.--The amount remaining 
        for allocation within a county area after the application of 
        paragraph (1) shall be allocated among the units of local 
        government (other than the county government and other than 
        township governments) located in that county area so that each 
        unit of local government will receive an amount which bears the 
        same ratio to the total amount to be allocated to all such 
        units as--
                    (A) the population of that local government, 
                multiplied by the general tax effort factor of that 
                local government, multiplied by the relative income 
                factor of that local government, bears to
                    (B) the sum of the products determined under 
                subparagraph (A) for all such units.
            (3) Township governments.--If the county area includes one 
        or more township governments, then before applying paragraph 
        (2)--
                    (A) there shall be set aside for allocation under 
                subparagraph (B) to such township governments that 
                portion of the amount allocated to the county area for 
                the entitlement period which bears the same ratio to 
                such amount as the sum of the adjusted taxes of all 
                such township governments bears to the aggregate 
                adjusted taxes of the county government, such township 
                governments, and all other units of local government 
                located in the county area, and
                    (B) that portion of each amount set aside under 
                subparagraph (A) shall be allocated to each township 
                government on the same basis as amounts are allocated 
                to units of local government under paragraph (2).
        If this paragraph applies with respect to any county area for 
        any entitlement period, the remaining portion allocated under 
        paragraph (2) to the units of local government located in the 
        county area (other than the county government and the township 
        governments) shall be appropriately reduced to reflect the 
        amounts set aside under subparagraph (A).
            (4) Indian tribes and alaskan native villages.--If within a 
        county area there is an Indian tribe or Alaskan native village 
        which has a recognized governing body which performs 
        substantial governmental functions, then before applying 
        paragraph (1) there shall be allocated to such tribe or village 
        a portion of the amount allocated to the county area for the 
        entitlement period which bears the same ratio to such amount as 
        the population of that tribe or village within that county area 
        bears to the population of that county area. If this paragraph 
        applies with respect to any county area for any entitlement 
        period, the amount to be allocated under paragraph (1) shall be 
        appropriately reduced to reflect the amount allocated under the 
        preceding sentence. If the entitlement of any such tribe or 
        village is waived for any entitlement period by the governing 
        body of that tribe or village, then the provisions of this 
        paragraph shall not apply with respect to the amount of such 
        entitlement for such period.
            (5) Rule for small units of government.--If the Secretary 
        determines that in any county area the data available for any 
        entitlement period are not adequate for the application of the 
        formulas set forth in paragraphs (2) and (3)(B) with respect to 
        units of local government (other than a county government) with 
        a population below a number (not more than 500) prescribed for 
        that county area by the Secretary, he may apply paragraph (2) 
        or (3)(B) by allocating for such entitlement period to each 
        such unit located in that county area an amount which bears the 
        same ratio to the total amount to be allocated under paragraph 
        (2) or (3)(B) for such entitlement period as the population of 
        such unit bears to the population of all units of local 
        government in that county area to which allocations are made 
        under such paragraph. If the preceding sentence applies with 
        respect to any county area, the total amount to be allocated 
        under paragraph (2) or (3)(B) to other units of local 
        government in that county area for the entitlement period shall 
        be appropriately reduced to reflect the amounts allocated under 
        the preceding sentence.
            (6) Entitlement.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the entitlement of any unit of local 
                government for any entitlement period shall be the 
                amount allocated to such unit under this subsection 
                (after taking into account any applicable modification 
                under subsection (c)).
                    (B) Maximum and minimum per capita entitlement.--
                Subject to the provisions of subparagraphs (C) and (D), 
                the per capita amount allocated to any county area or 
                any unit of local government (other than a county 
                government) within a State under this section for any 
                entitlement period shall not be less than 20 percent, 
                nor more than 145 percent, of two-thirds of the amount 
                allocated to the State under section 105, divided by 
                the population of that State.
                    (C) Limitation.--The amount allocated to any unit 
                of local government under this section for any 
                entitlement period shall not exceed 50 percent of the 
                sum of (i) such government's adjusted taxes, and (ii) 
                the intergovernmental transfers of revenue to such 
                government (other than transfers to such government 
                under this title).
                    (D) Entitlement less than $1,000, or governing body 
                waives entitlement.--If (but for this subparagraph) the 
                entitlement of any unit of local government below the 
                level of the county government--
                            (i) would be less than $1,000 for any 
                        entitlement period ($500 for an entitlement 
                        period of 6 months), or
                            (ii) is waived for any entitlement period 
                        by the governing body of such unit,
                then the amount of such entitlement for such period 
                shall (in lieu of being paid to such unit) be added to, 
                and shall become a part of, the entitlement for such 
                period of the county government of the county area in 
                which such unit is located.
            (7) Adjustment of entitlement.--
                    (A) In general.--In adjusting the allocation of any 
                county area or unit of local government, the Secretary 
                shall make any adjustment required under paragraph 
                (6)(B) first, any adjustment required under paragraph 
                (6)(C) next, and any adjustment required under 
                paragraph (6)(D) last.
                    (B) Adjustment for application of maximum or 
                minimum per capita entitlement.--The Secretary shall 
                adjust the allocations made under this section to 
                county areas or to units of local governments in any 
                State in order to bring those allocations into 
                compliance with the provisions of paragraph (6)(B). In 
                making such adjustments he shall make any necessary 
                adjustments with respect to county areas before making 
                any necessary adjustments with respect to units of 
                local government.
                    (C) Adjustment for application of limitation.--In 
                any case in which the amount allocated to a unit of 
                local government is reduced under paragraph (6)(C) by 
                the Secretary, the amount of that reduction--
                            (i) in the case of a unit of local 
                        government (other than a county government), 
                        shall be added to and increase the allocation 
                        of the county government of the county area in 
                        which it is located, unless (on account of the 
                        application of paragraph (6)) that county 
                        government may not receive it, in which case 
                        the amount of the reduction shall be added to 
                        and increase the entitlement of the State 
                        government of the State in which that unit of 
                        local government is located; and
                            (ii) in the case of a county government, 
                        shall be added to and increase the entitlement 
                        of the State government of the State in which 
                        it is located.
    (c) Special Allocation Rules.--
            (1) Optional formula.--A State may by law provide for the 
        allocation of funds among county areas, or among units of local 
        government (other than county governments), on the basis of the 
        population multiplied by the general tax effort factors of such 
        areas or units of local government, on the basis of the 
        population multiplied by the relative income factors of such 
        areas or units of local government, or on the basis of a 
        combination of those two factors. Any State which provides by 
        law for such a variation in the allocation formula provided by 
        subsection (a), or by paragraphs (2) and (3) of subsection (b), 
        shall notify the Secretary of such law not later than 30 days 
        before the beginning of the first entitlement period to which 
        such law is to apply. Any such law shall--
                    (A) provide for allocating 100 percent of the 
                aggregate amount to be allocated under subsection (a), 
                or under paragraphs (2) and (3) of subsection (b);
                    (B) apply uniformly throughout the State; and
                    (C) apply during the period beginning on the first 
                day of the first entitlement period to which it applies 
                and ending on September 30, 2011.
            (2) Certification.--Paragraph (1) shall apply within a 
        State only if the Secretary certifies that the State law 
        complies with the requirements of such paragraph. The Secretary 
        shall not certify any such law with respect to which he 
        receives notification later than 30 days prior to the first 
        entitlement period during which it is to apply.
    (d) Governmental Definitions and Related Rules.--For purposes of 
this Act--
            (1) Units of local government.--The term ``unit of local 
        government'' means the government of a county, municipality, 
        township, or other unit of government below the State which is 
        a unit of general government (determined on the basis of the 
        same principles as are used by the Bureau of the Census for 
        general statistical purposes). Such term also means, except for 
        purposes of paragraphs (1), (2), (3), (5), (6)(C), and (6)(D) 
        of subsection (b), and, except for purposes of subsection (c), 
        the recognized governing body of an Indian tribe or Alaskan 
        native village which performs substantial governmental 
        functions.
            (2) Certain areas treated as counties.--In any State in 
        which any unit of local government (other than a county 
        government) constitutes the next level of government below the 
        State government level, then, except as provided in the next 
        sentence, the geographic area of such unit of government shall 
        be treated as a county area (and such unit of government shall 
        be treated as a county government) with respect to that portion 
        of the State's geographic area. In any State in which any 
        county area is not governed by a county government but contains 
        two or more units of local government, such units shall not be 
        treated as county governments and the geographic areas of such 
        units shall not be treated as county areas.
            (3) Townships.--The term ``township'' includes equivalent 
        subdivisions of government having different designations (such 
        as ``towns''), and shall be determined on the basis of the same 
        principles as are used by the Bureau of the Census for general 
        statistical purposes.
            (4) Units of local government located in larger entity.--A 
        unit of local government shall be treated as located in a 
        larger entity if part or all of its geographic area is located 
        in the larger entity.
            (5) Only part of unit located in larger entity.--If only 
        part of a unit of local government is located in a larger 
        entity, such part shall be treated for allocation purposes as a 
        separate unit of local government, and all computations shall, 
        except as otherwise provided in regulations, be made on the 
        basis of the ratio which the estimated population of such part 
        bears to the population of the entirety of such unit.
            (6) Boundary changes, governmental reorganization, etc.--
        If, by reason of boundary line changes, by reason of State 
        statutory or constitutional changes, by reason of annexations 
        or other governmental reorganizations, or by reason of other 
        circumstances, the application of any provision of this section 
        to units of local government does not carry out the purposes of 
        this title, the application of such provision shall be made, 
        under regulations prescribed by the Secretary, in a manner 
        which is consistent with such purposes.

SEC. 107. DEFINITIONS AND SPECIAL RULES FOR APPLICATION OF ALLOCATION 
              FORMULAS.

    (a) In General.--For purposes of this title--
            (1) Population.--Population shall be determined on the same 
        basis as resident population is determined by the Bureau of the 
        Census for general statistical purposes.
            (2) Urbanized population.--Urbanized population means the 
        population of any area consisting of a central city or cities 
        of 50,000 or more inhabitants (and of the surrounding closely 
        settled territory for such city or cities) which is treated as 
        an urbanized area by the Bureau of the Census for general 
        statistical purposes.
            (3) Income.--Income means total money income received from 
        all sources, as determined by the Bureau of the Census for 
        general statistical purposes.
            (4) Personal income.--Personal income means the income of 
        individuals, as determined by the Department of Commerce for 
        national income accounts purposes.
            (5) Dates for determining allocations and entitlements.--
        Except as provided in regulations, the determination of 
        allocations and entitlements for any entitlement period shall 
        be made as of the first day of the third month immediately 
        preceding the beginning of such period.
            (6) Intergovernmental transfers.--The intergovernmental 
        transfers of revenue to any government are the amounts of 
        revenue received by that government from other governments as a 
        share in financing (or as reimbursement for) the performance of 
        governmental functions, as determined by the Bureau of the 
        Census for general statistical purposes.
            (7) Data used; uniformity of data.--
                    (A) General rule.--Except as provided in 
                subparagraph (B), the data used shall be the most 
                recently available data provided by the Bureau of the 
                Census or the Department of Commerce, as the case may 
                be.
                    (B) Use of estimates, etc.--Where the Secretary 
                determines that the data referred to in subparagraph 
                (A) are not current enough or are not comprehensive 
                enough to provide for equitable allocations, he may use 
                such additional data (including data based on 
                estimates) as may be provided for in regulations.
    (b) Income Tax Amount of States.--For purposes of this title--
            (1) In general.--The income tax amount of any State for any 
        entitlement period is the income tax amount of such State as 
        determined under paragraphs (2) and (3).
            (2) Income tax amount.--The income tax amount of any State 
        for any entitlement period is 15 percent of the net amount 
        collected from the State individual income tax of such State 
        during 2009 or (if later) during the last calendar year ending 
        before the beginning of such entitlement period.
            (3) Ceiling and floor.--The income tax amount of any State 
        for any entitlement period--
                    (A) shall not exceed 6 percent, and
                    (B) shall not be less than 1 percent,
        of the Federal individual income tax liabilities attributed to 
        such State for taxable years ending during 2008 or (if later) 
        during the last calendar year ending before the beginning of 
        such entitlement period.
            (4) State individual income tax.--The individual income tax 
        of any State is the tax imposed upon the income of individuals 
        by such State and described as a State income tax under section 
        164(a)(3) of the Internal Revenue Code of 1986.
            (5) Federal individual income tax liabilities.--Federal 
        individual income tax liabilities attributed to any State for 
        any period shall be determined on the same basis as such 
        liabilities are determined for such period by the Internal 
        Revenue Service for general statistical purposes.
    (c) General Tax Effort of States.--
            (1) In general.--For purposes of this title--
                    (A) General tax effort factor.--The general tax 
                effort factor of any State for any entitlement period 
                is (i) the net amount collected from the State and 
                local taxes of such State during the most recent 
                reporting year, divided by (ii) the aggregate personal 
                income (as defined in paragraph (4) of subsection (a)) 
                attributed to such State for the same period.
                    (B) General tax effort amount.--The general tax 
                effort amount of any State for any entitlement period 
                is the amount determined by multiplying--
                            (i) the net amount collected from the State 
                        and local taxes of such State during the most 
                        recent reporting year, by
                            (ii) the general tax effort factor of that 
                        State.
            (2) State and local taxes.--
                    (A) Taxes taken into account.--The State and local 
                taxes taken into account under paragraph (1) are the 
                compulsory contributions exacted by the State (or by 
                any unit of local government or other political 
                subdivision of the State) for public purposes (other 
                than employee and employer assessments and 
                contributions to finance retirement and social 
                insurance systems, and other than special assessments 
                for capital outlay), as such contributions are 
                determined by the Bureau of the Census for general 
                statistical purposes.
                    (B) Most recent reporting year.--The most recent 
                reporting year with respect to any entitlement period 
                consists of the years taken into account by the Bureau 
                of the Census in its most recent general determination 
                of State and local taxes made before the close of such 
                period.
    (d) General Tax Effort Factor of County Area.--For purposes of this 
title, the general tax effort factor of any county area for any 
entitlement period is--
            (1) the adjusted taxes of the county government plus the 
        adjusted taxes of each other unit of local government within 
        that county area, divided by
            (2) the aggregate income (as defined in paragraph (3) of 
        subsection (a)) attributed to that county area.
    (e) General Tax Effort Factor of Unit of Local Government.--For 
purposes of this title--
            (1) In general.--The general tax effort factor of any unit 
        of local government for any entitlement period is--
                    (A) the adjusted taxes of that unit of local 
                government, divided by
                    (B) the aggregate income (as defined in paragraph 
                (3) of subsection (a)) attributed to that unit of local 
                government.
            (2) Adjusted taxes.--
                    (A) In general.--The adjusted taxes of any unit of 
                local government are--
                            (i) the compulsory contributions exacted by 
                        such government for public purposes (other than 
                        employee and employer assessments and 
                        contributions to finance retirement and social 
                        insurance systems, and other than special 
                        assessments for capital outlay), as such 
                        contributions are determined by the Bureau of 
                        the Census for general statistical purposes, 
                        and
                            (ii) adjusted (under regulations prescribed 
                        by the Secretary) by excluding an amount equal 
                        to that portion of such compulsory 
                        contributions which is properly allocable to 
                        expenses for education.
                    (B) Certain sales taxes collected by counties.--In 
                any case where--
                            (i) a county government exacts sales taxes 
                        within the geographic area of a unit of local 
                        government and transfers part or all of such 
                        taxes to such unit without specifying the 
                        purposes for which such unit may spend the 
                        revenues, and
                            (ii) the Governor of the State notifies the 
                        Secretary that the requirements of this 
                        subparagraph have been met with respect to such 
                        taxes,
                then the taxes so transferred shall be treated as the 
                taxes of the unit of local government (and not the 
                taxes of the county government).
    (f) Relative Income Factor.--For purposes of this title, the 
relative income factor is a fraction--
            (1) in the case of a State, the numerator of which is the 
        per capita income of the United States and the denominator of 
        which is the per capita income of that State;
            (2) in the case of a county area, the numerator of which is 
        the per capita income of the State in which it is located and 
        the denominator of which is the per capita income of that 
        county area; and
            (3) in the case of a unit of local government, the 
        numerator of which is the per capita income of the county area 
        in which it is located and the denominator of which is the per 
        capita income of the geographic area of that unit of local 
        government.
For purposes of this subsection, per capita income shall be determined 
on the basis of income as defined in paragraph (3) of subsection (a).

                  TITLE II--ADMINISTRATIVE PROVISIONS

SEC. 201. REPORTS ON USE OF FUNDS; PUBLICATION.

    (a) Reports on Use of Funds.--Each State government and unit of 
local government which receives funds under title I shall, after the 
close of each entitlement period, submit a report to the Secretary 
setting forth the amounts and purposes for which funds received during 
such period have been spent or obligated. Such reports shall be in such 
form and detail and shall be submitted at such time as the Secretary 
may prescribe. The Secretary shall establish a publicly accessible 
website for purposes of this Act and shall post such reports on that 
website.
    (b) Reports on Planned Use of Funds.--Each State government and 
unit of local government which expects to receive funds under title I 
for any entitlement period beginning on or after October 1, 2009 shall 
submit a report to the Secretary setting forth the amounts and purposes 
for which it plans to spend or obligate the funds which it expects to 
receive during such period. Such reports shall be in such form and 
detail as the Secretary may prescribe and shall be submitted at such 
time before the beginning of the entitlement period as the Secretary 
may prescribe.

SEC. 202. MISCELLANEOUS PROVISIONS.

    (a) Assurances to the Secretary.--In order to qualify for any 
payment under title I for any entitlement period beginning on or after 
October 1, 2009, a State government or unit of local government must 
establish (in accordance with regulations prescribed by the Secretary, 
and, with respect to a unit of local government, after an opportunity 
for review and comment by the Governor of the State in which such unit 
is located) to the satisfaction of the Secretary that--
            (1) it will establish a trust fund in which it will deposit 
        all payments it receives under title I;
            (2) it will use amounts in such trust fund (including any 
        interest earned thereon while in such trust fund) during such 
        reasonable period or periods as may be provided in such 
        regulations;
            (3) in the case of a unit of local government, it will use 
        amounts in such trust fund (including any interest earned 
        thereon while in such trust fund) only for priority 
        expenditures (as defined in section 103(a)), and will pay over 
        to the Secretary (for deposit in the general fund of the 
        Treasury) an amount equal to 110 percent of any amount expended 
        out of such trust fund in violation of this paragraph, unless 
        such amount is promptly repaid to such trust fund (or the 
        violation is otherwise corrected) after notice and opportunity 
        for corrective action;
            (4) it will provide for the expenditure of amounts received 
        under title I only in accordance with the laws and procedures 
        applicable to the expenditure of its own revenues;
            (5) it will--
                    (A) use fiscal, accounting, and audit procedures 
                which conform to guidelines established therefor by the 
                Secretary (after consultation with the Comptroller 
                General of the United States),
                    (B) provide to the Secretary (and to the 
                Comptroller General of the United States), on 
                reasonable notice, access to, and the right to examine, 
                such books, documents, papers, or records as the 
                Secretary may reasonably require for purposes of 
                reviewing compliance with this Act (or, in the case of 
                the Comptroller General, as the Comptroller General may 
                reasonably require for purposes of reviewing compliance 
                and operations under subsection (c)(2)), and
                    (C) make such annual and interim reports (other 
                than reports required by section 201) to the Secretary 
                as he may reasonably require;
            (6) all laborers and mechanics employed by contractors or 
        subcontractors in the performance of work on any construction 
        project, 25 percent or more of the costs of which project are 
        paid out of its trust fund established under paragraph (1), 
        will be paid wages at rates not less than those prevailing on 
        similar construction in the locality as determined by the 
        Secretary of Labor in accordance with subchapter IV of chapter 
        31 of title 40, United States Code (commonly referred to as the 
        ``Davis-Bacon Act'');
            (7) individuals employed by it whose wages are paid in 
        whole or in part out of its trust fund established under 
        paragraph (1) will be paid wages which are not lower than the 
        prevailing rates of pay for persons employed in similar public 
        occupations by the same employer; and
            (8) in the case of a unit of local government as defined in 
        the second sentence of section 106(d)(1) (relating to 
        governments of Indian tribes and Alaskan native villages), it 
        will expend funds received by it under title I for the benefit 
        of members of the tribe or village residing in the county area 
        from the allocation of which funds are allocated to it under 
        section 106(b)(4).
Paragraph (7) shall apply with respect to employees in any category 
only if 25 percent or more of the wages of all employees of the State 
government or unit of local government in such category are paid from 
the trust fund established by it under paragraph (1).
    (b) Withholding of Payments.--If the Secretary determines that a 
State government or unit of local government has failed to comply 
substantially with any provision of subsection (a) or any regulations 
prescribed thereunder, after giving reasonable notice and opportunity 
for a hearing to the Governor of the State or the chief executive 
officer of the unit of local government, he shall notify the State 
government or unit of local government that if it fails to take 
corrective action within 60 days from the date of receipt of such 
notification further payments to it will be withheld for the remainder 
of the entitlement period and for any subsequent entitlement period 
until such time as the Secretary is satisfied that appropriate 
corrective action has been taken and that there will no longer be any 
failure to comply. Until he is satisfied, the Secretary shall make no 
further payments of such amounts.
    (c) Accounting, Auditing, and Evaluation.--
            (1) In general.--The Secretary shall provide for such 
        accounting and auditing procedures, evaluations, and reviews as 
        may be necessary to insure that the expenditures of funds 
        received under title I by State governments and units of local 
        government comply fully with the requirements of this Act. The 
        Secretary is authorized to accept an audit by a State of such 
        expenditures of a State government or unit of local government 
        if he determines that such audit and the audit procedures of 
        that State are sufficiently reliable to enable him to carry out 
        his duties under this Act.
            (2) Comptroller general shall review compliance.--The 
        Comptroller General of the United States shall make such 
        reviews of the work as done by the Secretary, the State 
        governments, and the units of local government as may be 
        necessary for the Congress to evaluate compliance and 
        operations under this Act.

SEC. 203. DEFINITIONS.

    (a) Secretary.--For purposes of this Act, the term ``Secretary'' 
means the Secretary of the Treasury or his delegate. The term 
``Secretary of the Treasury'' means the Secretary of the Treasury 
personally, not including any delegate.
    (b) Entitlement Period.--For purposes of this Act, the term 
``entitlement period'' means each of the following:
            (1) The period beginning on the date of the enactment of 
        this Act and ending September 30, 2009.
            (2) Fiscal year 2010.
            (3) Fiscal year 2011.
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