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cational agency’s maximum amount under sub-
section (b)’’.
(d) APPLICATION FOR PAYMENT.—Notwithstanding
any other provision of law, the Secretary shall treat as
timely filed an application under section 8002 (20 U.S.C.
7702) from Academy School District 20, Colorado, for a
payment for fiscal year 1999, and shall process that appli-
cation from funds appropriated for that section for fiscal
year 2001.
SEC. 602. CALCULATION OF PAYMENT UNDER SECTION 8003
FOR SMALL LOCAL EDUCATIONAL AGENCIES.
Section 
8003(b)(3)(B)(iv) 
(20 
U.S.C.
7703(b)(3)(B)(iv)) is amended by inserting after ‘‘of the
State in which the agency is located’’ the following: ‘‘or
less than the average per pupil expenditure of all the
States’’.
SEC. 603. ELIGIBILITY UNDER SECTION 8003 FOR CERTAIN
HEAVILY IMPACTED LOCAL EDUCATIONAL
AGENCIES.
(a) ELIGIBILITY.—Section 8003(b)(2)(C) (20 U.S.C.
7703(b)(2)(C)) is amended—
(1) in clauses (i) and (ii) by inserting after
‘‘Federal military installation’’ each place it appears
the following: ‘‘(or if the agency is a qualified local
educational agency as described in clause (iv))’’; and
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(2) by adding at the end the following:
‘‘(iv) 
QUALIFIED
LOCAL
EDU-
CATIONAL AGENCY.—A qualified local edu-
cational agency described in this clause is
an agency that meets the following require-
ments:
‘‘(I) The boundaries of the agen-
cy are the same as island property
designated by the Secretary of the In-
terior to be property that is held in
trust by the Federal Government.
‘‘(II) The agency has no taxing
authority.
‘‘(III) The agency received a pay-
ment under paragraph (1) for fiscal
year 2001.’’.
(b) EFFECTIVE DATE.—The Secretary shall consider
an application for a payment under section 8003(b)(2) for
fiscal year 2002 from a qualified local educational agency
described in section 8003(b)(2)(C)(iv), as added by sub-
section (a), as meeting the requirements of section
8003(b)(2)(C)(iii), and shall provide a payment under sec-
tion 8003(b)(2) for fiscal year 2002, if the agency submits
to the Secretary an application for payment under such
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section not later than 60 days after the date of the enact-
ment of this Act.
SEC. 604. CONSTRUCTION.
(a) SCHOOL
FACILITY
EMERGENCY
AND
MOD-
ERNIZATION
GRANTS.—Section 8007(b) (20 U.S.C.
7707(b)) is amended to read as follows:
‘‘(b) SCHOOL FACILITY EMERGENCY
AND MOD-
ERNIZATION GRANTS AUTHORIZED.—
‘‘(1) IN GENERAL.—From 60 percent of the
amount appropriated for each fiscal year under sec-
tion 8014(e), the Secretary—
‘‘(A) shall award emergency grants in ac-
cordance with this subsection to eligible local
educational agencies to enable the agencies to
carry out emergency repairs of school facilities;
and
‘‘(B) shall award modernization grants in
accordance with this subsection to eligible local
educational agencies to enable the agencies to
carry out the modernization of school facilities.
‘‘(2) 
PRIORITY.—In 
approving 
applications
from local educational agencies for emergency grants
and modernization grants under this subsection, the
Secretary shall give priority to applications for emer-
gency grants and, among such applications for emer-
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gency grants, shall give priority to those applications
of local educational agencies based on the severity of
the emergency.
‘‘(3) ELIGIBILITY REQUIREMENTS.—
‘‘(A) EMERGENCY GRANTS.—A local edu-
cational agency is eligible to receive an emer-
gency grant under this subsection only if—
‘‘(i) the agency (or in the case of a
local educational agency that does not have
the authority to tax or issue bonds, the
agency’s fiscal agent)—
‘‘(I) has no practical capacity to
issue bonds;
‘‘(II) has minimal capacity to
issue bonds and is at 75 percent of
the agency’s limit of bonded indebted-
ness; or
‘‘(III) does not meet the require-
ments of subclauses (I) and (II) but is
eligible to receive funds under section
8003(b)(2) for the fiscal year; and
‘‘(ii) the agency is eligible to receive
assistance under subsection (a) for the fis-
cal year and has a school facility emer-
gency, as determined by the Secretary,
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that poses a health or safety hazard to the
students and school personnel assigned to
the school facility.
‘‘(B) MODERNIZATION
GRANTS.—A local
educational agency is eligible to receive a mod-
ernization grant under this subsection only if—
‘‘(i) the agency (or in the case of a
local educational agency that does not have
the authority to tax or issue bonds, the
agency’s fiscal agent) meets the require-
ments of subclause (I), (II), or (III) of
subparagraph (A)(i);
‘‘(ii) the agency is eligible to receive
assistance under section 8002 for the fiscal
year and has an assessed value of real
property per student that may be taxed for
school purposes that is less than the aver-
age of the assessed value of real property
per student that may be taxed for school
purposes in the State in which the local
educational agency is located; and
‘‘(iii) the agency has facility needs re-
sulting from actions of the Federal Gov-
ernment, such as enrollment increases due
to the expansion of Federal activities,
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housing privatization, or the acquisition of
Federal property.
‘‘(C) RULE OF CONSTRUCTION.—For pur-
poses of subparagraph (A)(i), a local edu-
cational agency—
‘‘(i) has no practical capacity to issue
bonds if the total assessed value of real
property that may be taxed for school pur-
poses is less than $25,000,000; and
‘‘(ii) has minimal capacity to issue
bonds if the total assessed value of real
property that may be taxed for school pur-
poses is not less than $25,000,000 but not
more than $50,000,000.
‘‘(4) AWARD
CRITERIA.—In awarding emer-
gency grants and modernization grants under this
subsection, the Secretary shall consider the following
factors:
‘‘(A) The ability of the local educational
agency to respond to the emergency, or to pay
for the modernization project, as the case may
be, as measured by—
‘‘(i) the agency’s level of bonded in-
debtedness;
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‘‘(ii) the assessed value of real prop-
erty per student that may be taxed for
school purposes compared to the average of
the assessed value of real property per stu-
dent that may be taxed for school purposes
in the State in which the agency is located;
‘‘(iii) the agency’s total tax rate for
school purposes (or, if applicable, for cap-
ital expenditures) compared to the average
total tax rate for school purposes (or the
average capital expenditure tax rate, if ap-
plicable) in the State in which the agency
is located; and
‘‘(iv) funds that are available to the
agency, from any other source, including
section 8007(a), that may be used for cap-
ital expenditures.
‘‘(B) The percentage of property in the
agency that is nontaxable due to the presence
of the Federal Government.
‘‘(C) The number and percentages of chil-
dren described in subparagraphs (A), (B), (C),
and (D) of section 8003(a)(1) served in the
school facility with the emergency or served in
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the school facility proposed for modernization,
as the case may be.
‘‘(D) In the case of an emergency grant,
the severity of the emergency, as measured by
the threat that the condition of the school facil-
ity poses to the health, safety, and well-being of
students.
‘‘(E) In the case of a modernization
grant—
‘‘(i) the severity of the need for mod-
ernization, as measured by such factors
as—
‘‘(I) overcrowding, as evidenced
by the use of portable classrooms; or
‘‘(II) the agency’s inability to
maximize the use of technology or
offer a curriculum in accordance with
contemporary State standards due to
the physical limitations of the current
school facility; and
‘‘(ii) the age of the school facility pro-
posed for modernization.
‘‘(5) OTHER AWARD PROVISIONS.—
‘‘(A) GENERAL PROVISIONS.—
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‘‘(i) LIMITATIONS
ON
AMOUNT
OF
FUNDS.—
‘‘(I) IN GENERAL.—The amount
of funds provided under an emergency
grant 
or 
a 
modernization 
grant
awarded under this subsection to a
local educational agency that meets
the requirements of subclause (II) or
(III) of paragraph (3)(A)(i)—
‘‘(aa) shall not exceed 50
percent of the total cost of the
project to be assisted under this
subsection; and
‘‘(bb) 
shall 
not 
exceed
$3,000,000 during any 5-year pe-
riod.
‘‘(II) IN-KIND CONTRIBUTIONS.—
A local educational agency may use
in-kind contributions to meet the
matching requirement of subclause
(I)(aa).
‘‘(ii) 
PROHIBITIONS
ON
USE
OF
FUNDS.—A local educational agency may
not use funds provided under an emer-
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awarded an emergency grant under this
subsection may not use amounts under the
grant for the complete or partial replace-
ment of an existing school facility unless
such replacement is less expensive or more
cost-effective to correct the identified emer-
gency.
‘‘(ii) CARRY-OVER OF CERTAIN APPLI-
CATIONS.—In the case of a local edu-
cational agency that applies for an emer-
gency grant under this subsection for a fis-
cal year and does not receive the grant for
the fiscal year, the Secretary—
‘‘(I) shall, upon the request of
the agency, treat the application as an
application for an emergency grant
under this subsection for the subse-
quent fiscal year in accordance with
the priority requirements of para-
graph (2); and
‘‘(II) shall allow the agency to
amend or otherwise update the appli-
cation, as appropriate.
‘‘(6) APPLICATION.—A local educational agency
that desires to receive an emergency grant or a mod-
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ernization grant under this subsection shall submit
an application to the Secretary at such time, in such
manner, and accompanied by such information as
the Secretary may require. Each application shall
contain the following:
‘‘(A) The information described in clauses
(i) through (iv) of paragraph (4)(A) and sub-
paragraphs (B) and (C) of paragraph (4).
‘‘(B) In the case of an application for an
emergency grant—
‘‘(i) a description of the school facility
deficiency that poses a health or safety
hazard to the occupants of the facility and
a description of how the deficiency will be
repaired; and
‘‘(ii) a signed statement from an ap-
propriate local official certifying that a de-
ficiency in the school facility threatens the
health or safety of the occupants of the fa-
cility or that prevents the use of all or a
portion of the building.
‘‘(C) In the case of an application for a
modernization grant—
‘‘(i) an explanation of the need for the
school facility modernization project; and
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‘‘(ii) the date on which original con-
struction of the facility to be modernized
was completed.
‘‘(D) A description of the project for which
a grant under this subsection would be used, in-
cluding a cost estimate for the project.
‘‘(E) A description of the interest in, or
authority over, the school facility involved, such
as an ownership interest or a lease arrange-
ment.
‘‘(F) Such other information and assur-
ances as the Secretary may reasonably require.
‘‘(7) REPORT.—
‘‘(A) IN GENERAL.—Not later than Janu-
ary 1 of each year, the Secretary shall prepare
and submit to the appropriate congressional
committees a report that contains a justifica-
tion for each grant awarded under this sub-
section for the prior fiscal year.
‘‘(B) DEFINITION.—In this paragraph, the
term ‘appropriate congressional committees’
means—
‘‘(i) the Committee on Appropriations
and the Committee on Education and the
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Workforce of the House of Representa-
tives; and
‘‘(ii) the Committee on Appropriations
and the Committee on Health, Education,
Labor and Pensions of the Senate.’’.
(b) AUTHORIZATION OF APPROPRIATIONS.—Section
8014(e) (20 U.S.C. 7714(e)) is amended by striking ‘‘for
each of the three succeeding fiscal years’’ and inserting
‘‘for fiscal year 2001, $150,000,000 for fiscal year 2002,
and such sums as may be necessary for each of the four
succeeding fiscal years’’.
SEC. 605. STATE CONSIDERATION OF PAYMENTS IN PRO-
VIDING STATE AID.
Section 8009(b)(1) (20 U.S.C. 7709(b)(1)) is amend-
ed by inserting after ‘‘section 8003(a)(2)(B)’’ the fol-
lowing: ‘‘and, with respect to a local educational agency
that receives a payment under section 8003(b)(2), the
amount in excess of the amount that the agency would
receive if the agency were deemed to be an agency eligible
to receive a payment under section 8003(b)(1) and not
section 8003(b)(2)’’.
SEC. 606. AUTHORIZATION OF APPROPRIATIONS.
Section 8014 (20 U.S.C. 7714) is amended by strik-
ing ‘‘three succeeding fiscal years’’ each place it appears
and inserting ‘‘six succeeding fiscal years’’.
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SEC. 607. REPEAL OF EXISTING TITLE VI; TRANSFER AND
REDESIGNATION OF PROGRAM.
(a) REPEAL OF EXISTING TITLE VI.—Title VI (20
U.S.C. 7301 et seq.) is repealed.
(b) TRANSFER AND REDESIGNATION OF PROGRAM.—
(1) Title VIII (20 U.S.C. 7701 et seq.)—
(A) is transferred from the current placement
of the title and inserted after title V; and
(B) is redesignated as title VI.
(2) Title VI (as redesignated by paragraph (1)(B))
is amended—
(A) by redesignating sections 8001 through
8005 (20 U.S.C. 7701–7705) as sections 6001
through 6005, respectively; and
(B) by redesignating sections 8007 through
8014 (20 U.S.C. 7707–7714) as sections 6006
through 6013, respectively.
(c) CONFORMING AMENDMENTS.—(1) Title VI (as
redesignated by subsection (b)) is amended by striking
‘‘8002’’, ‘‘8003’’, ‘‘8004’’, ‘‘8005’’, ‘‘8008’’, ‘‘8009’’,
‘‘8011’’, ‘‘8013’’, and ‘‘8014’’ each place such terms ap-
pear and inserting ‘‘6002’’, ‘‘6003’’, ‘‘6004’’, ‘‘6005’’,
‘‘6007’’, ‘‘6008’’, ‘‘6010’’, ‘‘6012’’, and ‘‘6013’’, respec-
tively.
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(2) Section 6005 (as redesignated by subsection (b))
is amended in the heading by striking ‘‘8002 AND 8003’’
and inserting ‘‘6002 AND 6003’’.
(3) Section 6009(c)(1) (as redesignated by subsection
(b)) is amended in the heading by striking ‘‘8003’’ and in-
serting ‘‘6003’’.
(d) SAVINGS PROVISION.—Funds appropriated for
title VIII of the Elementary and Secondary Education Act
of 1965 (as in effect on the day before the date of the
enactment of this Act) shall be available for use under title
VI of such Act, as added by this section.
SEC. 608. SENSE OF CONGRESS RELATING TO FULL FUND-
ING OF THE IMPACT AID PROGRAM.
(a) FINDINGS.—Congress finds the following:
(1) More than 90 percent of resources for
school districts in the United States are raised from
State and local property taxes.
(2) School districts that are affected by the
presence of the Federal Government, such as Fed-
eral property that is not subject to taxation, must
still provide educational services to children who are
federally connected by such activities of the Federal
Government.
(3) To mitigate this loss of funding, Congress
has made ‘‘impact aid’’ payments to local edu-
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cational agencies to reimburse the agencies for the
costs of educating federally connected children.
(4) From 1950 to 1969, Congress provided full
funding for the impact aid program to help defray
the costs of educating federally connected children.
(5) For fiscal year 2000, Congress provided
only 46 percent of the costs of educating federally
connected children.
(b) SENSE OF CONGRESS.—It is the sense of Con-
gress that—
(1) the House of Representatives, the Senate,
and the Administration should work together to pro-
vide full funding for the impact aid program in fu-
ture fiscal years in order to meet the needs of school
districts affected by a Federal presence; and
(2) the full funding of the impact aid program
will ensure that federally connected children will con-
tinue to receive a quality education.
TITLE VII—ACCOUNTABILITY
SEC. 701. FLEXIBILITY AND ACCOUNTABILITY.
Title VII is amended to read as follows:
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‘‘TITLE VII—FLEXIBILITY AND
ACCOUNTABILITY
‘‘PART A—STATE ACCOUNTABILITY FOR
IMPROVING ACADEMIC ACHIEVEMENT
‘‘SEC. 7101. STATE FINANCIAL AWARDS.
‘‘(a) IN GENERAL.—Beginning in the 2002–2003
school year, the Secretary shall make in accordance with
this section financial awards, to be known as ‘Achievement
in Education Awards’, to States that have made signifi-
cant progress in improving educational achievement.
‘‘(b) CRITERIA OF PROGRESS.—For the purposes of
subsection (a), the Secretary shall judge progress using
each of the following criteria, giving the greatest weight
to the criterion described in paragraph (1):
‘‘(1) The progress of the State’s students from
economically disadvantaged families and students
from racial and ethnic minority groups—
‘‘(A) on the assessments administered by
the State under section 1111; and
‘‘(B) beginning in the 2003–2004 school
year, on assessments of 4th and 8th grade
reading and mathematics under—
‘‘(i) the State assessments carried out
as part of the National Assessment of
Educational Progress under section 411 of
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the National Education Statistics Act of
1994 (20 U.S.C. 9010); or
‘‘(ii) an assessment selected by the
State that—
‘‘(I) is administered annually;
‘‘(II) yields high quality data
that are valid and reliable;
‘‘(III) meets widely recognized
professional and technical standards,
including specific and rigorous test se-
curity procedures;
‘‘(IV) is developed by an entity
independent from each State and local
government agency in the State in a
manner that protects against any con-
flict of interest;
‘‘(V) has no test questions that
are identical to the test questions used
by the assessment used to meet the
State assessment requirements under
section 1111;
‘‘(VI) provides results in such a
form that they may be expressed in
terms of achievement levels that are
consistent with the achievement levels
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(basic, proficient, and advanced) set
forth in section 1111;
‘‘(VII) provides results in such a
form that they may be disaggregated,
at a minimum, according to income
level and major racial and ethnic
group; and
‘‘(VIII) is administered to all stu-
dents or to a representative sample of
students in the 4th and 8th grades
statewide, with a sample size that is
sufficiently large to produce statis-
tically significant estimates of state-
wide student achievement.
‘‘(2) The overall improvement in the achieve-
ment of all of the State’s students, as measured
by—
‘‘(A) the assessments administered by the
State under section 1111; and
‘‘(B) beginning in the 2003–2004 school
year, the assessments described in paragraph
(1)(B).
‘‘(3) The progress of the State in improving the
English proficiency of students who enter school
with limited English proficiency.
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‘‘(c) OTHER CONSIDERATIONS.—In judging a State’s
progress under subsection (a), the Secretary may also
consider—
‘‘(1) the progress of the State in increasing the
percentage of students who graduate from secondary
schools; and
‘‘(2) the progress of the State in increasing the
percentage 
of 
students 
who 
take 
advanced
coursework (such as Advanced Placement or Inter-
national Baccalaureate courses) and who pass the
exams associated with such coursework.
‘‘(d) AMOUNT.—The Secretary shall determine the
amount of an award under subsection (a) based on—
‘‘(1) the school-age population of the State; and
‘‘(2) the degree of progress shown by a State
with respect to the criteria set forth in subsections
(b) and (c).
‘‘(e) USE OF FUNDS.—
‘‘(1) IN GENERAL.—A State receiving a finan-
cial award under this section shall use the proceeds
of such award only to make financial awards to pub-
lic elementary and secondary schools in the State
that have made the most significant progress with
respect to the criteria described in subsection (b).
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‘‘(2) USE BY SCHOOLS.—In consultation with
the school’s teachers, the principal of each elemen-
tary or secondary school that receives a financial
award from a State under this section shall use the
proceeds of such award at the school for any edu-
cational purpose permitted under State law.
‘‘(3) RESPONSIBLE STATE AGENCY.—The State
educational agency for each State shall be the agen-
cy responsible for making awards under this sub-
section.
‘‘(f) PEER REVIEW.—In selecting States for awards
under subsection (a), the Secretary shall use a peer-review
process.
‘‘(g) COSTS OF INDEPENDENT ASSESSMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
the Secretary shall make grants to States to offset
the costs of administering assessments administered
by the States to meet the requirements of
(b)(1)(B)(ii).
‘‘(2) LIMITATIONS.—Grants made by the Sec-
retary in any year to a State under paragraph (1)—
‘‘(A) may be awarded only to offset the
costs of a single administration of an assess-
ment described in such paragraph in the State
for that year; and
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‘‘(B) may not exceed the costs of admin-
istering in the State for that year the State as-
sessments that would be carried out under the
National Assessment of Educational Progress
described in subsection (b)(1)(B).
‘‘(3) ALLOCATION.—The Secretary may deter-
mine the appropriate methodology of allocating
grants to States under this subsection.
‘‘SEC. 7102. STATE SANCTIONS.
‘‘(a) FAILURE TO MAKE PROGRESS.—
‘‘(1) LOSS OF ADMINISTRATIVE FUNDS.—The
Secretary shall reduce, by 30 percent, the amount of
funding that a State may reserve for State adminis-
tration under the State formula grant programs au-
thorized by this Act if the Secretary determines that,
for 2 consecutive years—
‘‘(A) the State’s students from economi-
cally disadvantaged families and students from
racial and ethnic minority groups failed to
make adequate yearly progress on the assess-
ments administered by the State under section
1111; and
‘‘(B) the State’s students from economi-
cally disadvantaged families and students from
racial and ethnic minority groups failed to
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make measurable progress in reading and
mathematics, as measured by the 4th and 8th
grade assessments described in subsection
(b)(1)(B).
‘‘(2) FURTHER REDUCTIONS.—In each of the first 2
years after the years described in paragraph (1), the Sec-
retary may increase the reduction described in such para-
graph by any amount not more than a total of an addi-
tional 45 percent.
‘‘(b) OTHER FAILURES.—In addition to any action
taken under subsection (a)(1) or (a)(2), the Secretary
shall reduce, by 20 percent, the amount of funding that
a State may reserve for State administration under the
State formula grant programs authorized by this Act if
the Secretary determines that, for 2 consecutive years, the
State failed to make adequate yearly progress—
‘‘(1) with respect to the achievement of children
with limited English proficiency under section
1111(b)(2)(C)(iii)(II)(dd); or
‘‘(2) with respect to the acquisition of English
language proficiency by children with limited
English 
proficiency 
under 
section
1111(b)(2)(C)(iii)(III).
‘‘(c) USE OF FUNDS FOR IMPROVEMENT.—
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‘‘(1) IN GENERAL.—The Secretary shall require
that any funds reduced under this section be allo-
cated by the State to local educational agencies in
the State for school improvement purposes described
in section 1116.
‘‘(2) TREATMENT OF FUNDS.—Funds described
in paragraph (1) shall not count toward the amounts
that are required to be reserved by a State for
school improvement under section 1003.
‘‘SEC. 7103. DEVELOPMENT OF STATE STANDARDS AND AS-
SESSMENTS.
‘‘(a) IN GENERAL.—The Secretary shall make finan-
cial awards to States to enable the States—
‘‘(1) to pay the costs of the development of the
additional State assessments and standards required
by section 1111(b), including the costs of working in
voluntary partnerships with other States, at the sole
discretion of each such State, in developing such as-
sessments and standards if a State chooses to do so;
and
‘‘(2) if a State has developed the assessments
and standards referred to in paragraph (1), to ad-
minister such assessments or to carry out other ac-
tivities described in this title and other activities re-
lated to ensuring accountability for results in the
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State’s schools and local educational agencies, such
as—
‘‘(A) developing academic content and
achievement standards and aligned assessments
in other subjects not required by section 1111;
‘‘(B) developing assessments of English
language proficiency necessary to comply with
section 1111(b)(7);
‘‘(C) assuring the continued validity and
reliability of State assessments;
‘‘(D) refining State assessments to ensure
their continued alignment with the State’s aca-
demic content standards and to improve the
alignment of curricula and instruction mate-
rials;
‘‘(E) providing for multiple measures to in-
crease the reliability and validity of student and
school classifications;
‘‘(F) strengthening the capacity of local
educational agencies and schools to provide all
students the opportunity to increase educational
achievement;
‘‘(G) expanding the range of accommoda-
tions available to students with limited English
proficiency and students with disabilities to im-
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prove the rates of inclusion of such students;
and
‘‘(H) improving the dissemination of infor-
mation on student achievement and school per-
formance to parents and the community.
‘‘(b) BONUSES.—The Secretary shall make a one-
time bonus payment to each State that completes the de-
velopment of the assessments described in subsection (a)
ahead of the deadline set forth in section 1111.
‘‘SEC. 7104. FUNDING.
‘‘(a) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) AWARDS AND BONUS PAYMENTS.—For the
purposes of making awards under section 7101 and
bonus payments under section 7103(b), there are
authorized to be appropriated $40,000,000 for fiscal
year 2002 and such sums as may be necessary for
each of fiscal years 2003 through 2006.
‘‘(2) GRANTS
FOR
INDEPENDENT
ASSESS-
MENTS; ADMINISTRATION OF STATE ASSESSMENTS
UNDER NAEP.—For the purposes of making grants
to offset the costs of independent assessments under
section 7101(g) and for the purposes of admin-
istering the State assessments carried out under the
National Assessment of Educational Progress re-
ferred to in section 7101(b)(1)(B)(i), there are au-
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thorized to be appropriated to the Secretary
$69,000,000 for fiscal year 2002 and such sums as
may be necessary for each of fiscal years 2003
through 2006.
‘‘(3) DEVELOPMENT AND ADMINISTRATION OF
STATE
STANDARDS
AND
ASSESSMENTS.—For the
purposes of carrying out subsection 7103(a), there
are authorized to be appropriated $400,000,000 for
fiscal year 2002 and such sums as may be necessary
for each of the fiscal years 2003 through 2005.
‘‘(b) ALLOCATION
OF
APPROPRIATED
FUNDS.—
From each of the amounts appropriated under subsection
(a), the Secretary shall allocate to the States—
‘‘(1) 50 percent based on the relative number of
children aged 5 to 17 in each State; and
‘‘(2) 50 percent allocated equally among the
States.
‘‘PART B—FUNDING FLEXIBILITY FOR STATE AND
LOCAL EDUCATIONAL AGENCIES
‘‘SEC. 7201. SHORT TITLE.
‘‘This part may be cited as the ‘State and Local
Transferability Act’.
‘‘SEC. 7202. PURPOSE.
‘‘The purpose of this part is to allow States and local
educational agencies the flexibility—
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‘‘(1) to target Federal funds to Federal pro-
grams that most effectively address the unique needs
of States and localities; and
‘‘(2) to transfer Federal funds allocated to
other activities to allocations for activities authorized
under title I programs.
‘‘SEC. 7203. TRANSFERABILITY OF FUNDS.
‘‘(a) TRANSFERS BY STATES.—
‘‘(1) IN
GENERAL.—In accordance with this
part, a State may transfer up 50 percent of the non-
administrative State funds allocated to the State for
use for State-level activities under each of the fol-
lowing provisions to one or more of the State’s allo-
cations under any other of such provisions:
‘‘(A) Part A of Title II.
‘‘(B) Subpart 1 of part A of title IV.
‘‘(C) Part A or B of title V.
‘‘(2) SUPPLEMENTAL FUNDS FOR TITLE I.—In
accordance with this part, a State may transfer any
funds allocated to the State under a provision listed
in paragraph (1) to its allocation under title I.
‘‘(b) TRANSFERS BY LOCAL EDUCATIONAL AGEN-
CIES.—
‘‘(1) AUTHORITY TO TRANSFER FUNDS.—
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‘‘(A) IN
GENERAL.—In accordance with
this part, a local educational agency (except a
local educational agency identified for improve-
ment under section 1116(c)(2) or subject to
corrective action under section 1116(c)(9)) may
transfer not more than 50 percent of the funds
allocated to it under each of the provisions list-
ed in paragraph (2) for a fiscal year to one or
more of its allocations for such fiscal year
under any other provision listed in paragraph
(2).
‘‘(B) AGENCIES
IDENTIFIED
FOR
IM-
PROVEMENT.—A local educational agency iden-
tified for improvement under section 1116(c)(2)
may transfer in accordance with this part not
more than 30 percent of the funds allocated to
it under each of the provisions listed in para-
graph (2)—
‘‘(i) to its allocation for school im-
provement under section 1003;
‘‘(ii) to any other allocation if such
transferred funds are used only for local
educational agency improvement activities
consistent with section 1116(d).
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‘‘(C) SUPPLEMENTAL
FUNDS
FOR
TITLE
I.—In accordance with this part, a local edu-
cational agency may transfer funds allocated to
such agency under a provision listed in para-
graph (2) to its allocation under title I.
‘‘(2) APPLICABLE
PROVISIONS.—A local edu-
cational agency may transfer funds under subpara-
graph (A) or (B) from allocations made under each
of the following provisions:
‘‘(A) Title II.
‘‘(B) Subpart 1 of part A of title IV.
‘‘(C) Subpart 1 of part A of title V or sec-
tion 5212(a)(2)(A).
‘‘(c) NO TRANSFER OF TITLE I FUNDS.—A State or
a local educational agency may not transfer under this
part to any other program any funds allocated to it under
title I.
‘‘(d) MODIFICATION OF PLANS AND APPLICATIONS;
NOTIFICATION.—
‘‘(1) STATE
TRANSFERS.—Each State that
makes a transfer of funds under this section shall—
‘‘(A) modify to account for such transfer
each State plan, or application submitted by the
State, to which such funds relate;
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‘‘(B) not later than 30 days after the date
of such transfer, submit a copy of such modi-
fied plan or application to the Secretary; and
‘‘(C) not later than 30 days before the ef-
fective date of such transfer, notify the Sec-
retary of such transfer.
‘‘(2) LOCAL
TRANSFERS.—Each local edu-
cational agency that makes a transfer under this
section shall—
‘‘(A) modify to account for such transfer
each local plan, or application submitted by the
agency, to which such funds relate;
‘‘(B) not later than 30 days after the date
of such transfer, submit a copy of such modi-
fied plan or application to the State; and
‘‘(C) not later than 30 days before the ef-
fective date of such transfer, notify the State of
such transfer.
‘‘(e) APPLICABLE RULES.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this part, funds transferred under this sec-
tion are subject to each of the rules and require-
ments applicable to the funds allocated by the Sec-
retary under the provision to which the transferred
funds are transferred.
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‘‘(2) CONSULTATION.—Each State educational
agency or local educational agency that transfers
funds under this section shall conduct consultations
in accordance with section 8503(c), if such transfer
transfers funds from a program that provides for
the participation of students, teachers, or other edu-
cational personnel, from private schools.
‘‘PART C—LOCAL FLEXIBILITY DEMONSTRATION
‘‘SEC. 7301. SHORT TITLE.
‘‘This part may be cited as the ‘Local Flexibility
Demonstration Act’.
‘‘SEC. 7302. PURPOSE.
‘‘The purpose of this part is to create options for local
educational agencies—
‘‘(1) to improve the academic achievement of all
students, and to focus the resources of the Federal
Government upon such achievement;
‘‘(2) to improve teacher quality and subject
matter mastery, especially in mathematics, reading,
and science;
‘‘(3) to empower parents and schools to effec-
tively address the needs of their children and stu-
dents;
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‘‘(4) to give local educational agencies max-
imum freedom in determining how to boost academic
achievement and implement education reforms;
‘‘(5) to eliminate Federal barriers to imple-
menting effective local education programs;
‘‘(6) to hold local educational agencies account-
able for boosting the academic achievement of all
students, especially disadvantaged children; and
‘‘(7) to narrow achievement gaps between the
lowest and highest performing groups of students so
that no child is left behind.
‘‘SEC. 7303. AGREEMENTS TO PROVIDE LOCAL FLEXIBILITY.
‘‘(a) AUTHORITY.—Except as otherwise provided in
this part, the Secretary shall enter into performance
agreements—
‘‘(1) with local educational agencies that meet
their State’s definition of adequate yearly progress,
that submit approvable performance agreement pro-
posals, and that are selected under paragraph (2);
and
‘‘(2) under which the agencies may consolidate
and use funds as described in section 7304.
‘‘(b) SELECTION OF LOCAL EDUCATIONAL AGEN-
CIES.—
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‘‘(1) IN GENERAL.—Subject to paragraph (2),
the Secretary shall enter into performance agree-
ments under this part with not more than 100 local
educational agencies. Each such local educational
agency shall be selected from among those local edu-
cational agencies that—
‘‘(A) submit a proposed performance
agreement to the Secretary and demonstrate, to
the satisfaction of the Secretary, that the
agreement—
‘‘(i) has substantial promise of meet-
ing the requirements of this part; and
‘‘(ii) describes a plan to combine and
use funds (as authorized under section
7304) under the agreement to meet the
State’s 
definition 
of 
adequate 
yearly
progress;
‘‘(B) provide information in the proposed
performance agreement regarding how the local
educational agency has notified the State of the
local educational agency’s intent to submit a
proposed performance agreement; and
‘‘(C) have consulted and involved parents
and educators in the development of the pro-
posed performance agreement.
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‘‘(2) GEOGRAPHIC DISTRIBUTION.—
‘‘(A) IN GENERAL.—
‘‘(i) INITIAL
AGREEMENTS.—During
the period of time that expires 3 years
after the date of enactment of the No
Child Left Behind Act of 2001, the Sec-
retary may enter into not more than 2 per-
formance agreements under this part with
local educational agencies in each State.
‘‘(ii) SUBSEQUENT
AGREEMENTS.—
After the expiration of the 3-year period
beginning on the date of enactment of the
No Child Left Behind Act of 2001, the
Secretary may enter into performance
agreements under this part with any num-
ber of local educational agencies in each
State until the total number of such agree-
ments equals 100.
‘‘(B) URBAN AND RURAL AREAS.—If more
than 2 local educational agencies in a State
submit approvable performance agreements
under this part, the Secretary shall select local
educational agencies for performance agree-
ments under this part in a manner that ensures
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an equitable distribution among such agencies
serving urban and rural areas.
‘‘(c) REQUIRED TERMS OF PERFORMANCE AGREE-
MENT.—Each performance agreement entered into with
the Secretary under this part shall have each of the fol-
lowing terms:
‘‘(1) TERM.— The performance agreement shall
be for a term of 5 years.
‘‘(2) APPLICATION
OF
PROGRAM
REQUIRE-
MENTS.—The performance agreement shall provide
that no requirements of any program described in
section 7304(b) and included by the local edu-
cational agency in the scope of the agreement shall
apply to the agency, except as otherwise provided in
this part.
‘‘(3) LIST
OF
PROGRAMS.—The performance
agreement shall list which of the programs described
in section 7304(b) are included in the scope of the
performance agreement.
‘‘(4) USE
OF
FUNDS
TO
IMPROVE
STUDENT
ACHIEVEMENT.— The performance agreement shall
contain a 5-year plan describing how the local edu-
cational agency intends to combine and use the
funds from programs included in the scope of the
performance agreement to advance the education
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priorities of the State and the local educational
agency, meet the general purposes of the included
programs, improve student achievement, and narrow
achievement gaps.
‘‘(5) LOCAL INPUT.—The performance agree-
ment shall contain an assurance that the local edu-
cational agency will provide parents, teachers, and
schools with notice and an opportunity to comment
on the proposed terms of the performance agreement
in accordance with State law.
‘‘(6) FISCAL RESPONSIBILITIES.—The perform-
ance agreement shall contain an assurance that the
local educational agency will use fiscal control and
fund accounting procedures that will ensure proper
disbursement of, and accounting for, Federal funds
consolidated and used under the performance agree-
ment.
‘‘(7) CIVIL RIGHTS.—The performance agree-
ment shall contain an assurance that the local edu-
cational agency will meet the requirements of appli-
cable Federal civil rights laws in carrying out the
agreement and in consolidating and using the funds
under the agreement.
‘‘(8) PRIVATE
SCHOOL
PARTICIPATION.—The
performance agreement shall contain an assurance
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that the local educational agency agrees that in con-
solidating and using funds under the performance
agreement—
‘‘(A) the local educational agency will pro-
vide for the equitable participation of students
and professional staff in private schools; and
‘‘(B) that sections 8504, 8505, and 8506
shall apply to all services and assistance pro-
vided with such funds in the same manner as
such sections apply to services and assistance
provided in accordance with section 8503.
‘‘(9) ANNUAL
REPORTS.—The performance
agreement shall contain an assurance that the local
educational agency agrees that not later than 1 year
after the date on which the Secretary enters into the
performance agreement, and annually thereafter
during the term of the performance agreement, the
local educational agency shall disseminate widely to
parents and the general public, transmit to its State
educational agency and the Secretary, distribute to
print and broadcast media, and post on the Internet,
a report that includes a detailed description of how
the local educational agency used the funds consoli-
dated under the agreement to improve student aca-
demic achievement and reduce achievement gaps.
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‘‘(c) APPROVAL.—Not later than 60 days after the
receipt of a proposed performance agreement submitted
by a local educational agency under this part, the Sec-
retary shall approve the performance agreement or provide
the local educational agency with a written determination
that such agreement fails to satisfy the requirements of
this part.
‘‘(d) 
AMENDMENT
TO
PERFORMANCE
AGREE-
MENT.—
‘‘(1) IN GENERAL.—In each of the following
circumstances, the Secretary shall agree to amend a
performance agreement entered into with a local
educational agency under this part:
‘‘(A) REDUCTION IN SCOPE OF PERFORM-
ANCE
AGREEMENT.—Not later than 1 year
after entering into the performance agreement,
a State seeks to amend the agreement to re-
move from the scope any program described in
section 7304(b).
‘‘(B) EXPANSION OF SCOPE OF PERFORM-
ANCE
AGREEMENT.—Not later than 1 year
after entering into the performance agreement,
a State seeks to amend the agreement to in-
clude in its scope any additional program de-
scribed in section 7304(b) or any additional
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achievement indicators for which the State will
be held accountable.
‘‘(2) APPROVAL OF AMENDMENT.—
‘‘(1) IN
GENERAL.—Not later than 60
days after the receipt of a proposed amendment
to the performance agreement submitted by a
local educational agency, the Secretary shall ap-
prove the amendment or provide the agency
with a written determination that the amend-
ment fails to satisfy the requirements of this
part.
‘‘(B) TREATMENT
AS
APPROVED.—Each
amendment for which the Secretary fails to
take the action required in subparagraph (A) in
the time period described in such subparagraph
shall be considered to be approved.
‘‘(3) TREATMENT OF PROGRAM FUNDS WITH-
DRAWN FROM AGREEMENT.—Beginning on the effec-
tive date of an amendment executed under para-
graph (1)(A), each program requirement of each
program removed from the scope of a performance
agreement shall apply to the local educational agen-
cy’s use of funds made available under the program.
‘‘SEC. 7304. CONSOLIDATION AND USE OF FUNDS.
‘‘(a) IN GENERAL.—
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‘‘(1) AUTHORITY.—Under a performance agree-
ment entered into under this part, a local edu-
cational agency may consolidate, subject to sub-
section (c), Federal funds made available to the
agency under the provisions listed in subsection (b)
and use such funds for any educational purpose per-
mitted under this Act.
‘‘(2) PROGRAM
REQUIREMENTS.—Except as
otherwise provided in this part, a local educational
agency may use funds under paragraph (1) notwith-
standing the program requirements of the program
under which the funds were made available to the
State.
‘‘(b) ELIGIBLE PROGRAMS.—Funds made available
under programs under each of the following provisions of
this Act may be consolidated and used under subsection
(a):
‘‘(1) Title II.
‘‘(2) Part A of title IV.
‘‘(3) Subpart 1 of part A of title V.
‘‘(4) Part B of title V.
‘‘SEC. 7305. LIMITATIONS ON ADMINISTRATIVE EXPENDI-
TURES.
‘‘Each local educational agency that has entered into
a performance agreement with the Secretary under this
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part may use for administrative purposes not more than
4 percent of the total amount of funds allocated to the
agency under the programs included in the scope of the
performance agreement.
‘‘SEC. 7306. PERFORMANCE REVIEW AND PENALTIES.
‘‘(a) MIDTERM REVIEW.—The Secretary may not
enter into a performance agreement under this part unless
the agreement includes a provision permitting the Sec-
retary, after notice and an opportunity for a hearing, to
terminate the agreement if, during the term of the agree-
ment, the local educational agency that is party to the
agreement fails to make adequate yearly progress for 3
consecutive years.
‘‘(b) FINAL REVIEW.—If, at the end of the 5-year
term of a performance agreement entered into under this
part, a local educational agency that is party to the agree-
ment has not met the achievement goals contained in the
performance agreement, the Secretary may not renew the
agreement under section 7307 and, beginning on the date
on which such term ends, the local educational agency
shall be required to comply with each of the program re-
quirements in effect on such date for each program in-
cluded in the performance agreement.
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‘‘SEC. 7307. RENEWAL OF PERFORMANCE AGREEMENT.
‘‘(a) IN GENERAL.—Except as provided in section
7306(b) and in accordance with this section, the Secretary
shall renew for 1 additional 5-year term a performance
agreement entered into under this part if the State that
is party to the agreement has met or has substantially
met, by the end of the original term of the agreement,
the achievement goals contained in the agreement.
‘‘(b) NOTIFICATION.—The Secretary may not renew
a performance agreement under this part unless, not less
than 6 months before the end of the original term of the
agreement, the local educational agency seeking the re-
newal notifies the Secretary of its intention to renew.
‘‘(c) EFFECTIVE DATE.—A renewal under this sec-
tion shall be effective at the end of the original term of
the agreement or on the date on which the local edu-
cational agency seeking renewal provides to the Secretary
all data required under the agreement, whichever is later.
‘‘SEC. 7308. REPORTS.
‘‘(a) TRANSMITTAL TO CONGRESS.—Not later than
60 days after the Secretary receives a report described in
section 7303(c)(9), the Secretary shall make the report
available to the Committee on Education and the Work-
force of the House of Representatives and the Committee
on Health, Education, Labor and Pensions of the Senate.
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‘‘(b) LIMITATION.—A State in which a local edu-
cational agency that is party to a performance agreement
entered into under this part is located may not require
such local educational agency to provide any application
information with respect to the programs included within
the scope of such performance agreement other than that
information that is required to be included in the report
described in section 7303(c)(9).
‘‘SEC. 7309. DEFINITIONS.
‘‘In this part, the following definitions apply:
‘‘(1) ADEQUATE YEARLY PROGRESS.—The term
‘adequate yearly progress’ means the adequate year-
ly progress determined by the State in which a local
educational agency is located pursuant to section
1111(b)(2)(C).
‘‘(2) ALL STUDENTS.—The term ‘all students’
means all students attending public schools or char-
ter schools that are participating in the State’s ac-
countability and assessment system.’’.
TITLE VIII—GENERAL
PROVISIONS
SEC. 801. GENERAL PROVISIONS.
The Elementary and Secondary Education Act of
1965, as amended by this Act, is further amended by add-
ing at the end of title VII the following:
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‘‘TITLE VIII—GENERAL
PROVISIONS
‘‘PART A—DEFINITIONS
‘‘SEC. 8101. DEFINITIONS.
‘‘Except as otherwise provided, for the purposes of
this Act, the following terms have the following meanings:
‘‘(1) Average daily attendance—
‘‘(A) Except as provided otherwise by
State law or this paragraph, the term ‘average
daily attendance’ means—
‘‘(i) the aggregate number of days of
attendance of all students during a school
year; divided by
‘‘(ii) the number of days school is in
session during such school year.
‘‘(B) The Secretary shall permit the con-
version of average daily membership (or other
similar data) to average daily attendance for
local educational agencies in States that provide
State aid to local educational agencies on the
basis of average daily membership or such other
data.
‘‘(C) If the local educational agency in
which a child resides makes a tuition or other
payment for the free public education of the
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‘‘(iv) Continuous review of students
and programs to evaluate the effects of in-
struction.
‘‘(17) ELEMENTARY SCHOOL.—The term ‘ele-
mentary school’ means a nonprofit institutional day
or residential school, including a public elementary
charter school, that provides elementary education,
as determined under State law.
‘‘(18) ESSENTIAL
COMPONENTS
OF
READING
INSTRUCTION.—The term ‘essential components of
reading instruction’ means explicit and systematic
instruction in—
‘‘(A) phonemic awareness;
‘‘(B) phonics;
‘‘(C) vocabulary development;
‘‘(D) reading fluency; and
‘‘(E) reading comprehension strategies.
‘‘(19) FAMILY LITERACY SERVICES.—The term
‘family literacy services’ means services provided to
participants on a voluntary basis that are of suffi-
cient intensity in terms of hours, and of sufficient
duration, to make sustainable changes in a family,
and that integrate all of the following activities:
‘‘(A) Interactive literacy activities between
parents and their children.