of the State to participate under this subpart; 
or 
‘‘(C) a partnership of— 
‘‘(i) one or more agencies described in 
subparagraph (A) or (B), or both; and 
‘‘(ii) at least one nonprofit organiza-
tion. 
‘‘(2) HIGH-NEED LOCAL EDUCATIONAL AGEN-
CY.—The term ‘high-need local educational agency’ 
has the meaning given the term in section 2102. 
‘‘(3) HIGH-NEED
SCHOOL.—The term ‘high- 
need school’ has the meaning given the term in sec-
tion 2312. 
‘‘(4) 
PERFORMANCE-BASED
COMPENSATION 
SYSTEM.—The term ‘performance-based compensa-
tion system’ means a system of compensation for 
teachers and principals that— 
‘‘(A) differentiates levels of compensation 
primarily on the basis of measurable increases 
in student academic achievement; and 
‘‘(B) may include— 
‘‘(i) differentiated levels of compensa-
tion on the basis of high-quality teachers’ 
and principals’ employment and success in 
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hard-to-staff schools or high-need subject 
areas; and 
‘‘(ii) recognition of the skills and 
knowledge of teachers and principals as 
demonstrated through— 
‘‘(I) successful fulfillment of ad-
ditional responsibilities or job func-
tions; and 
‘‘(II) evidence of high achieve-
ment and mastery of content knowl-
edge and superior teaching skills. 
‘‘SEC. 2372. TEACHER INCENTIVE FUND GRANTS. 
‘‘(a) IN GENERAL.—From the amounts appropriated 
to carry out this subpart, the Secretary is authorized to 
make grants on a competitive basis to eligible entities to 
develop, implement, or improve performance-based com-
pensation systems in participating schools. 
‘‘(b) PRIORITY.—In making such a grant, the Sec-
retary shall give priority to an eligible entity that con-
centrates its proposed activities on teachers and principals 
serving in high-need schools. 
‘‘(c) APPLICATIONS.—To be eligible to receive a grant 
under this subpart, an eligible entity shall submit an appli-
cation to the Secretary, at such time and in such manner 
as the Secretary may reasonably require, that includes— 
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‘‘(1) a description of the performance-based 
compensation system that the applicant proposes to 
develop and implement or improve; 
‘‘(2) a description and demonstration of the 
support and commitment from teachers and prin-
cipals in the targeted schools, the community, and 
local educational agency or agencies for the perform-
ance-based compensation system, including dem-
onstration of consultation with teachers and prin-
cipals on the development and implementation of the 
performance-based compensation system; 
‘‘(3) a description of how the eligible entity will 
develop and implement a fair, rigorous, and objective 
process to evaluate teacher, principal, and student 
performance, including the baseline performance 
against which evaluations of improved performance 
will be made; 
‘‘(4) a description and demonstration of how 
teacher and principal views were included in the de-
velopment of the performance-based compensation 
system; 
‘‘(5) a description of the local educational agen-
cy or local educational agencies to be served by the 
project, including such demographic information 
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about students in the schools to be served by the 
project as the Secretary may request; 
‘‘(6) information on student academic achieve-
ment, the quality of the teachers and principals, and 
existing compensation, bonuses, and incentive sys-
tems for teachers and principals in the schools to be 
served by the project; 
‘‘(7) a description of how the applicant will use 
grant funds under this subpart in each year of the 
grant; 
‘‘(8) a description of the comprehensive, focused 
professional development that is aligned with stu-
dent content and achievement standards that the ap-
plicant will implement to support the performance- 
based compensation system; 
‘‘(9) an explanation of how the grantee will con-
tinue its performance-based compensation system 
after the grant ends; 
‘‘(10) a description, if applicable, of how the ap-
plicant will define the term ‘high-quality’ for the 
purposes of section 2371(b)(4)(B)(i), through the 
use of measurable indicators; 
‘‘(11) a description of the State, local, or phil-
anthropic funds that will be used to supplement the 
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grant and sustain the activities at the end of the 
grant period; and 
‘‘(12) A description of how the applicant will 
evaluate the project annually, including any objective 
measures that are clearly related to the goals for the 
project and information on how the evaluation will 
produce quantitative and qualitative data. 
‘‘(d) USE OF FUNDS.— 
‘‘(1) IN GENERAL.—A grantee shall use grant 
funds provided under this subpart only to develop, 
implement, or improve, in collaboration with teach-
ers, principals, other school administrators, and 
members of the public, a performance-based com-
pensation system consistent with the requirements of 
this subpart. 
‘‘(2) AUTHORIZED ACTIVITIES.—Authorized ac-
tivities under this subpart may include the following: 
‘‘(A) Developing appraisal systems that re-
flect clear and fair measures of student aca-
demic achievement. 
‘‘(B) Developing appraisal systems that re-
flect clear and fair measures of teacher and 
principal performance based on demonstrated 
improvements in student academic achievement. 
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‘‘(C) Conducting outreach within the local 
educational agency (or agencies) or the State to 
gain input on how to construct the appraisal 
system and to develop support for it. 
‘‘(D) Paying, as part of a comprehensive 
performance-based compensation system, bo-
nuses and increased salaries to teachers and 
principals who raise student academic achieve-
ment, so long as the grantee uses an increasing 
share of non-Federal funds to pay these mone-
tary rewards each year of the grant. 
‘‘(E) Paying, as part of a comprehensive 
performance-based compensation system, addi-
tional bonuses to teachers who both raise stu-
dent academic achievement and either teach in 
high-need schools or teach subjects that are dif-
ficult to staff, or both, so long as the grantee 
uses an increasing share of non-Federal funds 
to pay these monetary rewards each year of the 
grant. 
‘‘(F) Paying, as part of a comprehensive 
performance-based compensation system, addi-
tional bonuses to principals who both raise stu-
dent academic achievement and serve in high- 
need schools, so long as the grantee uses an in-
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creasing share of non-Federal funds to pay 
these monetary rewards each year of the grant. 
‘‘(e) DURATION OF GRANTS.— 
‘‘(1) IN GENERAL.—The Secretary may make 
grants under this section for periods of up to 5 
years. 
‘‘(2) LIMITATION.—An agency described in sub-
paragraph (A) of section 2371(b)(1) may receive 
(whether individually or as part of a consortium or 
partnership) a grant under this subpart only once. 
Such an agency may continue to receive that grant 
for the period of that grant, but shall not receive 
(whether individually or as part of a consortium or 
partnership) any other grant under this subpart. 
‘‘(f) EQUITABLE
DISTRIBUTION.—To the extent 
practicable, the Secretary shall ensure an equitable geo-
graphic distribution of grants under this section. 
‘‘(g) MATCHING REQUIREMENT.— 
‘‘(1) Each eligible entity that receives a grant 
under this section shall provide, from non-Federal 
sources, an amount (which may be provided in cash 
or in kind) to carry out the activities supported by 
the grant equal to— 
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‘‘(A) for the first year of the grant, 25 per-
cent of the amount received for that year under 
the grant; 
‘‘(B) for the second year, 30 percent; 
‘‘(C) for the third year, 35 percent; 
‘‘(D) for the fourth year, 40 percent; and 
‘‘(E) for the fifth year, 50 percent. 
‘‘(2) The Secretary may waive all or part of the 
matching requirement described in paragraph (1) for 
any fiscal year for an eligible entity described in sec-
tion 2371(b)(1)(A) if that eligible entity is a high- 
need local educational agency, a consortium of high- 
need local educational agencies, or a charter school 
that is a high-need local educational agency and the 
Secretary determines that applying the matching re-
quirement to such eligible entity would result in seri-
ous hardship or an inability to carry out the activi-
ties described in subsection (d). 
‘‘(h) SUPPLEMENT, NOT SUPPLANT.—Grant funds 
provided under this section shall be used to supplement, 
not supplant, other Federal or State funds. 
‘‘SEC. 2373. REPORT AND EVALUATION. 
‘‘(a) REPORT.—The Secretary shall provide an an-
nual report on the implementation of the program to the 
Congress. 
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‘‘(b) EVALUATION.— 
‘‘(1) 
IN
GENERAL.—The 
Secretary 
shall, 
through grant or contract, carry out an independent 
evaluation of the program under this subpart. 
‘‘(2) CONTENT.—The evaluation shall meas-
ure— 
‘‘(A) the effectiveness of the program in 
improving student academic achievement; 
‘‘(B) the satisfaction of the participating 
teachers or principals; and 
‘‘(C) the extent to which the program as-
sisted the eligible entities in recruiting and re-
taining high-quality teachers and principals, es-
pecially in hard-to-staff subject areas. 
‘‘SEC. 2374. AUTHORIZATION OF APPROPRIATIONS. 
‘‘(a) IN GENERAL.—There are authorized to be ap-
propriated to carry out this subpart such sums as may 
be necessary for fiscal year 2008 and each of the suc-
ceeding 5 fiscal years. 
‘‘(b) RESERVATION.—The Secretary may reserve not 
more than 3 percent of the funds appropriated to carry 
out this subpart for any one fiscal year for the cost of 
the evaluation under section 2373(b) and for technical as-
sistance and program outreach.’’. 
Æ 
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