To amend the Elementary and Secondary Education Act of 1965 to establish the Teacher Incentive Fund Program, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Teacher Incentive Fund Act''.

SEC. 2. TEACHER INCENTIVE FUND PROGRAM.

    Part C of title II of the Elementary and Secondary Education Act of 
1965 is amended by adding at the end the following:

              ``Subpart 6--Teacher Incentive Fund Program

``SEC. 2371. PURPOSES; DEFINITIONS.

    ``(a) Purposes.--The purposes of this subpart are--
            ``(1) to assist States, local educational agencies, and 
        nonprofit organizations to develop, implement, or improve 
        comprehensive performance-based compensation systems for 
        teachers and principals, especially for teachers and principals 
        in high-need schools, who raise student academic achievement 
        and close the achievement gap; and
            ``(2) to study and review performance-based compensation 
        systems for teachers and principals to evaluate their 
        effectiveness, fairness, quality, consistency, and reliability.
    ``(b) Definitions.--For purposes of this subpart:
            ``(1) Eligible entity.--The term `eligible entity' means--
                    ``(A) a local educational agency (including a 
                charter school that is a local educational agency), or 
                a consortium of such agencies;
                    ``(B) a State educational agency, or other State 
                agency designated by the chief executive 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 organization.
            ``(2) High-need local educational agency.--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 section 2312.
            ``(4) Performance-based compensation system.--The term 
        `performance-based compensation 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 compensation 
                        on the basis of high-quality teachers' and 
                        principals' employment and success in 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 
                                additional responsibilities or job 
                                functions; and
                                    ``(II) evidence of high achievement 
                                and mastery of content knowledge 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 compensation systems in participating schools.
    ``(b) Priority.--In making such a grant, the Secretary shall give 
priority to an eligible entity that concentrates 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 application to the 
Secretary, at such time and in such manner as the Secretary may 
reasonably require, that includes--
            ``(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 principals in the targeted 
        schools, the community, and local educational agency or 
        agencies for the performance-based compensation system, 
        including demonstration of consultation with teachers and 
        principals 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 development of the 
        performance-based compensation system;
            ``(5) a description of the local educational agency or 
        local educational agencies to be served by the project, 
        including such demographic information about students in the 
        schools to be served by the project as the Secretary may 
        request;
            ``(6) information on student academic achievement, the 
        quality of the teachers and principals, and existing 
        compensation, bonuses, and incentive systems 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 student content 
        and achievement standards that the applicant will implement to 
        support the performance-based compensation system;
            ``(9) an explanation of how the grantee will continue its 
        performance-based compensation system after the grant ends;
            ``(10) a description, if applicable, of how the applicant 
        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 philanthropic 
        funds that will be used to supplement the 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 teachers, principals, other school 
        administrators, and members of the public, a performance-based 
        compensation system consistent with the requirements of this 
        subpart.
            ``(2) Authorized activities.--Authorized activities under 
        this subpart may include the following:
                    ``(A) Developing appraisal systems that reflect 
                clear and fair measures of student academic 
                achievement.
                    ``(B) Developing appraisal systems that reflect 
                clear and fair measures of teacher and principal 
                performance based on demonstrated improvements in 
                student academic achievement.
                    ``(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, bonuses and 
                increased salaries to teachers and principals who raise 
                student academic achievement, so long as the grantee 
                uses an increasing share of non-Federal funds to pay 
                these monetary rewards each year of the grant.
                    ``(E) Paying, as part of a comprehensive 
                performance-based compensation system, additional 
                bonuses to teachers who both raise student academic 
                achievement and either teach in high-need schools or 
                teach subjects that are difficult 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, additional 
                bonuses to principals who both raise student academic 
                achievement and serve in high-need schools, so long as 
                the grantee uses an increasing 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 subparagraph (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 geographic 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--
                    ``(A) for the first year of the grant, 25 percent 
                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 section 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 requirement 
        to such eligible entity would result in serious hardship or an 
        inability to carry out the activities 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 annual report on the 
implementation of the program to the Congress.
    ``(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 measure--
                    ``(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 assisted the 
                eligible entities in recruiting and retaining high-
                quality teachers and principals, especially in hard-to-
                staff subject areas.

``SEC. 2374. AUTHORIZATION OF APPROPRIATIONS.

    ``(a) In General.--There are authorized to be appropriated to carry 
out this subpart such sums as may be necessary for fiscal year 2008 and 
each of the succeeding 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 assistance and program outreach.''.

Summary: Teacher Incentive Fund Act - Amends the Elementary and Secondary Education Act of 1965 to create a Teacher Incentive Fund program of competitive grants to assist states, local educational agencies (LEAs), and nonprofit organizations to develop and implement, or improve, appraisal and performance-based compensation systems to reward teachers and principals who raise student academic achievement and close the achievement gap, especially in the highest-need LEAs.

Increases required non-federal contributions to the program, on a graduated basis, from an amount equal 25% of the grant amount received in the first year to 50% of the grant amount received in the grant's fifth and final year. Allows the Secretary of Education to waive such matching requirement for high-need LEAs.