SECTION 1. RURAL EDUCATION.

    Part J of title X of the Elementary and Secondary Education Act of 
1965 (20 U.S.C. 8271 et seq.) is amended to read as follows:

                  ``PART J--RURAL EDUCATION INITIATIVE

``SEC. 10951. SHORT TITLE.

    ``This part may be cited as the `Rural Education Initiative Act of 
2001'.

``SEC. 10952. FINDINGS.

    ``Congress finds the following:
            ``(1) The National Center for Educational Statistics 
        reports that 46 percent of our Nation's public schools serve 
        rural areas.
            ``(2) While there are rural education initiatives 
        identified at the State and local level, no Federal education 
        policy focuses on the specific and unique needs of rural school 
        districts and schools.
            ``(3) Small school districts often cannot use Federal grant 
        funds distributed by formula because the formula allocation 
        does not provide enough revenue to carry out the program the 
        grant is intended to fund.
            ``(4) Rural schools often cannot compete for Federal 
        funding distributed by competitive grants because the schools 
        lack the personnel needed to prepare grant applications and the 
        resources to hire specialists in the writing of Federal grant 
        proposals.
            ``(5) A critical problem for rural school districts 
        involves the hiring and retention of qualified administrators 
        and certified teachers (especially in reading, science, and 
        mathematics). As a result, teachers in rural schools are almost 
        twice as likely to provide instruction in three or more subject 
        areas than teachers in urban schools. Rural schools also face 
        other tough challenges, such as shrinking local tax bases, high 
        transportation costs, aging buildings, limited course 
        offerings, and limited resources.

              ``Subpart 1--Small and Rural School Program

``SEC. 10961. FORMULA GRANT PROGRAM AUTHORIZED.

    ``(a) Alternative Uses.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, an eligible local educational agency may use the 
        applicable funding, that the agency is eligible to receive from 
        the State educational agency for a fiscal year, to support 
        local or statewide education reform efforts intended to improve 
        the academic achievement of elementary school and secondary 
        school students and the quality of instruction provided for the 
        students.
            ``(2) Notification.--An eligible local educational agency 
        shall notify the State educational agency of the local 
        educational agency's intention to use the applicable funding in 
        accordance with paragraph (1) not later than a date that is 
        established by the State educational agency for the 
        notification.
    ``(b) Eligibility.--
            ``(1) In general.--A local educational agency shall be 
        eligible to use the applicable funding in accordance with 
        subsection (a) if--
                    ``(A)(i) the total number of students in average 
                daily attendance at all of the schools served by the 
                local educational agency is less than 600; and
                    ``(ii) all of the schools served by the local 
                educational agency are located in a community with a 
                Rural-Urban Continuum Code of 6, 7, 8, or 9, as 
                determined by the Secretary of Agriculture; or
                    ``(B) the agency meets the criteria established in 
                subparagraph (A)(i) and the Secretary, in accordance 
                with paragraph (2), grants the local educational 
                agency's request to waive the criteria described in 
                subparagraph (A)(ii).
            ``(2) Certification.--The Secretary shall determine whether 
        or not to waive the criteria described in paragraph (1)(A)(ii) 
        based on certification provided by the local educational 
        agency, or the State educational agency on behalf of the local 
        educational agency, that the local educational agency is 
        located in an area defined as rural by a governmental agency of 
        the State.
    ``(c) Applicable Funding.--In this section, the term `applicable 
funding' means funds provided under each of titles II, IV, and VI, 
parts A and C of title VII, and part I of title X.
    ``(d) Disbursal.--Each State educational agency that receives 
applicable funding for a fiscal year shall disburse the applicable 
funding to local educational agencies for alternative uses under this 
section for the fiscal year at the same time that the State educational 
agency disburses the applicable funding to local educational agencies 
that do not intend to use the applicable funding for such alternative 
uses for the fiscal year.
    ``(e) Supplement Not Supplant.--Funds used under this section shall 
be used to supplement and not supplant any other Federal, State, or 
local education funds that would otherwise be available for the purpose 
of this subpart.
    ``(f) Special Rule.--References in Federal law to funds for the 
provisions of law set forth in subsection (c) may be considered to be 
references to funds for this section.

``SEC. 10962. PROGRAM AUTHORIZED.

    ``(a) In General.--The Secretary is authorized to award grants to 
eligible local educational agencies to enable the local educational 
agencies to support local or statewide education reform efforts 
intended to improve the academic achievement of elementary school and 
secondary school students and the quality of instruction provided for 
the students.
    ``(b) Eligibility.--
            ``(1) In general.--A local educational agency shall be 
        eligible to receive a grant under this section if--
                    ``(A)(i) the total number of students in average 
                daily attendance at all of the schools served by the 
                local educational agency is less than 600; and
                    ``(ii) all of the schools served by the local 
                educational agency are located in a community with a 
                Rural-Urban Continuum Code of 6, 7, 8, or 9, as 
                determined by the Secretary of Agriculture; or
                    ``(B) the agency meets the criteria established in 
                subparagraph (A)(i) and the Secretary, in accordance 
                with paragraph (2), grants the local educational 
                agency's request to waive the criteria described in 
                subparagraph (A)(ii).
            ``(2) Certification.--The Secretary shall determine whether 
        or not to waive the criteria described in paragraph (1)(A)(ii) 
        based on certification provided by the local educational 
        agency, or the State educational agency on behalf of the local 
        educational agency, that the local educational agency is 
        located in an area defined as rural by a governmental agency of 
        the State.
    ``(c) Allocation.--
            ``(1) In general.--Except as provided in paragraph (3), the 
        Secretary shall award a grant to an eligible local educational 
        agency for a fiscal year in an amount equal to the initial 
        amount determined under paragraph (2) for the fiscal year minus 
        the total amount received under the provisions of law described 
        under section 10961(c) for the preceding fiscal year.
            ``(2) Determination of the initial amount.--The initial 
        amount referred to in paragraph (1) is equal to $100 multiplied 
        by the total number of students, over 50 students, in average 
        daily attendance in such eligible agency plus $20,000, except 
        that the initial amount may not exceed $60,000.
            ``(3) Ratable adjustment.--
                    ``(A) In general.--If the amount made available for 
                this subpart for any fiscal year is not sufficient to 
                pay in full the amounts that local educational agencies 
                are eligible to receive under paragraph (1) for such 
                year, the Secretary shall ratably reduce such amounts 
                for such year.
                    ``(B) Additional amounts.--If additional funds 
                become available for making payments under paragraph 
                (1) for such fiscal year, payments that were reduced 
                under subparagraph (A) shall be increased on the same 
                basis as such payments were reduced.
            ``(5) Census determination.--
                    ``(A) In general.--Each local educational agency 
                desiring a grant under this section shall conduct a 
                census not later than December 1 of each year to 
                determine the number of kindergarten through grade 12 
                students in average daily attendance at the schools 
                served by the local educational agency.
                    ``(B) Submission.--Each local educational agency 
                shall submit the number described in subparagraph (A) 
                to the Secretary not later than March 1 of each year.
    ``(d) Disbursal.--The Secretary shall disburse the funds awarded to 
a local educational agency under this section for a fiscal year not 
later than July 1 of that year.
    ``(e) Special Rule.--A local educational agency that is eligible to 
receive a grant under this subpart for a fiscal year shall be 
ineligible to receive funds for such fiscal year under subpart 2.
    ``(f) Supplement Not Supplant.--Funds made available under this 
section shall be used to supplement and not supplant any other Federal, 
State or local education funds.

``SEC. 10963. ACCOUNTABILITY.

    ``(a) Academic Achievement.--
            ``(1) In general.--Each local educational agency that uses 
        or receives funds under section 10961 or 10962 for a fiscal 
        year shall administer an assessment consistent with section 
        1111.
            ``(2) Special rule.--Each local educational agency that 
        uses or receives funds under section 10961 or 10962 shall use 
        the same assessment described in paragraph (1) for each year of 
        participation in the program under such section.
    ``(b) State Educational Agency Determination Regarding Continuing 
Participation.--Each State educational agency that receives funding 
under the provisions of law described in section 10961(c) shall--
            ``(1) after the second year that a local educational agency 
        participates in a program under section 10961 or 10962 and on 
        the basis of the results of the assessments described in 
        subsection (a), determine whether the students served by the 
        local educational agency participating in the program performed 
        in accordance with section 1111; and
            ``(2) only permit those local educational agencies that so 
        participated and met the requirements of section 1111(b)(2) to 
        continue to so participate.

            ``Subpart 2--Low-Income And Rural School Program

``SEC. 10971. PROGRAM AUTHORIZED.

    ``(a) Reservations.--From amounts appropriated under section 10982 
for this subpart for a fiscal year, the Secretary shall reserve \1/2\ 
of 1 percent to make awards to elementary or secondary schools operated 
or supported by the Bureau of Indian Affairs to carry out the purpose 
of this subpart.
    ``(b) Grants to States.--
            ``(1) In general.--From amounts appropriated under section 
        10982 for this subpart that are not reserved under subsection 
        (a), the Secretary shall award grants for a fiscal year to 
        State educational agencies that have applications approved 
        under section 10973 to enable the State educational agencies to 
        award subgrants to eligible local educational agencies for 
        local authorized activities described in subsection (c)(2).
            ``(2) Allocation.--From amounts appropriated for this 
        subpart, the Secretary shall allocate to each State educational 
        agency for a fiscal year an amount that bears the same ratio to 
        the amount of funds appropriated under section 10982 for this 
        subpart that are not reserved under subsection (a) as the 
        number of students in average daily attendance served by 
        eligible local educational agencies in the State bears to the 
        number of all such students served by eligible local 
        educational agencies in all States for that fiscal year.
            ``(3) Direct awards to specially qualified agencies.--
                    ``(A) Nonparticipating state.--If a State 
                educational agency elects not to participate in the 
                program under this subpart or does not have an 
                application approved under section 10973 a specially 
                qualified agency in such State desiring a grant under 
                this subpart shall apply directly to the Secretary to 
                receive an award under this subpart.
                    ``(B) Direct awards to specially qualified 
                agencies.--The Secretary may award, on a competitive 
                basis, the amount the State educational agency is 
                eligible to receive under paragraph (2) directly to 
                specially qualified agencies in the State.
    ``(c) Local Awards.--
            ``(1) Eligibility.--A local educational agency shall be 
        eligible to receive funds under this subpart if--
                    ``(A) 20 percent or more of the children aged 5 to 
                17, inclusive, served by the local educational agency 
                are from families with incomes below the poverty line; 
                and
                    ``(B) all of the schools served by the agency are 
                located in a community with a Rural-Urban Continuum 
                Code of 6, 7, 8, or 9, as determined by the Secretary 
                of Agriculture.
            ``(2) Uses of funds.--Grant funds awarded to local 
        educational agencies or made available to schools under this 
        subpart shall be used for--
                    ``(A) educational technology, including software 
                and hardware;
                    ``(B) professional development;
                    ``(C) technical assistance;
                    ``(D) teacher recruitment and retention;
                    ``(E) parental involvement activities; or
                    ``(F) academic enrichment programs.

``SEC. 10972. STATE DISTRIBUTION OF FUNDS.

    ``(a) Award Basis.--A State educational agency shall award grants 
to eligible local educational agencies--
            ``(1) on a competitive basis; or
            ``(2) according to a formula based on the number of 
        students in average daily attendance served by the eligible 
        local educational agencies or schools (as appropriate) in the 
        State, as determined by the State.
    ``(b) Administrative Costs.--A State educational agency receiving a 
grant under this subpart may not use more than 5 percent of the amount 
of the grant for State administrative costs.

``SEC. 10973. APPLICATIONS.

    ``Each State educational agency and specially qualified agency 
desiring to receive a grant under this subpart shall submit an 
application to the Secretary at such time, in such manner, and 
accompanied by such information as the Secretary may require. Such 
application shall include specific measurable goals and objectives to 
be achieved which may include specific educational goals and objectives 
relating to increased student academic achievement, decreased student 
drop-out rates, or such other factors that the State educational agency 
or specially qualified agency may choose to measure.

``SEC. 10974. REPORTS.

    ``(a) State Reports.--Each State educational agency that receives a 
grant under this subpart shall provide an annual report to the 
Secretary. The report shall describe--
            ``(1) the method the State educational agency used to award 
        grants to eligible local educational agencies and to provide 
        assistance to schools under this subpart;
            ``(2) how local educational agencies and schools used funds 
        provided under this subpart; and
            ``(3) the degree to which progress has been made toward 
        meeting the goals and objectives described in the application 
        submitted under section 10973.
    ``(b) Specially Qualified Agency Report.--Each specially qualified 
agency that receives a grant under this subpart shall provide an annual 
report to the Secretary. Such report shall describe--
            ``(1) how such agency uses funds provided under this 
        subpart; and
            ``(2) the degree to which progress has been made toward 
        meeting the goals and objectives described in the application 
        submitted under section 10971(b)(3)(A).
    ``(c) Report to Congress.--The Secretary shall prepare and submit 
to the Committee on Education and the Workforce for the House of 
Representatives and the Committee on Health, Education, Labor, and 
Pensions for the Senate an annual report. The report shall describe--
            ``(1) the methods the State educational agency used to 
        award grants to eligible local educational agencies and to 
        provide assistance to schools under this subpart;
            ``(2) how eligible local educational agencies and schools 
        used funds provided under this subpart; and
            ``(3) progress made in meeting specific measurable 
        educational goals and objectives.

``SEC. 10975. DEFINITIONS.

    ``For the purposes of this subpart--
            ``(1) The term `poverty line' means the poverty line (as 
        defined by the Office of Management and Budget, and revised 
        annually in accordance with section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2))) applicable to a 
        family of the size involved.
            ``(2) The term `specially qualified agency' means an 
        eligible local educational agency, located in a State that does 
        not participate in a program under this subpart in a fiscal 
        year, that may apply directly to the Secretary for a grant in 
        such year in accordance with section 10971(b)(3).

                    ``Subpart 3--General Provisions

``SEC. 10981. DEFINITION.

    ``For the purposes of this part, the term `State' means each of the 
50 States, the District of Columbia, and the Commonwealth of Puerto 
Rico.

``SEC. 10982. AUTHORIZATION OF APPROPRIATIONS.

    ``There are authorized to be appropriated to carry out this part 
$125,000,000 for fiscal year 2002 and such sums as may be necessary for 
each of four succeeding fiscal years to be distributed equally between 
subparts 1 and 2.''.
Output: Rural Education Initiative Act of 2001 - Amends the Elementary and Secondary Education Act of 1965 to establish a Rural Education Initiative, including various grants by the Secretary of Education to State and local educational agencies under: (1) a Small and Rural School Program; and (2) a Low-Income and Rural School Program.