The No Child Left Behind Act of 2001 (NCLB, P.L. 107-110 ) established the Rural Education Achievement Program (REAP) under Title VI-B of the Elementary and Secondary Education Act of 1965 (ESEA). Congress created this program to address the unique needs of rural schools that disadvantage them relative to nonrural schools. To compensate for the challenges facing rural schools, REAP awards two types of formula grants; one goes directly to eligible school districts, or local educational agencies (LEAs), and a second grant goes to states, which then award subgrants to LEAs. The authorization for REAP, along with the rest of the ESEA, expired at the end of FY2008. However, these programs continue to operate as long as appropriations are provided. Congress is expected to consider whether to amend and extend the ESEA programs, including REAP. This report will discuss the challenges facing rural schools, the manner in which REAP addresses these challenges, and reauthorization issues that may arise as Congress takes up the ESEA. Much of the discussion of reauthorization considerations centers on allocation of funds, given that allocation issues tend to factor prominently in deliberations about REAP. According to their proponents, rural schools have some advantages over their urban and suburban counterparts. Rural teachers are key members of the community and tend to know students and their families well. Rural schools have less complex organizational structures with fewer layers than nonrural school systems, and are able to adjust or adapt relatively quickly to change. Additionally, the schools within rural communities are very visible and strongly connected with the community. However, rural schools also confront significant challenges. Many face the worst of local fiscal limitations due to tax base constraints. Resource shortages produce various problems, including limited range of curricular options (such as a lack of advanced placement course offerings) and difficulties providing competitive salaries to attract and retain highly qualified teachers. Rural schools tend to have declining enrollment due to net out-migration and an aging of the population. Rural schools' low population density results in other problems, such as high transportation costs and limited access to cultural and educational resources. In addition to these general challenges, rural LEAs may face particular problems meeting NCLB requirements, such as standards of adequate yearly progress (AYP). They may also find it difficult to implement NCLB's consequences for failure to make AYP (such as providing public-school choice and supplementary educational services), and they often experience difficulty in attracting and retaining qualified teachers of core academic subjects (such as math and science). A study by the Government Accountability Office (GAO) confirmed these problems. The GAO study reached five main conclusions. Achieving NCLB goals for large enrollments of economically disadvantaged students presents more challenges for rural LEAs than for nonrural LEAs. Some rural districts lack the community resources, such as libraries and museums, that may support improved academic performance. Compared with nonrural LEAs, rural LEAs are more likely to experience problems recruiting teachers because of difficulties offering competitive salaries. Small rural districts are more likely to report that factors related to school size and geographic isolation, such as limited personnel, make it difficult to release teachers and administrators for attending conferences and training, impeding their ability to implement NCLB requirements. Some rural districts indicated that limited numbers of staff created difficulties completing NCLB requirements, such as reporting on school progress. The U.S. Department of Education (ED) has sought to address concerns of rural school districts. In response to the GAO report, ED has attempted to provide additional flexibility for rural LEAs. For example, ED allows teachers in rural LEAs "extra time—up to 3 years—to meet teacher qualification requirements," and permits states to "use a single state test for teachers to demonstrate subject matter competency for core academic subjects." Congress created REAP to meet many of the challenges identified in the subsequent GAO study. According to the statute, REAP funds are to address "the unique needs of rural school districts that frequently (1) lack the personnel and resources needed to compete effectively for Federal competitive grants; and (2) receive formula grant allocations in amounts too small to be effective in meeting their intended purposes." REAP authorizes two rural education programs under ESEA Title VI-B. Subpart 1 authorizes the Small, Rural School Achievement Program (SRSA), which focuses on LEAs with less than 600 students. Subpart 2 authorizes the Rural and Low-Income School Program (RLIS), which focuses on larger rural LEAs with relatively high poverty rates (at least 20% of children from families below the poverty line). Funds are to be divided equally between the SRSA and RLIS programs. NCLB authorized REAP at $300 million for FY2002 and "such sums as necessary" for FY2003-FY2007; however, the program continues to operate as long as appropriations are provided. In FY2012, $179 million was appropriated for REAP. Table 1 shows the history of appropriations for the program. Appropriations have grown modestly, except for FY2006 and FY2011. Overall, appropriations for FY2012 represent about a 10% increase over FY2002, the first year of program funding. To be eligible for REAP funds, LEAs must be designated rural by the ED. The National Center for Education Statistics (NCES) has devised a typology to classify schools based on their geographic location. Using Census Bureau geographic data, NCES assigns so-called "locale codes" to each school. Locale codes are used to classify schools along an eight-point urban-to-rural scale that is based on their proximity to metropolitan areas. These so-called "metro-centric" locale codes are defined as follows: 1 = Large City : A central city of a core based statistical area (CBSA) or metropolitan statistical area (MSA), with the city having a population greater than or equal to 250,000. 2 = Midsize City : A central city of a CBSA or MSA, with the city having a population of less than 250,000. 3 = Urban Fringe of a Large City : Any territory within a CBSA or MSA of a Large City and defined as urban by the Census Bureau. 4 = Urban Fringe of a Midsize City : Any territory within a CBSA or MSA of a Midsize City and defined as urban by the Census Bureau. 5 = Large Town : An incorporated place or Census-designated place with a population greater than or equal to 25,000 and located outside a CBSA or MSA. 6 = Small Town : An incorporated place or Census-designated place with a population less than 25,000 and greater than or equal to 2,500 and located outside a CBSA or MSA. 7 = Rural, Outside MSA : Any territory designated as rural by the Census Bureau that is outside a CBSA or MSA of a Large or Midsize City. 8 = Rural, Inside MSA : Any territory designated as rural by the Census Bureau that is within a CBSA or MSA of a Large or Midsize City. An LEA is eligible for the Small Rural School Achievement (SRSA) program if all schools served by the LEA have a locale code of 7 or 8 and either its average daily attendance (ADA) is less than 600 or the county or counties in which the LEA is located has a population density of fewer than 10 people per square mile. The SRSA statute allows the Secretary of Education to waive the locale code requirement (but not the ADA or population density requirements) based on a state government agency's determination that the LEA is located in a rural area. An LEA is eligible for the Rural Low-Income School (RLIS) program if all its schools have locale codes of 6, 7, or 8 and at least 20% of the children the LEA serves are from families below the poverty line. Unlike the SRSA program, the RLIS statute does not provide the Secretary with waiver authority for the locale code requirement. Finally, an LEA that receives a grant under the SRSA program is not eligible for RLIS funding. Table 2 shows estimates of LEAs eligible for the SRSA and RLIS programs based on CRS analysis of Common Core of Data (CCD). As the table illustrates, compared with determination by locale alone, combining eligibility criteria significantly reduces the number of LEAs that are eligible for assistance. In the case of the SRSA program (as noted below), actual grants for eligible LEAs can be reduced or even eliminated depending on funds eligible LEAs receive under offsetting ESEA formula grant programs. Amounts that LEAs receive and aggregate state amounts are determined differently under the SRSA and RLIS programs. Under the SRSA program, an initial amount is calculated for each eligible LEA and then funds are added based on enrollment and subtracted based on "offsetting" amounts received from other ESEA programs. Under RLIS, grants are first made to states based on a formula and then subgranted to LEAs either on a formula or competitive basis. To the initial SRSA base grant of $20,000, an additional amount is added based on the number of students in the LEA for LEAs with more than 50 students. The additional amount is equal to $100 for each student over 50; however, no grant amount may exceed $60,000. The following are some examples of initial amount calculations: LEAs with 50 students or fewer have initial amounts of $20,000. An LEA with 55 students has an initial amount of $20,500 (i.e., $20,000 plus $500, which is $100 times the five students over 50).