(Approved by the Office of Management and Budget under control number 18100036) (Authority: 20 U.S.C. 238(d)(2)(B), 242(b)) [54 FR 37259, September 7, 1989, as amended at 54 FR 47076, Nov. 9, 1989] § 222.126 What tax rates does the Secretary use if real property is assessed at different percentages of true value? If the real property of an LEA and its generally comparable LEAs consists of one classification of property but the property is assessed at different percentages of true value in the different LEAS, the Secretary determines whether the LEA is making a reasonable tax effort under § 222.124(c)(1) by using tax rates computed by (a) Multiplying the LEA's actual tax rate for real property by the percentage of true value assigned to that property for tax purposes; and (b) Performing the computation in paragraph (a) of this section for each of its generally comparable LEAS and determining the average of those computed tax rates. (Approved by the Office of Management and Budget under control number 18100036) (Authority: 20 U.S.C. 238(d)(2)(B)) [54 FR 37259, September 7, 1989, as amended at 54 FR 47076, Nov. 9, 1989] § 222.127 What tax rates does the Secretary use if two or more different classifications of real property are taxed at different rates? If the real property of an LEA and its generally comparable LEAs consists of two or more classifications of real property taxed at different rates, the Secretary determines whether the LEA is making a reasonable tax effort under § 222.124(c) (1) or (2) by using one of the following: (a) Actual tax rates for each of the classifications of real property. (b) Tax rates computed in accordance with § 222.126 for each of the classifications of real property. (c) Tax rates computed by (1) Determining the total true value of all real property in the LEA by dividing the assessed value of each classification of real property in the LEA by the percentage, of true value as signed to that property for tax purposes and aggregating the results; (2) Determining the LEA's total revenues derived from local real property taxes for school purposes; (3) Dividing the amount determined in paragraph (c)(2) of this section by the amount determined in paragraph (c)(1) of this section; and (4) Performing the computations in paragraphs (c) (1), (2), and (3) of this section for each of the generally comparable LEAs and determining the average of their computed tax rates. (Approved by the Office of Management and Budget under control number 18100036) (Authority: 20 U.S.C. 238(d)(2)(B)) [54 FR 37259, September 7, 1989, as amended at 54 FR 47076, Nov. 9, 1989] § 222.128 What tax rates may the Secretary use if substantial local revenues are derived from local tax sources other than real property taxes? (a) In a State in which a substantial portion of revenues for current expenditures for educational purposes is derived from local tax sources other than real property taxes, the SEA may request that the Secretary take those revenues into account in determining whether an LEA in that State is making a reasonable tax effort under § 222.124. (b) If, based upon the request of an SEA, the Secretary determines that it is appropriate to take the revenues described in paragraph (a) of this section into account in determining whether an LEA in that State is making a reasonable tax effort under § 222.124, the Secretary uses tax rates computed by (1) Dividing the assessed value of each classification of real property in the LEA by the percentage of true value assigned to that property for tax purposes and aggregating the results, (2) Determining the LEA's total revenues derived from local tax sources for school purposes; (3) Dividing the amount determined in paragraph (b)(2) of this section by the amount determined in paragraph (b)(1) of this section; and (4) Performing the computations in paragraphs (b) (1), (2), and (3) of this section for each of the generally comparable LEAs and determining the average of those computed tax rates. (Approved by the Office of Management and Budget under control number 18100036) (Authority: 20 U.S.C. 238(d)(2)(B)) [54 FR 37259, September 7, 1989, as amended at 54 FR 47076, Nov. 9, 1989] § 222.129 How does the Secretary determine whether a fiscally dependent LEA is making a reasonable tax effort? (a) If an LEA is fiscally dependent, as defined in § 222.3, the Secretary compares the LEA's imputed local tax rate, calculated under paragraph (b) of this section, with the average tax rate of its generally comparable LEAS, calculated under paragraph (c) of this section, to determine whether the LEA is making a reasonable tax effort. (b) The Secretary imputes a local tax rate for a fiscally dependent LEA by (1) Dividing the assessed value of each classification of real property within the boundaries of the general government by the percentage of true value assigned to that property for tax purposes and aggregating the results; (2) Determining the amount of locally derived revenues made available by the general government for the LEA's current expenditures for school purposes; and (3) Dividing the amount determined in paragraph (b)(2) of this section by the amount determined in paragraph (b)(1) of this section. (c) The Secretary performs the computations in paragraph (b) of this section for each of the fiscally dependent generally comparable LEAS and the computations in §§ 222.126-222.128, whichever is applicable, for each of the fiscally independent generally comparable LEAS and determines the average of all those tax rates. (d) The Secretary determines that a fiscally dependent LEA is making a reasonable tax effort if its imputed local tax rate is equal to at least 95 percent of the average tax rate of its generally comparable LEAS. (Approved by the Office of Management and Budget under control number 18100036) (Authority: 20 U.S.C. 238(d)(2)(B)) [54 FR 37259, September 7, 1989, as amended at 54 FR 47076, Nov. 9, 1989] § 222.130 How does the Secretary determine whether an LEA lacks sufficient funds to enable it to provide a level of education equivalent to that provided by its generally comparable LEAS? (a) The Secretary determines whether an LEA lacks sufficient funds to enable it to provide a level of education equivalent to that provided by its generally comparable LEAS, in accordance with § 222.122, as follows: (1) First, the Secretary establishes the level of education equivalent to that provided by the LEA's generally comparable LEAs by (i) Computing the average per pupil expenditure (APPE) of the generally comparable LEAS by dividing the sum of the total current expenditures of those LEAs for their prior fiscal year by the sum of the total ADA of those LEAS for that prior fiscal year; (ii) Increasing or decreasing the amount obtained in paragraph (a)(1)(i) of this section by the percentage the APPE of the generally comparable LEAs increased or decreased from their second preceding fiscal year to their prior fiscal year; and (iii) Multiplying the amount determined in paragraph (a)(1)(ii) of this section by the LEA's total ADA for its current fiscal year. (2) The Secretary next identifies the funds available to the LEA for current expenditures for its current fiscal year by (i) Adding the LEA's section 3 payment for the current fiscal year and all other funds available to the LEA for current expenditures for that current fiscal year; and (ii) Subtracting from the amount obtained in paragraph (a)(2)(i) of this section the LEA's allowable carryover amount, which is that portion of the LEA's opening cash balance for the current fiscal year that does not exceed (A) The maximum amount of funds for current expenditures that the LEA was allowed by State law to carry over from the prior fiscal year to the current fiscal year, provided that State restrictions on carryover amounts were applied uniformly to all LEAs in the State; or (B) If no State law governing cash balances exists, 30 percent of the LEA's "operating costs" for the prior fiscal year. (3) The Secretary then subtracts the amount obtained in paragraph (a)(2)(ii) of this section from the figure computed in paragraph (a)(1)(iii) of this section. (b) The Secretary determines that an LEA lacks sufficient funds to enable it to provide a level of education equivalent to that provided by its generally comparable LEAs if the amount determined in paragraph (a)(3) of this section is greater than 0. (c) The following definitions apply to this subpart: All other funds available to the LEA for current expenditures means— (1) All funds received by the LEA for current expenditures from local sources (or, in the case of a fiscally dependent LEA, all funds budgeted for or made available to the LEA, whichever is greater, by the general government) and from State and Federal sources, except any payments under section 3 or section 3(d)(2)(B) of the Act received during the current fiscal year and funds granted for the purpose of Chapter 1 or Chapter 2 of Title 1 of the Elementary and Secondary Education Act of 1965; and (2) Funds on hand for current expenditures at the beginning of the current fiscal year ("opening cash balance"). Operating costs is given the same meaning as the term "current expenditures," which is defined in § 222.3. Section 3 payment means the total payment based on the LEA's entitlements under sections 3(d)(1), (3)(d)(2)(C)(i), and 3(d)(2)(D) of the Act. (Authority: 20 U.S.C. 238(d)(2)(B), (C)(i), and (D), 244(5)) § 222.131 How does the Secretary determine an LEA's maximum entitlement under section 3(d)(2)(B)? To determine the maximum entitlement under section 3(d)(2)(B) for an LEA that meets the requirements of § 222.122, the Secretary (a) Computes the average per pupil expenditure of the generally comparable LEAS in accordance with § 222.130(a)(1) (i) and (ii); (b) Multiplies the amount determined in paragraph (a) of this section by the total ADA of the LEA's federally connected children; and (c) Subtracts from the amount computed in paragraph (b) of this section the total amount of State aid received by the LEA for its federally connected children. (Authority: 20 U.S.C. 238(d)(2)(B)) (2) The LEA's maximum entitlement determined under § 222.131 minus the amount of the LEA's section 3 payment for the current fiscal year. (b) In the case of an LEA whose tax rate is at least 95 percent but less than 100 percent of the average tax rate of its generally comparable LEAS, the Secretary reduces the LEA's payment under section 3(d)(2)(B), as determined in paragraph (a) of this section, by the percentage that the average tax rate of the generally comparable LEAS exceeds the tax rate of the LEA. (Authority: 20 U.S.C. 238(d)(2)(B)) APPENDIX to Part 222 ASSISTANCE FOR LOCAL EDUCATIONAL AGENCIES PROGRAMS The following paragraphs described the methods for making certain calculations in conjunction with determinations made under various requirements of the regulations set forth in this subpart. These methods shall be the only methods used in making these calculations. 1. Determinations of disparity standard compliance under § 222.63(b)(1). The determination of disparity in current expenditures or revenue per pupil is made by: (a) Ranking all local educational agencies having similar grade levels within the State on the basis of current expenditures or revenues per pupil with respect to the fiscal year for which data has been submitted in accordance with these regulations; (b) Identifying those local agencies in each ranking which fall at the 95th and 5th percentiles of the total number of pupils in attendance in the schools of these agencies; and (c) Subtracting the lower current expenditure or revenue per pupil figure from the higher for those agencies identified in paragraph (b) and dividing the difference by the lower figure. Example: In State X, after ranking all local educational agencies organized on a grade 9-12 basis in order of the expenditures per pupil for the fiscal year in question, it is ascertained by counting the number of pupils in attendance in these agencies in ascending order of expenditure that the 5th percentile of student population is reached at LEA A with a per pupil expenditure of $820, and that the 95th percentile of student population is reached at LEA B with a per pupil expenditure of $1000. The percentage disparity between the 95th and 5th local educational agencies is 22 percent ($1000 - $820-$180÷$820). The program would be deemed to qualify. (d) In cases under § 222.63(b), where separate computations are made for different groups of local educational agencies, the disparity percentage for each group is obtained in the manner described in paragraphs (a), (b) and (c) above. Then the weighted average disparity percentage as for the State as a whole is determined by: (i) Multiplying the disparity percentage for each group by the total number of pupils receiving free public education in the schools in that group; (ii) Summing the figures obtained in (i); and (iii) Dividing the sum obtained in (ii) by the total number of pupils for all the groups. Example: For State Y three groups of local educational agencies were considered. Group No. 1 (grades 1-6) had a disparity percentage of 18 percent and 80,000 pupils. Group No. 2 (grades 7-12) had a disparity percentage of 22 percent and 100,000 pupils. Group No. 3 (grades 1-12) had a disparity percentage of 35 percent and 20,000 pupils. The figure obtained under (i) is 14,400 for group No. 1, 22,000 for group No. 2, and 7000 for group No. 3. The sum of these figures under (ii) is 43,400. Dividing that number by the total number of pupils for all three groups (200,000) gives a weighted average percentage of 21.7 percent. State Y meets the requirement of § 222.63(b). 2. Determination under § 222.63(b) as to maximum proportion of Pub. L. 81-874 payments that may be taken into consideration by a State under an equalization program. The proportion that local revenues covered under a State equalization program are of total local revenues for a particular local educational agency shall be obtained by dividing: (a) the amount of local revenues covered under the equalization program by (b) the total local revenues attributable to current education within the agency. Examples. Example 1. State A has an equalization program under which each LEA is guaranteed $900 per pupil less the LEA contribution based on a uniform tax levy. LEA X contributes $700 per pupil and the State contributes the $200 difference. No other local revenues are applied to current expenditures for education by LEA X. The percentage of funds under the Act which may be taken into consideration by State A for LEA X is 100% (700/700). If LEA X receives $100 per pupil in Pub. L. 81-874 funds, $100 per pupil may be taken into consideration by State A in determining LEA X's relative financial resources and needs under the program. LEA X is regarded as contributing $800 and State A would now contribute the $100 difference. Example 2. The initial facts are the same as in Example 1, except that LEA X, under a permissible additional levy outside the equalization program, raises an additional $100 per pupil. The percentage of Pub. L. 81-874 funds which may be taken into consideration is 87.5% (700/800). If LEA X receives $100 per pupil in Pub. L. 81-874 funds, $87.50 per pupil may be taken into consideration. LEA X is now regarded as contributing $787.50 per pupil under the program and State A would now contribute $112.50 per pupil as the difference. Example 3. State B has an equalization program in which each participating LEA is guaranteed a certain per pupil revenue at various levels of tax rates. For an 8 mill rate the guarantee is $500, for 9 mills $550, for 10 mills $600. LEA Y levies a 10 mill rate and realizes $300 per pupil. Furthermore, it levies an additional 10 mills under a local leeway option, realizing another $300 per pupil. The percentage of Pub. L. 81-874 which may be taken into consideration is 50% (300/600). If LEA Y receives $100 per pupil in Pub. L. 81-874 funds, $50 per pupil may be taken into consideration. LEA Y may be regarded as contributing $350 per pupil under the program and State B would not contribute $250 as the difference. Example 4. The initial facts are the same as in Example 3, except that LEA Z in State B, while taxing at the same 10 mill rate for both the equalization program and leeway allowance as LEA Y, realizes $550 per pupil for each tax. As with LEA Y, the percentage of Pub. L. 81-874 funds which may be taken into consideration for LEA Z is 50% (550/ 1100). If LEA Z receives $150 per pupil in Pub. L. 81-874 funds, then up to $75 per pupil normally could be taken into consideration. However, since LEA Z would have received only $50 per pupil in State aid, only $50 on the allowable $75 could be taken into consideration. Thus, LEA Z may be regarded as contributing $600 per pupil under the program and State B would not contribute any State aid. Example 5. The initial facts are the same as in Example 4, except that LEA Z realizes $600 per pupil from each of the 10 mill taxes. Since LEA Z is regarded as contributing $600 to the equalization program and receives no State aid, no Pub. L. 81-874 funds are taken into consideration under the program. 3. Examples of wealth neutrality calculations under § 222.64. Example 1. State A has an equalization program under which each LEA is guaranteed $900 per pupil less the LEA contribution derived from a uniform required tax of 20 mills. A minimum of $100 per pupil in paid even if the required tax produces more than $900. Each LEA is permitted to levy additional local taxes. Additional categorical State aid is made available for special cost programs. The State has no limitations on budget, expenditure or local tax effort increases. The State is composed of three LEA's with data as shown. The $600 per pupil derived from the required local tax rate and the $300 per pupil in State equalization aid are neutral since $900 per pupil was the least amount realized by any LEA for the same required tax effort. One third of the $100 per pupil from the additional local tax is not neutral since the least wealthy LEA, #3, could only realize two-third of the revenue that LEA #1 could at the same tax rate. The $160 per pupil of State categorical aid is neutral. Thus, $1,127 per pupil ($600+ $300+% of $100+$160) is wealth neutral and $33 per pupil is not neutral. LEA No. 2 Of the $1,200 per pupil derived from local required effort $900 is neutral since that was the least amount realized by any LEA for the required local tax rate. The $300 per pupil above the guarantee and the $100 per pupil minimum State equalization aid are not neutral since they exceed the least amount realized by another agency. Twothirds of the $300 per pupil realized on the additional local tax, $200, is not neutral since the least wealthy, LEA #3, could only realize one-third of the revenue that LEA #2 could at the same rate. The $150 per pupil of State categorical aid is neutral. Thus, $1,150 per pupil ($900+ 3 of $300+$150) is wealth neutral and $600 per pupil is not neutral. LEA No. 3 The $400 per pupil derived from the required local tax rate and the $500 per pupil in State equalization aid are neutral since $900 is the least amount realized under the equalization program. All of the $70 per pupil realized from the additional local tax is neutral since LEA #3 is the least wealthy in the State. The $155 per pupil of State categorical aid is neutral. Thus, all of the $1,125 per pupil is neutral. The calculation of the percentage of wealth neutral funds for State A is as follows: |