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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+ 43 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+ Y3 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:

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LEA
No. 1

LEA
No. 2

LEA
No. 3

Taxable wealth per pupil..
Enrollment......

$30,000 $60,000 $20,000

2,000 1,000 1,000

Yield per pupil from required

local tax...
Equalized State aid per pupil
Additional local tax per pupil.
Additional State aid per pupil.

$600
300
100
160

$1,200

100 300 150

$400 500

70 155

LEA No. 1...

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Example 2. State B in the prior year had an equalization program which required a 5 mill effort and allowed 5 mills additional leeway. For the required 5 mill effort each LEA was guaranteed $600 per pupil. LEA 2, on a wealth base of $60,000 per pupil, levied the full 10 mills producing $300 per pupil received $300 per pupil of State basic aid, and with the $300 per pupil leeway yield, had revenues of $900 per pupil. LEA #2, on a wealth base of $160,000 per pupil, also levied the full 10 mills producing $800 per pupil from the required 5 mills which exceed the guarantee and thus received no State basic aid. The 5 mill leeway yielded an additional $800 per pupil for a total of $1,600 per pupil.

The State has instituted a new program raising the guarantee to $900 per pupil with a 10 percent budget increase limitation. LEA #1, (with 2,000 pupils), now realizes $300 per pupil from its required effort, receives $600 of State basic aid, received $300 per pupil 1.5 mills of local leeway for a yield of $90 per child because of its budget restraint of $990 per child. ($900 per child plus 10 percent), LEA #2 (with 1,000 pupils), realizes $800 per pupil from its required effort, receives $100 per pupil in State equalization aid, levies 5 mills leeway for another $800 per pupil for a total of $1,700 per pupil which is still within its budget increase limitation of $1,760 per pupil.

Assuming that no other LEA is restrained below the $900 per pupil guarantee and that LEA #1 is the most restrained at $90 per pupil leeway then all of the revenues of LEA #2 above that level are not neutral.

The percentage of neutrality for the State is calculated in the same way as in Example 1. Assuming there are no other LEA's, the percentage of wealth neutral revenues is 80.7, and State B does not qualify.

Example 3. State C has an equalization program under which each LEA is guaranteed $900 per weighted pupil or 110 percent of the prior year's per weighted pupil reve

nue under the program, whichever is less, minus the LEA contribution derived from a required tax which is uniform for all LEA's guaranteed $900 per pupil and proportionately less for those LEA's guaranteed lesser amounts per pupil. No additional local leeway taxes are allowed. LEA #1 received $850 per pupil under the program in the prior year while LEA #2 received $800 per pupil under the program in the prior year. LEA #1 is limited to the $900 guarantee since 110 percent of its prior year's expenditure exceeds the $900 guarantee. LEA #2 qualifies for an $880 guarantee since 110 percent of $800 equals $880. LEA #2's required tax effort is also proportionately less.

Assume that neither LEA realizes revenues in excess of the guarantee. For LEA #1 (with 10,000 pupils), $880 of the $900 per pupil revenue is wealth neutral and for LEA #2 (with 2,000 pupils), all $880 in per pupil revenue is wealth neutral. (See $ 222.64(b)(2)(iii)).

The percentage of neutrality for the State would be calculated as in Example 1. The percentage of wealth neutral revenues is 98.2 and

the

State qualifies under § 222.64(a).

Example 4. State D has an equalization program which permits different local tax efforts from 1 mill to 10 mills and which guarantees $100 per pupil for each mill levied. LEA #1 taxes at 5 mills and realizes $300 per pupil. Since the guarantee level for 5 mills is $500 per pupil, State D gives LEA #1 $200 in equalization aid. LEA #2 also taxes at 5 mills, but realizes $800 per pupil. Since the guarantee for 5 mills is only $500 per pupil, LEA #2 receives no equalization aid. LEA #3 taxes at 8 mills and realizes $400 per pupil. Since the guarantee at 8 mills is $800 per pupil, LEA #3 receives $400 in equalization aid. LEA #4 taxes at 8 mills, and realizes $1,000 per pupil. Since the guarantee for 8 mills is only $800 per pupil, LEA #4 receives no equalization aid. All of the PART 223_SPECIAL IMPACT AID

PROVISIONS FOR LOCAL EDUCATIONAL AGENCIES THAT CLAIM ENTITLEMENTS BASED ON THE NUMBER OF CHILDREN RESIDING ON INDIAN LANDS

Subpart A-General

Sec. 223.1 Purpose. 223.2 Applicability of regulations in this

part. 223.3 Applicability of other statutes and

regulations. 223.4 Definitions. 223.5 Entitlement based on the number of

children residing on Indian lands. 223.6 Use of entitlement. 223.7 Requirements to receive entitlement. 223.8 Waiver of deadline for establishing

policies and procedures. 223.9 (Reserved)

funds LEA #1 realized under the equalization program are neutral since there is no excess over the guaranteed amount for 5 mills. $300 per pupil of the funds realized by LEA #2 are not neutral, because that is the amount in excess of the amount guaranteed for a 5 mill tax effort under the equalization program, and is attributable to the greater wealth of LEA #2.

All of the funds realized by LEA #3 under the equalization program are neutral since there is no excess over the guaranteed amount for an 8 mill tax effort. $200 per pupil realized by LEA #4 is not neutral, because that is the amount in excess of the guaranteed amount for an 8 mill tax effort under the equalization program and is attributable to the greater wealth of LEA #4.

Example 5. State E has a foundation-type equalization program under which each LEA receives funds for a teacher salary, based on a salary schedule, for each 25 pupils in average daily attendance with ad. ditional teacher units allocated for small or sparsely populated districts, and special edu. cation programs such as handicapped and vocational classes. Each district also receives under the program a set amount of dollars per teacher unit for expenses other than salaries. Each LEA must make a tax effort of 10 mills to qualify for the foundation equalization aid. The yield from the 10 mills tax is deducted from the amount of the equalization guarantee. There are no State restrictions on budget, expenditure or tax effort increases over prior years. No LEA in the State realizes more than the guaranteed amount for the 10 mill effort. All of the funds realized by all LEAs under the foundation equalization program are neutral. Any excess in the amount of revenues realized by any agency over that realized by any other are attributable to differences in the designated needs. (See $ 222.61(b)(3)).

4. Determination under $ 222.66 as to marimum proportion of Pub. L. 81-874 payments that may be taken into consideration by a State under an equalization program. (40 FR 16032, Apr. 8, 1975, as amended at 42 FR 65526, Dec. 30, 1977. Redesignated at 45 FR 77368, Nov. 21, 1980)

Subpart B-Policies and Procedures

223.10 Required policies and procedures. 223.11 Minimum standards for establishing

policies and procedures. 223.12 Review by LEAs of policies and pro

cedures. 223.13 Review by the Secretary of policies

and procedures. 223.14-223.19 (Reserved)

Subpart C-Complaint Procedures

223.20 Contents of a complaint. 223.21. Who may file a complaint. 223.22 Where to file a complaint. 223.23 When to file a complaint. 223.24 Receipt of a complaint by the As

sistant Secretary. 223.25 Dismissal of a complaint. 223.26 Consolidation of complaints. 223.27-223.29 (Reserved)

Subpart D-Hearing Procedures

223.30 Applicability of hearing procedures

in this subpart. 223.31 Applicability of other laws. 223.32 Parties to a hearing. 223.33 Notice. 223.34 LEA's reply to the complaint. 223.35 General procedural rules. 223.36 Conduct of the hearing. 223.37 Opportunity to submit additional

evidence. 223.38 The hearing examiner's findings

and recommendations. 223.39 Opportunity to comment on the

hearing examiner's findings and recommendations.

Sec. 223.40 The Assistant Secretary's final de

termination. 223.41 Judicial review of the Assistant Sec

retary's final determination. 223.42 Effects of noncompliance with the

Assistant Secretary's final determination.

AUTHORITY: Sec. 5(b)(3) of Title I of the Act of September 30, 1950, Pub. L. 81-874, as amended by the Education Amendments of 1978, Pub. L. 95-561 (20 U.S.C. 240(b)(3)), unless otherwise noted.

SOURCE: 46 FR 7199, Jan. 22, 1981, unless otherwise noted.

8 223.3 Applicability of other statutes and

regulations. In addition to the regulations in this part, the following statutes and regulations apply to LEAs that claim entitlements under $ 223.5:

(a) Title I (Financial assistance for LEAs in areas affected by Federal activity) of the Act of September 30, 1950, Pub. L. 81-874, as amended in 20 U.S.C. 236 et seq. particularly 240(b)(3).

(b) The Impact Aid regulations in 34 CFR part 222 pertaining to LEAs in areas affected by Federal activity.

(c) The General Education Provi. sions Act (GEPA) in 20 U.S.C. 1221 et seg. (Authority: 20 U.S.C. 240(b)(3); 20 U.S.C. 1221 et seq.; 34 CFR part 222)

Subpart A-General

8 223.1 Purpose.

The purpose of this part is to:

(a) Clarify the requirements which local educational agencies (LEAS) must meet to receive an entitlement under Section 3(d)(2)(D) of the Act and $ 223.5 of these regulations;

(b) Establish minimum standards for formulating policies and procedures to ensure the participation of Indian parents and tribes in the education process;

(c) Describe the process that a tribe or its designee shall follow to file a complaint regarding those policies and procedures; and

(d) Establish hearing procedures to resolve complaints.

(Authority: 20 U.S.C. 240(b)(3))

8 223.2 Applicability of regulations in this

part. (a) The regulations in this part apply to LEAs that claim entitlements under § 223.5.

(b)(1) Except as provided in paragraph (b)(2) of this section, these regulations are designed to ensure participation in the LEA's education program by Indian tribes and parents of Indian children residing on Indian lands.

(2) For purposes of computing the entitlement only, the LEA shall count all children, including any non-Indian children, residing on Indian lands. (Authority: 20 U.S.C. 238(d)(2)(D); 20 U.S.C. 240(b)(3))

8 223.4 Definitions.

For purposes of this part, the following definitions apply:

"Act” means Title I (Financial assistance for LEAs in areas affected by Federal activity) of the Act of September 30, 1950, Pub. L. 81-874, as amended. Significant amendments pertinent to this part were made by the Educatien Amendments of 1978, Pub. L. 95561.

“Assistant Secretary” means the Assistant Secretary for Elementary and Secondary Education or the Assistant Secretary's designee.

“Child” means any child who is within the age limits for which the applicable State provides free public education.

“Department” means the U.S. Department of Education.

“Entitlement” means, for purposes of this part, the amount of funds (or whatever portion of those funds that is provided by an appropriation) determined by the number of children residing on Indian lands in average daily attendance at the LEA multiplied by the local contribution rate multiplied by 125 percent.

"Indian children” means children residing on Indian lands who are recognized by an Indian tribe as being affiliated with that tribe.

“Indian lands" means:

the requirements in paragraph (a) of this section, the Secretary may not pay either:

(1) The entitlement defined in $ 223.4; or

(2) The preliminary payment defined in § 223.4. (Authority: 20 U.S.C. 238(d)(2)(D); 20 U.S.C. 240(b)(3)(A))

$ 223.6 Use of entitlement.

An LEA that receives the entitlement referred to in $ 223.5 is not required to spend that entitlement exclusively for Indian children or for special programs for Indian children. (Authority: 20 U.S.C. 240(b)(3); H. Rept. 1137, 95th Cong., 2d Sess. 114 (1978))

(a) Real property held in trust by the United States for individual Indi. ans or Indian tribes; and

(b) Real property held by individual Indians or Indian tribes that is subject to restrictions on alienation imposed by the United States.

"Indian tribe" means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established under the Alaska Native Claims Settlement Act (85 Stat. 688), which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.

"Local educational agency (LEA)”. means a board of education or other legally constituted local authority having administrative control and direction of free public education in a county, township, independent, other school district located within a State. This term includes any State agency which directly operates and maintains facilities for providing free public education.

"Parent” includes a legal guardian or other person standing in loco parentis.

"Preliminary payment” means a payment equal to 75 percent (or the percentage permitted by an appropriation) of the total impact aid payment received by the LEA for the preceding year.

"Secretary” means the Secretary of the U.S. Department of Education. (Authority: 20 U.S.C. 240(b)(3); 20 U.S.C. 244)

or

8 223.7 Requirements to receive entitle

ment. To receive the entitlement referred to in § 223.5:

(a) An LEA formed before November 1, 1978 shall have complied with the requirements under Section 5(b)(3) of the Act for establishing policies and procedures by the end of the 19791980 school year; or

(b) An LEA formed after November 1, 1978 shall:

(1) Establish the policies and procedures described in $$ 223.10-223.11, in consultation with and based on information from tribal officials and parents of Indian children, within one year of its formation; and

(2) Include in its application for payments under the Act:

(i) An assurance that the LEA established these policies and procedures in consultation with and based on information from tribal officials and parents of Indian children; and

(ii) A copy of the policies and procedures.

(Authority: 20 U.S.C. 240(b)(3)(A))

8 223.5 Entitlement based on the number

of children residing on Indian lands. (a) To be eligible for an entitlement under this part, an LEA that serves children who reside on Indian lands shall meet:

(1) The eligibility requirements in Section 3(c) of the Act; and

(2) The requirements in § 223.7.

(b) If an LEA meets the requirements in paragraph (a) of this section, the Secretary pays the LEA the entitlement defined in § 223.4.

(c) Except as provided in $ 223.8, if an LEA that serves children who reside on Indian lands does not meet

8 223.8 Waiver of deadline for establishing

policies and procedures. (a)(1) If an LEA cannot meet its deadline in $ 223.7 for establishing policies and procedures, the LEA may request the Secretary to waive that deadline and set a new one.

(2) The LEA's request for a waiver must:

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