(b) For purposes of this subpart, level of education means average per pupil expenditure amount.

(Authority: 20 U.S.C. 7703(f))

§ 222.62 Which local educational agencies are eligible to apply for an additional payment under section 8003(f)?

Local educational agencies that are eligible to apply for additional assistance under section 8003(f) include those that have

(a)(1) A tax effort equal to at least 95 percent of the average tax rate of generally comparable LEAS identified under §§ 222.39–222.41 or 222.74; and

(2)(i) Federally connected children equal to at least 50 percent of the total number of children in average daily attendance (ADA) if a section 8003(b) payment is received on behalf of children described in section 8003(a)(1)(F)-(G); or (ii) Federally connected children equal to at least 40 percent of the total number of children in ADA if a section 8003(b) payment is not received on behalf of children described in section 8003(a)(1)(F)-(G);

(b)(1) A tax effort equal to at least 125 percent of the average tax rate of generally comparable LEAS identified under §§ 222.39-222.41; and

(2) Federally connected children equal to at least 35 percent of the total number of children in ADA;

(c) The same boundaries as those of a Federal military installation; or

(d) Current expenditures that are not reasonably comparable to those of generally comparable LEAS identified under §§ 222.39-222.41 because unusual geographical factors affect the applicant LEAS' current expenditures necessary to maintain a level of education equivalent to that of generally comparable LEAS.

(Authority: 20 U.S.C. 7703(f))

§ 222.63 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(A)? Subject to § 222.65, an LEA described in § 222.62(a), (b), or (c) is eligible for financial assistance under section 8003(f)(2)(A) if the Secretary determines that the LEA meets all of the following requirements:

(a) The LEA is eligible for a basic support payment under section 8003(b).

(b) The LEA timely applies for assistance under section 8003(f) and meets all of the other application and eligibility requirements of subparts A and C of these regulations.

(c) The LEA is exercising due diligence in availing itself of revenues derived from State and other sources and, except for an LEA described in § 222.62(c), is making a reasonable tax effort in accordance with the requirements of §§ 222.66-222.71.

(d) The eligibility of the LEA for State aid and the amount of State aid are determined on a basis no less favorable than that for other LEAs in the State.

(Authority: 20 U.S.C. 7703(f))

§ 222.64 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(B)? Subject to §222.65, an LEA described in §222.62(d) is eligible for financial assistance under section 8003(f)(2)(B) if the Secretary determines that the LEA meets all of the following requirements

(a) The LEA complies with the requirements of § 222.63(a)–(d).

(b)(1) As part of its section 8003(f) application, the LEA provides the Secretary with documentation that demonstrates that the LEA is unable to provide a level of education equivalent to that provided by its generally comparable LEAS because

(i) The applicant's current expenditures are affected by unusual geographical factors; and

(ii) As a result, those current expenditures are not reasonably comparable to the current expenditures of its generally comparable LEAS.

(2) The LEA's application must include

(1) A specific description of the unusual geographical factors on which the applicant is basing its request for compensation under this section and objective data demonstrating that the applicant is more severely affected by these factors than any other LEA in its State;

(ii) Objective data demonstrating the specific ways in which the unusual geographical factors affect the applicant's current expenditures so that they are not reasonably comparable to the current expenditures of its generally comparable LEAS;

(iii) Objective data demonstrating the specific ways in which the unusual geographical factors prevent the applicant from providing a level of education equivalent to that provided by its generally comparable LEAS; and

(iv) Any other information that the Secretary may require to make an eligibility determination under this section.

(Approved by the Office of Management and Budget under control number 1810-0036) (Authority: 20 U.S.C. 7703(f))

§ 222.65 How may a State aid program affect a local educational agency's eligibility for assistance under section 8003(f)?

The Secretary determines that an LEA is not eligible for financial assistance under section 8003(f) if—

(a) The LEA is in a State that has an equalized program of State aid that meets the requirements of section 8009; and

(b) The State, in determining the LEA's eligibility for or amount of State aid, takes into consideration the LEA's payment under section 8003(f). (Authority: 20 U.S.C. 7703(f))

§ 222.66 How does the Secretary determine whether a fiscally independent local educational agency is making a reasonable tax effort?

(a) To determine whether a fiscally independent LEA, as defined in § 222.2(c), is making a reasonable tax effort as required by §222.63 or § 222.64, the Secretary compares the LEA's local real property tax rates for current expenditure purposes (referred to in this part as "tax rates"), as defined in §222.2(c), with the tax rates of its generally comparable LEAS.

(b) For purposes of this section, the Secretary uses

(1) Actual tax rates if all the real property in the LEA and its generally comparable LEAS is assessed at the same percentage of true value; or

(c) The Secretary determines that an LEA described in §222.62(a) or (d) is making a reasonable tax effort if

(1) The LEA's tax rate is equal to at least 95 percent of the average tax rate of its generally comparable LEAS;

(2) Each of the LEA's tax rates for each classification of real property is equal to at least 95 percent of each of the average tax rates of its generally comparable LEAS for the same classification of property;

(3) The LEA taxes all of its real property at the maximum rates allowed by the State, if those maximum rates apply uniformly to all LEAS in the State; or

(4) The LEA has no taxable real property.

(d) The Secretary determines that an LEA described in § 222.62(b) is making a reasonable tax effort if—

(1) The LEA's tax rate is equal to at least 125 percent of the average tax rate of its generally comparable LEAs;

(2) Each of the LEA's tax rates for each classification of real property is equal to at least 125 percent of each of the average tax rates of its generally comparable LEAS for the same classification of property;

(3) The LEA taxes all of its real property at the maximum rates allowed by the State, if those maximum rates apply uniformly to all LEAS in the State; or

(4) The LEA has no taxable real property.

(Authority: 20 U.S.C. 7703(f))

§ 222.67 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 § 222.66(c)(1) or (d)(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 1810-0036) (Authority: 20 U.S.C. 7703(f))

§222.68 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 § 222.66(c)(1) or (2) or §222.66(d)(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 §222.67 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 assigned to that property for tax purposes and aggregating the results;

(2) Determining the LEA's total revenues derived from local real property taxes for current expenditures (as defined in section 8013);

(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 1810-0036) (Authority: 20 U.S.C. 7703(f))

§ 222.69 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 de

rived from local tax sources other than real property taxes, the State educational agency (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 § 222.66.

(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 §222.66, 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 current expenditures (as defined in section 8013);

(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 1810-0036) (Authority: 20 U.S.C. 7703(f))

§ 222.70 How does the Secretary determine whether a fiscally dependent local educational agency is making a reasonable tax effort?

(a) If an LEA is fiscally dependent, as defined in §222.2(c), 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 (as defined in section 8013); 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 §§ 222.67-222.69, whichever is applicable, for each of the fiscally independent generally parable LEAs and determines the average of all those tax rates.

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(d) The Secretary determines that a fiscally dependent LEA described in § 222.62 (a) or (d) 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.

(e) The Secretary determines that a fiscally dependent LEA described in § 222.62(b) is making a reasonable tax effort if its imputed local tax rate is equal to at least 125 percent of the average tax rate of its generally comparable LEAS.

(Approved by the Office of Management and Budget under control number 1810-0036) (Authority: 20 U.S.C. 7703(f))

§ 222.71 What information must be provided by the State educational agency?

The SEA of any State with an LEA applying for assistance under section 8003(f) shall provide the Secretary with relevant information necessary to determine whether the LEA is making a reasonable tax effort under §§ 222.67222.70, whichever is applicable.

(Approved by the Office of Management and Budget under control number 1810-0036) (Authority: 20 U.S.C. 7703(f))

§ 222.72 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(A) and § 222.63? (a) Except as otherwise provided in paragraphs (b) through (c) of this section or § 222.76, the Secretary deter

mines a maximum payment under section 8003(f)(2)(A) for an eligible LEA by

(1) First calculating the greater of— (i) The State average per pupil expenditure (APPE) or the national APPE;

(ii) The APPE of generally comparable LEAs identified under §§ 222.39222.41; or

(iii) The APPE of three generally comparable LEAS identified under

§ 222.74;

(2) Next subtracting from the amount calculated in paragraph (a)(1) of this section the average State aid per pupil amount received by the LEA;

(3) Multiplying the amount calculated in paragraph (a)(2) of this section by the total number of federally connected students in ADA who are eligible for basic support payments under section 8003(b);

(4) 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, reducing the amount calculated in paragraph (a)(3) of this section by the percentage that the average tax rate of its generally comparable LEAS exceeds the tax rate of the LEA; and

(5) Subtracting from the amount calculated in paragraph (a)(3), or paragraph (a)(4) of this section, the total amount of payments received by the eligible LEA under sections 8003 (b) and (d) for the fiscal year for which a payment is being determined under section 8003(f).

(b) For the first step of the computations described in paragraph (a) of this section, the Secretary calculates a maximum payment under section 8003(f)(2)(A) for an eligible LEA described in §222.62 (b) or (c) by multiplying the national APPE by .70, except that the resulting amount may not exceed 125 percent of the State APPE.

(c) For the fourth step of the computations described in paragraph (a) of this section, generally comparable LEAS for reasonable tax effort purposes are the LEAS whose APPE is identified in §222.72(a)(1) except that for applicant LEAs for whom the national

APPE is identified, all LEAS in the applicant's State will be used as generally comparable LEAs for reasonable tax effort purposes.

(Authority: 20 U.S.C. 7703(f))

§ 222.73 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(B) and § 222.64?

Except as otherwise provided in paragraphs (b) and (c) of this section and § 222.76, the Secretary determines a maximum payment under section 8003(f)(2)(B) for an eligible LEA as follows:

(a) The Secretary increases the eligible LEA's local contribution rate (LCR) for section 8003(b) payment purposes up to the amount the Secretary determines will compensate the applicant for the increase in its current expenditures necessitated by the unusual geographical factors identified under § 222.64(b)(2), but no more than is necessary to allow the applicant to provide a level of education equivalent to that provided by its generally comparable LEAS.

(b) The increase in the LCR referred to in paragraph (a) of this section may not exceed the per pupil share (computed with regard to all children in ADA), as determined by the Secretary, of the increased current expenditures necessitated by the unusual geographical factors identified under § 222.64(b)(2).

(c) 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, reducing the amount calculated in paragraph (a) of this section by the percentage that the average tax rate of its generally comparable LEAS exceeds the tax rate of the LEA.

(Authority: 20 U.S.C. 7703(f))

§ 222.74 How does the Secretary identify generally comparable local educational agencies for purposes of section 8003(f)?

(a) Except as otherwise provided in paragraph (b) of this section, the Secretary identifies generally comparable LEAS for purposes of this subpart in

accordance with the LCR procedures described in §§ 222.39–222.41.

(b) For applicant LEAs described in §222.62(a), to identify the three generally comparable LEAS referred to in § 222.72(a)(1)(iii), the Secretary uses the following procedures:

(1) The Secretary asks the SEA of the applicant LEA to identify generally comparable LEAS in the State by first following the directions in §222.39(a)(4), using data from the preceding fiscal year. The SEA then removes from the resulting list any LEAs that are significantly impacted, as described in § 222.39(b)(1), except the applicant LEA. (2) If the remaining LEAs are not in rank order by total ADA, the SEA shall list them in that order.

(3) The LEA may then select as its generally comparable LEAs, for purposes of section 8003(f) only, three LEAS from the list that are closest to it in size as determined by total ADA (e.g., the next three larger LEAs, the next three smaller, the next two larger and the next one smaller, or the next one larger and the next two smaller). (Authority: 20 U.S.C. 7703(f))

§ 222.75 How does the Secretary compute the average per pupil expenditure of generally comparable local educational agencies under this subpart?

The Secretary computes APPE under this subpart by

(a) Dividing the sum of the total current expenditures for the preceding fiscal year for the identified generally comparable LEAS by the sum of the total ADA of those LEAs for the same fiscal year and performing this calculation again using data for the second preceding year; and

(b) Increasing or decreasing the APPE for the preceding fiscal year by the percentage the APPE of the generally comparable LEAs increased or decreased from the second preceding fiscal year to the preceding fiscal year. (Authority: 20 U.S.C. 7703(f))

§ 222.76 What does the Secretary do if appropriation levels are insufficient to pay in full the amounts calculated under §§ 222.72 and 222.73? Payments under section 8003(f) for eligible LEAs will be ratably reduced if