the local educational agency did not engage in consultation that was meaningful and timely, or did not give due consideration to the views of the private school official.

(B) PROCEDURE.-If the private school official wishes to complain, the official shall provide the basis of the noncompliance with this section by the local educational agency to the State educational agency, and the local educational agency shall forward the appropriate documentation to the State educational agency.

(c) ALLOCATION FOR EQUITABLE SERVICE TO PRIVATE SCHOOL STUDENTS.

(1) CALCULATION.-A local educational agency shall have the final authority, consistent with this section, to calculate the number of children, ages 5 through 17, who are from lowincome families and attend private schools by

(A) using the same measure of low income used to count public school children;

(B) using the results of a survey that, to the extent possible, protects the identity of families of private school students, and allowing such survey results to be extrapolated if complete actual data are unavailable;

(C) applying the low-income percentage of each participating public school attendance area, determined pursuant to this section, to the number of private school children who reside in that school attendance area; or

(D) using an equated measure of low income correlated with the measure of low income used to count public school children.

(2) COMPLAINT PROCESS.-Any dispute regarding low-income data for private school students shall be subject to the complaint process authorized in section 9505.

(d) PUBLIC CONTROL OF FUNDS.—

(1) IN GENERAL.-The control of funds provided under this part, and title to materials, equipment, and property purchased with such funds, shall be in a public agency, and a public agency shall administer such funds, materials, equipment, and property.

(2) PROVISION OF SERVICES.

(A) PROVIDER.-The provision of services under this section shall be provided

(i) by employees of a public agency; or

(ii) through contract by such public agency with an individual, association, agency, or organization. (B) REQUIREMENT.-In the provision of such services, such employee, individual, association, agency, or organization shall be independent of such private school and of any religious organization, and such employment or contract shall be under the control and supervision of such public agency.

(e) STANDARDS FOR A BYPASS.-If a local educational agency is prohibited by law from providing for the participation in programs on an equitable basis of eligible children enrolled in private elementary schools and secondary schools, or if the Secretary determines that a local educational agency has substantially failed or is

unwilling, to provide for such participation, as required by this section, the Secretary shall

(1) waive the requirements of this section for such local educational agency;

(2) arrange for the provision of services to such children through arrangements that shall be subject to the requirements of this section and sections 9503 and 9504; and

(3) in making the determination under this subsection, consider one or more factors, including the quality, size, scope, and location of the program and the opportunity of eligible children to participate.

SEC. 1120A. [20 U.S.C. 6321] FISCAL REQUIREMENTS.

(a) MAINTENANCE OF EFFORT.-A local educational agency may receive funds under this part for any fiscal year only if the State educational agency involved finds that the local educational agency has maintained the agency's fiscal effort in accordance with section. 9521.

(b) FEDERAL FUNDS TO SUPPLEMENT, NOT SUPPLANT, NONFEDERAL FUNDS.—

(1) IN GENERAL.-A State educational agency or local educational agency shall use Federal funds received under this part only to supplement the funds that would, in the absence of such Federal funds, be made available from non-Federal sources for the education of pupils participating in programs assisted under this part, and not to supplant such funds.

(2) SPECIAL RULE.-No local educational agency shall be required to provide services under this part through a particular instructional method or in a particular instructional setting in order to demonstrate such agency's compliance with paragraph (1).

(c) COMPARABILITY OF SERVICES.

(1) IN GENERAL.

(A) COMPARABLE SERVICES.-Except as provided in paragraphs (4) and (5), a local educational agency may receive funds under this part only if State and local funds will be used in schools served under this part to provide services that, taken as a whole, are at least comparable to services in schools that are not receiving funds under this part.

(B) SUBSTANTIALLY COMPARABLE SERVICES.-If the local educational agency is serving all of such agency's schools under this part, such agency may receive funds under this part only if such agency will use State and local funds to provide services that, taken as a whole, are substantially comparable in each school.

(C) BASIS.-A local educational agency may meet the requirements of subparagraphs (A) and (B) on a gradespan by grade-span basis or a school-by-school basis. (2) WRITTEN ASSURANCE.

(A) EQUIVALENCE.-A local educational agency shall be considered to have met the requirements of paragraph (1) if such agency has filed with the State educational agency a written assurance that such agency has established and implemented

(i) a local educational agency-wide salary schedule;

(ii) a policy to ensure equivalence among schools in teachers, administrators, and other staff; and

(iii) a policy to ensure equivalence among schools in the provision of curriculum materials and instructional supplies.

(B) DETERMINATIONS.-For the purpose of this subsection, in the determination of expenditures per pupil from State and local funds, or instructional salaries per pupil from State and local funds, staff salary differentials for years of employment shall not be included in such determinations.

(C) EXCLUSIONS.-A local educational agency need not include unpredictable changes in student enrollment or personnel assignments that occur after the beginning of a school year in determining comparability of services under this subsection.

(3) PROCEDURES AND RECORDS.-Each local educational agency assisted under this part shall

(A) develop procedures for compliance with this subsection; and

(B) maintain records that are updated biennially documenting such agency's compliance with this subsection. (4) INAPPLICABILITY.-This subsection shall not apply to a local educational agency that does not have more than one building for each grade span.

(5) COMPLIANCE.-For the purpose of determining compliance with paragraph (1), a local educational agency may exclude State and local funds expended for-

(A) language instruction educational programs; and

(B) the excess costs of providing services to children with disabilities as determined by the local educational

agency.

(d) EXCLUSION OF FUNDS.-For the purpose of complying with subsections (b) and (c), a State educational agency or local educational agency may exclude supplemental State or local funds expended in any school attendance area or school for programs that meet the intent and purposes of this part.

SEC. 1120B. [20 U.S.C. 6322] COORDINATION REQUIREMENTS.

(a) IN GENERAL.-Each local educational agency receiving assistance under this part shall carry out the activities described in subsection (b) with Head Start agencies and, if feasible, other entities carrying out early childhood development programs such as the Early Reading First program.

(b) ACTIVITIES.-The activities referred to in subsection (a) are activities that increase coordination between the local educational agency and a Head Start agency and, if feasible, other entities carrying out early childhood development programs, such as the Early Reading First program, serving children who will attend the schools of the local educational agency, including

(1) developing and implementing a systematic procedure for receiving records regarding such children, transferred with parental consent from a Head Start program or, where applica

ble, another early childhood development program such as the Early Reading First program;

(2) establishing channels of communication between school staff and their counterparts (including teachers, social workers, and health staff) in such Head Start agencies or other entities carrying out early childhood development programs such as the Early Reading First program, as appropriate, to facilitate coordination of programs;

(3) conducting meetings involving parents, kindergarten or elementary school teachers, and Head Start teachers or, if appropriate, teachers from other early childhood development programs such as the Early Reading First program, to discuss the developmental and other needs of individual children;

(4) organizing and participating in joint transition-related training of school staff, Head Start program staff, Early Reading First program staff, and, where appropriate, other early childhood development program staff; and

(5) linking the educational services provided by such local educational agency with the services provided by local Head Start agencies and entities carrying out Early Reading First programs.

(c) COORDINATION OF REGULATIONS.-The Secretary shall work with the Secretary of Health and Human Services to coordinate regulations promulgated under this part with regulations promulgated under the Head Start Act.

Subpart 2-Allocations

SEC. 1121. [20 U.S.C. 6331] GRANTS FOR THE OUTLYING AREAS AND THE SECRETARY OF THE INTERIOR.

(a) RESERVATION OF FUNDS.-From the amount appropriated for payments to States for any fiscal year under section 1002(a) and 1125A(f), the Secretary shall reserve a total of 1 percent to provide assistance to

(1) the outlying areas in the amount determined in accordance with subsection (b); and

(2) the Secretary of the Interior in the amount necessary to make payments pursuant to subsection (d).

(b) ASSISTANCE TO OUTLYING AREAS.—

(1) FUNDS RESERVED.-From the amount made available for any fiscal year under subsection (a), the Secretary shall award grants to local educational agencies in the outlying

areas.

(2) COMPETITIVE GRANTS.-Until each appropriate outlying area enters into an agreement for extension of United States educational assistance under the Compact of Free Association after the date of enactment of the No Child Left Behind Act of 2001, the Secretary shall carry out the competition described in paragraph (3), except that the amount reserved to carry out such competition shall not exceed $5,000,000.

(3) LIMITATION FOR COMPETITIVE GRANTS.—

(A) COMPETITIVE GRANTS.-The Secretary shall use funds described in paragraph (2) to award grants to the

outlying areas and freely associated States1 to carry out the purposes of this part.

(B) AWARD BASIS.-The Secretary shall award grants under subparagraph (A) on a competitive basis, taking into consideration the recommendations of the Pacific Region Educational Laboratory in Honolulu, Hawaii.

(C) USES.-Except as provided in subparagraph (D), grant funds awarded under this paragraph may be used only

(i) for programs described in this Act, including teacher training, curriculum development, instructional materials, or general school improvement and reform; and

(ii) to provide direct educational services that assist all students with meeting challenging State academic content standards.

(D) ADMINISTRATIVE COSTS.-The Secretary may provide not more than 5 percent of the amount reserved for grants under this paragraph to pay the administrative costs of the Pacific Region Educational Laboratory under subparagraph (B).

(4) SPECIAL RULE.-The provisions of Public Law 95-134, permitting the consolidation of grants by the outlying areas, shall not apply to funds provided to the freely associated States 1 under this section.

(c) DEFINITIONS.-For the purpose of subsections (a) and (b)— (1) the term "freely associated states" means the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau; and

(2) the term "outlying area" means the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

(d) ALLOTMENT TO THE SECRETARY OF THE INTERIOR.—

(1) IN GENERAL.-The amount allotted for payments to the Secretary of the Interior under subsection (a)(2) for any fiscal year shall be, as determined pursuant to criteria established by the Secretary, the amount necessary to meet the special educational needs of

(A) Indian children on reservations served by elementary schools and secondary schools for Indian children operated or supported by the Department of the Interior; and

(B) out-of-State Indian children in elementary schools and secondary schools in local educational agencies under special contracts with the Department of the Interior.

(2) PAYMENTS.-From the amount allotted for payments to the Secretary of the Interior under subsection (a)(2), the Secretary of the Interior shall make payments to local educational agencies, on such terms as the Secretary determines will best carry out the purposes of this part, with respect to out-of-State Indian children described in paragraph (1). The amount of such payment may not exceed, for each such child, the greater of(A) 40 percent of the average per-pupil expenditure in the State in which the agency is located; or

1 So in law. Should probably be "states".