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(b) QUALIFIED PROGRAMS.

(1) WHERE STATE SUPPLIES AT LEAST 90 PERCENT OF COST OF PUBLIC EDUCATION.-If a State for any entitlement period supplies 90 percent or more of the non-Federal funding of public elementary and secondary education, then its expenditures for such period will be considered to be public education equalization expenditures if the State funds are allocated among public elementary and secondary schools under a program based on providing an equal amount of funds for the education of each public school student in the State appropriately adjusted to provide differential amounts of funds for public school students in the State according to criteria prescribed by the Secretary designed to achieve the equalization of educational opportunities of public school students within the State.

(2) WHERE STATE SUPPLIES LESS THAN 90 PERCENT OF COST OF PUBLIC EDUCATION. If a State for any entitlement period supplies less than 90 percent of the non-Federal funding of public elementary and secondary education, then its expenditures for such period will be considered to be public education equalization expenditures if the State funds are distributed among school districts under a program which will allocate State funds among school districts for an entitlement period in proportion to the amount by which each districts hypothetical educational expenditures exceeds the sum of its hypothetical property tax revenue plus State allocations to the district for public education other than allocations under a program providing public education equalization expenditures.

(A) For purposes of this subsection, the term "hypothetical educational expenditures" means for any school district the product derived by multiplying (i) the number of public school students within the district times (ii) the total non-Federal expenditures for public education within the State over the total number of public school students within the State.

(B) For purposes of this subsection, the term "hypothetical property tax revenues" means for any school district the product derived by multiplying (i) the assessed value of all assessable real property within the district times (ii) the total non-Federal expenditures for public education within the State over the total assessed value of all assessable real property within the State.

(C) For the purposes of this subsection, the Secretary by appropriate regulation shall prescribe such criteria as may be necessary to assure equalization of educational opportunity in each local education agency of the State comparable to that that would be achieved in a State qualifying under subsection (1).

(D) REGULATIONS.-The Secretary may prescribe regulations describing other programs for equalizing educational opportunities of public school students expenditures under which will qualify as public education equalization expenditures.

SEC. 103. AMOUNT OF ENTITLEMENT OF STATE.

(a) IN GENERAL.—

(1) Except as provided in paragraphs (b), (c), and (d) there shall be paid to a State educational agency from two-thirds of the amount appropriated to the Trust Fund pursuant to section 104 (a) (1) for any entitlement period an amount equal to the amount obtained by multipling the fraction of which (i) the estimated number of children who will be in the membership of elementary and secondary schools within the State is the numerator and (ii) the total number of all such children in all of the States is the denominator by two-thirds of the total amount of the funds deposited in the Trust Fund established pursuant to section 104 (a) (1) available for distribution at the time the allocation is made.

(2) In addition to the payments made in subsection (1) there shall be paid to a State educational agency from one-third of the amounts appropriated to the Trust Fund pursuant to section 104 (a) (1) for any entitlement period an amount obtained by multiplying the fraction of which (i) the number of children aged five to seventeen coming from families whose income is less than $4,000 per annum (to be referred to as the "low income factor”) (as determined by the Secretary from the most recent United States Census data available to him) within such State is the numerator and (ii) the total of all such children in all the States is the denominator by one-third of the total amount of the funds deposited in the Trust Fund pursuant to section 104(a) (1) available for distribution at the time the allocation is made. For

the fiscal year beginning June 30, 1974, and for each ensuing fiscal year thereafter there shall also be counted for the purposes of this subsection those children coming from families, if any, whose income is in excess of $4,000 per annum from that program of aid to families with dependent children under a State plan approved under title IV of the Social Security Act. (3) The estimated number of children who will be in the membership of elementary and secondary schools in a State shall be determined by uniform criteria prescribed by the Secretary.

(b) EXCEPTIONS.-The total payment to a State for any entitlement period under subsecton (a) may not exceed 30 percent of the total non-Federal funds spent within the State for such period on public elementary and secondary education.

(c) From the amounts appropriated to the trust fund pursuant to section 104(a) (2) the Secretary shall allot such sums to Puerto Rico, Guam, American Samoa, the Virgin Islands, and the Trust Territory of the Pacific Islands as will most appropriately meet the objectives of this Act according to their respective needs for assistance.

(d) No allotment shall be made to any State from the trust fund established pursuant to section 104 unless for the applicable entitlement period such State has in effect a qualified program of public education equalization expenditure in conformance with section 102.

SEC. 104. PUBLIC EDUCATION TRUST FUND.

(a) APPROPRIATIONS.

(1) IN GENERAL.-There is hereby authorized to be appropriated for the fiscal year beginning July 1, 1972, $2,250,000,000, for the fiscal year beginning July 1, 1973, $4,000,000,000, for the fiscal year beginning July 1, 1974, $6,000,000,000, and for each of the fiscal years thereafter through the fiscal year beginning July 1, 1977, $10,000,000,000, to carry out the purposes of this Act.

(2) In addition to the amounts authorized to be appropriated pursuant to subsection (1) there is authorized to be appropriated for each of the fiscal years for which an appropriation is authorized by subsection (1) an amount equal to 2 percent of the amounts authorized to be appropriated for each of the fiscal years provided for in subsection (1) for making payments out of the Trust Fund created by this section for the purposes specified in paragraph (c) of section 103.

(3) DEPOSIT IN TRUST FUND.-The amounts appropriated pursuant to paragraphs (1) and (2) for any period shall be deposited in the trust fund created by subsection (b) on the first day of such period (or, if later, on the day on which this Act is enacted).

(b) CREATION OF TRUST FUND.

(1) There is created in the books of the Treasury of the United States a trust fund to be known as the "Public Education Trust Fund" (referred to in this subtitle as the "Trust Fund"). The Trust Fund shall remain available without fiscal year limitation and shall consist of such amounts as may be appropriated to it and deposited in it as provided in subsection (a) Amounts in the Trust Fund may be used only for the payments to State educational agencies provided by this Act.

(2) The Secretary of Health, Education, and Welfare shall be the trustee of the Trust Fund and shall report to the Congress not later than March 1 of each year on the operation and status of the Trust Fund during the preceding fiscal year.

SEC. 105. GENERAL PROVISIONS.

(a) ASSURANCE OF STATE PUBLIC EDUCATIONS EQUALIZATION EXPENDITURES PLANS.-In order to qualify for any payment under this Act for any entitlement period beginning on or after July 1, 1972, a State educational agency must establish (in accordance with regulations prescribed by the Secretary) to the satisfaction of the Secretary

(1) that the State educational agency will establish a trust fund in which it will deposit all payments it receives under this Act;

(2) that it will use amounts in such trust fund (including any interest earned thereon while in such trust fund) only for high-priority public education equalization expenditures, and for the purposes of section 105(a) (7) and that it will so use such amounts during such reasonable period or periods as may be provided in such regulations;

(3) that it will pay over to the Secretary (for deposit in the general fund of the Treasury) an amount equal to 110 percent of any amount expended out of its trust fund established pursuant to paragraph (1) in violation of paragraph (2) which is not promptly repaid to the trust fund (or the violation otherwise corrected) after notice and an opportunity to take corrective action;

(4) that the State educational agency will

(A) use such fiscal, accounting, and audit procedures as will conform to guidelines established therefor by the Secretary (after consultation with the Comptroller General of the United States) and as will assure compliance with paragraphs (2) and (3).

(B) provide to the Secretary (and to the Comptroller General of the United States), on reasonable notice, access to, and the right to examine, such books, documents, papers, or records as the Secretary may reasonably require for purposes of reviewing compliance with this subsection (or, in the case of the Comptroller General, as the Comptroller General may reasonably require for purposes of reviewing compliance and operations under subsection (c) (2)), and

(C) make such annual and interim reports to the Secretary as he may reasonably require;

(5) that all laborers and mechanics employed by contractors or subcontractors in the performance of work on construction financed in whole or in part out of its trust fund established under paragraph (1) will be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act, as amended (40 U.S.C. 276a-276a-5), and that with respect to the labor standards specified in this paragraph the Secretary of Labor shall act in accordance with Reorganization Plan Numbered 14 of 1950 (15 F.R. 3176: 64 Stat. 1267) and section 2 of the Act of June 13, 1934, as amended (40 U.S.C. 276c);

(6) that persons employed in jobs financed in whole or in part out of its trust fund established under paragraph (1) will be paid wages which shall not be lower than the prevailing rates of pay for persons employed in similar jobs by such State;

(7) that

(A) (i) to the extent consistent with the number of children in the State who are enrolled in private nonprofit elementary and secondary schools, the State educational agency, after consultation with the appropriate private school officials, will provide for the benefit of such children in such schools secular, neutral, or nonideological services, materials, and equipment including such facilities as necessary for their provisions, consistent with subparagraph (B) of this section, or, if such are not feasible or necessary in one or more of such private schools as determined by the State educational agency after consultation with the appropriate private school officials, such other arrangements, as dual enrollments, which will assure adequate benefits for such children and (ii) from the funds received by the State educational agency under this Act the State educational agency will expend for the purposes of fulfilling the requirements of this paragraph, an amount which bears the same ratio to the total amount received under this Act as the number of children enrolled in private nonprofit schools bears to the total number of such children enrolled in elementary and secondary schools in the State;

(B) (i) the control of funds provided under this section and title to property acquired therewith shall be in a public agency for the uses and purposes provided in this section, and that a public agency will administer such funds and property; (ii) the provision of services pursuant to subparagraph (A) shall be provided by employees of such public agency or through contract by such public agency with a person, an association, agency, or corporation who or which in the provision of such services, is independent of such private school and any religious organization, and such employment or contract shall be under the control and supervision of such public agency; (iii) the funds provided under this paragraph shall not be commingled with other funds; and (iv) Federal funds made available under this paragraph will be so used as to supplement and, to the extent possible, increase the level of 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 and projects assisted under this paragraph; and

(C) it will keep such records and afford such access thereto as the State educational agency may find necessary to assure the correctness and verification of such applications.

(8) that it will require any local educational agency in a State which is to receive for any fiscal year a grant under this section shall submit to the appropriate State educational agency an application which contains

(A) (i) an analysis of the facilities, curriculum, equipment, teacher preparation, and other related matters of the elementary and secondary schools in the school district of the local educational agency; (ii) an assessment of the educational attainment of elementary and secondary school pupils in basic educational subject areas; (iii) an analysis of the number of those students who proceed to postsecondary education, those who after completion leave the elementary and secondary education system and find substantial employment, and those who leave school before completion of elementary or secondary education; (iv) an analysis of the need for adult education programs; (v) the need for special inservice, teacher-training programs; (vi) a detailed description of the proposed use of funds granted under this section with assurance such use of the funds will best enable the local educational agency to meet the educational needs of children and adults in the school district as reflected by the analysis and assessment of the educational needs of such children and adults evidenced in the matters submitted in clauses (i), (ii), (iii), (iv), and (v) above;

(B) an evaluation of the effectiveness, including objective measurements of educational achievement, of programs and projects funded in the preceding fiscal year from funds provided under this section; and (C) such other information as the State educational agency may reasonably need to enable it to perform its duties under this Act. (b) WITHHOLDING OF PAYMENTS.-If the Secretary determines that a State educational agency has failed to comply substantially with any provision of this Act (other than section 106) or any regulations prescribed thereunder, after giving reasonable notice and opportunity for a hearing to the State educational agency of such State, the Secretary shall notify such agency that if it fails to take corrective action within 60 days from the date of receipt of such notification further payments to such agency shall be withheld for the remainder of the entitlement period and for any subsequent entitlement period until such time as the Secretary is satisfied that appropriate corrective action has been taken and that there will no longer be any failure to comply. Until he is satisfied, the Secretary shall make no further payments of such amounts. (c) ACCOUNTING, AUDITING, AND EVALUATION.—

(1) IN GENERAL.-The Secretary shall provide for such accounting and auditing procedures, evaluations, and reviews as may be necessary to insure that the expenditures of funds comply fully with the requirements of this Act.

(2) COMPTROLLER GENERAL SHALL REVIEW COMPLIANCE.-The Comptroller General of the United States shall make such reviews of the work as done by the Secretary, and the State educational agencies, as may be necessary for the Congress to evaluate compliance and operations under this subtitle. SEC. 106. NONDISCRIMINATION PROVISION.

(a) No person in the United States shall on the ground of race, color, national origin, or sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with funds made available under this title.

(b) Whenever the Secretary determines that a State educational agency has failed to comply with subsection (a) or an applicable regulation, he shall notify the State educational agency of the noncompliance and shall request such agency to secure compliance. If within a reasonable period of time it fails or refuses to secure compliance, the Secretary shall have the authority (1) to refer the matter to the Attorney General with a recommendation that an appropriate civil action be instituted; (2) to exercise the powers and functions provided by title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); or (3) to take such other action as may be provided by law.

(c) When a matter is referred to the Attorney General pursuant to subsection 85-568-72-2

(b), or whenever he has reason to believe that a State educational agency is engaged in a pattern or practice in violation of the provisions of this section, the Attorney General may bring a civil action in any appropriate United States district court for such relief as may be appropriate, including injunctive relief. SEC. 107. DEFINITIONS AND SPECIAL RULES.

(a) SECRETARY.-For purposes of this title, the term "Secretary" means the Secretary of Health, Education, and Welfare or his delegate. The term "Secretary of Health, Education, and Welfare" means the Secretary of Health, Education, and Welfare personally, not including any delegate.

(b) ENTITLEMENT PERIOD.-For purposes of this Act, the term "entitlement period" means the one-year periods beginning on July 1 of 1972, 1973, 1974, 1975, 1976, and 1977.

(c) STATE. The term "State" means (1) one of the fifty States and the District of Columbia and (2) for the purposes of sections 101, 102 and paragraph (c) of the section 103, section 105, section 106 includes Puerto Rico, Guam, American Samoa, Virgin Islands, and the Trust Territory of the Pacific Islands.

(d) STATE EDUCATIONAL AGENCIES.-The term "State educational agency" means the State board of education or other agency or officer primarily responsible for the State supervision of public elementary and secondary schools, or, if there is no such officer or agency, an officer or agency designated by the Governor or by State law for this purpose.

(e) ELEMENTARY AND SECONDARY SCHOOL.-The terms "elementary and secondary school" and "school" mean a school which provides elementary or secondary education, as determined under State law, except that it does not include any education provided beyond grade 12.

SEC. 108. REGULATIONS.

(a) GENERAL RULE.-The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the provisions of this title.

(b) ADMINISTRATIVE PROCEDURE ACT TO APPLY.-The rulemaking provisions of subchapter II of chapter 5 of title 5 of the United States Code shall apply to the regulations prescribed under this title for entitlement periods beginning on or after July 1, 1972.

SEC. 109. JUDICIAL REVIEW.

(a) PETITIONS FOR REVIEW.-Any State educational agency which receives a 60-days notice under section 105(b) may, within 60 days after receiving such notice, file with the United States court of appeals for the circuit in which such State is located a petition for review of the action of the Secretary. A copy of the petition shall forthwith be transmitted to the Secretary; a copy shall also forthwith be transmitted to the Attorney General.

(b) RECORD.-The Secretary shall file in the court the record of the proceeding on which he based his action, as provided in section 2112 of title 28, United States Code. No objection to the action of the Secretary shall be considered by the court unless such objection has been urged before the Secretary.

(c) JURISDICTION OF COURT.-The court shall have jurisdiction to affirm or modify the action of the Secretary or to set it aside in whole or in part. The findings of fact by the Secretary, if supported by substantial evidence contained in the record, shall be conclusive. However, if any finding is not supported by substantial evidence contained in the record, the court may remand the case to the Secretary to take further evidence, and the Secretary may thereupon make new or modified findings of fact and may modify his previous actions. He shall certify to the court the record of any further proceedings. Such new or modified findings of fact shall likewise be conclusive if supported by substantial evidence contained in the record.

(d) REVIEW BY SUPREME COURT.-The judgment of the court shall be subject to review by the Supreme Court of the United States upon certiorari or certification, as provided in section 1254 of title 28, United States Code.

Mr. PUCINSKI. The subcommittee will come to order. The General Subcommittee on Education is today resuming its hearings on the financing of elementary and secondary education.

Earlier this year we held 10 intensive days of hearings on the enormous implications of the Serrano, and related court decisions, on our elementary and secondary school system. We heard from lawyers,

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