METHOD OF PAYMENT.

SEC. 2015. METHOD OF PAYMENT. (a) Rounding of Payments.—The first sentence of section 5(b) of the Act is amended by inserting after “agency” a comma and the following: “rounded to the nearest whole dollar,”. (b) Disposition of Recovered Funds.—Section 5(b) of the Act is amended— (1) by inserting “(1)” after the subsection designation; and (2) by adding at the end thereof the following sentence: “The Secretary shall return to the United States Treasury any funds appropriated for payments under this title for fiscal years 1988 and thereafter that, as the result of overpayments or unallowable expenditures, are recovered by the Department of Education after the end of the fifth fiscal year following the end of the fiscal year for which the sums were appropriated, or that remain in Department of Education accounts after that time.”. (c) Preliminary Payments.—Section 5(b)(2) of the Act is amended to read as follows: “(2) As soon as possible after the beginning of any fiscal year, the Secretary shall, on the basis of a written request for a preliminary payment from any local educational agency that was eligible for a payment for the preceding fiscal year on the basis of entitlements established under section 2 or 3, make such a preliminary payment— “(A) to any agency for whom the number of children determined under section 3(a) amounts to at least 20 per centum of such agency’s total average daily attendance, of 75 per centum of the amount that such agency received for such preceding fiscal year on the basis of such entitlements; and “(B) to any other agency, of 50 per centum of the amount that such agency received for such preceding fiscal year on the basis of such entitlements.”. (d) General Rule on Payments.—Section 5(c)(1) of the Act is amended to read as follows: “(1)(A) The Secretary shall first allocate to each local educational agency which is entitled to a payment under section 2 an amount equal to 100 per centum of the amount to which it is 102 STAT. 297entitled as computed under that section for such fiscal year and to each local educational agency an amount equal to the supplemental 50 per centum of the entitlement that each child described in section 3(d)(2)(C) served by such agency is eligible to receive under section 3(d)(2)(C). “(B) The Secretary shall then allocate to any local educational agency which is eligible under section 3(d)(2)(B) an amount equal to 100 per centum of the amount to which such agency is entitled under sections 3(a) and 3(b). “(C) The Secretary shall reserve from the remainder of the sums appropriated for this Act (other than amounts needed for section 7) for such fiscal year— “(i) 80 per centum for the purpose of allocating sums under paragraph (2) for entitlements determined under section 3(a); and “(ii) 20 per centum for the purpose of allocating sums under paragraph (3) for entitlements determined under section 3(b).”. (e) Allocation of Payments Rule.—(1) Section 5(c)(2) of the Act is amended to read as follows: “(2)(A) For the purpose of allocating sums available for section 3(a) for any fiscal year which remain after the allocation required by paragraph (1) and any allocation required by sections 5(e) and 3(h) for such fiscal year, the Secretary shall determine the category to which a local educational agency belongs as follows: “(i) Each local educational agency in which the number of children determined under section 3(a) amounts to at least 20 per centum of the total number of children who were in average daily attendance in the schools of such agency is in category (i). “(ii) Each local educational agency in which the number of children determined under section 3(a) amounts to at least 15 per centum, but less than 20 per centum of the total number of children who were in average daily attendance in the schools of such agency is in category (ii). “(iii) Each local educational agency in which the number of children determined under section 3(a) amounts to less than 15 per centum of the total number of children who were in average daily attendance in the schools of such agency is in category (iii). “(B) The Secretary shall allocate the amounts described in subparagraph (A) according to the following schedule: “(i) A first allocation shall be made as follows: “(I) 80 per centum of entitlement to local educational agencies described in category (i); “(II) 60 per centum of entitlement to local educational agencies described in category (ii); and “(III) 40 per centum of entitlement to local educational agencies described in category (iii). “(ii) Any sums remaining after the allocation pursuant to clause (i) shall be allocated as follows: “(I) 20 per centum of entitlement to local educational agencies described in category (i); “(II) 15 per centum of entitlement to local educational agencies described in category (ii); and 102 STAT. 298 “(III) 10 per centum of entitlement to local educational agencies described in category (iii). “(iii) Any sums remaining after the allocation pursuant to clause (ii) shall be allocated as follows: “(I) 25 per centum of entitlement to local educational agencies described in category (ii); and “(II) 50 per centum of entitlement to local educational agencies described in category (iii). “(3)(A) For the purpose of allocating sums available for section 3(b) for any fiscal year which remain after the allocation required by paragraph (1) and any allocation required by sections 5(e) and 3(h) for such fiscal year, the Secretary shall determine the category to which a local educational agency belongs as follows: “(i) Each local educational agency in which the number of children determined under section 3(b) amounts to at least 20 per centum of the total number of children who were in average daily attendance in the schools of such agency is in category (i). “(ii) Each local educational agency in which the number of children determined under section 3(b) amounts to less than 20 per centum of the total number of children who were in average daily attendance in the schools of such agency is in category (ii). “(B) The Secretary shall allocate the amounts described in subparagraph (A) according to the following schedule: “(i) A first allocation shall be made as follows: “(I) 20 per centum of entitlement to local educational agencies described in category (i); and “(II) 10 per centum of entitlement to local educational agencies described in category (ii). “(ii) Any sums remaining after the allocation pursuant to clause (i) shall be allocated as follows: “(I) 30 per centum of entitlement to local educational agencies described in category (i); and “(II) 5 per centum of entitlement to local educational agencies described in category (ii). “(iii) Any sums remaining after the allocation pursuant to clause (ii) shall be allocated as follows: “(I) 50 per centum of entitlement to local educational agencies described in category (i); and “(II) 85 per centum of entitlement to local educational agencies described in category (ii). “(4) Whenever the additional amounts described in para-graphs (2)(A) and (3)(A) in each fiscal year are insufficient to provide the required percent of entitlement to each local educational agency under clause (ii) or (iii) of paragraph (2)(B), or clause (ii) or (iii) of paragraph (3)(B), respectively, the full amount which local educational agencies are entitled to receive under such clauses shall be ratably reduced. If additional funds become available for making such payments for any fiscal year during which the preceding sentence is applicable, such reduced amounts shall be increased on the same basis as they were reduced.”. (2)(A) Section 5(c)(3) of the Act is repealed. (B) The sentence following paragraph (2) of section 5(c) (as amended by subparagraph (An is amended by striking out “or (3)”. 102 STAT. 299 (C) The last sentence of section 5(c) of the Act is repealed. (f) State Aid Rule.—Section 5(d)(2)(A) of the Act is amended by inserting after the first sentence the following flush sentence: “The increase in payments described in sections 3(d)(2)(B), 3(d)(2)(C), 3(d)(2)(D), and 3(d)(3)(B)(ii) shall not be taken into consideration by the State for the purpose of this subparagraph.”. (g) Hold Harmless Rules.—Section 5(e) of the Act is amended to read as follows: “(e)(1)(A) For any fiscal year after September 30, 1988, the Secretary shall allocate to any local educational agency which received a payment under section 3(a) in fiscal year 1987, an amount which is not less than the product of 100 per centum of the per pupil amount paid to such agency in fiscal year 1987 and the number of such children in average daily attendance for the fiscal year for which the determination is made under such subsection. “(B) For any fiscal year beginning after September 30, 1988, the Secretary shall allocate to any local educational agency which received a payment under section 3(b) in fiscal year 1987 for children described in section 5(c)(3)(A)(i), an amount which is not less than the product of 100 per centum of the per pupil amount paid to such agency in fiscal year 1987 and the number of such children in average daily attendance in the fiscal year for which such determination is made. “(C) The provisions of subparagraphs (A) and (B) of this paragraph shall not apply to any local educational agency for which the factor in the determination of the local contribution rate described in section 3(d)(3)(A)(i) in the year for which the determination is made is less than the amount for such factor for fiscal year 1987. “(D) The Secretary is authorized to modify the per pupil amount described in subparagraph (A) of this paragraph, in any case in which, in the fiscal year for which the determination is made a local educational agency is no longer an agency described in section 5(c)(2)(A)(i), or section 5(c)(2)(A)(ii), but is an agency described in section 5(c)(2)(A)(ii) or section 5(c)(2)(A)(iii), as the case may be. “(E) The provisions of subparagraph (B) of this paragraph shall not apply to any local educational agency which, in the fiscal year for which the determination is made, is not a local educational agency described in section 5(c)(3)(A)(i). “(2) If sums appropriated for any fiscal year for making payments under this section are not sufficient to pay in full the amount to which each local educational agency is entitled under the previous paragraph, such amounts shall be ratably reduced. “(3) In no event shall the amount allocated to any local educational agency in any fiscal year under paragraph (1) exceed the amount received by such agency in the fiscal year 1987.”.