20 U.S.C. § 7709 — State consideration of payments in providing State aid

(a) General prohibition — Except as subsection (b) allows, a state may not: (1) count payments under this subchapter when deciding, for any fiscal year, a local educational agency's eligibility for state aid for free public education, or the amount of that aid; or (2) hand out state aid in a way that leaves an eligible district worse off than it would be if it were not eligible for the federal payment. (b) State equalization plans — (1) In general: A state may reduce state aid to a district that gets a payment under section 7702 or 7703(b) — except for certain excluded amounts described in the section — for any fiscal year, if the Secretary determines and certifies under subsection (c)(3)(A) that the state runs a program of state aid that equalizes school spending among its districts. (2) Computation: (A) A state aid program counts as equalizing spending if, in the second fiscal year before the year being judged, the district with the highest per-pupil spending or revenue did not exceed the district with the lowest per-pupil spending or revenue by more than 25 percent. (B) In making that determination, the Secretary must disregard districts above the 95th percentile or below the 5th percentile of spending or revenue, and must take into account how far the state's aid program accounts for the extra cost of providing education in certain kinds of districts, such as geographically isolated ones, or to certain kinds of students, such as children with disabilities. (3) Exception: If the Secretary finds that a state has substantially revised its aid program, the Secretary may still certify it for a fiscal year if projected data shows the program will meet the 25-percent standard, and the state assures the Secretary that if final data shows the standard was not actually met, the state will pay back each affected district the amount by which its state aid was reduced. (c) Procedures for review of state equalization plans — (1) Written notice: (A) A state that wants to consider these payments in providing state aid must give the Secretary written notice of that intent at least 120 days before the state's fiscal year begins. (B) That notice must be in the Secretary's required form, including evidence that the state notified every district in the state of its intention. (2) Opportunity to present views: Before making a determination under subsection (b), the Secretary must give the state, and districts in the state, a chance to present their views. (3) Qualification procedures: If the Secretary determines a state's aid program qualifies under subsection (b), the Secretary must certify the program, notify the state, and give any district harmed by that certification an opportunity for a hearing under section 7711(a). (4) Nonqualification procedures: If the Secretary determines a program does not qualify, the Secretary must notify the state, and give the state and any harmed district an opportunity for a hearing under section 7711(a). (d) Treatment of state aid — (1) In general: If a state runs a program of state aid designed to equalize education spending among its districts, it may take payments under this subchapter into account when determining districts' relative financial resources and financial need — but only in proportion to the share that local tax revenue covered by the state's equalization program is of the district's total local tax revenue. (2) Prohibition: A state may not take these payments into account until the state's aid program has been certified by the Secretary under subsection (c)(3). (e) Remedies for state violations — (1) In general: No sooner than 150 days after the Secretary makes an adverse determination against a state for violating subsection (a) or (d)(2), or for failing to carry out an assurance made under subsection (b)(3)(B) — and if an administrative proceeding has not concluded by then — the Secretary or any aggrieved local educational agency may sue the state in federal district court. (2) Immunity: A state is not immune from such a suit under the Eleventh Amendment. (3) Relief: The court must grant whatever relief it determines is appropriate.