(a) In general The Secretary shall make grants to States with applications approved under section 6612 of this title to pay for the Federal share of the cost of carrying out the activities specified in section 6613 of this title.

Each grant shall consist of the allotment determined for a State under subsection (b) of this section. (b) Determination of allotments (1) Reservation of funds (A) (!1) In general From the total amount appropriated under section 6603(a) of this title for a fiscal year, the Secretary shall reserve - (i) one-half of 1 percent for allotments for the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, to be distributed among those outlying areas on the basis of their relative need, as determined by the Secretary, in accordance with the purpose of this part; and (ii) one-half of 1 percent for the Secretary of the Interior for programs under this part in schools operated or funded by the Bureau of Indian Affairs. (2) State allotments (A) Hold harmless (i) In general Subject to subparagraph (B), from the funds appropriated under section 6603(a) of this title for any fiscal year and not reserved under paragraph (1), the Secretary shall allot to each of the 50 States, the District of Columbia, and the Commonwealth of Puerto Rico an amount equal to the total amount that such State received for fiscal year 2001 under - (I) section 2202(b) of this Act (as in effect on the day before January 8, 2002); and (II) section 306 of the Department of Education Appropriations Act, 2001 (as enacted into law by section 1(a)(1) of Public Law 106-554). (ii) Ratable reduction If the funds described in clause (i) are insufficient to pay the full amounts that all States are eligible to receive under clause (i) for any fiscal year, the Secretary shall ratably reduce those amounts for the fiscal year. (B) Allotment of additional funds (i) In general Subject to clause (ii), for any fiscal year for which the funds appropriated under section 6603(a) of this title and not reserved under paragraph (1) exceed the total amount required to make allotments under subparagraph (A), the Secretary shall allot to each of the States described in subparagraph (A) the sum of - (I) an amount that bears the same relationship to 35 percent of the excess amount as the number of individuals age 5 through 17 in the State, as determined by the Secretary on the basis of the most recent satisfactory data, bears to the number of those individuals in all such States, as so determined; and (II) an amount that bears the same relationship to 65 percent of the excess amount as the number of individuals age 5 through 17 from families with incomes below the poverty line, in the State, as determined by the Secretary on the basis of the most recent satisfactory data, bears to the number of those individuals in all such States, as so determined. (ii) Exception No State receiving an allotment under clause (i) may receive less than one-half of 1 percent of the total excess amount allotted under such clause for a fiscal year. (3) Reallotment If any State does not apply for an allotment under this subsection for any fiscal year, the Secretary shall reallot the amount of the allotment to the remaining States in accordance with this subsection.