1. (a)

   1. (1) As of June 30 of each school year, the total aggregate balance of all state categorical fund sources shall not exceed twenty percent (20%) of the total aggregate annual state categorical fund allocations for the current school year except as provided herein.
   2. (2) On June 30 of each school year, if the total aggregate balance of all state categorical fund sources exceeds twenty percent (20%) of the school district's total aggregate annual state categorical fund allocations for the current school year, the school district shall reduce that total balance by ten percent (10%) each year until the school district's June 30 balance of aggregate annual categorical fund sources is twenty percent (20%) or less of the total aggregate annual state categorical fund allocations for the current school year.
   3. (3) The annual reduction required under subdivision (a)(2) of this section shall be a minimum of ten percent (10%) of the total excess balances of all state categorical fund sources.
   4. (4) ESA Matching Grant funds shall not be included when calculating the total aggregate annual state categorical fund allocation.
2. (b) A school district may transfer funds received from any categorical fund source to another categorical fund source.

3. (c)

   1. (1) The Division of Elementary and Secondary Education shall monitor on a yearly basis each school district's compliance with the requirements of:

      1. (A) Arkansas Code § 6-20-2305(e); and
      2. (B) This section.

   2. (2) If a school district fails to comply with the requirements of Arkansas Code § 6-20-2305(e) or this section during a school year, the division may in the following school year withhold from that school district's categorical funding allocation an amount equal to the amount required to be spent by the school district in order to be in compliance with the requirements of:

      1. (A) Arkansas Code § 6-20-2305(e); and
      2. (B) This section.
   3. (3) The division may redistribute amounts withheld under Arkansas Code § 6-20-2305(e) and this section to other school districts entitled to receive categorical funding allocations.

Codification Notes: “ESA” means enhanced student achievement.