A bill to encourage States to increase the proportion of the expenditures in the State for public education which are derived from State rather than local revenue sources.

Makes a State eligible for direct educational assistance if the State educational agency applies therefor and the Commissioner of Education determines that at least fifty percent of the financial support for elementary and secondary education in such State is provided from State sources.

Provides that the amount of direct financial assistance to be paid to an eligible State shall be equal to the amount the Commissioner determines a State and its political subdivisions would receive for that year under provisions of: (1) title I of the Elementary and Secondary Education Act of 1965; (2) title II, III, V, and VII of the Elementary and Secondary Education Act of 1965; (3) titles III, V, and VI of the National Defense Education Act of 1958; (4) the Vocational Education Act of 1963; (5) the Adult Education Act; (6) the Education of the Handicapped Act, and (7) the Vocational Education Act of 1946.

States that funds granted under this Act shall be used for the support of elementary and secondary education in that State without regard to the purposes for which funds could be used under the provision of the aforementioned laws.

Provides that a State shall be eligible for a grant for any fiscal year if the State education agency applies therefor and the Commissioner determines: (1) that the State has increased the percentage of its expenditures for elementary and secondary education which are derived from State revenue sources during the preceding fiscal year over such percentage for the second preceding fiscal year, and (2) the average per pupil expenditure in the State for such year is not less than such expenditure for the preceding fiscal year.

Establishes formulae for determining the amount of such grant.

Provides that, in the event the funds appropriated are insufficient to make in full the grant to which the States are entitled, the grant to each of the States eligible for a grant shall be reduced pro rata.