(a) Reservation of funds
From the sum appropriated under section 3275 of this title for a fiscal year, the Secretary—

(1) shall reserve 2 percent to carry out section 3332 of this title, except that the amount so reserved shall not exceed $15,000,000; and

(2) shall reserve 12 percent of the amount that remains after reserving funds under paragraph (1) to carry out section 3333 of this title.

(b) Grants to eligible agencies

(1) In general
From the sum appropriated under section 3275 of this title and not reserved under subsection (a) for a fiscal year, the Secretary shall award a grant to each eligible agency having a unified State plan approved under section 3112 of this title or a combined State plan approved under section 3113 of this title in an amount equal to the sum of the initial allotment under subsection (c)(1) and the additional allotment under subsection (c)(2) for the eligible agency for the fiscal year, subject to subsections (f) and (g), to enable the eligible agency to carry out the activities assisted under this subchapter.

(2) Purpose of grants
The Secretary may award a grant under paragraph (1) only if the eligible entity involved agrees to expend the grant for adult education and literacy activities in accordance with the provisions of this subchapter.

(c) Allotments

(1) Initial allotments
From the sum appropriated under section 3275 of this title and not reserved under subsection (a) for a fiscal year, the Secretary shall allot to each eligible agency having a unified State plan approved under section 3112 of this title or a combined State plan approved under section 3113 of this title—

(A) $100,000, in the case of an eligible agency serving an outlying area; and

(B) $250,000, in the case of any other eligible agency.

(2) Additional allotments
From the sum appropriated under section 3275 of this title, not reserved under subsection (a), and not allotted under paragraph (1), for a fiscal year, the Secretary shall allot to each eligible agency that receives an initial allotment under paragraph (1) an additional amount that bears the same relationship to such sum as the number of qualifying adults in the State or outlying area served by the eligible agency bears to the number of such adults in all States and outlying areas.

(d) Qualifying adult
For the purpose of subsection (c)(2), the term "qualifying adult" means an adult who—

(1) is at least 16 years of age;

(2) is beyond the age of compulsory school attendance under the law of the State or outlying area;

(3) does not have a secondary school diploma or its recognized equivalent; and

(4) is not enrolled in secondary school.

(e) Special rule

(1) In general
From amounts made available under subsection (c) for the Republic of Palau, the Secretary shall award grants to Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Republic of Palau to carry out activities described in this subchapter in accordance with the provisions of this subchapter, as determined by the Secretary.

(2) Award basis
The Secretary shall award grants pursuant to paragraph (1) on a competitive basis and pursuant to the recommendations from the Pacific Region Educational Laboratory in Honolulu, Hawaii.

(3) Termination of eligibility
Notwithstanding any other provision of law, the Republic of Palau shall be eligible to receive a grant under this subchapter except during the period described in section 3102(45) of this title.

(4) Administrative costs
The Secretary may provide not more than 5 percent of the funds made available for grants under this subsection to pay the administrative costs of the Pacific Region Educational Laboratory regarding activities assisted under this subsection.

(f) Hold-harmless provisions

(1) In general
Notwithstanding subsection (c), for fiscal year 2015 and each succeeding fiscal year, no eligible agency shall receive an allotment under this section that is less than 90 percent of the allotment the eligible agency received for the preceding fiscal year under this section.

(2) Ratable reduction
If for any fiscal year the amount available for allotment under this subchapter is insufficient to satisfy the provisions of paragraph (1) the Secretary shall ratably reduce the payments to all eligible agencies, as necessary.

(g) Reallotment
The portion of any eligible agency's allotment under this subchapter for a fiscal year that the Secretary determines will not be required for the period such allotment is available for carrying out activities under this subchapter, shall be available for reallotment from time to time, on such dates during such period as the Secretary shall fix, to other eligible agencies in proportion to the original allotments to such agencies under this subchapter for such year.