BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 734    
                                                                           
                                                                           
                                                                           
                                                                 
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          Date of Hearing:   September 6, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                SB 734 (DeSaulnier) - As Amended:  September 2, 2011 

          Policy Committee:                             N/A   Vote:N/A

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              No

           SUMMARY  

          This bill requires specified minimum amounts of federal 
          Workforce Investment Act (WIA) funds provided to local WIA 
          (LWIA) boards to be spent on workforce training programs, as 
          specified.  Specifically, this bill:  

          1)Requires the following minimum amounts of WIA funds provided 
            to local boards be spent on workforce training programs: (a) 
            25% beginning with the 2012 federal program year and (b) 30% 
            beginning with the 2016 federal program year.

          2)Requires expenditures on training services (as defined under 
            federal WIA statute) to be counted toward the minimum 
            percentage requirements, as specified.  Authorizes the LWIA 
            boards to achieve the above minimum amounts by utilizing 
            leveraged funds in combination with WIA training funds, as 
            specified.  

          3)Authorizes LWIA boards to receive a credit of up to 10% of 
            their adult and dislocated worker base formula allocations for 
            public education and training funds and private resources that 
            are leveraged by a local board to be counted toward meeting 
            the minimum percentage requirements for expenditure on 
            workforce training, as specified.  

          4)Requires credit for leveraged funds to only be given if an 
            LWIA board keeps records of all training expenditures it 
            chooses to apply to the 10% credit.  Further specifies these 








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            leveraged funds can only be applied to the credit if the costs 
            can be independently verified by the Employment Development 
            Department (EDD), as specified.  

          5)Requires the EDD, beginning with the 2012 program year, to 
            calculate whether each LWIA board met the expenditure 
            requirements of this bill, as specified.  Further requires EDD 
            to provide each LWIA board with its individual calculations.  

          6)Requires a LWIA board that does not meet the requirement of 
            this bill to submit a corrective action plan to EDD, within 90 
            days of receiving its calculation, that provides reasons for 
            not meeting the requirements and describes actions taken to 
            address the identified expenditure deficiencies. 





           FISCAL EFFECT  

          1)Federal local WIA fund reallocation of $45.5 million to $56.8 
            million in order to meet the requirements of this bill.  To 
            the extent local WIA boards are currently meeting the minimum 
            expenditure requirement for training (20% and 25%), this cost 
            may be reduced.    

          2)Minor absorbable costs to EDD to implement the requirements 
            related to the review of corrective action plans. To the 
            extent, however, LWIA boards choose to use leveraged funds to 
            meet the minimum percentages specified in this bill, EDD may 
            incur significant administrative costs, likely in the hundreds 
            of thousands.  Increases in administrative costs are due to 
            EDD's potential redesign of database systems to track the use 
            of leveraged funds, as specified.    


           COMMENTS  

           1)Background  .  The WIA was established by federal law in 1998 
            for purposes of job training and workforce development. It 








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            requires states to form state workforce investment boards, and 
            requires governors to designate local workforce investment 
            areas and oversee local workforce investment boards to 
            coordinate and distribute job training funds. 

            In California, WIA funds are provided through the state 
            Workforce Investment Board (CWIB) and 49 local boards.  The 
            state board receives 15% of the state's WIA allocation, and 
            the remaining 85% is allocated to the local boards.  CWIB 
            works with the governor to provide policy guidance on how to 
            spend these funds.  Likewise, each board determines how they 
            spend their funds in accordance with the workforce needs of 
            their areas. 

           2)Purpose  .  The Senate Office of Research (SOR) published a 
            report in May 2011 entitled: WIA: How is the Federal Funding 
            Being Spent, which states: "The data show that most LWIBs 
            reported spending less than 25% of their federal funds on job 
            training and instead spent substantially more of their federal 
            funds on core and intensive services provided through the more 
            than 200 One Stop Career Centers in the state.  A third of the 
            boards reported spending less than 15% of their funds on job 
            training."

            SOR's report also reveals that other states require their LWIA 
            boards to invest significantly in job training.  Specifically, 
            the report provides information that Florida mandates its 
            local boards spend at least 50% of their funding on job 
            training and Illinois requires its local boards to spend at 
            least 40% of their funds on job training.  

            The California Labor Federation, sponsor of this bill, state: 
            "Workers in California face the toughest jobs crisis since the 
            Great Depression.  With the declining state revenues and 
            pressure on public resources, it is crucial that every dollar 
            of federal workforce funds is invested in high quality 
            employment services that connect workers to good jobs."  

            This bill requires, beginning with the 2012 federal program 
            year, specified minimum amounts of federal WIA funds provided 
            to LWIA boards to be spent on workforce training programs, as 








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            specified.  

           3)Opposition  .  Opponents of this measure (Los Angeles County 
            Board of Supervisors, California State Association of 
            Counties, Los Angeles County Workforce Investment Board, the 
            Southern California Workforce Partnership, and the California 
            Workforce Association) contend this measure limits LWIA 
            boards' authority to best serve the needs of workers in their 
            area.  Specifically, the Los Angeles County Board of 
            Supervisors states: "ÝThis legislation] would have serious 
            unintentional consequences and could result in the elimination 
            of services and closure of various One Stop Career Centers, 
            which serve more than 161,000 universal access clients with 
            essential services to help gain employment in the county's 
            workforce investment area."   
           
          4)LWIA boards and use of WIA funds  . WIA funds are distributed to 
            the states based on formulas that consider unemployment rates 
            and other economic and demographic factors.  California and 
            its 49 Local LWIA boards receive funding from the U.S. 
            Department of Labor through three revenue streams: adult, 
            youth, and dislocated workers. Under federal law, 85% of adult 
            and youth formula funds and 60% of dislocated worker formula 
            funds are distributed to local boards.  Fifteen percent of 
            adult, youth, and dislocated worker formula funds are 
            allocated to the state for a variety of discretionary uses.  

            LWIA boards are required to provide core and intensive 
            employment services, which are designed to help workers find 
            employment quickly.  These services consist of job 
            search/placement, workplace counseling, skills assessment, and 
            individual career counseling, and case management.  In order 
            to provide these services, each local workforce area created 
            one or more One Stop Centers, which provide access to career 
            information, counseling, funding for education, training and 
            supportive services.  Federal law does allow more than one One 
            Stop Center to operate within each workforce area.  According 
            to SOR's report, more than 200 centers operate in California.  
              

            Federal law also requires LWIA boards to provide job training 








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            services, which includes classroom training, customized 
            training, and on-the-job training (also known as incumbent 
            worker training). Training funds are designed to aid workers 
            in gaining new skills or upgrade existing skills.  Funds are 
            often distributed through vouchers to job seekers to enroll in 
            eligible training programs. Likewise, WIA funds used for 
            training can also be used for supportive services that are 
            used to enable a participant to attend and complete training, 
            such as subsidized child care and transportation vouchers.  

           5)Related legislation  .  SB 776 (DeSaulnier), similar to this 
            bill, failed passage in this committee on August 25, 2011.  
            The difference between SB 776 and this bill is the following: 

             a)   SB 734 authorizes LWIA boards to utilize specified 
               leveraged funds to meet the minimum percentage requirements 
               expended for workforce training.  Specifically, local 
               boards are allowed to utilize up to 10% of leveraged funds 
               to meet these requirements. 

             b)   SB 734 increases the minimum training requirements from 
               20% to 25% in 2012 and 25% to 30% in 2016.  



           Analysis Prepared by  :    Kimberly Rodriguez / APPR. / (916) 
          319-2081