BILL ANALYSIS Ó SB 734 Page 1 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 SB 734 Page 2 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 SB 734 Page 3 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 SB 734 Page 4 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 SB 734 Page 5 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