BILL ANALYSIS Ó SB 734 Page 1 SENATE THIRD READING SB 734 (DeSaulnier) As Amended September 2, 2011 Majority vote SENATE VOTE :Vote not relevant TRANSPORTATION ECONOMIC DEVELOPMENT (vote not relevant) (vote not relevant) ----------------------------------------------------------------- | | | | | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- APPROPRIATIONS APPROPRIATIONS 12-2 (vote not relevant) ----------------------------------------------------------------- | | |Ayes:|Fuentes, Blumenfield, | | | | |Bradford, Charles | | | | |Calderon, Campos, Davis, | | | | |Gatto, Hall, Hill, Lara, | | | | |Mitchell, Nielsen | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Harkey, Donnelly | | | | | | ----------------------------------------------------------------- SUMMARY : Imposes requirements related to the expenditure of Workforce Investment Act (WIA) funds on job training programs. Specifically, this bill : 1)Requires (beginning program year 2012) that at least 25% of federal Workforce Investment Act (WIA) funds provided to local workforce investment boards (WIBs) be spent on workforce training programs. 2)Increases this percentage to 30% beginning in program year 2016. 3)Specifies that the expenditures that shall count towards the above requirement shall include only training services as defined under specified federal law, including specified activities. SB 734 Page 2 4)Specifies that local WIBs may receive a credit of up to 10% of their base allocations for public education and training funds and private resources from industry and joint labor-management trusts that are leveraged for training services, as specified. This credit may be applied toward the aforementioned training thresholds. 5)Specifies that leveraged funds applied toward the credit shall only include the following: a) Federal Pell Grants; b) Programs authorized under WIA; c) Trade adjustment assistance; d) Federal Department of Labor National Emergency Grants; e) Match funds from employers, industry and industry associations; f) Match funds from joint labor-management trusts; and, g) Employment Training Panel grants. 6)Specifies that credit for leveraged funds shall only be given if the local WIB keeps records of all training expenditures it chooses to apply towards the credit. Training expenditures may only be applied to the credit if the relevant training costs can be independently verified by the Employment Development Department (EDD) and training participants must be co-enrolled in the WIA performance monitoring system. 7)Specifies that the use of leveraged funds to partially meet the training requirements is the prerogative of the local WIB. 8)Requires EDD to monitor compliance, as specified, and requires a local WIB that does not meet these requirements to submit a corrective action plan to EDD. FISCAL EFFECT : According to the Assembly Appropriations Committee, this measure will result in local WIA fund reallocation of $45.5 million to $56.8 million to meet the requirements of the bill. In addition, to the extent local WIBs SB 734 Page 3 choose to use leveraged funds to meet the minimum training percentages specified in this bill, EDD may incur significant administrative costs, likely in the hundreds of thousands. COMMENTS : The main question raised by this proposal is whether the Legislature should establish a statutory minimum percentage of WIA funds to be spent on workforce training programs. According to the author, with declining state revenues and pressure on public resources it is crucial that every dollar of federal workforce funds are invested in high quality employment services that connect workers to good jobs. The author argues that despite the need for targeted and effective training, Employment Development Department data has shown that local WIBs spend very little of our local WIA funds on skills training. According to the author, on average, local WIBs in California invest just 20% of their federal funds on training services and a third spend less than 11% on training, while many invest nothing. According to the author, federal law provides states with significant latitude to adjust WIA and align it with a broader economic vision, something of which California has failed to take advantage. Proponents argue that a vast majority of funds are going to support relatively less effective short-term "core" services (such as job search assistance) provided through a costly network of nearly 150 comprehensive One-Stop centers. The author and proponents believe that this bill is the first step in re-evaluating how these dollars are spent and ensuring that more money is invested in training programs that are effective and align with a state plan for economic growth. In addition, proponents argue that the objective behind this legislation is not to displace anyone that might be currently providing job services through the One-Stop Centers, but instead redirecting our overall efforts toward more effective training programs that result in permanent jobs for all displaced workers. This bill is similar to SB 776 (DeSaulnier). Opponents of SB 776 argued that if passed, it would close career centers throughout the state, return the public workforce system to an antiquated model of funding streams, and limit much needed services to job seekers and businesses during this recession. Opponents argued that SB 776 would interfere with core tenants of the federal legislation, namely, local control and individual empowerment. SB 776 failed passage in the Assembly SB 734 Page 4 Appropriations Committee. According to the sponsors, the language of this bill reflects a compromise reached with community-based workforce partners. This bill differs from SB 776 primarily in that it allows a credit of up to 10% for leveraged funds, as specified. With the recent amendments, this bill is supported by groups including Jewish Vocational Services of Los Angeles, Chicana Service Action Center, the Southeast L.A.-Watts Worksource Center, the Watts Labor Community Action Committee and the Council of California Goodwill Industries. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0002726