BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                               SB 1401
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       Date of Hearing:   July 3, 2012

                               V. Manuel Pérez, Chair
                     SB 1401 (Lieu) - As Amended:  May 30, 2012

        SENATE VOTE  :   26-9
       SUBJECT  :   California Workforce Investment Act

        SUMMARY  :   Modifies the California Workforce Investment Act (WIA) to 
       add guiding principles, emphasizing a "sector strategy" approach, 
       among other changes.  Specifically,  this bill  :

       1)Adds to the duties of the California Workforce Investment Board 
         (CWIB), aligning the state education and workforce investment 
         systems to the needs of the 21st century economy and workforce. 

       2)Establishes the following six guiding principles for the state's 
         workforce investment system:

          a)   Workforce investment programs and services are required to be 
            responsive to the needs of employers, workers and students by 
            accomplishing the following:

            i)     Preparing California's students and workers with the 
              skills necessary to successfully compete in the global 

            ii)    Producing greater numbers of individuals who obtain 
              industry-recognized certificates and degrees in competitive 
              and emerging industry sectors, and filling critical labor 
              market skills gaps.

            iii)   Adapting to rapidly changing local and regional labor 
              markets as specific workforce skill requirements change over 

            iv)    Preparing workers for good-paying jobs that foster 
              economic security and upward mobility.

          b)   State and local workforce investment boards are encouraged to 


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            collaborate with other public and private institutions to better 
            align resources and build a well-articulated workforce 
            investment system by accomplishing the following:

            i)     Adopting local and regional training and education 
              strategies that build on the strengths and fill the gaps in 
              the education and workforce development pipeline in order to 
              address the needs of job seekers, workers, and employers 
              within regional labor markets by supporting "sector 

            ii)    Leveraging resources across education and workforce 
              training delivery systems to build career pathways and fill 
              critical skills gaps.

          c)   Workforce investment programs and services are required to be 
            data driven and evidence based when setting priorities, 
            investing resources, and adopting practices.

          d)   Workforce investment programs and services are required to 
            develop strong partnerships with the private sector, ensuring 
            industry involvement in needs assessment, planning, and program 

          e)   Workforce investment programs and services are required to be 
            outcome oriented with accountable, measurable results for 
            program participants, including, but not limited to, outcomes 
            related to program completion, employment, and earnings.

          f)   Programs and services required to be accessible to employers, 
            workers, and students who may benefit from their operation, 
            including individuals with employment barriers, such as persons 
            with economic, physical, or other barriers to employment.

       3)Defines a number of economic and workforce development terms 
         including, but not limited to:

          a)   "Sector strategies" to mean methods of prioritizing 
            investments in competitive and emerging industry sectors and 
            industry clusters on the basis of labor market and other 
            economic data indicating strategic growth potential, especially 
            with regard to jobs and income, as specified.


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          b)   "Career pathways," "career ladders," or "career lattices" to 
            mean an identified series of positions, work experiences, or 
            educational benchmarks or credentials with multiple access 
            points that offer occupational and financial advancement within 
            a specified career field or related fields over time. 

          c)   "Cluster-based sector strategies" to mean methods of focusing 
            workforce and economic development on those sectors that have 
            demonstrated a capacity for economic growth and job creation in 
            a particular geographic area.

       4)Requires the state to develop a California Industry Sector 
         Initiative that will serve as the cornerstone of the CWIB's state 
         plan and provide a framework for state workforce investments and 
         support for sector strategies.

       5)Requires the CWIB to annually identify industry sectors and 
         industry clusters, new emergent industry sectors and industry 
         clusters, and undertake a skills-gap analysis, as specified.  In 
         performing these functions, the CWIB shall consider the expertise 
         of local workforce investment boards, as provided.

       6)Requires the CWIB to establish initial and subsequent eligibility 
         criteria for the state's eligible training provider list that 
         effectively directs training resources into training programs 
         leading to employment in high-demand, high-priority, and high-wage 
         occupations, particularly those facing a shortage of skilled 

       7)Makes other related and conforming changes.

        EXISTING LAW  :

       1)Establishes the CWIB, comprised of members appointed by the 
         Governor and the appropriate presiding officers of each house of 
         the Legislature, and specifies that the executive director of the 
         CWIB report to the Secretary of the California Labor and Workforce 
         Development Agency.  The CWIB is responsible for assisting the 
         state in meeting the requirements of the federal Workforce 
         Investment Act of 1998, as well as assisting the Governor in the 
         development, oversight, and continuous improvement of California's 


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         workforce investment system.

       2)Requires each local workforce investment board to establish at 
         least one full service one-stop career center in the local 
         workforce investment area.  One-Stop career centers are required to 
         include a specified group of job search related entities and 
         provide jobseekers with integrated employment, education, training, 
         and job search services.  Employers can also be provided with 
         access to career and labor market information, job placement 
         assistance, and other such services as businesses in the community 
         may require.

        FISCAL EFFECT  :    This measure was referred from the Senate Committee 
       on Appropriations pursuant to Senate Rule 28.8.

        COMMENTS  :    

        1)Purpose of the Bill  :  This bill is intended to establish additional 
         requirements of the CWIB that proponents contend will better align 
         education and workforce investment training systems to meet the 
         needs of today's economy and workforce, primarily through an 
         emphasis on "sector strategies."  According to the author, workers 
         in California are facing the toughest jobs crisis in over 50 years 
         and, unfortunately, at a time when workers, families and 
         communities need more support, states are facing unprecedented 
         budget challenges.  The author argues that now more than ever, it 
         is crucial that every dollar of workforce funds is invested in high 
         quality employment services that connect workers with good paying 

        2)Double Referral  :  This measure was previously heard in the Assembly 
         Committee on Labor and Employment, where it received a 5 to 1 vote. 

        3)California Workforce Investment Board  :  The federal Workforce 
         Investment Act of 1998 provides funding for job training and 
         employment investment activities and programs in which states may 
         participate, including work incentive and employment training 
         outreach programs.  

         Implementation of the federal WIA required significant reforms to 
         California's job training system.  These reforms emphasized private 


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         sector involvement, improved customer service, a better alignment 
         of public sector resources, and the integration of education, 
         workforce, and economic development programs in order to help both 
         workers and employers compete and succeed in the global economy.   
         Among its primary duties, the CWIB provides guidance to local 
         workforce investment boards (LWIB) and development of a unified, 
         strategic plan to coordinate various education, training, and 
         employment programs that result in an integrated workforce 
         development system that supports economic development.  This plan 
         is required to be updated at least every 5 years in order to 
         address the state's changing economic, demographic, and workplace 

         There are 49 LWIBs that plan for and oversee the workforce 
         investment system at the local level.  Each LWIB also has one or 
         more One-Stop Centers, which provide access to career information, 
         counseling, and funding for education, training and supportive 
         WIA funding is distributed to states based on a set formula which 
         includes specified economic and demographic data and flows to the 
         state through three primary programs:  Adult, Youth and Dislocated 
         Worker.  California's WIA allocation from the U.S. Department of 
         Labor has declined over the years from a high of $630 million in 
         2000-01 to $426 million in 2009-10.  Federal law dictates that 85% 
         of Adult and Youth formula funds, and 60% of Dislocated Worker 
         formula funds, are distributed to local WIBs.  Funding for the 
         state's activities is derived from the 15% WIA discretionary funds. 
            In 2009-10 LWIBs received $363 million, while the state received 
         about $63 million in discretionary moneys.  Budget actions in prior 
         years redirected portions of state discretionary moneys to offset 
         General Fund employment and training costs at the California 
         Department of Corrections and Rehabilitation or the California 
         Conservation Corp.

         Among other responsibilities, the CWIB develops protocols to ensure 
         that policies are developed with full public input and discussion.  
         The CWIB is also responsible for establishing criteria for 
         development of (1) the formulae to be used for allocating funds to 
         the local areas, (2) allocation of the 15% WIA discretionary 
         funding, and 3) certification and re-certification of LWIBs.  The 
         State Board also provides recommendations to the Governor on policy 


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         and vision for the statewide employment statistics system.  

         As such, the CWIB has adopted "sector strategies" as the statewide 
         framework for workforce development and is working with other state 
         agencies and departments and its 49 LWIBs to support the emergence 
         of effective regionally driven sector initiatives.

        4)Recent California State Auditor Report on Federal Workforce 
         Investment Act  :  A March 2012 report, "Federal Workforce Investment 
         Act: More Effective State Planning and Oversight Is Necessary to 
         Better Help California's Job Seekers Find Employment," evaluated 
         the state's administration of WIA funding.  Among its findings, the 
         audit revealed that: 

              More than five years after state law required the CWIB to 
            develop a strategic workforce plan to serve as a framework for 
            public policy, fiscal investment, and state labor programs to 
            address workforce needs it has failed to do so and thus, has not 
            provided sufficient guidance to its workforce development 

              Both EDD and the CWIB can do more to assess the quality of 
            services - neither has a mechanism to evaluate whether an 
            appropriate match exists between a participant's skills, 
            education, and experience and the employment the participant 

              Although the CWIB is building partnerships with various 
            entities to coordinate workforce investment planning, it has 
            done little to ensure that the one-stop delivery system does not 
            duplicate services for program participants.

         The State Auditor made several recommendations in the report, 
         including one that the Legislature consider establishing a due date 
         for the CWIB to develop a strategic workforce plan, and clarify the 
         roles and responsibilities of the state board and EDD.  According 
         to the auditor, without this plan, there is no assurance that the 
         state workforce investment system provides life-long learning, 
         promotes self-sufficiency, links education and training to economic 
         development, and prepares California to compete successfully in the 
         global economy as the Legislature intended.   


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         According to the report, the Labor Agency, the CWIB, and EDD agreed 
         with the recommendations.  The CWIB is currently working on the 
         strategic workforce plan and intends to have it finalized by the 
         summer of 2012. 

        1)California Economy  :  Historically, the state's significance in the 
         global marketplace resulted from a variety of factors, including:  
         its strategic west coast location that provides direct access to 
         the growing markets in Asia; its economically diverse regional 
         economies; its large, ethnically diverse population, representing 
         both a ready workforce and significant consumer base; its access to 
         a wide variety of venture and other private capital; its broad base 
         of small- and medium-sized businesses; and its culture of 
         innovation and entrepreneurship, particularly in the area of high 

         The chart below (not included in electronic version, contact the 
         committee for chart), California Employment by Sector (2009), shows 
         total reported California employment by industry sector.  

         As noted above, California's dominance in many industry sectors is 
         based, in part, on the significant role small businesses play in 
         global supply chains, providing specialized services and products 
         to meet niche markets, and their ability to create jobs while 
         providing a means of wealth creation for an increasingly diverse 
         entrepreneur class.  Businesses with fewer than 100 employees 
         comprise nearly 98% of all businesses and are responsible for 
         employing more than 37% of all workers in the state.   The 
         Committee may wish to amend the guiding principles to more 
         specifically include the varying employer needs of microenterprises 
         and small businesses, as well as supporting the training needs of 
         prospective entrepreneurs.

        2)Regional Economies and Sector Strategies  :  California is not only 
         one of the largest economies in the world, but it is also one of 
         the most economically diverse.  The state's economy is comprised of 
         a variety of industry clusters.  While many of these clusters are 
         linked through extended economic value chains across the state and 
         world, in general, industry clusters operate within their own 
         regional micro-economies.  

         Economic developers like to use sector strategies to better 


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         understand the interconnections between related businesses, 
         workforce capabilities, and available infrastructure.  When done 
         successfully, sector strategies at the regional level provide 
         mutually beneficial outcomes for business, labor, and the state by 
         increasing competitiveness and growth, improving worker 
         employability and income, and reducing the need for social services 
         while also bolstering government revenues generated by both 
         business and workers.  According to a 2010 study of three sector 
         focused training programs in Wisconsin, Massachusetts, and New 
         York, it was found that participants in the relevant training 
         programs earned more and were employed at higher rates than were 
         members of the study's control group (Tuning Into Local Labor 
         Markets: Findings from the Sectorial Employment Impact Study, 
         Public/Private Ventures, 2010).

         SB 1401 proposes to use industry sector strategies to guide state 
         investments and activities related to workforce development 
         including targeting resources to dominant and emerging industries.  
         In general, the bill supports the need for regional analysis of 
         industry sectors.  The Committee may, however, wish to further 
         clarify that priorities should be based on regional significance, 
         as well as overall dominance of an industry within the state.  
         Without clarification, state funding priorities could 
         insufficiently address the economic and workforce development needs 
         of rural areas.

        3)Strengthening Linkages between Education and Training System  :  As 
         California slowly moves out of the recession, it is clear that the 
         next economy will require new and more agile thinking about 
         resources and deployment of human, physical and financial capital.  
         Economic researchers has identified several key emerging trends, 
         including that nations and states will become less significant and 
         that regions will be the more dominant drivers of economic growth.  
         Job growth will be driven by smaller size companies that are able 
         to connect and access expanding global markets through the 
         deployment of new technologies that can cost effectively increase 
         productivity and meet changing market demands.  Due to scarcity and 
         rising prices the emerging economy will also be power by lower 
         carbon fuels.  All these new market realities will need to be 
         accomplished with a workforce that is substantially smaller, more 
         diverse, and historically underinvested.


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         This new workplace environment will require integrated and 
         well-articulated career pathways between the K-12, the state's 
         higher education systems, and workforce training providers.  SB 
         1402 currently specifies several specific operational tools for 
         implementing sector strategies including stackable certificate 
         programs, which could be offered through the California Community 
         College System's Economic and Workforce Development Program.  The 
         Committee may wish to also specify the importance of linking CWIB 
         and LWIB activities with of high school career preparation 
         programs, including regional occupation programs and nonprofit 
         career thematic academies.   

        4)Related Legislation  :  Below is a list of related legislation.

           a)   SB 698 (Lieu) High Performance Boards  : This bill required the 
            Governor to establish, through the California Workforce 
            Investment Board, standards for certification of 
            high-performance local WIBs, in accordance with specified 
            criteria.  The bill also required the Governor and the 
            Legislature, in consultation with the California Workforce 
            Investment Board, to reserve specified federal discretionary 
            funds for high-performing local WIBs.  Status:  The bill was 
            signed by the Governor, Chapter 497, Statutes of 2011.

           b)   SB 734 (DeSaulnier) Mandated Training Expenditures  :  This 
            bill required local WIBs to spend a certain percentage of 
            available WIA funds (25% now and increased to 30% in 2016) on 
            workforce training programs in a manner consistent with federal 
            law and allows the boards to leverage specified funds to meet 
            this requirement.  The bill also required a local WIB that does 
            not meet the expenditure to provide the EDD with a corrective 
            action plan regarding those expenditures.  Status:  The bill was 
            signed by the Governor, Chapter 498, Statutes of 2011.

           c)   AB 3018 (Nunez) Green Collar Jobs Council  : This bill enacted 
            the California Green Collar Jobs Act of 2008, which create the 
            Green Collar Jobs Council within the State WIB to perform 
            specified tasks related to addressing the green economy 
            workforce needs of the state.  Specifically, the bill required 
            the Council to develop a comprehensive array of programs, 
            strategies, and resources to address the state's growing green 
            economy.  Status:  The bill was signed by the Governor, Chapter 


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            312, Statutes of 2008.



       California Conference Board of the Amalgamated Transit Union 
       California Conference of Machinists 
       California Hospital Association 
       California Labor Federation 
       California Teachers Association 
       California Teamsters Public Affairs Council
       California Workforce Association 
       City and County of San Francisco 
       Council of Goodwill Industries 
       Engineers and Scientists of California
       International Longshore & Warehouse Union
       Jewish Vocational Services of San Francisco
       Professional & Technical Engineers, Local 221
       The California Manufacturers & Technology Association 
       United Food and Commercial Workers Union 
       Utility Workers Union of America, Local 132
       None received

        Analysis Prepared by  :    Toni Symonds / J., E.D. & E. / (916)