BILL ANALYSIS                                                                                                                                                                                                    

                 Senate Committee on Labor and Industrial Relations
                                 Ted W. Lieu, Chair

          Date of Hearing: March 13, 2013              2013-2014 Regular  
          Consultant: Alma Perez                       Fiscal:Yes
                                                       Urgency: No 
                                   Bill No: SB 118
                                    Author: Lieu
                       As Introduced/Amended: January 17, 2013

             Unemployment insurance: education and workforce investment  

                                     KEY ISSUES

          Should the Legislature direct state workforce development  
          resources towards in-demand and emerging industries that will  
          have a significant economic impact? 

          Should the state conduct annual studies that identify  
          skills-gaps and industries with a competitive economic advantage  
          - in order to direct training resources towards those  

          Should the Legislature require the establishment of initial and  
          subsequent eligibility criteria for training providers to  
          effectively direct training resources towards successful outcome  
          oriented programs? 

           The federal Workforce Investment Act (WIA) of 1998  provides  
          funding for job training and employment investment programs in  
          which states may participate, including work incentive and  
          employment training outreach programs. Following passage of the  
          federal WIA, the state established the California Workforce  
          Investment Board (CWIB) and charged the board with the  
          responsibility of developing a unified, strategic planning  
          process to coordinate various education, training, and  


          employment programs into an integrated workforce development  
          system that supports economic development. There are 49 Local  
          Workforce Investment Boards that plan and oversee the workforce  
          investment system at the local level.  

           Existing law  requires the board, in collaboration with specified  
          state and local partners, and the local WIBs to develop a  
          strategic workforce plan, updated at least every 5 years, to  
          address the state's economic, demographic, and workplace needs.

           Among its other responsibilities,  the State Board 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) dissemination  
          of the Governor's 15% WIA discretionary funding, and 3)  
          certification and re-certification of local WIBs.  The State  
          Board also provides recommendations to the Governor on policy  
          and vision for the statewide employment statistics system.  

           This Bill  would additionally require the California Workforce  
          Investment Board to incorporate specific principles into the  
          state's strategic plan that align the education and workforce  
          investment systems of the state to the needs of the 21st century  
          economy as well as promote and a well-educated and highly  
          skilled workforce to meet our future workforce needs. 

          Specifically, this bill would establish six principles to guide  
          the state's workforce investment system that include:

             1.   Programs and services must be responsive to the needs of  
               employers, workers, and students, as specified. 

             2.   Encourage state and local WIBs to collaborate with other  
               public and private institutions to adopt local and regional  
               training and education strategies across all delivery  

             3.   Workforce investment programs and services shall be data  
               driven and evidence based when setting priorities,  
               investing resources, and adopting practices. 
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             4.   Develop strong partnerships with the private sector,  
               ensuring industry involvement in needs assessment,  
               planning, and program evaluation.

             5.   Making investments outcome oriented and accountable,  
               measuring results through program completion, employment,  
               and earnings. 

             6.   Making programs and services accessible to employers,  
               workers, and students, including individuals with  
               employment barriers, such as persons with economic,  
               physical, or other barriers to employment.

           Additionally, this bill  would also direct the State WIB to:

             1.   Target resources towards high-wage competitive and  
               emerging industry sectors that have a significant economic  
               impact on the state, have immediate education and workforce  
               development needs, and have documented career  

             2.   As part of its strategic workforce plan, create a  
               California Industry Sector Initiative to provide a  
               framework for state workforce investments and support for  
               sector strategies.

             3.   By considering the expertise of local WIBs, annually  
               identify industry sectors with a competitive economic  
               advantage and annually conduct skills-gap analyses  
               enumerating occupational and skills shortages in the  
               industries identified as having strategic importance to the  

             4.   Establish, with input from local WIBs and other  
               stakeholders, initial and subsequent eligibility criteria  
               for the Workforce Investment Act Eligible Training Provider  
               List (ETPL) that effectively directs training resources  
               into training programs leading to employment in  
               high-demand, high-priority, and high-wage occupations, as  

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          Consultant: Alma Perez                                   Page 3

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             5.   Provide definitions for specific terms used in the bill,  
               including, "career pathways," "sector strategies,"  
               "industry sectors" and "economic security," among others. 

          1.  Background on the CA Workforce Investment Board:

             Under federal law, Workforce Investment Act funds are  
            distributed to the states based on formulas that consider  
            unemployment rates and other economic and demographic factors.  
             California and its 49 Local WIBs receive WIA formula funding  
            from the U.S. Department of Labor through three revenue  
            streams - Adult, Youth, and Dislocated Workers.  

            The State WIB is charged with developing a unified, strategic  
            planning process to coordinate various education, training,  
            and employment programs into an integrated workforce  
            development system that supports economic development.  As  
            such, the State WIB has adopted Sector Strategies as the  
            statewide framework for workforce development, and is working  
            closely with the Economic Strategy Panel, other State Agencies  
            and departments and its 49 local Workforce Investment Boards  
            to support the emergence of effective statewide and regionally  
            driven sector initiatives.

            All members of the CWIB are appointed by the Governor and  
            represent the many facets of workforce development - business,  
            labor, public education, higher education, economic  
            development, youth activities, employment and training, as  
            well as the Legislature.  Through its broad membership, the  
            state board encourages collaboration among both state and  
            local public and private entities. 

          2.  Background on the Eligible Training Provider List (ETPL):
            California's Eligible Training Provider List (ETPL) was  
            established in compliance with the Workforce Investment Act.   
            The purpose of the ETPL is to provide customer-focused  
            employment training for adults and dislocated workers.   
            Training providers who are eligible to receive Individual  
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          Consultant: Alma Perez                                   Page 4

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            Training Accounts (ITAs) through WIA Title I-B funds are  
            listed on the ETPL. California's statewide list of qualified  
            training providers offers a wide range of educational  
            programs, including classroom, correspondence, Internet,  
            broadcast, and apprenticeship programs.

            Existing law requires the establishment of two separate  
            procedures for the ETPL: initial eligibility and subsequent  
            eligibility.  California has been granted a waiver of the  
            requirement for subsequent eligibility specified in WIA  
            Section 122(c)(5) and Title 20 of the Code of Federal  
            Regulations (CFR) Section 663.530.  This current federal  
            waiver allows providers and programs to remain on the State  
            ETPL indefinitely as long as their initial eligibility is  
            still valid. 

            According to an Employment Development Department (EDD)  
            information notice to the workforce development community, it  
            was notated that the current ETPL contained more than 5,000  
            program/providers that never had a WIA client referred to  
            them, nor had the programs been validated for at least two  
            years.  In an effort to meet the terms of the waiver  
            pertaining to subsequent eligibility, the Workforce Services  
            Division had to deactivate all existing ETPL programs that  
            were more than two years old (i.e. initial approval date prior  
            to January 1, 2010) and did not have a single WIA client  
            referred to them during their tenure on the ETPL. (WSIN11-45,  
            March 27, 2012).  However, if the local board determines that  
            an unused program/provider should be reactivated and remain on  
            the ETPL, a verification must be done at the local level to  
            ensure that the data on the inactive ETPL is valid and that  
            this program/provider is a not a duplication of an existing  
            program/provider on the ETPL.

          3.  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.  

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            Among its finding, the audit revealed that: 

                     More than five years after state law required the  
                 State WIB 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 partners. 

                     Both EDD and the state board 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 attains. 

                     Although the state board 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  

            The State auditor made several recommendations in the report,  
            including one that the Legislature consider establishing a due  
            date for the state board to develop a strategic workforce  
            plan, and clarify the roles and responsibilities of the state  
            board and EDD.  The State auditor also made recommendations to  
            the state board aimed at developing, overseeing, and  
            continuously improving California's workforce investment  
            system by collaborating with state and local workforce  
            partners and clearly defining terminology and identifying  
            state-specific performance measures.  

            According to the report, the Labor Agency, the state board,  
            and EDD agreed with the recommendations. In 2012, the State  
            WIB went through many changes, including the introduction of  
            new membership on its board. The State WIB has taken several  
            steps to address the concerns raised by the audit, including  
            incorporating some of the requirements included in this bill.   

          4.  Sector Strategies and Need for this bill?
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            There is broad consensus that better educated and trained  
            workers are more productive and more successful in labor  
            markets.  However, targeting these efforts towards the jobs  
            sectors that are best positioned to make gains if investments  
            are made is essential and requires the use of current economic  
            and labor market data to determine what those sectors are.  
            "Sector strategies" are policy initiatives designed to promote  
            the economic growth and development of a state's competitive  
            industries using strategic workforce investments to boost  
            labor productivity. The strategic focus of sectors is on  
            prioritizing investments where overall economic returns are  
            likely to be highest, specifically in those sectors that will  
            generate significant gains in terms of jobs and income or in  
            industries facing a shortage of skilled workers. 

            When done successfully, sector strategies can lead to 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  
            Sectoral Employment Impact Study, Public/Private Ventures,  
            2010) Sector strategies have been adopted in several states,  
            including Pennsylvania, Michigan, Washington and  

            In California, we have taken initial steps to adopt sector  
            strategies by directing portion of discretionary funds to job  
            training programs for nurses and workers in allied health  
            fields. Additionally, the state board has incorporated sector  
            strategies into the State Strategic Plan. This bill is a  
            re-introduction of a bill that died in the Assembly  
            Appropriations Committee last year (SB 1401).  The author  
            believes it is important to update the responsibilities of the  
            state board to address our changing economy and encourage a  
            more strategic approach to training for future workforce  
            needs.  Furthermore, this bill would help address some of the  
          Hearing Date:  March 13, 2013                            SB 118  
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            concerns raised by the State Auditor's office in the 2012  
            audit of the federal WIA.  

          5.  Proponent Arguments  :
            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  

            Proponents argue that despite the state's high unemployment  
            rate, job openings in key industries are going unfilled  
            because employers cannot find workers with the necessary  
            credentials and training for these jobs.  They argue that this  
            workforce shortage has the potential of becoming a full blown  
            crisis as baby boomers continue to retire in increasingly high  
            numbers.  In addition, many of these openings are  
            "middle-skill" jobs, which require education and training past  
            high school.  According to proponents, 47 percent of jobs in  
            California's labor market are middle-skill, but only 38  
            percent of Californians likely have the credentials and  
            training for these jobs.  This bill takes important steps to  
            close this skills gap by providing new principles to guide the  
            work of the State WIB.   
          6.  Opponent Arguments  :

            None received. 

          7.  Prior Legislation  :

            SB 1401 (Lieu) of 2012: Died in Assembly Appropriations  
            This bill (SB 118) is a re-introduction of last year's SB 1401  
            which died in the Assembly. 

            SB 698 (Lieu) of 2011: Chaptered
            SB 698 requires the Governor to establish, through the  
          Hearing Date:  March 13, 2013                            SB 118  
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            California Workforce Investment Board, standards for  
            certification of high-performance local WIBs, in accordance  
            with specified criteria. 

            SB 734 (DeSaulnier) of 2011: Chaptered 
            SB 734 requires local WIBs to spend a certain percentage of  
            available WIA funds (25% now and increased to 30% in 2016) on  
            workforce training programs. A Local WIB that does not meet  
            the expenditure must provide the EDD with a corrective action  

            AB 3018 (Nunez) of 2008: Chaptered 
            AB 3018 enacted the California Green Collar Jobs Act of 2008,  
            which created the Green Collar Jobs Council within the State  
            WIB to perform specified tasks related to addressing the green  
            economy workforce needs of the state. 

          California Hospital Association
          California Labor Federation
          California Manufacturers & Technology Association (CMTA)
          California Workforce Association
          City of Long Beach
          State Building and construction Trades Council of California

          None received 

          Hearing Date:  March 13, 2013                            SB 118  
          Consultant: Alma Perez                                   Page 9

          Senate Committee on Labor and Industrial Relations