BILL ANALYSIS Ó
SB 118
Page 1
Date of Hearing: August 12, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
SB 118 (Lieu) - As Amended: January 17, 2013
SENATE VOTE : 35-3
SUBJECT : Unemployment insurance: education and workforce
investment systems.
SUMMARY : Sets guiding principles for the state's workforce
investment system including the use of federal Workforce
Investment Act (WIA) moneys. These principles and related
changes emphasize industry sector strategies, regional
economies, data-driven decisions, and the more effective
alignment of state education, the private sector, and workforce
development systems. Specifically, this bill :
1)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
economy.
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 time.
iv) Preparing workers for good-paying jobs that foster
economic security and upward mobility.
b) State and local workforce investment boards are
encouraged to collaborate with other public and private
institutions to better align resources and build a
SB 118
Page 2
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 strategies."
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 must be based on setting
priorities, investing resources, and adopting practices.
d) Workforce investment programs and services are required
to develop strong partnerships with the private sector,
including all sizes of businesses, for the purpose of
ensuring industry involvement in the needs of assessment,
planning, and program evaluation.
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 are 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.
2)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.
SB 118
Page 3
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.
3)Requires the California Workforce Investment Board (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.
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 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 workers.
6)Makes other related and conforming changes.
EXISTING LAW
1)Establishes the CWIB, comprised of members appointed by the
Governor and the appropriate presiding officer(s) 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
(WIA), as well as assisting the Governor in the development,
oversight, and continuous improvement of California's
workforce investment system.
SB 118
Page 4
2)Requires each WIB 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 the 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)Author's Purpose : According to the author, "workers are
facing the toughest jobs crisis in over 50 years. Now more
than ever, it is crucial that every dollar of workforce funds
be invested in high quality employment services. "Sector
strategies" are policy initiatives designed to promote the
economic growth and development of a state's competitive
industries by prioritizing investments where overall economic
returns are likely to be highest. This bill would direct the
State WIB to implement strategies that allow us to better
prepare workers with the skills necessary to successfully
compete in the global economy. Among other things, the board
would be required to 1) conduct annual skills gap analyses
specifying industries facing worker shortages or growth
potential, and 2) organize the state workforce investment plan
around the adoption of sector strategies using these
skills-gap analyses. We will be better positioned to recover
from the recession by knowing what our current and future
workforce needs are and directing training resources towards
those in-demand occupations. Sector strategies have been
adopted in several states including Pennsylvania, Michigan,
Washington and Massachusetts. In California, we have taken
initial steps but more needs to be done to help our unemployed
workers get the training and skills necessary to advance in
this economy."
2)Framing the Policy Issue : This measure proposes the
establishment of a set of guiding principles for the state's
workforce investment system and expand the scope of the CWIB
SB 118
Page 5
to serve as a facilitator in the assistance of the Governor to
align the state's education and workforce investment systems
to best serve the needs of California's 21st century economy
and workforce.
In making the case for these changes, the author notes the
need for more data-based policy making and better integration
of existing resources. The analysis includes information on
the CWIB, the California economy, and the need to make
comprehensive and strategic changes in how California will
propose to meet its workforce challenges in the coming
decades.
3)WIA and the California Workforce Investment Board : Enacted in
1998, WIA provides states with federal funding for job
training and employment investment activities and programs,
including work incentive and employment training outreach
programs. Distribution of the funds is 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 $411 million in 2012-13. 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 2012-13 local workforce
investment boards (LWIBs) received $348 million, while the
state received about $20 million in discretionary moneys.
California's WIA dollars are overseen by the 56-member CWIB,
of which 61% of the members represent the private sector, as
required by federal law. Among its primary duties, the CWIB
provides guidance to local LWIBs and is responsible for the
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. The plan is required to be updated at least
every 5 years in order to address the state's changing
economic, demographic, and workplace needs. The most recent
plan was submitted to the federal Department of Labor in April
2013 and approved after consultation and modest revision in
June 2013. Based on the framework of the state plan, in July
SB 118
Page 6
2013, the LWIBs submitted local workforce investment plans for
the CWIB's review. Key among the policy enhancements in the
current state and local plans are strengthened performance
indicators to allow for ongoing monitor of the plan success.
The CWIB has a staff of 17 authorized positions and is
currently led by Executive Director Tim Rainey. 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
services.
4)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 technology.
--------------------------------------------------------------
| California Employment by Sector (Reported in Thousands, |
| Seasonally Adjusted) |
--------------------------------------------------------------
|-------------+------------+-----------+--------+-------------|
| | Year Ago | Current |Year-Ove| Percent of |
| | June 2012 | Year June | r | Total |
| | | 2013 | Change | Employment |
| | | | | June 2013 |
|-------------+------------+-----------+--------+-------------|
|Mining and | 30.4| 29.5| -3.0% | 0.01% |
|Logging | | | | |
|-------------+------------+-----------+--------+-------------|
|Construction | 583.3| 615.5| 5.5% | 0.3% |
|-------------+------------+-----------+--------+-------------|
|Manufacturing| 1,256.0| 1,250.3| -0.5% | 7.9% |
| | | | | |
|-------------+------------+-----------+--------+-------------|
SB 118
Page 7
|Trade, | 2,728.2| 2,758.5| 1.1% | 17.6% |
|Transportatio| | | | |
|n, & | | | | |
|Utilities | | | | |
|-------------+------------+-----------+--------+-------------|
|Information | 428.5| 424.1| -1.0% | 2.7% |
|-------------+------------+-----------+--------+-------------|
|Financial | 775.6| 788.2| 1.6% | 5.0% |
|Services | | | | |
|-------------+------------+-----------+--------+-------------|
|Professional | 2,237.6| 2,297.4| 2.7% | 14.6% |
|& Business | | | | |
|Services | | | | |
|-------------+------------+-----------+--------+-------------|
|Educational | 1,875.0| 1,922.0| 2.5% | 22.9% |
|and Health | | | | |
|Services | | | | |
|-------------+------------+-----------+--------+-------------|
|Leisure & | 1,600.8| 1,671.6| 4.4% | 10.6% |
|Hospitality | | | | |
|-------------+------------+-----------+--------+-------------|
|Other | 506.5| 503.9| -0.5% | 3.2% |
|Services | | | | |
|-------------+------------+-----------+--------+-------------|
|Government | 2,372.9| 2,387.7| 0.6% | 15.2% |
|-------------+------------+-----------+--------+-------------|
| | | | | |
|-------------+------------+-----------+--------+-------------|
|Total | 14394.8| 15648.7| 1.8% | 100% |
|Nonfarm | | | | |
|Incomes | | | | |
-------------------------------------------------------------
--------------------------------------------------------------
| Source: EDD, Labor Market Information Division, Current |
|Employment Statistics (July 2013) |
--------------------------------------------------------------
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. The single
largest cohort of California businesses has no employees,
comprising 2.8 million out of an estimated 3.5 firms in 2010.
SB 118
Page 8
Microenterprises, meaning businesses with less than five
employees, represent approximately 93% of all businesses in
the state, or approximately 3.2 million of all businesses.
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.
These non-employer and small employer firms create jobs,
generate taxes, and revitalize communities. However, their
small size also results in certain market challenges,
including, but not limited to, expanding into new market,
planning for long-term employment and revenue growth,
complying with government regulations, and meeting the
traditional credit and collateral requirements of mainstream
financial institutions. Specialized training and education,
technical assistance, access to microloans, and collaborative
marketing opportunities can help many of these businesses
overcome or at least minimize these difficulties.
In April 2013, the Committee passed AB 285 (Brown), which
directs the CWIB to assist local workforce investment boards
better understand how their resources can legally be used to
meet the needs of microenterprises. The Committee may wish to
amend the guiding principles in SB 118 to more specifically
include self-employment and entrepreneurial training.
5)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.
Currently, many economic developers like to use sector
strategies to better understand the interconnections between
related businesses, workforce capabilities, access to capital,
available infrastructure and other key economic conditions.
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
SB 118
Page 9
Wisconsin, Massachusetts, and New York, it was found that
participants 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 118 proposes to use industry sector strategies, including
assessment of regional emphasis, to guide state investments
and activities related to workforce development including
targeting resources to dominant and emerging industries.
6)Strengthening Linkages between Education and Training System :
As California continues to move into the post-recession
economy, it is clear that this next economy will require new
and more agile thinking about resources and deployment of
human, physical and financial capital. Economic researchers
have 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 powered 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.
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 118 specifies a number of specific operational tools for
implementing sector strategies including stackable certificate
programs, entrepreneurial training, adult education, and youth
policies that support linkages between K-12 and higher
education and training opportunities.
7)Related Legislation : Below is a list of related legislation.
a) AB 1310 (Furutani) Career Technical Education and
Workforce Development : This bill would have required the
Secretary of Labor and Workforce Development, in
conjunction with the California Workforce Investment Board,
the California Community Colleges, the State Department of
SB 118
Page 10
Education, and the California Postsecondary Education
Commission to develop a strategic plan for connecting the
delivery of education and workforce development in the
state. Status: Vetoed by Governor in 2011.
b) AB 3018 (Nunez) Green Collar Jobs Council : This bill
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. 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: Signed by the
Governor, Chapter 312, Statutes of 2008.
c) 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: Signed by the Governor, Chapter 497, Statutes of
2011.
d) 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: Signed by the Governor,
Chapter 498, Statutes of 2011.
e) SB 1401 (Lieu) California Workforce Investment Act :
This bill would have modified the California Workforce
Investment Act to add guiding principles, emphasizing a
"sector strategy" approach, among other changes. Status:
Held in the Assembly Appropriations Committee in 2012.
f) SB 1402 (Lieu) California Workforce and Economic
Development Program : This bill recasts and revises the
SB 118
Page 11
California Community Colleges Economic and Workforce
Development Program to more closely align with economic and
workforce best practices and extends the program's sunset
date from January 1, 2013 to January 1, 2018. Status:
Signed by the Governor, Chapter 361, Statutes of 2012.
8)Double Referral : This measure was previously heard in the
Assembly Committee on Labor and Employment, where it received
a 5 to 1 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Healthcare Districts
California Hospital Association
California Labor Federation
California Manufacturers & Technology Association
California State Association of Electrical Workers
California State Pipe Trades Council
California Workforce Association
Career Ladders Project for the California Community Colleges
City of Long Beach
Community College League of California
Council of California Goodwill Industries
Jewish Vocational Services of San Francisco
National Council of La Raza
National Skills Coalition
Palos Verdes Peninsula Chamber of Commerce
PolicyLink
Santa Monica Chamber of Commerce
South Bay Association for Chamber of Commerce
State Building and Construction Trades Council of California
Torrance Area Chamber of Commerce
Western States Council of Sheet Metal Workers
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
SB 118
Page 12