BILL ANALYSIS                                                                                                                                                                                                    



                                                                  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