BILL ANALYSIS Ó SB 118 Page 1 Date of Hearing: August 21, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 118 (Lieu) - As Amended: August 13, 2013 Policy Committee: Labor and Employment Vote: 7-0 Jobs, Econ. Dev. & the Economy 8-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill makes several changes to statute governing workforce investment in order to emphasize a sector strategy and promote a well-educated and highly skilled workforce. FISCAL EFFECT Minor, absorbable administrative costs to the Employment Development Department (EDD) to implement this measure. According to EDD, it currently collects the labor market data necessary to implement the bill's requirements. SUMMARY CONTINUED 1)Defines sector strategy as methods of prioritizing investments in competitive and emerging industry sectors and industry clusters on the basis of the labor market and other economic data indicating strategic growth potential, especially with regards to jobs and income, as specified. 2)Requires the state to develop a California Industry Sector Initiative to serve as the cornerstone of the state's strategic workforce plan state plan and provide a framework for the state workforce investments and support for sector strategies. 3)Defines industry sector as those firms that produce similar products or provide similar services using somewhat similar business processes, and are closely linked by workforce needs, within a regional labor market. SB 118 Page 2 4)Defines industry clusters as a geographic concentration or emerging concentration of independent industries with direct service, supplier, and research relationships, or independent industries that share common resources in a given regional economy or labor market, as specified. 5)Requires the California Workforce Investment Board (CWIB) to work collaboratively with state and local partners to identify ways to eliminate statewide barriers and better align and leverage federal, state, and local workforce investment act (WIA) funding streams, as specified. Further requires the California Workforce Investment Act (CWIA) to do the following to meet this requirement: a) Annually identify industry sectors and industry clusters that have a competitive economic advantage and demonstrated economic importance to the state and its regional economies, as specified. b) Annually identify new dynamic emergent industry sectors and industry clusters with substantial potential to generate new jobs and income growth for the state and its regional economies. c) Provide an annual skills gap analysis enumerating occupational and skills shortages in the industry sectors and clusters identified as having strategic importance to the state's economy and its regional economies. d) Establish eligibility criteria for the federal WIA eligible training provider list (ETPL) that effectively directs training resources into training programs leading to employment in high-demand, high-priority, and occupations that provide economic security, as specified. Further specifies criteria, to the extent feasible, measure provider performance, including program completion and employment placement and retention. 6)Specifies the division of labor for making initial and subsequent eligibility determinations for the ETPL shall be modeled on federal law and include input from local workforce investment boards and other stakeholders, as specified. Local boards shall have the authority to place and retain training providers on the list, as specified. COMMENTS SB 118 Page 3 1)Background . The WIA was established by federal law in 1998 for purposes of job training and workforce development. It requires states to form state workforce investment boards, and requires governors to designate local workforce investment areas and oversee local workforce investment boards to coordinate and distribute job training funds. In California, WIA funds are provided through the state CWIB and 49 local boards. The state board receives 15% of the state's WIA allocation, and the remaining 85% is allocated to the local boards. CWIB works with the governor to provide policy guidance on how to spend these funds. Likewise, each board determines how they spend their funds in accordance with the workforce needs of their areas. WIA funds are distributed to the states based on formulas that consider unemployment rates and other economic and demographic factors. California and its 49 local workforce investment boards (LWIBs) formula funding from the U.S. Department of Labor through three revenue streams: adult, youth, and dislocated workers. Under federal law, 85% of adult and youth formula funds and 60% of dislocated worker formula funds are distributed to local boards. Fifteen percent of adult, youth, and dislocated worker formula funds are allocated to the state for a variety of discretionary uses. Existing law requires the CWIB, in collaboration with specified state and local partners, and the LWIBs to develop a strategic workforce plan, updated at least every five years, to address the state's economic, demographic, and workplace needs. The CWIB 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 CWIB 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. 2)Rationale . In March 2012, the State Auditor (SA) released a report entitled: Federal Workforce Investment Act: More Effective State Planning and Oversight Is Necessary to Better Help California's Job Seekers Find Employment. This report SB 118 Page 4 concluded 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 partners. According to the SA, "Without a strategic workforce plan, the State cannot ensure that its workforce investment system provides life-long learning for all Californians, promotes self-sufficiency, links education and training to economic development, and prepares California to compete successfully in the global economy as the Legislature intended." The SA's report made several recommendations, including the following: a) "To assist the governor in the development, oversight, and continuous improvement of California's workforce investment system, the state board should collaborate with state and local entities involved in workforce investment programs or activities to develop and implement a strategic workforce plan, as state law requires. b) To assist the state board and other entities involved in workforce investment programs and activities in developing and implementing performance measures specific to California, EDD should ensure that it works with the state board to develop procedures for approving the addition of data elements to its Web-based system and for the exchange of data between EDD and the state board." 3)Previous legislation . a) SB 1401 (Lieu), nearly identical to this measure, was held on this committee's Suspense File in August 2012. b) AB 698 (Lieu), Chapter 697, Statutes of 2011, required the establishment of standards and incentives for high-performance LWIBs. 4)Related legislation . AB 285 (Brown), pending on the Senate Floor, revises the definition of "microenterprise," and adds to, and recasts, provisions requiring CWIB to develop guidelines for targeting resources to high-wage industry sectors and implementing entrepreneurial and self-employment training programs. AB 118 contains chaptering language to SB 118 Page 5 ensure it does not affect AB 285. Analysis Prepared by : Kimberly Rodriguez / APPR. / (916) 319-2081