BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 118
                                                                  Page  1

          Date of Hearing:   August 21, 2013

                                  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


          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.  

          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  

          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.



                                                                  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  

             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)