BILL ANALYSIS
AB 1804
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1804 (Hagman) - As Amended: March 24, 2010
SUBJECT : Employment Training Fund
SUMMARY : Limits the use of moneys in the Employment Training
Fund (ETF) to financing the collection of contributions to the
ETF, paying the operations and administration of the Employment
Training Panel (Panel), and paying interest charges on federal
loans to the state Unemployment Fund. Specifically, this bill :
1)Eliminates the authority of the State Controller to use the
moneys in the ETF for loans to the General Fund when the
General Fund is or will be exhausted, or when there is
insufficient cash in the General Fund to meet payments.
2)Deletes a provision of law that specifically authorizes the
Legislature to appropriate from the ETF an amount specified in
the annual Budget Act to fund the local assistance portion of
welfare-to-work activities under the CalWORKS Program that is
administered by the State Department of Social Services.
EXISTING LAW :
1)Establishes the ETF in the State Treasury for the deposit of
contributions from employers at the rate of 0.1 percent of the
first $7,000 of annual wages of each employee.
2)Specifies that moneys in the ETF shall be expended to
administer the ETF, pay the costs of collecting the
contributions from employers to finance the ETF, and finance
the operation of the Panel and the various responsibilities of
the Panel including establishing a plan for training, paying
for employment training to eligible people including people
eligible for the CalWORKS Program, and conducting evaluations
of training.
3)Provides that with the approval of the Legislature, the ETF
may be used to pay interest charged on federal loans to the
state Unemployment Fund.
4)Requires that any moneys allocated to the Panel in a fiscal
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year that are not encumbered in that fiscal year shall revert
to the Unemployment Insurance Fund.
5)Authorizes the State Controller to use the moneys in the ETF
for loans to the General Fund when the General Fund is or will
be exhausted, or when the Governor (upon request of the
Controller) determines that there is insufficient cash in the
General Fund to meet payments. In these instances, interest
shall be paid at a rate determined by the Pooled Money
Investment Board to be the current earning rate of the ETF.
6)Authorizes the Legislature to appropriate from the ETF an
amount specified in the annual Budget Act to fund the local
assistance portion of welfare-to-work activities under the
CalWORKS Program that is administered by the State Department
of Social Services. In this program, individuals of working
age are required to take a series of steps including job
search, employment assessment, and work activities.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . The purpose of this bill is to protect the funding
for the Employment Training Panel.
2)Background . The author states that California businesses
currently pay a special tax assessment into the ETF to train
and enhance workers' skills and keep business competitive in
the global economy. The author also states that the 2006 and
2010 Budget bills changed the intent of the ETF. In 2006,
language was added to use the ETF to back-fill CalWORKS. In
2010 during the budget process, in addition to the previous
borrowing from the ETF, new language was added to Section 1611
of the Unemployment Insurance Code that allows moneys from the
ETF to be loaned to the General Fund. AB 1804 will change the
language back and express the intent of the Legislature that
this fund is to be used only to fund the Panel.
The Panel annually identifies priority industries that are most
vital to California's economic growth. Employers in these
industries receive a higher reimbursement rate for training
programs funded by the ETF. This helps to concentrate the
expenditure of dollars in both growing industries and those
which are vital to the state's interests. The Panel has
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identified the following industries as priority industries for
next year: manufacturing, green technology, nursing and allied
healthcare, construction, goods movement and transportation,
information technology services, biotechnology and life
sciences, multimedia/entertainment, and agriculture.
3)Arguments in Support . The author and bill's sponsor, the
California Manufacturers and Technology Association (CMTA),
state that in recent years there has occurred diminished
revenues to the Panel and significant transfers of ETF monies
to non-related activities which has reduced the Panel's
ability to serve California businesses and workers. The
author and CMTA note that in 1999 the ETF received
contributions of $100 million and the Panel received $60.5
million, while in FY 2005-06, the ETF received $84.7 million
in employer contributions but the Panel received only $38.2
million. This is a reduction of $22.3 million in funding to
the Panel. During this period, the appropriation to the
Department of Social Services increased from $30 million to
$37.4 million, or nearly the same amount of funding as the
Panel.
According to CMTA, in FY 2008-09 the ETF received contributions
of $100.8 million but $43.8 million was transferred to
non-Panel activities, and the Panel received only $46.7
million for all of its training and related operations. In FY
2008-09, $35 million was appropriated to the CalWORKS Program,
$3.3 million was appropriated for apprenticeship programs
administered by the Department of Industrial Relations, $5.3
million was appropriated to pay for tax collections expenses
of the Employment Development Department (EDD), and $168.000
was appropriated to the State Controller for administrative
expenses. Importantly, during this fiscal year, due to more
employers becoming exempt from paying the tax that funds the
ETF, there may be $20 million to $40 million less funds
available. Thus, since 1999 the Panel has received less funds
to accomplish its purpose to help people retain or gain
employment in this changing economy.
The California Teamsters Public Affairs Council states that the
Employment Training Panel is considered to be a model for
these programs across the United States. Each year, thousands
of California workers receive training that helps increase
their wages and make their employers more competitive. The
Teamsters state that if millions of dollars had not been
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siphoned away from the program, a great deal more training
could have take place in the last decade.
4)Argument in Opposition . The California Association of
Counties (CSAC) states that it opposes this bill because it
would limit the state's budget flexibility and erase any
future possibility of employment training funding for CalWORKS
recipients. CSAC states that the amount of funding from the
ETF for CalWORKS has varied from year to year, but the current
year appropriation amount is $20 million. Additionally, the
Governor's January budget does not propose any appropriation
from the ETF for CalWORKS in FY 2010-11, which is permitted
under current law. However, if this bill is enacted, it would
remove the Legislature's and Governor's flexibility to use
funds in this way in the future.
The Service Employees International Union (SEIU) states that the
ETF is a funding source for both the Panel, which provides
training for existing employees, and the CalWORKS Program,
which helps unemployed poor people obtain skills and training
for employment. SEIU states that the current law allowing the
transfer of from the ETF to CalWORKS provides flexibility to
the Legislature and is necessary to help the CalWORKS Program
continue to successfully transition unemployed people to work.
5)Prior Legislation . AB 816 (Hagman) of 2009 proposed to delete
the statutory authority that specifies the Legislature may
appropriate from the Employment Training Fund an amount
specified in the annual Budget Act to fund the local
assistance portion of welfare-to-work activities under the
CalWORKS Program. AB 816 failed passage in the Assembly
Insurance Committee.
6)An option to consider . There is a history of appropriations
from the ETF to other than Panel projects. At the same time,
the state is in a severe state economic situation. Given this
situation, should consideration be given to amending the bill
to require that any future appropriations made to non-Panel
purposes be repaid over a period of time?
REGISTERED SUPPORT / OPPOSITION :
Support
California Manufacturers & Technology Association
AB 1804
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California Aerospace Technology Association
California Chamber of Commerce
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California League of Food Processors
California Teamsters Public Affairs Council
Coalition of California Welfare Rights Organization, Inc.
Engineers & Scientists of California, IFPTE Local 20, AFL-CIO
International Longshore & Warehouse Union
Professional and Technical Engineers, IFPTE Local 21, AFL-CIO
The Engineering Contractors' Association
The Marin Builders' Association
The California Fence Contractors' Association
The Flasher/Barricade Association
The California Chapter of the American Fence Association
UNITE-HERE
United Food & Commercial Workers Western States Council
Western Electrical Contractors Association
Western Growers
Opposition
California State Association of Counties
County Welfare Directors Association of California
Laborers' International Union of North America, Locals 777 and
792
Service Employees International Union
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086