Dear Mr. Lee:

I am pleased to offer JTPA waiver approvals to the State of California in response to Governor Wilson's request. This could not have been done without the vision, strategy and planning that was produced by the local, State, and Federal (national and regional staff) partnership, of which it has been our pleasure to be a part. I thank you for your and your staff's hard work and patience.

The State's request was considered under the special appropriations act provision granting the Secretary of Labor authority to waive certain requirements of Titles I-III of JTPA, and Sections 8-10 of the Wagner-Peyser Act. This authority was granted to the Secretary in the Department of Labor's (DOL) Appropriation Act for 1997 (Pub. L. 104-208, section 101(e)).

This is a one-year authority and applies only to JTPA funds available for expenditure during the period July 1, 1997 through June 30, 1998, and, therefore, could affect the JTPA Grant Agreements for Program Year (PY) 1997, 1996 and 1995 funds, depending on fund availability during the waiver period. Enclosed you will find an overview and our disposition with regard to each of your requests, as well as copies of our formal response to the Governor. Enclosed also is a grant modification (3 copies) that will require signature by the Governor or the State's JTPA signatory official. Please check off the applicable JTPA grant agreements (PY 97, 96, 95) that the statutory waiver modification will affect. We ask that the documents be signed by the appropriate official and returned to the Grant Officer at the address indicated below:

Mr. James C. De Luca
U.S. Department of Labor - ETA
Office of Grants and Contract Management - DAA
200 Constitution Avenue, N.W,
Room - South 4203
Washington, D.C. 20210

Upon execution by the appropriate USDOL grant officer, we will return an executed copy for the State's official files. This modification is effective September 30, 1997.

We applaud California's efforts to focus on a workforce vision and the development of a strategy to meet that vision. Waivers, of course, are only a small part of this strategy. We will continue to work with California to reach these goals. We expect that these reforms will continue to reflect the Department of Labor's guiding principles: individual opportunity and customer choice; leaner government; greater accountability; State and local flexibility; and strong private sector roles.

This is a living document. As we continue our partnership be sure to let us know if additional waivers or other action would be beneficial.

Sincerely,

Armando Quiroz
Regional Administrator

Enclosures

OVERVIEW

The applicable JTPA Grant Agreements between the State and the Department will be modified upon execution of the enclosed Modification. Unless specified otherwise these waivers are authorized for the period beginning July 1, 1997 and ending June 30, 1998. In exchange for these waivers the State is expected to meet the agreed upon performance improvements.

Requests to waive program design components were honored except in the case where the request conflicted with the Secretary's statutory waiver authority, the Department's guiding principles for waivers and the One-Stop Career Centers and School-to-Work Systems principles. Administrative waivers were granted in such a manner as to maintain fiscal responsibility and accountability.

These waivers are based upon the Governor's request, meetings and discussions among staff, and the Department's familiarity with the program in California. They do not necessarily constitute an endorsement of the examples in California waiver request. In several instances, the Department would recommend against the interventions proposed. For example, most research would caution against general use of stand-alone work experience, job search or on-the job training interventions, particularly for youth without a high school diploma or its equivalent. The Department continues to strongly encourage educational components for youth participants.

WAIVERS

A. The Secretary waives the prohibition on stand-alone work experience, job search assistance, job search skills training, and job club, for both youth and adults, in instances when an individual service strategy substantiates its use as appropriate, by waiving JTPA § 204(c)(2)(B)(ii) and 20 CFR 628.535(b)(2) and (c)(1)(ii) and applying JTPA § 264(d)(3)(B) as if it reads ". . . shall be accompanied by . . . additional services . . . unless the individual service strategy demonstrates such additional services are not warranted. Additionally, the title III prohibition on work experience at 20 CFR 627.245(e), where such strategy is supported by an individual assessment, and the combination requirements at 20 CFR 627.245(d) and 628.804(e) and (f) are waived. We wish to point out to the State that there is research suggesting that work experience provided in a stand-alone mode is not as effective as when combined with other needed services.

B. The Secretary will apply JTPA § 204(c)(4) and 20 CFR 627.310(e) to title III to enable title III participants to receive post-termination services, except for financial assistance, for up to one year consistent with title II. Additionally, the Secretary will apply JTPA §§ 204(b)(2)(J) and (c)(4) and 314(c)(15) and 20 CFR 627.310(e) to authorize training as a post-termination service and waives that portion of 20 CFR 627.240(f)(3) which precludes OJT with a participant's "current employer" in "an upgraded job" for title II eligible participants, on condition that the OJT with a title II eligible participant's current employer results in the acquisition of new skills and higher pay by the participant and is contingent upon the Governor:

i. Developing a record keeping system that will track post-termination training provided and outcomes achieved for any post-termination training provided.

ii. Maintaining current safeguards to ensure that employers do not receive federal funding for training/retraining laid off and subsequently recalled/rehired employees.

iii. Developing a policy that addresses the limited circumstances under which the on-the-job-training methodology and means of reimbursement will be used for additional upgrade training.

However, the provision within 20 CFR 627.310(e) which prohibits the use of financial assistance as a post-termination service is not waived. Therefore, needs-based and needs-related payments are not post-termination options under this waiver for both title II and III.

In addition, the State has requested, and the Secretary approved, the use of on-the-job training as a post termination service with the purpose of such training being for the participant to gain additional skills that will aid their retention in a job and to increase their earnings. This waiver is granted with the understanding that on-the-job training will not be provided as a post placement training service for Title III participants with their previous lay-off employer for any purpose.

C. The Secretary will apply the definition of "family income" in 20 CFR 626.5 such that ". . . such income shall also exclude Social Security Disability Income for an individual with a disability. . . ." This administrative regulatory waiver is being granted under the provisions of 20 CFR 627.201 for a period of four years from the effective date of this Grant Modification.

D. As requested, the Secretary waives the two core performance standards for youth programs in Training and Employment Information Notice (TEIN) 5-93, dated June 24, 1994, the Entered Employment Rate and the Employability Enhancement Rate, and substitutes the Positive Termination Rate, defined as: "The number of youth who had a positive termination (either entered employment or met one of the employability enhancement definitions) as a percentage of the total number of youth who terminated." Performance on the Positive Termination Rate shall be calculated in the same way for both PY 1996 baseline and the PY 1997 goal. In considering whether the State and the SDAs have attained the agreed upon performance improvement for PY 1997, the Department will apply the Positive Termination Rate (Youth) Adjustment Model, exclusive of Governor's Adjustments, in the "Guide to JTPA Performance Standards for Program Years 1996 and 1997", distributed to States via TEIN 26-96, dated April 22, 1997. In implementing this waiver, the State will need to revise its incentives and sanctions policies. ETA will provide revised reporting instructions.

E. The Secretary waives the youth OJT wage requirement at JTPA § 264(d)(3)(C)(i)(I) and the related regulations at 20 CFR 628.804(j)(1)(i) and the participation requirement at § 264(d)(3)(C)(iii) and the related regulation at 20 CFR 628.804(j)(2), when indicated as appropriate in the assessment and individual service strategy for youth on-the-job training. The State shall assure that the OJT positions for youth have substantial training content and that the training time is correctly determined.

F. As requested, the Secretary waives the age requirements in TEIN 5-93, Change 1, dated June 23, 1994, to obtain the Youth Employability Enhancement outcome for either the "Returned to Full-Time School" or the "Remained in School" definition. The State may allow attainment of any recognized Youth Employment Competency by any age youth to meet the required Youth Employment Competency under the "Returned to Full-Time School" or "Remained in School" definitions for the Youth Employability Enhancement outcome.

G. The State's request to waive the JTPA §254(b)(2) and 20 CFR §628.702(a)(2) to allow up to 10 percent of the enrollments in title II-B to be non-economically disadvantaged if they face one or more barriers to employment (as is permitted under titles II-A and II-C) by applying JTPA § 263(e) to title II-B participants has not been granted. The 1997 DOL Appropriations Act did not grant the Secretary the authority to waive JTPA eligibility requirements such as those contained in the State's request; therefore the request cannot be approved.

H. As requested, the State's request to waive only the provisions of JTPA §141(q) pertaining to the prohibition of employment generating activities and economic development activities is approved. The State proposes that such funding shall be limited to a total of 5 percent from JTPA title II-A 77% and/or title III 50% formula allocated funds and may be used to support local economic development activities. In smaller SDAs where 5 percent is less than $50,000 of such funds, SDAs may use up to $50,000. In all other SDAs, such funds may not exceed $400,000.

Under the State's request, allowable activities are limited to those that directly benefit JTPA participants, for example: promoting the use of first source hiring agreements; vouchering services in support of various enterprise zone efforts; collective marketing of services available through JTPA with local economic development practitioners; advertising to industry clusters that match the skill sets of JTPA participants; and active participation with local business resource centers (incubators) to provide technical assistance to small and new business to reduce the rate of business failure.

Under this waiver, JTPA funds would not be allowed for foreign travel; activities aimed at promoting business relocation; or activities which result from any general purpose of economic development corporations, business advocacy organizations, county general funds, or private or public financial institutions (such as the creation of revolving loan funds, investment in industrial park infrastructure, financing of lighting, building materials or water/sewage systems) or the purchase of equipment that would directly benefit private businesses or enterprises. These funds must remain in the control of the SDA and may not be redirected, in whole or in part, to any other agency. Subcontracting for services will not be precluded, however, the SDA will remain accountable for the oversight and expenditure of these funds for JTPA purposes.

In addition, this funding may not be used to supplant or duplicate facilities or services available in the area from federal, state of local sources. Such funding may only be used for activities which are in addition to those which would otherwise be available in the area in the absence of such funds. State policy will be developed to further define employment generating activities, to ensure that these activities are charged to the appropriate cost category, and to set appropriate parameters for using JTPA funds for this purpose.

I. The State's request to exclude persons who transfer to another JTPA program from the calculation of the performance on the Entered Employment Rate for the original program has been granted for inter-SDA/SSA transfers only. For transfers between programs in the same SDA, a waiver is not necessary because a workable alternative already exists. The alternative is to co-enroll the individual in both programs and terminate the individual from both programs at the same time. The same outcomes should be recorded for all programs from which the individual is terminated at one time. The same follow-up contacts for the same individual will suffice for all programs from which the individual terminated.

Inter-SDA/SSA transfers between SDAs/SSAs can be excluded from calculation of the Entered Employment Rate provided that the State develops and implements guidelines for verifying that transferred individuals have, in fact, been enrolled in another SDA's/SSA's program(s) within a reasonable period of time, which we would like to recommend be no longer than 90 days. Only those individuals whose transfer can be verified should be excluded from the calculation of performance.

J. As requested, the Secretary waives the provisions of the JTPA regulations at 20 CFR 627.450(c)(1)(i), and (c)(1)(iv) which require that program income be used for the same purposes as the funds of the grant, subgrant and title under which it was earned, and that the administrative cost limitation shall apply to the use of program income. Program income may be used for any allowable JTPA purpose regardless of title. Also, the administrative cost limitation will not apply to the use of program income. JTPA § 141(m)(1) will be read to require that income earned under JTPA may be retained for use on any JTPA program regardless of title.

K. As requested, the Secretary waives JTPA §§ 108(b)(4)(B) and 315(a), and (b); 20 CFR 627.445(a)(1)(i), and (a)(2)(i) and 631.14(a) and (b) eliminating the non-administration cost limitations for titles II and III [except for national reserve account (NRA) grants]; the 20% administration limitation for titles II-A and II-C, at JTPA § 108(b)(4)(A), the 15% limitation for title III, at JTPA § 315(c), and the 15% limitation for title II-B, at JTPA § 253(a)(3) and 20 CFR 627.445(b)(3) will remain in effect. The provisions at § 108(b)(1) and (c), and all references in the JTPA regulations that address the cost limitations under titles II-A, II-B, II-C, and III [except for NRA grants] shall refer only to the administration cost limitations. The Secretary will apply JTPA § 108(b)(2) and (3) and 20 CFR 627.440(b), (c)(1) and (d) and 631.13(a)(1) to reduce the number of cost categories to two: Administration and Program Costs. The costs of Administration shall be those defined at 20 CFR 627.440(d)(5) for title II and 631.13(f) for title III. Program Costs will consist of all other costs including those defined at 20 CFR 627.440(d)(1), (2), (3), and (4) for title II and at 631.13(c), (d), and (e) for title III. The costs of Rapid Response activities identified at JTPA § 314(b) and 20 CFR 631.13(b) shall continue to be separately reported. Reporting instructions for the two cost category reporting method have been developed and are attached for use by the State.

L. As requested for title III only, the JTPA Standardized Program Information Report (SPIR) instructions in TEIN 5-93, Change 1 that require follow-up by participant contact for the 13th week after termination are waived on the condition that the State adopt the provisions in the Department's "JTPA Statutory Waiver Guidelines: Substitution of Wage Record Follow-Up for Survey Follow-Up in JTPA Performance Standards" (attached) and future implementing guidance.

These provisions were developed to provide some uniformity in system wide measurement for the limited number of States that receive such waivers. The guidelines make provisions pertaining to: universal reporting; reporting elements, formats, and electronic media; reporting deadline; out-of-state placements; required core performance measures; adjustments to performance standards; alternative incentives and sanctions policy; sampling or baseline data for national follow-up measures; performance improvement; and other provisions deemed appropriate.

M. In consideration of the waivers contained in this grant modification, the State agrees to a performance improvement of four percent (4%) at the State level measured at the conclusion of Program Year 1997 using actual performance in PY 1996 as the baseline for improvement. Performance improvements will apply to all the Secretary's performance measures or to their approved equivalents, for titles II-A, II-C, and III. In order to meet this performance improvement, the State is expected to require that each SDA/SSG make some improvement in performance and that those SDAs/SSGs which demonstrate comparatively lower levels of performance be required to make greater performance improvements. States will take into account the SDA's performance improvement targets in determining the receipt of title II incentive grant awards for PY 1997. In considering whether the State has attained the agreed upon performance improvement for PY 1997, the Department will apply the Secretary's Adjustment Models, exclusive of Governor's Adjustments, to the performance improvement goals. Program Year 1996 and Program Year 1997 performance will be calculated in the same way for both years.

The Standardized Participant Information Report (SPIR) instructions in Training and Employment Information Notice 5-93, Change 1 (dated June 23, 1994), as modified by Training and Employment Information Notice 5-93, Change 2 (dated January 24, 1997), remain in effect where not specifically waived or modified in this Agreement. Also in effect unless specifically waived are the Performance Standards Status Summary Report requirements put forth in Training and Employment Guidance Letter 2-95 (dated August 10, 1995). This requires Governors to report each SDA's final standard and actual performance for each of the Secretary's title II core standards, with required technical assistance plans and reorganization plans attached.

These waivers are open for modification and the Department will also entertain additional requests for waivers during this program year. These waivers apply to the title II and the title III formula programs. However, ETA will consider requests to apply specific waivers to individual title III Secretary's NRA grants which are active during Program Year 1997. In addition, ETA will consider requests to incorporate specific waivers into new individual NRA grants, as appropriate.