ETA Congressional Testimony

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Thank you, Mr. Chairman and Members of the Subcommittee:

I am pleased to appear before you to discuss the Fiscal Year (FY) 2004 budget request for Department of Labor programs administered by the Employment and Training Administration. We are in the process of incorporating exciting changes in the national workforce investment system, many of which are reflected in this budget request, so I am particularly anxious to share more information with you about those activities, and later answer any questions you may have.

President Bush, in his State of the Union address, stated as his first goal: "We must have an economy that grows fast enough to employ every man and woman who seeks a job." As the President works to promote this type of economy, the Employment and Training Administration is supporting his efforts by working with state partners to ensure that we have a workforce that is prepared to fill those jobs. Through this budget request we will enable the states to assist millions of American workers and employers that need these services, and we will ensure that they are provided these services through a streamlined and effective delivery mechanism, the national One-Stop Career Center system.

In addition, this year we are working to reauthorize the legislation that is the foundation of this system, the Workforce Investment Act of 1998 (WIA). By making strategic changes to the current legislation, and supporting them through this budget request, we can ensure that the President's objectives and system reforms are accomplished in this Fiscal Year.

In addition to discussing our budget proposal, I will briefly review our WIA reauthorization proposal, our proposal for Unemployment Insurance reform and a new initiative we are very enthusiastic about, Personal Reemployment Accounts.

The Administration's request for workforce preparation, employment services and unemployment insurance totals more than $11.0 billion. This is an increase of $98.4 million from the FY 2003 level, including the 0.65 percent across-the-board rescission and taking into account the sunsetting of revenues from the H-1B fees in FY 2003. This request:

• Will enable ETA and the states to carry out their mission and support the Secretary's Strategic Goals and the President's Management Agenda; · Continues to further the goals of the President and the Secretary by integrating budget and performance, addressing foreign labor certification backlogs, reengineering Trade Act certification processing, and addressing UI overpayment problems; and · Continues to fund strategies across all program areas that have proven effective.

Much of our employment services and workforce preparation activity falls under WIA, and I'll start with the Administration's plans for reauthorization. Our proposal to reauthorize WIA is designed to continue to transform the One-Stop Career Center system into a cohesive system that can respond quickly and effectively to the changing needs of employers and workers in the new economy while also addressing the needs of special populations. It is intended to build on and improve what works, and fix what does not work. The bill seeks to better connect post-secondary education and training, social services, and economic development systems through the One-Stop Career Centers to prepare the 21st century workforce with skills for career opportunities in high-growth sectors of the economy.

Our reauthorization proposal focuses on six key objectives to improve the nation's public workforce investment system. First, it creates a more effective governance structure by streamlining the membership of state and local boards and more tightly focusing the functions of these boards.

Second, it strengthens the One-Stop Career Center system by financing the operational cost of the system through dedicated "one-stop infrastructure" funding, authorizing a wide range of services for low-wage workers, and removing barriers to serving targeted populations.

Third, it enhances the provision of comprehensive services for adults by combining funding streams that now finance similar services for similar populations, increasing flexibility in the delivery of core, intensive and training services, improving the functioning of the eligible training provider system, and expanding Individual Training Accounts.

Fourth, it creates a targeted approach to serving youth by focusing resources on out-of-school youth through a Targeted State Formula program and Challenge Grants to states and local areas.

Fifth, it improves performance accountability by simplifying and rationalizing the current accountability system and establishing long-term national performance goals.

Finally, it promotes state flexibility by removing statutory limitations to providing waivers and simplifying current "Work-Flex" authority to allow states to apply for block grant authority. Over 37 states have requested waivers under the current law, which indicates that more flexibility is desired. Waiver requests have also informed our recommended amendments. As examples, we have granted waivers on the restrictions regarding eligible training providers, and to increase the amount of funds that can be transferred between adult and dislocated worker funding streams.

The President's FY 2004 budget proposal proposes urgently needed reform of the administrative structure of the Unemployment (UI) system. The reform proposal promotes innovation and efficiency in the operation of UI programs. It would give states control over funding for UI administration, providing new flexibility to enhance the provision of services to the unemployed and to employers. It would dramatically reduce the federal unemployment tax, and curtail the longstanding practice of returning to the States only a portion of the taxes employers pay to run the UI program. The administrative funding reforms would be phased in during a five-year transition period, with significant federal support as states take responsibility for financing the administration of their UI programs.

This common sense reform would improve service to our unemployed workers; offer needed tax relief to employers; and free the states from their dependence on Washington for resources.

While UI administrative reform will have a positive impact on the economy in the long-term, Personal Reemployment Accounts (PRAs) will help our current economy by giving UI claimants unprecedented choice in accessing the services they need to get back to work as quickly as possible. This new asset for the unemployed is a key component of President Bush's Economic Growth and Jobs Plan and WIA reauthorization proposal. The President's proposal would authorize PRAs and provide $3.6 billion in resources to fund PRAs in FY 2003. The Administration estimates that these resources will be spent over two years. PRAs represent a significant investment of new dollars to be made available directly to unemployed citizens, to assist them in a rapid return to employment. The accounts would be available to certain individuals who have been determined to be most likely to exhaust unemployment insurance benefits before finding employment, without some service intervention.

PRAs would be worker-managed, contain up to $3,000, and would be used for the purchase of a wide variety of reemployment services, from formal training to counseling services. For example, some individuals may determine they need extensive retraining in order to compete for jobs in a high growth industry; others may only need to complete a short-term computer course, or may just need a supportive service such as day-care. The proposal also provides that individuals who obtain full-time employment before the 13th week for which UI benefits are paid will receive 60 percent of any account balances as a reemployment bonus, with the remaining 40 percent paid as a bonus if employment is retained for 6 months. Perhaps most importantly, PRAs will help apply one of our guiding principles: that wherever possible, resources and decision-making authority belong directly in the hands of individual citizens.

The President's FY 2004 budget reflects his deep commitment to try bold, innovative and flexible initiatives. For the Employment and Training Administration those initiatives will prepare young people for the world of work, and get people back to work quickly when they lose their jobs. We are in business to understand the labor market, understand its relationship to the American economy, and facilitate the preparation of American workers for the jobs that employers are creating today.

Youth – Our request for youth funds is $1.001 billion. This is $37.7 million below the funding level for 2003, including the 0.65 percent across-the-board rescission. The difference is due to the completion of the Youth Opportunity Grant (YOG) program, through which 36 grantees received competitive funding to serve at-risk youth. The FY 2003 budget provided $44 million for the fifth and final year of these grants, and the FY 2004 budget proposes the elimination of this program because YOGs duplicate funding provided through the youth formula grant program and Job Corps, and because of reports and concerns related to the management and spending practices of several grantees, which the Department of Labor and its Inspector General continue to investigate.

The Administration's WIA reauthorization proposal would create a more targeted approach to serving youth. Currently, funds for the WIA youth program are spread ineffectively in a manner that lacks a strategic direction for WIA youth activities on a national level. Based on findings of the Administration's assessment of this program for the FY 2004 budget using the Program Assessment Rating Tool (PART) and on discussions with youth practitioners, academics and other experts on how best to focus the Department of Labor's youth dollars, the Administration recommends reforming current youth programs in the WIA reauthorization by focusing resources on out-of-school youth through a combination of a Targeted State Formula program and Challenge Grants to states and local areas.

The targeted formula program – 75 % of the youth funds – would be used at the local level to serve out-of-school youth between the ages of 16 and 21. "Challenge Grants" would represent twenty-five percent (25%) of the state allocation for youth, and the grants would be awarded on a competitive basis. Funds for Challenge Grants would go to programs with proven effectiveness at serving out-of-school youth, as well as to high-quality programs that lead to high academic achievement, self-sufficient employment, or other positive performance outcomes.

Job Corps – We propose a budget of almost $1.57 billion for the Job Corps, a $57.2 million increase above the Fiscal Year 2003 appropriation, to continue expansion of this highly successful program. Job Corps is a residential job training program for disadvantaged youth, and our proposal will permit the Job Corps to enroll 68,452 new students. The increased funding includes $23.5 million for construction to complete a two-center expansion that began under the FY 2002 appropriation.

Adults, Dislocated Workers and Employment Services – Our request for serving eligible adults through a new consolidated adult state grants program totals almost $3.08 billion.

Our WIA reauthorization proposal would consolidate three funding accounts-adults, dislocated workers, and employment and reemployment service grants to states-into a single formula grant to states. This consolidation will increase state flexibility and coordination in the use of these funds to serve adults, while at the same time reducing duplication and inefficiency that exists with the multiple funding streams. This reform will address these and other problems that were identified by the Administration in an assessment of the dislocated worker program that it completed for the FY 2004 budget using the PART. The requested funding level of the consolidated grant equals the sum of the three individual funding streams: $900 million for adults; $1,383 million for dislocated workers; and $797 million for employment and reemployment service grants. The consolidated funding stream includes state Formula Grants and a state reserve, and provides states the flexibility to target resources where needed. Further, it retains authority for the Secretary to provide National Emergency Grants – to be renamed "National Dislocated Worker Grants" in WIA reauthorization – to address states' special layoff situations. Overall, we expect at least 18,490,000 adult participants under the single formula grant program, the same level as estimated for FY 2003.

National Programs

A total of $102.1 million is being requested in FY 2004 for National Programs. In this account, we have proposed phasing out some programs that are duplicative of services in the WIA title I programs.

First, we are not requesting funds for the National Farmworkers Jobs Program (NFJP) program. The NFJP population is eligible for services under the new consolidated adults/dislocated worker state grants and youth formula grant programs. We believe that workforce services organized through the One-Stop system play a vital role in building strong local economies, and that providing services to farmworkers through the One-Stop system will increase the number served and have a positive employment and earnings impact on those who receive services.

To assure their ultimate success, ETA is working with the current National Farmworkers Jobs Program (NFJP) grantees to identify technical assistance strategies that will facilitate such linkages and support the One-Stop system's efforts to be more responsive to farmworkers. In addition, ETA is considering pilot and demonstration projects to test innovative ways to increase farmworkers' employment and earnings, and training and technical assistance to states and localities to meet the challenge of providing universal and effective workforce development services.

Second, we are proposing that performance incentive grants be funded at the Secretary's discretion in the upcoming Fiscal Year. The current incentive grant structure has not fostered improved service delivery or coordination between programs that we had expected. Nor have the awards promoted efforts to achieve strategic goals such as high skill training or enhanced efforts to serve targeted groups, such as persons with disabilities. Rather, incentive funding has contributed to administrative complexity, because a particular program's performance and the activities carried out under the incentive grant were not linked, and performance goals had to be met by three separate federal programs in order to qualify for incentives. As part of WIA reauthorization, we propose revising the incentive grants process by basing them on performance for programs authorized under Title IB of WIA only, and a particular emphasis would be put on increasing the ability of the states and local areas to serve special needs populations.

Other significant changes in our FY 2004 request include:

• We are not requesting funds for the Women in Apprenticeship Program, administered by the Women's Bureau and funded at about $1 million in FY 2003. The Department is focusing on making greater inroads for women in nontraditional occupations through the registered apprenticeship and other existing programs.
• We are not requesting funding for Responsible Reintegration for Young Offenders, funded at about $55 million in FY 2003. The lessons learned in this program, such as linking youthful offenders under age 35 with essential services that can help make the difference in their future choices, are being incorporated into the basic WIA formula grants.
• We are requesting $55 million for Native American programs, about $0.6 million less than the same level as the 2003 appropriation, post-rescission. We estimate this will serve approximately 22,200 Native American adults. In addition to this special program for Native Americans, we will continue to strive for a greater level of integration of Native American program services throughout the One-Stop Career Center system, as we believe this is a way of increasing further the options available to assist adult workers.

Community Service Employment for Older Americans – In this account we are asking for $440.2 million, $2.1 million below the FY 2003 appropriated level. We expect to assist 92,300 Older Americans with community employment opportunities and unsubsidized job opportunities. The Administration's PART assessment of this program for the FY 2004 budget found that the competitions for national grants need to be strengthened to improve service delivery and open the door to new grantees, including faith-based and community-based organizations. The FY 2004 budget supports these and other reforms.

State Unemployment Insurance and Employment Service Operations Account – For State Unemployment Insurance and Employment Service Operations, our request is $3.647 billion, an increase of $51.4 million.

Unemployment Insurance – The FY 2004 request for UI state administration is $2.7 billion, an increase of $16.2 million above the FY 2003 enacted level after the rescission. In FY 2004, these funds will finance the following major functions of the states:

• Determining benefit entitlement for about 14 million newly unemployed workers.
• Paying benefits to an average of 2.9 million unemployed workers per week.
• Collecting state taxes from 7.1 million employers.

In line with the President's Management Agenda – to improve government performance and efficiency – the request for UI includes $500,000 for a study to examine current state payment practices and to develop cost-effective procedures to prevent and detect fraud and UI benefit overpayments. Eliminating erroneous payments in the Unemployment Insurance program could save states hundreds of millions of dollars annually.

Employment and Reemployment Services – Our request for Employment Service Allotments to states, $761.7 million, is $5.0 million above the FY 2003 appropriated level after the rescission, and the request for Reemployment Services Grants is $35 million. As discussed earlier, the Administration's WIA reauthorization would combine into a single formula grant the Employment Service (Wagner-Peyser Act) programs, including reemployment services funds, the Workforce Investment Act Adult program funds, and the Dislocated Worker funding stream in the Training and Employment Services account. In this streamlined proposal, labor exchange services would be the foundation of the One-Stop Career Center system, with the remaining funds focused on adult training and intensive services.

One-Stop/America's Labor Market Information System – The FY 2004 request includes $101 million for providing employment and related information through One-Stop Career Centers. This is $1.7 million above the FY 2003 appropriated level after the rescission. The funding request will cover key national infrastructure investments in information, e-government technology and services that our customers-workers and businesses-need, such as core Labor Market Information products and services and funding to support O*NET, the system that provides a common language for occupations. Electronic web-based tools such as America's Career InfoNet, America's Service Locator, and America's Job Bank will continue to be supported with this request.

Work Incentive Grants – Our request for Work Incentive grants remains $20.0 million, about the same level as the FY 2003 funding level.

Employment Service National Activities – Our request for National Activities is $78.5 million for technical assistance and training for the system, and administration of the Work Opportunity Tax Credit and Foreign Labor Certification programs. This represents an increase of $28.2 million over FY 2003 to reduce the backlog of approximately 300,000 foreign labor certification applications in the states. It can take between 2 – 5 years, depending upon the state in which an application was filed, for a permanent labor certification application to be processed. This is unacceptable.

Beginning in FY 2004, ETA will eliminate the current backlog over a two-year period by consolidating part or all of the current state and Regional office processing into a central national location using a combination of federal staff and contractors. We are requesting $54.9 million in National Activities funds to cover the on-going operations of all foreign labor certification programs and to implement the first year of the two-year effort to eliminate the permanent labor certification backlog.

Program Administration Account – For the ETA Program Administration account, we request $183.4 million (1,357 FTE from direct appropriations), $8.8 million above FY 2003 enacted amount. Our request includes $11.4 million for 120 FTE to reengineer, streamline, and clear the backlog that exists in the foreign labor certification program.

Federal Unemployment Benefits and Allowances – We request $1.338 billion, $366 million above the FY 2003 funded level for implementation of the Trade Reform Act of 2002, which consolidated the Trade Adjustment Assistance (TAA) and NAFTA-Transitional Adjustment Assistance programs and expands coverage and services to workers adversely affected by international trade. The request includes the first year of a demonstration project for alternative TAA for older workers. The TAA program was the subject of a PART assessment for the FY 2004 budget. In response to that assessment, ETA will establish common performance measures aligned with those of other federal job training programs, which is further discussed below. In addition, ETA will seek to increase accountability for TAA outcomes using revised TAA regulations and its Secretary-Governor agreements.

Another key principle of the President's Management Agenda is the integration of budget and performance activities. Consistent with this principle, we are committed to making job training and employment programs more efficient and results-oriented. To this end, our WIA reauthorization proposal and our Annual Performance Plan for the Government Performance and Results Act (GPRA) provide for eight common indicators of performance-four for adult programs and four for youth and lifelong learning programs-developed by several Federal partner agencies as part of an initiative for employment and job training programs. These "common performance measures" will provide a powerful way to evaluate and improve performance for programs with similar goals. They may also have the effect of promoting coordination among programs that would share common outcomes and definitions of success.

Accordingly, the Administration's WIA reauthorization proposal seeks to reduce the number of WIA performance measures from 17 indicators under the current legislation to these eight common indicators, including an efficiency measure. The core set of measures would also have a common set of definitions and data sets to help integrate service delivery through the One-Stop Career Centers at the local level. Although the performance measures would be reduced to eight, the Governors would retain the authority to add additional measures for use within their states.

The Employment and Training Administration has heightened its focus on performance to accomplish our goals, as reflected in our key guiding principle that we will ". . . support programs that are outcome-focused and results-oriented." I believe that we owe it to our fellow Americans to deliver the best results that we can with the public resources entrusted to our agency. Following are some examples of overall performance and results for key program areas.

In PY 2001, the ETA-administered programs continued to meet or substantially meet the majority of their established performance targets. For example, based on fourth quarter data, the WIA adult and dislocated worker programs exceeded goals for employment retention and earnings. Seventy-nine percent of adults and 86 percent of dislocated workers were still working in the third quarter following employment against respective targets of 78 percent and 83 percent. Adults increased their average earnings by $3,555 and dislocated workers averaged 101 percent of their pre-dislocation earnings - far exceeding the target of $3,361 for adults and 91 percent for dislocated workers.

Seventy-five percent of older youth ages 19 to 21 were working six months after they obtained employment, meeting our retention goal. Fifty percent of younger youth ages 14 to 18 were employed or enrolled in advanced training, postsecondary education, military service or apprenticeships six months after exiting the program, which also met the target.

The Job Corps also performed strongly-90% of graduates got jobs with entry average hourly wages of $7.96, exceeding the target of $7.25, or were enrolled in education. The 6-month job retention rate after initial placement was 64 percent for Job Corps students, slightly below the target of 70 percent.

In FY 2002, the Unemployment Insurance system continued to focus on making timely benefit payments to unemployed workers and setting up tax accounts promptly for new employers. Eighty-nine percent of benefit payments were made timely, in comparison to a goal of 91%. The Unemployment Insurance system exceeded its goal to promptly set-up new tax accounts. Eighty-two percent of new status determinations were made timely in comparison to a goal of 80 percent.

Detailed performance information on these measures may be found in the Department of Labor's annual Performance Report, recently issued in compliance with the Government Performance and Results Act.

Mr. Chairman, we believe our budget request supports the many important initiatives that have been entrusted to our administration, and also fully supports President Bush's goal of revitalizing our economy and creating jobs. Thank you for the opportunity to testify before you today. I will be happy to answer any questions you may have about our FY 2004 budget request.