Ms. Jill K. Day
Staff Assistant
Office of Training and Reemployment
Workforce Development Cabinet
209 St. Clair Street, 4th Floor
Frankfort, Kentucky 40601

Dear Ms. Day:

I am pleased to offer Kentucky JTPA waiver approvals in response to Governor Patton's April 25, 1997 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 July 1, 1997.

We applaud Kentucky'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 Kentucky 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,

Toussaint Hayes
Regional Administrator

Enclosures

OVERVIEW

The JTPA Grant Agreement between the Governor and the Department will be modified upon the Governor (or his designee) signing the attached Modification. The granted waivers are authorized for the period of Program Year 1997. In exchange for these waivers Kentucky is expected to meet the agreed upon performance improvements. Below is a discussion, including the disposition, of all of the State's waiver requests.

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 Kentucky. They do not necessarily constitute an endorsement of the examples in Kentucky's 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. As requested, 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)(A) and (B) as if they read ". . . 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 and that, as suggested in the request, this authority will be used sparingly.

B. 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 JTPA § 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. In addition, the State should issue policies to assure that youth OJT opportunities reflect positions with career potential and avoid the introduction of abuses in developing youth OJT slots in low wage, low skill positions which precipitated the enactment of the provisions for which this waiver is requested.

C. For title II and III, current authority permits participants to continue to receive training services following placement so long as participants have not been terminated. Instead of terminating at placement, termination occurs at the completion of planned services. ETA encourages such a policy and is willing to work with Kentucky to develop reporting procedures to take credit for job placements occurring prior to termination.

Nevertheless, as requested, the Secretary will apply JTPA § 204(b)(2)(J) and (c)(4), and 20 CFR 627.310(e) to title III to enable title III participants to receive post-termination services for up to one year consistent with title II. Additionally, as requested, 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 contingent upon the Governor:

1. Developing a record keeping system that will track post-termination training provided and outcomes achieved for any post-termination training provided.
   
   
2. Maintaining current safeguards to ensure that employers do not receive federal funding for training/retraining laid off and subsequently recalled/rehired employees.

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.

D. As requested, the Secretary waives the JTPA procurement requirements at JTPA §164(a)(3) of the Act and the implementing regulations at 20 CFR 627.420(a)(1), (2), (3), and (4), (b), (d)(1), (e)(1), (2), (3), and (5), (g) and (h). The Governor agrees to use State and local procurement procedures and abide by the procurement provisions included in the Office of Management and Budget (OMB) Circular A-102, as codified in the DOL regulations at 29 CFR 97.36. References elsewhere in JTPA to § 164(a)(3) will be understood to refer to State and local procurement provisions. The Circular requires the State to follow the same policies and procedures it uses for procurements using non-Federal funds when procuring property and services under a grant.

Section 627.420 of the JTPA regulations includes rules implementing statutory provisions other than JTPA § 164(a)(3). As a result, the waiver of this section is not all encompassing. Section 627.420 subsections which are not being waived follow (the sections of JTPA which they implement, where applicable, are listed in brackets): (a)(5) [§141(h)], (a)(6) [§107(a)], (c); (d)(2); (e)(4), (f) [§163], (i) [§144], and (j) [§107(e)(2)].

Subsection 627.420(c) deals with conflict of interest. Even though OMB Circular A-102 also has a section that deals with conflict of interest, it is a generic requirement. Subsection 627.420(c) was written specifically to cover the unique relationships that JTPA created with the formation of Private Industry Councils. Therefore, this subsection is not being waived.

Subsection 627.420(d)(2) provides the State and its SDAs/SSGs with pass through authority to any unit of State or local government. This requirement is being retained for the State since the Circular does not provide this authority.

Subsection 627.420(e)(4) is based on the financial requirements contained in the Act and requires that costs be charged according to the allowable cost provisions at 20 CFR 627.435.

Although JTPA § 164(a)(3)(I) has been waived, the requirements contained in 20 CFR 627.450, Program Income, still apply. The section being waived requires that procurement transactions between units of State or local government, SDAs/SSGs, et. al., be conducted on a cost reimbursement basis. The Program Income section of the regulations, in summary, requires that program income earned be used for purposes of the program.

The State's request to waive JTPA § 107(a) which requires the consideration of demonstrated performance in selecting entities to deliver services and calls for giving proper consideration to community based organizations (CBOs) for the delivery of services has not been waived. In the case of demonstrated performance, ETA considers this to be an important component in the selection of service providers. In the case of CBOs, historically they have provided integral employment and training services. The State is expected to not only take into consideration the demonstrated performance of entities being considered for funding, but also to include CBOs in the pool of entities being considered for funding.

Although the JTPA procurement requirements, as cited above, are being waived, this does not relieve the State from awarding JTPA monies through competitive processes as required by § 107(e) which is not being waived. Competition has a positive impact on the services provided with JTPA funds by leading to the selection of service providers with the capabilities to provide the services and by resulting in competitive pricing for the purchased services.

E. 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), will remain in effect; and the 15% limitation for title III, at JTPA § 315(c), as well as the 15% limitation for title II-B, at JTPA § 253(a)(3), and at 20 CFR 627.445(b)(3), will be waived and replaced by the same 20% administration limitation as for titles II-A and II-C, at JTPA

§ 108(b)(4)(A). The provisions at JTPA § 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 national reserve account (NRA) grants] shall refer only to the 20% administration cost limitation. 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.

F. In response to the State's request to waive 20 CFR 631.3(i) to permit a participant to accept "temporary employment for the purpose of income maintenance" when enrolling in basic readjustment services activities, the Department does not believe a waiver is required. We believe that the regulatory authority to permit a dislocated worker to enter such a temporary job after layoff, either "prior to and/or during enrollment in a training program under this part" is not limited to enrollment in activities under the "retraining cost category." Rather, it includes an array of program training services that are available under title III of Job Training Partnership Act.

G. In response to the State's request to waive 20 CFR 631.3(i) to permit the temporary recall to the former employer and thus permit a participant to continue to participate in the title III program, the Department does not believe such a waiver is required. Title III eligibility requirements (as defined in § 301(a)(1) or § 314(h)) authorize services to workers who have been determined eligible prior to actual layoff, thus a temporary recall in and of itself may not change the ability to continue title III services as long as the eligibility requirements are met. This would require a determination that the recall was of short duration, e.g., under a continuing plant closure notice or layoff notice acceptable to the State. There is a related discussion in the preamble to the September 2, 1994 JTPA regulations (p. 45810). In summary, the Department believes that a "temporary recall" as described in your request and within the parameters discussed above is not the same as "temporary employment for the purpose of income maintenance" as described in 20 CFR 631.3(i)(2). However, the caveat described in paragraph "C.," above, that safeguards be in place to ensure that employers do not receive federal funding for training/retraining laid off and subsequently recalled/rehired employees applies here as well.

H. It is not clear that the Secretary has authority to waive her statutory responsibilities for formula allotment and reallotment requirements, including the requirements under Sec. 303 for the recapture and reallotment of unexpended title III formula funds. However, except as noted below, the State's request to waive Sec. 303(b) and 20 CFR 631.12 is not approved for the following policy reasons:

• It is the Secretary's responsibility to judiciously manage scarce federal resources nationally, and to ensure that funds are allotted and reallotted to States where they are most needed. The fluidity of movement of dislocated workers within and outside of traditional labor markets; the unpredictability of most layoffs; the ability for workers to access reemployment services quickly in order to maintain the principle of early intervention; and the access of eligible dislocated workers to JTPA services regardless of where they reside increase the need to move funds within the system.

• Each Governor has a similar requirement under Sec. 303(d) to obligate and deobligate formula funds, at both the State and Substate levels, to permit the funding to be available where it is most needed within the State--and to preclude the necessity for the Secretary to recapture funds from a State.

• In addition, there are several "safety nets" in place for ensuring that Title III resources are available where and when they are needed:



• a Governor may retain up to ten percent of a State's annual allotment for allocation to substate areas based upon need (JTPA § 302(c)(2));
  
  
• a Governor may utilize a portion of the State's reserve funds (up to forty percent of annual allotment) as a discretionary allocation to substate areas to provide additional assistance to areas that experience substantial increases in the number of dislocated workers (JTPA § 302(c)(1)(E));
  
  
• a Governor may request Secretary's National Reserve funds to supplement resources that are available in a State to provide assistance to dislocated workers as a result of mass layoffs, plant or BRAC closures, natural disasters, etc. (JTPA § 323); and
  
  
• a Governor may request from the Secretary additional financial assistance for the formula programs when there is a need (JTPA § 323(a)(7).

It is noted that Kentucky was earlier granted a four-year waiver to the regulatory provision at 20 CFR 631.12(a)(1)(ii). This waiver permits the State to carryover prior year funds contingent upon meeting the eighty percent expenditure requirement in the year of allotment. DOL believes a State's policy for recapture and reallocation of unexpended title III funds within a State can accommodate obligations to serve dislocated workers across program years.

I. The State's request to waive JTPA Performance Standards has not been granted as performance standards ensure that the basic purposes of the Act are accomplished. Currently, under the Act and regulations, Governors may adopt additional performance standards and/or adjust core performance standards -- either using the optional DOL model or the State's own -- to accomplish their policy purposes. A waiver is not necessary for the State to adjust performance standards for TANF participants.

J. The State's request to waive the title II reallotment and reallocation provisions at § 109(a) has not been granted. This appears to be excepted from the Secretary's waiver authority under the "allocation of funds to local areas" exclusion in the DOL 1997 Appropriations Act, and, therefore, not waivable. In any event, this provision ensures that JTPA funds are expended in a timely manner, and where they are most needed.

K. As requested, 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 this Grant Modification.

L. It has been determined that Kentucky's request regarding a customer satisfaction system is outside the scope of the waiver system. Action on this item is being deferred. ETA staff will be in contact with the State to discuss how this matter might be addressed.

M. In consideration of the waivers contained in this grant modification, the State agrees to a performance improvement of at least five percent at the State and local levels 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. States will take into account the SDAs' performance improvement targets in determining the receipt of Title II incentive grant awards for PY 1997. In considering whether the State and the SDAs have 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 will be open for modification. The Department will also entertain additional requests for waivers during this period. In addition to these waivers, the Department agrees to work with Kentucky on the following:

1. These waivers apply to the title II and the title III formula programs. ETA will also consider requests to apply specific waivers to individual title III Secretary's National Reserve Account (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.
   
   
2. The Secretary accepts Kentucky's request that the Governor be given the flexibility to develop policies prescribing the content and format of plans for the State's workforce development services. Such State policies must provide for:
   
   

   a. An inclusive planning process;
   
   

   b. Review and comment of local plans consistent with JTPA § 105; and
   
   

   c. Plans with sufficient information to demonstrate to the Secretary that the services and the activities reflected in the plan will ensure quality, integrity and accountability.

ETA will work with the State to identify the specific contents of the State and local plans required for JTPA titles II and III, as well as the time lines for the publication and submission of the plans contained in JTPA §§ 104(b), 205(a), 121(b), 311(a) and (b) and 313(b); 20 CFR 628.205(a)(2), 20 CFR 628.420(b), 20 CFR 631.36(b), 20 CFR 631.36 (b) and 20 CFR 631.50(b) and (c); and Training and Employment Guidance Letter No. 4-95, "Instructions for Submission of State Plans Under title II and III of the Job Training Partnership Act." Once this is accomplished, the Secretary will entertain a request for any waivers needed to implement the revised planning process.