Summary

Manufacturing workers face an uncertain future as manufacturing employment declines--more than 3 million manufacturing jobs have been lost in this country since 2000 because of international trade as well as other factors. The Trade Adjustment Assistance (TAA) program, administered by the Department of Labor (Labor), is the nation's primary program providing income support, job training, and other benefits for manufacturing workers who lose their jobs as a result of international trade. During the 3-year period from fiscal years 2004 through 2006, Labor certified nearly 4,700 petitions for TAA covering an estimated 400,000 workers. For fiscal year 2006, Congress appropriated about $966 million for TAA, of which about $220 million was for training trade-affected workers. Each year, Labor initially allocates 75 percent of the training funds, or $165 million, to states according to a formula developed by Labor. Labor holds the remaining 25 percent in reserve to distribute to states throughout the year as the need arises because of unexpected layoffs. To minimize year-to-year fluctuations in state funding, Labor uses a "hold harmless" policy that ensures that each state's initial allocation is at least 85 percent of the initial allocation received in the previous year. States have 3 years to spend TAA funds--fiscal year 2006 funds must be used by the end of fiscal year 2008. In addition, to cover administrative costs, Labor allocates to each state an additional 15 percent of its training allocation. Labor can also provide states with supplemental funding to assist TAA participants through National Emergency Grants (NEG)--discretionary awards intended to temporarily expand service capacity in response to major layoffs. During hearings held in June 2007, Labor asserted that, based on reported expenditures, all states had sufficient funds to provide training benefits to trade-affected workers. We reported in May 2007 that, in fact, 13 states used virtually none of their fiscal year 2006 training funds, even when considering both expenditures and obligations--that is, funds that have been committed but not yet paid. On the other hand, we also reported that nine states had used virtually all of their fiscal year 2006 training funds. Our prior work on another key employment and training program--the Workforce Investment Act--found that expenditures by themselves do not provide a complete picture of spending activity. Obligations must be considered to accurately gauge how much is available to provide services--such as training--to participants, and we recommended that Labor use obligations when estimating available funds. Recently, Labor's Office of Inspector General has also concluded that obligations provide a more useful measure for assessing states' funding status if the obligations accurately reflect legally committed funds and are consistently reported. Because TAA reauthorization is rapidly approaching, Congress must have accurate information on whether current funding levels are meeting TAA training needs. Congress asked that we assess (1) the total amount of TAA training funds states actually had available in fiscal year 2007, (2) the process states use to obligate training funds and how they manage these obligations, and (3) the amount of National Emergency Grants (NEG) funds that have been awarded for TAA during the past 3 fiscal years.

In summary, we found that as of March 31, 2007, states had about $173 million of TAA training funds available compared with Labor's estimate of $447 million. The difference between our estimate and Labor's is due to several factors. First, Labor's estimate included about $92 million in administrative funds, not intended to be used for training, that was awarded to states during fiscal years 2005 through 2007. Second, Labor included more than $12 million that was provided to states in fiscal year 2006 to upgrade their management information systems. Third, Labor's estimate did not consider any of the approximately $107 million of TAA training obligations states reported for funds allocated during fiscal years 2005 through 2007. Finally, Labor's estimate did not account for any of the TAA training expenditures states reported in fiscal year 2007, through March 31, 2007. These factors contributed to our estimate of available training funds being lower than Labor's. We also found that total funding available in 2007 varied widely from state to state, consistent with our earlier findings of fiscal year 2006 spending alone. For example, seven states reported spending or obligating all of the funds they had received during fiscal years 2005 through 2007. On the other hand, 21 states reported not spending or obligating any of their fiscal year 2007 TAA training funds--and, 6 of the 21 states had not spent or obligated any of their fiscal year 2006 TAA training funds as well. Nearly all of the states responding to our telephone survey reported obligating TAA training funds when an actual commitment occurs, and most states reported actively managing their obligations, including de-obligating funds in a timely manner. Of the 45 states responding to our survey, 44 reported obligating funds when either a training contract is signed or when a participant is approved for, or enrolls in, training. For longer-term training, about one-third of the states reported obligating the entire amount of the training contract. Thus, if a participant enrolled in training that cost $20,000 and covered 2 years, these states would obligate the entire $20,000 at one time. On the other hand, about two-thirds of the states would only obligate a portion of the $20,000 needed for a specific period, such as the current fiscal year. Nearly 90 percent of the states responding to our survey also reported having procedures to de-obligate training funds in a timely manner, often as soon as the state is notified that the participant is no longer in training. Most of the states reported actively monitoring obligations to ensure that they are current and accurate, often through the use of training attendance records.