Good morning. Chairman McKeon and members of the Subcommittee, I thank you for inviting me to testify on the Administration’s Workforce Investment Act reauthorization proposal. This proposal is designed to strengthen the One-Stop service delivery system, that states and local communities have developed to serve businesses and individuals with workforce needs and to promote further innovation. My testimony this morning will detail the proposal.

In 1998, under the strong leadership of this Committee, Congress passed by a large bi-partisan majority the Workforce Investment Act (WIA). WIA was a groundbreaking piece of legislation that has sparked dramatic improvements in the delivery of employment and training services nationwide. The authorization of appropriations for the Act expires on September 30, 2003. Now our challenge is to build on these reforms in order to make the Act even more effective and responsive to the needs of local labor markets and to strengthen the innovations that many states and local communities have developed to serve businesses and individuals with workforce needs. Preliminary outcome data from Program Year 2001, along with a description of the Administration’s new common performance measures for federal job training programs, is contained in the Appendix.

Over the past year, the Department of Labor has gone to considerable effort to consult with stakeholders on how the workforce investment system can be strengthened to address the challenges of globalization, technological advances, and the demographic changes of the American workforce. The Department gathered public input on WIA reauthorization through a series of public forums. The Department held twelve forums around the country in the spring of 2002. In addition, the Department held a forum focused on services to individuals with disabilities in June of 2002, which was conducted in partnership with the Department of Education, the Department of Health and Human Services and the Social Security Administration. In addition, the Department held two forums on Indian and Native American programs in the fall of 2002. In total, over 1,400 people attended the forums, and more than 240 of them presented oral remarks. Moreover, in February of 2002, the Department sought public comment on reauthorization issues in the Federal Register. Over 370 comments were received in response to this announcement. A summary of the oral and written comments is available on the Employment and Training Administration’s website at www.doleta.gov/usworkforce/reauthorization .

The input from our stakeholders, our experience at the federal level, recent research findings, and reports issued by the General Accounting Office have all informed the Administration’s proposal for WIA reauthorization. It is designed to continue to transform the One-Stop Career Center delivery system into a cohesive workforce investment system that can respond quickly and effectively to the changing needs of employers and workers in the new economy. It builds on and improves what works, and fixes what does not work. Finally, the proposal seeks to connect better with the private sector and with post-secondary education and training, social services, and economic development systems to prepare the 21^st century workforce for career opportunities and skills in high-growth sectors. Many of these reforms are outlined in the President’s Fiscal Year 2004 budget.

The Administration’s WIA reauthorization proposal addresses six key areas of reform. Those areas are: (1) creating a more effective governance structure; (2) strengthening the One-Stop Career Center System; (3) delivering comprehensive services for adults; (4) creating a targeted approach to serving youth; (5) improving performance accountability; and (6) providing state flexibility.

WIA called for the establishment of business-led workforce investment boards to oversee WIA implementation at the state and local levels. The statute listed what types of members should participate on the workforce investment boards and specified that boards have a majority of representatives from the business community. Membership requirements were similar for both State and Local Boards.

Since the early stages of implementation, complaints have been heard from many groups that the boards are too large and unwieldy. This has been an issue raised by private sector board members in particular, and as a result, it has been difficult to attract and retain employer participation on the boards. As indicated in the October 2001 report issued by the General Accounting Office (GAO) entitled, "Workforce Investment Act: Better Guidance Needed to Address Concerns Over New Requirements," private sector representatives are frustrated with the operations of the boards under WIA. They believe that the boards are too large to effectively address their concerns. And, where some boards have created executive committees or other structures to help deal with the size of the board, these entities may not have employer representation or reflect employer views – contrary to the clear intention of the Act.

According to the National Association of Workforce Boards, the average number of members of State Boards exceeds 40 in most places where new boards have been established since the passage of WIA. GAO found that Vermont had over 40 seats on its board, California had 64, and Pennsylvania had 33. Local Boards can be just as large. For example, GAO found one in Pennsylvania with 43 members and two in California with 45 members. This board size is especially large in comparison to various private-sector corporate boards. For example, General Motors’ board of directors has 13 members, while Intel’s board has 11.

Under the Administration’s proposal the role of the State Workforce Investment Board (State Board) would be clarified and strengthened, and the membership requirements streamlined. A minimum set of membership requirements would be contained in the statute that consist of: (1) the state agencies responsible for administering the One-Stop partner programs; (2) the state economic development agency; (3) business representatives; (4) worker advocates and (5) state legislators. The chair of the Board would still be a member of the business community. Governors would have the authority to expand Board membership.

The State Board would be tasked with setting policies and priorities for the One-Stop Career Center system. Such policies would include the development of minimum service delivery standards, comprehensive outreach strategies, and economic development strategies. Providing state-level administrators of One-Stop partner programs with more authority over One-Stop Career Centers would result in increased support for and partner usage of the system. It will also create a more global approach to addressing workforce needs in a community.

WIA reauthorization would reconfigure the membership and functions of Local Workforce Investment Boards (Local Boards). Statutory language would ensure that Board members represent the leading industry sectors as well as geographic areas within the local community. Membership would be streamlined by removing the requirement that the One-Stop partner programs have a seat on the local boards. This would provide an increased voice for business representatives, education officials, community groups and worker advocates, enabling Boards to be more responsive to local needs. One-Stop partner officials would retain involvement in the local system through the local One-Stop memorandum of understanding (MOU) process. Local Boards would also have the option of creating "Operating Committees" comprised of One-Stop partners and other key parties to provide advice on operational issues. In addition, partner programs would benefit from having an increased voice on the State Boards.

The functions of the Local Boards should be focused on strategic planning and policy development activities. WIA attempted to move Local Boards away from operational details and towards strategic planning. However, such a shift has not occurred in many areas. In some local areas, three entities are actually trying to "lead" the local system: (1) employer groups such as local chambers of commerce; (2) the Local Board, which may not have the appropriate business leadership as members; and (3) One-Stop operators that are not getting adequate policy direction from the State and Local Workforce Investment Boards. The employer groups are frequently frustrated that they are not able to connect with or access resources from the Local Board, and as a result, they request funding directly from the U.S. Department of Labor. Rather than three "parallel systems" at the local level, there should be one comprehensive system for workforce investment that utilizes One-Stop Career Centers as the delivery mechanism governed by the Local Workforce Investment Board.

WIA required each Local Workforce Investment Board to establish a Youth Council tasked with coordinating youth activities in the local area. Councils are comprised of Local Board members with special interest or expertise in youth policy, representatives of juvenile justice agencies, parents, and other groups. Although not required by law, some states have taken the initiative to establish State Youth Councils. In the Administration’s reauthorization proposal, the requirement for local Youth Councils would be dropped because in many areas, Youth Councils are floundering and have not added value to local system efforts. However, Governors and chief elected officials would retain the authority to create or maintain Youth Councils if it is believed the Councils add value in their areas.

WIA gave Governors and chief elected officials broad authority to grandfather State and Local Boards that were in existence prior to the enactment of WIA. This was due to the desire to maintain smaller, and more manageable boards. However, many states and local areas did not establish the types of comprehensive boards authorized under WIA. According to Department of Labor data, 27 states are using grandfathered state boards and 15 states chose to grandfather the local boards (private industry councils) that were established under the Job Training Partnership Act. In order to drive system reform, and because boards would be smaller under this proposal, the grandfathering provisions would be dropped as part of the reauthorization process.

Agreements on local area designations should be made as a result of discussions at the state and local level – without federal interference. One change recommended in the Administration’s reauthorization proposal is the elimination of a local area’s right to appeal non-designation to the Secretary of Labor. Local area appeal rights would end at the state level. In addition, the initial and subsequent designation provisions would be eliminated to allow Governors to better align local workforce investment areas with local labor market areas or economic development regions.

Under current law, states and local areas are required to submit strategic plans every five years. The statute outlines the types of information that must be contained in the plan. While strategic planning is important, the plans are currently not living documents that are updated to reflect changing economic situations or state/local priorities. The Department of Labor issued comprehensive guidance on the state plan modification process. However, very few modifications have been received over the past few years even though some states have changed Governors, and many have experienced slowing economic conditions. Under the Administration’s proposal, the planning cycle for state and local plans would be reduced to two years.

Under title I of WIA, One-Stop partner programs (such as Adult Education, Vocational Rehabilitation and Unemployment Insurance) are required to contribute a portion of their funds to create and maintain the One-Stop delivery system. This is to be accomplished by One-Stop partners negotiating cost allocation and resource sharing through memoranda of understanding developed at the local level. However, there are many areas around the country where cost sharing has still not been resolved, even though WIA has been operational for several years. This was one of the key barriers to effective WIA implementation identified by GAO in their 2001 report on WIA. These ongoing debates on financial issues prevent local partners from fully focusing on services to customers. Guidance issued by DOL and partner agencies has not adequately resolved this issue.

Through WIA reauthorization, the operational cost of the One-Stop system would be financed through dedicated "One-Stop infrastructure" funding. This One-Stop infrastructure funding would alleviate a great deal of the current local negotiation issues and allow local areas to focus on what is most important -- meeting the needs of businesses and workers. Each partner program at the Federal level would contribute a portion of their funds to the One-Stop infrastructure funding – either at the Federal level or as a set-aside at the state level. This approach would create a greater sense of partner "ownership" of the system than currently exists and would encourage movement toward comprehensive workforce system reform by using existing dollars to support an integrated service delivery system at the state and local level. Research is currently being done to determine the amount of funding that would be needed. Funding would go to the Governor for local allocation. State and local partners could augment this funding as needed. The State Board would work with the Governor to determine the most strategic uses for this funding within the state.

One-Stop Career Centers offer employment and training assistance to a universal worker population, but do not offer a broad range of products and services (such as work supports and other supportive services) to low-wage workers. The Administration’s reauthorization proposal would authorize local areas to provide a wide-range of services for low-wage workers that would enhance career advancement opportunities through the One-Stop system. Focusing on access to financial work supports (such as Food Stamps and Medicaid transitional assistance after job placement) and retention and advancement services (such as on-site child care and training during nontraditional hours in a One-Stop setting), in addition to using WIA resources for work supports would address the needs of both employers and members of the country’s low-wage workforce. These supports and services would be funded by a variety of One-Stop partners and made available to participants through the One-Stop system.

A concern has been raised that a move towards universal service has resulted in less available and effective services to at-risk populations such as individuals with disabilities, migrant and seasonal farmworkers, and older workers. For example, less than 5% of the total number of adults and dislocated workers that left the program in 2001 were registered as individuals with disabilities. The Administration’s proposal would remove any barriers to serving targeted populations through a comprehensive One-Stop system. By eliminating barriers to service, the system would become more dynamic and flexible while maintaining a universal access focus. Most importantly, changes would be made to the current performance accountability system in order to ensure that local program operators do not face disincentives to serving those most in need.

Currently, the WIA Adult, WIA Dislocated Worker and Wagner-Peyser funding streams finance similar services targeted to similar populations. Combining these three funding streams into a single formula grant would result in streamlined program administration at the state and local level and the reduction of current duplication and inefficiency. In this streamlined proposal, labor exchange services would be the foundation of the One-Stop Career Center system, with the remaining funds focused on training and intensive services. One-Stop operators would no longer have to track multiple streams of funds. The consolidation would also give states and local areas greater flexibility to integrate WIA title I service delivery with the TANF program. In states that have developed an integrated model, TANF has become the primary funding stream for serving workers in low-income families with children; with WIA funding being used to serve dislocated workers and employed adults.

This change would build upon current law that allows up to 20 percent to be transferred between the Adult and Dislocated Worker funding streams. In Program Year 2001, 30 states utilized this authority. The fiscal year 2003 appropriation raised the transfer limit to 30 percent.

The formula for the comprehensive adult program should take into account the formula factors used for the Adult, Dislocated Worker and Wagner-Peyser programs and minimize shifts in the allocation shares that states currently receive. In addition, the Secretary’s reallotment authority would be based on expenditures rather than obligations. This should strengthen targeting of resources to areas where need has been demonstrated by the use of funding.

Currently all Wagner-Peyser funds are retained at the state level. Fifteen percent of WIA Adult funds can be used for statewide activities, and up to forty percent of WIA Dislocated Worker funds can be used for statewide activities and rapid response. As part of reauthorization, Governors would allocate at least 50% of the combined WIA adult, dislocated workers and Wagner-Peyser funding stream to local areas – 40% according to a statutory formula and 10% according to a formula to be determined by the Governor based on economic and demographic factors. The remaining 50% would be available to the Governor for activities such as rapid response, support for core employment services in the One-Stop system, evaluations and demonstrations.

WIA reauthorization also would increase the proportion of funding that goes to the National Reserve for what are currently referred to as National Emergency Grants. As part of reauthorization, these grants would be renamed "National Dislocated Worker Grants," but they would continue to be provided to states and localities at the Secretary’s discretion to address special layoff situations. Increasing the proportion of funding that is available for this targeted, flexible assistance would continue to improve services to dislocated workers.

Under current law, many states and local areas have misinterpreted the "sequence of service" strategy (how a participant moves from core to intensive to training services), often interpreting it to require individuals to spend a specific amount of time in one tier of service before moving onto the next. In some extreme circumstances, this has resulted in individuals being placed in low-paying jobs before they have access to the additional services they need in order to succeed in today’s competitive economy. The Administration’s proposal would provide greater flexibility in the delivery of core, intensive and training services. Individuals would have the opportunity to receive the services that are most appropriate for their unique needs. A priority of service would be placed on unemployed workers. In addition, if a state determines that funds are limited, a second-tier priority would also be placed on low-income individuals. Concurrent delivery of services such as English as a Second Language and occupational training would also be specifically authorized as needed.

We believe that the current eligible training provider requirements are overly burdensome. For example, providers must report performance outcomes for all of their students, not just students who receive WIA funding. As a result, many training providers are deciding not to participate in the system. Federal and state confidentiality laws often make compliance with current requirements difficult, if not impossible. Rather than increasing customer choice, the current requirements have had the unintended effect of reducing customer choice due to limited numbers of eligible training providers in some states. The Administration’s proposal would provide Governors with the authority to determine what standards, information and data would be required for the eligible training providers in their state. Providing Governors with such authority would result in an improved eligible training provider system. This revised approach would ensure the continuation of such key ideas as customer choice and provider accountability while making it easier for training providers to participate in the system. The Governor would be required to set minimum standards for all providers in a manner that would ensure quality choice and accountability to the Federal government.

While customized training and on-the-job training (OJT) services are authorized under title I of WIA, they are perceived as being overly bureaucratic, making them unattractive to employer customers. Also, incumbent worker training can be currently funded only through the Governor’s 15 percent reserve account. Many employer groups have indicated that greater flexibility in providing services to incumbent workers is needed. We propose to simplify the requirements for customized training, OJT and incumbent worker training. Current statutory requirements would be simplified in a way that would increase employer utilization of these tools while maintaining fiscal integrity. For example, with the approval of the Governor, local areas could spend up to 10 percent of their consolidated adult grant funds on incumbent worker training. An employer match would be required. The amount of the match would be determined according to the size of the employer.

WIA created Individual Training Accounts (ITAs) to enable participants to choose among available training providers, thus bringing market focus into federally funded training programs. Currently, states and local areas have a great deal of authority to develop policies related to procedures for making payments as well as restrictions on duration or amount of the ITA. However, ITAs are generally limited to WIA title I Adult and Dislocated Worker training funds. The Administration’s proposal would expand the concept of Individual Training Accounts by changing them into Career Scholarships. In addition to being the vehicle for obtaining training with WIA funds, Career Scholarships could be enhanced by adding other resources such as private (employer paid) and individual training resources to facilitate training. Career Scholarships would be available to unemployed as well as certain groups of employed workers.

Finally, in the area of delivering comprehensive services to adults, the Administration’s WIA reauthorization proposal would incorporate the President’s proposed Reemployment Accounts into WIA since these two proposals are complementary. As you know, Secretary Chao has already testified in great detail about these accounts. WIA reauthorization would establish authority for Governors to create Reemployment Accounts – special self-managed accounts for use by individuals who are out of work and who have been identified as very likely to exhaust their Unemployment Insurance benefits. The accounts would allow these individuals to more personally control their workforce fate and speed placement into an unsubsidized job.

Currently, funds for the WIA youth program are spread too thinly across the country due to the statutory formula and lack of strategic direction. Over the past year, we have held numerous discussions with youth practitioners, academics and other experts on how best to focus the Department of Labor’s youth dollars. We also worked closely with the Department of Education to ensure our strategies and priorities did not overlap. As a result, the Administration recommends reforming current WIA youth programs by focusing resources on out-of-school youth through a Targeted State Formula program and Challenge Grants to cities and rural areas.

Under the Administration’s proposal the Targeted State Formula Program would be used at the local level to serve targeted categories of out-of-school, at-risk youth between the ages of 16 and 21. Research has shown that such youth face the greatest workforce development barriers – specifically, school drop-outs, court-involved youth, and young people making the difficult transition from foster care to independent living. Formula funds would be allocated to states, and, as under current law, the Governor and the State Board would be responsible for setting policies and strategies to guide the use of the funds at the local level. Governors would have discretion to target funds to local areas with the highest eligible youth population.

The Department will also award "Challenge Grants" on a competitive basis to cities and local areas, with funds going to programs proven effective at serving out-of-school youth as well as high-quality programs that provide activities in a non-school setting that lead to high academic achievement. Cities and rural areas with programs that incorporate proven strategies and lessons learned from the Youth Opportunity Grant initiative and other demonstrations would apply to the Department of Labor for this targeted funding. Grantees would need to demonstrate partnerships, financial contributions from a variety of sources including the education and business communities, and inclusion of "best practices" as part of the program design. These grants would provide a "laboratory" to test and lead improvements in the larger formula grant program.

Since the implementation of WIA, states and local areas have raised concerns about the seventeen statutory performance indicators under WIA title I. The measures are perceived to be too numerous and overly burdensome. In addition, the utility of some of the measures (such as customer satisfaction) as federally required measures has been questioned. The Administration’s reauthorization proposal would reduce the number of performance indicators from seventeen to eight. The current WIA title I performance indicators would be replaced by the eight indicators (4 for youth and 4 for adults) being developed by the Federal partner agencies as part of the new common measures initiative for employment and job training programs. The Appendix contains a description of these measures. Some of these common measures will support the provision of services to the targeted populations mentioned earlier. For example, there is a youth measure that will evaluate literacy and numeracy gains during participation in the WIA program. Governors would have the authority to add additional measures for use within their state, including the customer satisfaction and adult credential attainment measures.

Different federal job training programs seldom define performance indicators in a common manner, resulting in confusion and burden at the state and local level. For example, "entered employment" is a performance outcome tracked for many One-Stop partner programs; however, how the program defines entered employment varies widely from WIA title I to the Wagner-Peyser employment services, to Vocational Education to Adult Education. As part of the common measures initiative, the core set of measures would also have a common set of definitions and data sets. This will help integrate service delivery through the One-Stop Career Centers at the local level. Streamlining and simplifying the requirements would also lead to increased co-enrollment flexibility among programs, ultimately leading to the maximum leverage of resources and potential cost savings at all levels of the system.

Finally under improving performance accountability, the WIA reauthorization proposal would strengthen the current performance accountability process by establishing long-term national performance goals. These national targets, which would be established through notice and comment rulemaking, would form the basis of state-level negotiations, with the individual state negotiated levels averaging the established national targets. This approach would ensure that performance levels established for the job training common measures are challenging. In addition, the current performance negotiation process between states and the Department is rather rigid and does not allow local workforce investment areas to target the needs of special populations (such as ex-offenders or migrant and seasonal farmworkers). Through reauthorization, a more dynamic performance negotiation process would be designed that would take into account local labor market needs and the characteristics of individuals being served. The Act currently allows for this flexibility, but stronger language would be added to the statute to encourage all levels of the system to take a variety of factors into account when establishing levels of performance. Such factors could include differences in economic conditions, such as the rate of job creation or loss in a given local area, and differences in local participant characteristics.

The last part of the Administration’s proposal provides states with the flexibility to design and implement the most effective workforce system. Currently, over 30 states have received waivers under the general waiver authority contained in title I of WIA. However, this authority is perceived to be very limited. Statutory limitations to increased waiver authority would be removed.

Lastly, Section 192 currently allows states to be designated as "Work-Flex" states in order to receive greater flexibility in administering WIA programs. No state has requested this authority under WIA since there is a perception that the process is too bureaucratic. In the Administration’s reauthorization proposal, this section would be simplified to allow Governors to apply for block grant authority. Under this authority, Governors would have complete discretion as to how to administer WIA title I formula programs – both adult and youth. The Governors would determine sub-state funding and governance structures. The block grants would be guided by a set of guiding parameters. Such parameters would include use of the One-Stop Career Center system as the core service delivery system as well as a basic set of services to be provided. However, Governors would have the responsibility for selecting partner programs and the array of services. States receiving this block grant authority would need to submit a plan, similar to the TANF plan, to the Department. This plan would include expected levels of performance under the Federal common measures for employment and job training programs. A state that fails to meet negotiated levels of performance two years in a row would be subject to sanctions and loss of the authority to run programs under this option.

In order to achieve economic development and a better-trained workforce, we need to ensure that our workforce investment system provides both business and workers with the opportunities and tools they need for driving economic growth. I believe that the Administration’s proposal for reforming the Workforce Investment Act will steer our nation’s workforce investment system in this direction. Secretary Chao and I look forward to working with this Subcommittee as we move ahead.

This concludes my remarks. I would be glad to respond to any questions you may have.

Thank you.