Workforce Investment Act: Better Guidance and Revised Funding Formula Would Enhance Dislocated Worker Program
Published: 2002-02-11T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: Under the Workforce Investment Act, local workforce areas are likely to offer dislocated workers services that are tailored to local needs and that emphasize a quick return to employment. Nine of the local workforce areas that GAO visited emphasized a quick return to work and enrolled fewer dislocated workers into training than were enrolled under the Job Training Partnership Act (JTPA). Five local areas enrolled into training an equal or greater number of dislocated workers than were enrolled under JTPA. States used the act's flexibility to decide how much of their set-aside funds to spend on rapid response for dislocated workers and how much to spend on other statewide activities. Most of the 50 states that responded to a GAO survey on rapid response activities said that their state unit provided services when layoffs and plant closings involved 50 or more workers and that the state generally relied on local workforce area officials to provide rapid response services for layoffs affecting fewer workers. Workforce officials in several states expressed concern that the act's dislocated worker funding formula causes dramatic fluctuations in funding that are unrelated to the number of dislocated workers in the state.

section_title: Letter
paragraphs: In the past, the nation’s job training system was fragmented, consisting of overlapping programs that did not serve job seekers or employers well. Then, in 1998, the U.S. Congress passed the Workforce Investment Act (WIA), seeking to create a system connecting employment, education, and training services to better match job seekers to labor market needs. WIA specifies separate funding sources for each of the act’s main client groups—adults, youths, and dislocated workers. In general, dislocated workers are those who have been laid off and are unlikely to return to their previous employment. During program year 2000, the Congress appropriated about $950 million to provide services to adults, $1.2 billion to provide services to youths, and $1.6 billion to assist states in providing services to some of the 3.3 million people laid off from their jobs each year. The dislocated worker program under WIA has taken on increased importance because the economy, which had entered a recession in March of 2001, took a sharper downturn with the loss of an estimated 415,000 jobs during the month following the terrorist attacks of September 11, 2001—the largest employment decrease in a single month in more than 20 years.
When WIA replaced the Job Training Partnership Act (JTPA), it changed the definition of who is targeted for services and the way that the services are funded and delivered. The new legislation introduced a greater degree of state and local flexibility that allows training and employment programs to be designed and managed at the local level to meet the unique needs of local businesses and individuals. Under WIA, states can set aside up to 25 percent of their dislocated worker allotment to provide “rapid response” to layoffs and plant closings. States can also set aside up to 15 percent of their dislocated worker allotment and combine these funds with similar  funds from their adult and youth allotments to support a variety of other  statewide activities. States allocate the remainder of the dislocated worker  funds to local workforce areas. Because states did not implement many of  WIA’s provisions until July 1, 2000, little information has been available on  how WIA changed the way that services are provided to dislocated  workers. To determine how states and local workforce areas are assisting  dislocated workers under WIA, you asked us to determine
How WIA has affected the services provided to dislocated workers at the
How funds set aside for rapid response and other statewide activities are  used to assist dislocated workers under WIA
Whether the dislocated worker funding formula distributes funds to states  in relation to their dislocated worker population  To determine how services are provided to dislocated workers, we sent  two surveys to 50 states, the District of Columbia, and Puerto Rico and  visited 14 local workforce areas located in 6 states. One survey focused on  how states used dislocated worker set-aside funds for rapid response  activities, and the other survey focused on how states used combined set- aside funds from the adult, youth, and dislocated worker programs. We  received 50 responses to each survey. We also visited six states  (California, Illinois, Louisiana, Maryland, Massachusetts, and Minnesota)  that provided variety in terms of program year 2000 funding, number of  dislocated workers, and geographic dispersion. Within each state, we  visited two local workforce areas, except in California where we visited  four areas. We judgmentally selected these workforce areas to represent a  range of funding amounts and urban and rural areas. We also interviewed,  either in person or by telephone, state officials and representatives of the  local Workforce Investment Boards in each local area that we visited.  (App. I contains a more detailed discussion of our scope and  methodology.) We performed our work between December 2000 and  December 2001 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: WIA specifies one funding source for each of the act’s main client  groups—adults, youths, and dislocated workers. Labor estimated that  approximately 927,000 dislocated workers would be served with these  funds in program year 2000. A dislocated worker is an individual who  (1) has been terminated or laid off, or who has received a notice of  termination or layoff, from employment; is eligible for, or has exhausted  entitlement to, unemployment insurance or is not eligible but has been  employed for a sufficient duration to demonstrate attachment to the  workforce; and is unlikely to return to previous industry or occupation;  (2) has been terminated or laid off, or has received a notice of termination  or layoff, from employment as a result of any permanent plant closure of,  or substantial layoff at, a plant, facility, or enterprise; (3) was self  employed but is unemployed as a result of general economic conditions in  the community in which the individual resides or because of natural  disasters; or (4) is a displaced homemaker.
The secretary of Labor retains 20 percent of the dislocated worker funds  in a national reserve account to be used for emergency grants,  demonstrations, and technical assistance and allots the remaining funds to  each of the 50 states, the District of Columbia, and Puerto Rico according  to a specific formula. The formula, first adopted in 1982 under the Job  Training Partnership Act, was grandfathered into the dislocated worker  program under WIA. According to the formula, of the total funds that  Labor allots to the states, one-third is based on each of the following:  the number of unemployed in the state compared with the total number of  unemployed in all states,  the number of excess unemployed in the state compared with the total  number of excess unemployed in all states (i.e., the number of  unemployed greater than 4.5 percent of the total civilian labor force in  each state), and  the number of individuals unemployed for 15 weeks or more in the state  compared with the number of individuals unemployed for 15 weeks or  more in all states.
Upon receiving its allotment, each state can reserve no more than 25  percent of its dislocated worker funds to provide “rapid response” services  to workers affected by layoffs and plant closings. The funds set aside by  the states to provide rapid response services are intended to help  dislocated workers transition quickly to new employment. In its  regulations, Labor divides rapid response activities into the following  three categories:  Required services. These include immediate and on-site contact with the  employer experiencing layoffs as well as with employee representatives to  assess the needs of affected workers and to provide information to the  affected workers about unemployment insurance (UI) and other services.
Optional services. These include developing programs for layoff aversion  and incumbent worker training and for analyzing economic dislocation  data.
Additional assistance. This includes providing aid to local areas that are  experiencing increased unemployment, to pay for direct services such as  training.
Under WIA regulations, each state is required to have a rapid response unit  with responsibility for rapid response services. The staff in these units may  deliver services directly by providing orientations or workshops for  dislocated workers, or they may supervise the provision of such services.  In the latter capacity, the state unit staff would assign the delivery of direct  services to other personnel such as local area staff or private contractors.
In addition to the dislocated worker funds that are set aside for rapid  response, WIA allows states to set aside up to 15 percent of their  dislocated worker allotment to support statewide activities other than  rapid response. These may include a variety of activities that benefit  adults, youths, and dislocated workers statewide, such as providing  assistance in the establishment and operation of one-stop centers,  developing or operating state or local management information systems,  and disseminating lists of organizations that can provide training. WIA also  permits states to combine the set-aside from the dislocated worker  allotment with similar set-asides from their adult and youth allotments.  After states set aside funds for rapid response and for other statewide  activities, they allocate the remainder of the funds—at least 60 percent—  to their local workforce areas. Approximately 600 local workforce areas  exist throughout the nation to provide services to dislocated workers.
When the Congress passed WIA in 1998, the dislocated worker program  was changed in ways that have important implications for dislocated  workers. Unlike JTPA, WIA ensured that some job search and placement  assistance is offered to anyone who seeks it, whether or not he or she is  eligible for the dislocated worker program. WIA also created three  sequential levels of service—core, intensive, and training. In order to move  from the core level to the intensive level and from the intensive level to  training, an individual must be unable to obtain a job that allows him or  her to become self sufficient.
Under WIA, the initial core services—including job search and placement  assistance, the provision of labor market information, and preliminary  assessment of skills and needs—are available to everyone, whether or not  he or she is a dislocated worker. If a dislocated worker is determined to be  unable to find a job or has a job that does not lead to self-sufficiency after  core services, he or she can receive intensive services, which include  comprehensive assessments, development of an individual employment  plan, case management, and short-term prevocational services. A  dislocated worker cannot receive intensive services until he or she is  officially registered in the program. A dislocated worker who is  determined to be unable to find a job leading to self sufficiency after  intensive services can move on to training. At this level, a dislocated  worker can receive occupational skills training, on-the-job training, and  customized training.
section_title: With Greater Flexibility, Local Workforce Areas Tailored Services to Meet Dislocated Worker Needs
paragraphs: With the greater flexibility granted by WIA, local workforce areas are  likely to offer services tailored to local needs and services that emphasize  a quick return to employment. Many of the local areas that we visited  tailored services or designed programs to meet the needs of dislocated  workers in their areas. Some workforce areas had also adopted a work- first approach to their services and required individuals to dedicate a set  amount of time or a specific number of tasks to finding employment  before receiving additional services, such as training. This meant that  more individuals returned to work before being registered in the  dislocated worker program. Thus, fewer dislocated workers were  registered in the program and fewer were enrolled in training. Although  WIA was intended to provide local workforce officials with greater  flexibility, it also increased their need for timely and accurate information  concerning the provisions of the legislation that they are required to  implement. Labor has provided guidance and technical assistance to help  states transition from JTPA to WIA. Despite these efforts, state and local  officials cite an ongoing need for guidance concerning basic program  requirements and how to interpret them.
subsections: section_title: Several Local Areas Used Flexibility to Tailor Services to the Needs of Their Dislocated Workers
paragraphs: Several of the local areas we visited tailored their services or designed  programs to meet the particular needs of the dislocated workers in their  areas. For example, staff at the one-stop centers that we visited provided  general orientation about available services to all interested individuals.  However, one local area in California designed an orientation program  exclusively for dislocated workers. At this two-hour orientation, benefits  and requirements specific to dislocated workers were described and  counselors met one-on-one with interested workers for more in-depth  needs assessments and strategy development. Unlike other local areas that  we visited, this area had two staff members who were responsible for  providing a range of services only to dislocated workers.
Another local area in California established a separate career resource  program to assist the area’s professional workers who have been  dislocated and employers seeking qualified job applicants in areas such as  software development, biotechnology, communications, and human  resources. The program, tailored to professional and high-tech dislocated  workers, provided the dislocated workers with their own one-stop center  where job information and computers were available. In addition, regular  meetings were held to share information on job leads and career fairs as  well as for moral support. This program also had its own Web site where  participating dislocated workers could post their résumés. Employers  looking for qualified professional or high-tech applicants were able to  search the Web site for potential candidates by means of key words, such  as “Web design,” and obtain a list of all résumés containing those key  words.
A local area in Maryland that we visited was administering a 3-year $20- million dislocated worker demonstration grant tailored to local employer  needs. The training programs consisted of customized training with  extensive involvement from employers in designing the programs to train  3,000 people for high-tech jobs in a metropolitan area covering three  states. The program focused on entry-level information technology and  telecommunication jobs and, to date, has established training programs for  Web developers and cable technicians. This same local area also  developed a career transition workshop to help dislocated workers cope  emotionally with being laid off and plan for the future.
A local area in Louisiana facing a major plant closing tailored a program to  meet the needs of the 1,300 workers being laid off. Workers in this plant  were primarily from two adjacent workforce areas. Staff from these two  areas joined together to establish a transition center on site at the  employer’s location. Staff and computers were available around the clock  to advise the workers of available services; provide job search and  placement assistance, career counseling, and vocational assessments; and  register workers into the dislocated worker program under WIA.
section_title: Some Local Areas Emphasized Job Search and Placement, Leading to Fewer Dislocated Worker Registrations
paragraphs: The emphasis placed by some local workforce areas on individuals finding  a job and the availability of job search and placement assistance prior to  enrolling in the dislocated worker program has reduced the number of  people registering in the dislocated worker program in those areas. Some  local officials have interpreted WIA’s requirements as supporting a work- first philosophy. In four of the local areas we visited, officials required  individuals to spend a certain amount of time or perform a specific  number of tasks related to finding employment before registering in the  dislocated worker program and receiving additional services. In its March  2001 Status of WIA Readiness Implementation Report, Labor  acknowledged that many local areas have adopted some form of a work- first approach to the delivery of services that stresses the importance of a  quick entry or reentry into the workforce. Officials from several of the  local areas that we visited confirmed that they viewed WIA as a work-first  program that emphasizes returning dislocated workers to the workforce.  For example, a counselor from a local area in Massachusetts told us that if  a client has a marketable skill, he or she must reenter the workforce  regardless of any desire for training for a career change.
Unlike JTPA, which required that an individual be enrolled as a participant  before receiving any services, WIA requires the provision of core services  to all adults who seek them, regardless of program eligibility. All of the  one-stop centers that we visited had a resource area where individuals  could access labor market information, review job openings, create  résumés, and even attend some workshops, with topics such as  interviewing techniques, without registering for the dislocated worker  program. Some local program officials believe that many individuals found  employment through these core services and that they therefore did not go  on to seek other services that would have required program registration.  Because program participation is not recorded before receipt of these  preliminary services, the total number of people who used them and found  employment is not known. Collectively, the 14 locations that we visited  registered nearly 3,000 fewer dislocated workers during the first year of  WIA than they had registered under JTPA during the previous program  year (5,603 vs. 8,462). Of these locations, eight registered fewer dislocated  workers under WIA and six registered more dislocated workers (see fig.1).
Officials from the local workforce areas that registered more dislocated  workers under WIA than during the previous year under JTPA cited  various reasons for the increase. For example, officials from two local  workforce areas said that they had more dislocated worker funds available  in program year 2000 and thus were able to provide services to more  workers, while another official said that the local workforce area  experienced several plant closings that resulted in more workers’ needing  assistance.
section_title: In Some Local Workforce Areas, Fewer Dislocated Workers Received Training
paragraphs: Under WIA, the 14 local workforce areas that we visited enrolled 52  percent fewer dislocated workers in training than they had enrolled under  JTPA. Collectively, about 1500 fewer dislocated workers were enrolled in  training under WIA than were enrolled in training under JTPA (1,427 vs.  2,967). Of these areas, nine enrolled fewer dislocated workers and five  enrolled an equal or greater number of dislocated workers in training  under WIA (see fig. 2).
The decrease in the percentage of dislocated workers entering training is  tied to local requirements that dislocated workers spend a certain amount  of time receiving services or complete a certain number of tasks before  being enrolled in training. Although the act requires individuals to receive  sequential services, Labor has not imposed a required minimum period of  participation in the core or intensive services, leaving this decision instead  to the discretion of local workforce boards. Four local areas have set  requirements for the amount of time or the number of tasks that a  dislocated worker must complete at each level of service before he or she  can move to the next level. Officials in three of these areas required  dislocated workers to spend at least three weeks searching for a job and  documenting their attempts at finding employment. Officials in the fourth  local area required dislocated workers to complete a certain number of  tasks, such as documenting 12 unsuccessful job applications or five case  management appointments, before moving to the next level of service.
The decrease in the percentage of dislocated workers being trained is also  tied to the wages of the jobs they may be offered during the job search  required before training. The receipt of future services—specifically,  training—hinges on a dislocated worker’s ability to find a job leading to  self-sufficiency. Only those who are unable to find such a job can continue  to training. Among the locations we visited, self-sufficiency was defined  differently. Because the definition, within certain parameters, is left to the  discretion of state or local workforce boards, the dislocated workers who  are allowed to continue to training vary from area to area. For example, a  local area in Maryland defined self-sufficiency as having a job that pays  $8.50 per hour, while a local area in Louisiana had recently increased its  self-sufficiency standard to having a job that pays $16.39 per hour. Three  other local areas we visited had no set standard at all. The lower the  standard, the harder it is for a worker to qualify for training, because it is  easier for the worker to find a job meeting the criterion.
section_title: Some Local Workforce Officials Expressed Confusion about Some Dislocated Worker Requirements under WIA
paragraphs: State and local workforce officials, uncertain as to the act’s new  requirements or how to interpret them in a manner consistent with that of  Labor’s Office of Inspector General, sought specific guidance from Labor  to assist them in implementing the act. Several officials in the states and  local workforce areas that we visited voiced a need for more guidance.  They said that they felt uncertain about when individuals should be  registered into the dislocated worker program, how to determine when  training is an appropriate service strategy, and how to use rapid response  funds to provide additional assistance to local workforce areas. For  example, a rapid response official in the state of Maryland told us that he  would like additional guidance from Labor concerning the extent to which  a state could use rapid response funds to provide additional assistance to  local workforce areas experiencing layoffs. Labor’s guidance, however,  does not adequately address this issue. In addition, WIA created a new  mindset for workforce development professionals and makes substantial  changes in how dislocated workers receive services. Unlike the more  prescriptive dislocated worker program under JTPA, state and local  workforce officials must continually interpret WIA’s requirements in order  to meet the constantly changing needs of the workers and employers they  serve. However, all local workforce officials were not prepared to meet  this challenge. For example, Labor’s February 2001 final interim report on  the early state and local progress toward WIA implementation noted that  state and local workforce officials would like to have more guidance on  how to interpret the requirements of the act.
Labor has provided guidance and technical assistance to aid state and  local workforce officials in transitioning from JTPA to WIA ranging from  training sessions conducted by headquarters and regional office staff to  the dissemination of guidance concerning WIA’s technical requirements.  This guidance, in addition to information about best practices, is generally  available via the Internet. According to some workforce officials, however,  Labor’s guidance has generally been too broad for them to use when  implementing WIA’s requirements and the information available on the  Internet is often outdated. According to Labor officials, the guidance that  it has provided to state and local workforce officials on a range of WIA  topics has been intentionally nonprescriptive to allow state and local  workforce officials to use the flexibility that the act allows to design  programs that will accomplish state and locally established goals.
Despite Labor’s efforts to provide state and local workforce officials with  program guidance, misunderstandings still exist concerning some of WIA’s  dislocated worker program requirements. In its March 2001 Status of WIA  Readiness Implementation Report, Labor found that some dislocated  worker program requirements were being interpreted incorrectly. In  particular, the report, which was based on Labor’s WIA Readiness Review  of all states and 126 local workforce areas, identified the need for  additional guidance in the areas of program eligibility and registration, the  sequence of services, training, the eligible training provider list, and the  consumer report system.
section_title: WIA Flexibility Allowed States To Use Set-Aside Funds for Various Statewide Activities in Addition to Rapid Response
paragraphs: States used the flexibility under WIA to decide how much of their set-aside  funds to spend on rapid response for dislocated workers and how much to  spend on other statewide activities. All states provided some rapid  response services, but there was variation in the amount of dislocated  worker funds they obligated for rapid response and in the services they  provided. Most states, however, have not changed the way they provide  rapid response services since implementing WIA. During program year  2000, state set-aside obligations for rapid response averaged 12 percent  and ranged from less than 1 percent to the maximum allowable 25 percent.  When providing rapid response, most states responded primarily to layoffs  and plant closings affecting at least 50 workers and provided, at a  minimum, basic informational services for affected workers. Many states  also offered other services such as group workshops on job search and  used a portion of their rapid response funds to provide additional  assistance to local areas experiencing an increase in unemployment. In  addition, as allowed by the act, most states combined funds from the 15- percent dislocated worker set-aside with set-aside funds from the adult  and youth programs to support a variety of statewide activities and  programs. Some activities, such as disseminating a list of eligible training  providers, are required by the act, while others, such as conducting  research and demonstration projects, are optional.
subsections: section_title: Rapid Response Funding and Services Varied among States
paragraphs: States differed in how much of their dislocated worker funds they used for  rapid response during program year 2000 and what services they funded  with this money. Nearly a third of the 42 states that provided program  year 2000 data in their survey responses said that they obligated 5 percent  or less of their dislocated worker funds for rapid response activities.
Overall, the amount obligated for rapid response in the 42 states ranged  from less than 1 percent in Hawaii and Wyoming to the maximum  allowable 25 percent in Georgia and Rhode Island (see fig. 3). On average,  these states obligated about 12 percent of their dislocated worker funds  for rapid response activities. Appendix II shows each state’s dislocated  worker allotment and the amount obligated for rapid response activities.
Any rapid response funds not used in program year 2000, up to the 25- percent ceiling, could be distributed to local areas or carried over to the  following program year to conduct rapid response activities. For example,  Maryland reallocated to its local workforce areas $1 million of the $4.2  million it had set aside for rapid response activities, and Louisiana carried  over into the next program year $5.1 million of the $6.1 million it had set  aside for rapid response.
Rapid response services almost always include the provision of basic  information for workers being laid off, and in many states, additional  services such as group workshops are available. Forty-five of the 50 states  that responded to our survey had a rapid response unit consisting of state  employees who delivered at least some direct services to the workers  being laid off. Almost all of these state units contacted employers  experiencing layoffs to explain available rapid response services and  provided orientations for workers being laid off. State staff often delivered  these services in conjunction with local area staff. In the six states that we  visited, orientation sessions provided information to workers on topics  such as UI benefits, services available at the local one-stop centers, and  training opportunities. In many states, services in addition to orientation  are also available to dislocated workers. These services, including group  workshops on topics such as job search and stress management and one- on-one meetings to discuss subjects such as financial planning, were  provided usually by local area staff but sometimes in conjunction with the  state unit or private contractors, such as unions (see fig. 4).
Rapid response units in some states were more involved in providing  direct services after a layoff than were units in other states. For example,  in Florida, the state rapid response unit provided a broader range of  services than did the units of most other states. The Florida unit directly  provided workshops and one-on-one meetings in addition to general  informational services. In Maryland, as in many states, the state unit  played a more limited role. The Maryland unit contacted employers  experiencing layoffs and participated, along with staff from local one-stop  centers, in orientations for the affected workers. Any services beyond the  orientations, including workshops and one-on-one meetings at the work- sites, were provided exclusively by local staff. Louisiana had a state unit  that met with employers and conducted orientations but provided no other  direct services. To supplement the additional services provided by its local  areas, Louisiana contracted with a private agency to provide workshops  on topics such as résumé development and stress management for  dislocated workers around the state. A state official explained that  Louisiana hired this agency because some local areas that experience  significant layoffs infrequently lack the experience to provide effective  rapid response services.
Five of the 50 states that responded to our survey delegated all  responsibility for direct rapid response services to staff in the local  workforce areas. For example, California had a state unit that informed  local areas of impending layoffs but delivered no direct services. The state  distributed a portion of its rapid response funds to the local areas to  provide direct services. State officials believed that the state’s size and  diversity made local flexibility more feasible than a single, uniform  approach. Another advantage, according to a local official, was that  referrals of workers from rapid response units to one-stop centers were  smoother because rapid response staff were also local area staff. While the  state stressed local flexibility, it also encouraged coordination among local  areas that share a labor market. Ten local areas in northern California  were collaborating to standardize their rapid response services, provide  services jointly, and possibly contract with a private agency for all rapid  response. New York was another state where local workforce area staff  were generally responsible for delivering rapid response services. Unlike  California, however, New York did not provide the local workforce areas  with funding for these services. New York also had a $1 million contract  with representatives of organized labor to provide rapid response  assistance when their union members were affected by a layoff.
Most states provided rapid response primarily for larger layoffs and plant  closings affecting 50 or more workers. Responding to layoffs of 50 or more  workers appears to be related to the Worker Adjustment and Retraining  Notification (WARN) Act of 1988, which requires companies with 100 or  more full-time employees to notify state dislocated-worker staff of layoffs  and plant closures generally affecting 50 or more full-time workers. Of the  45 states using state staff to provide rapid response services, staff in 37  states generally provided rapid response services for layoffs affecting 50 or  more workers, which, on average, represented 75 percent of the layoffs to  which each state unit responded during program year 2000. Workers  affected by dislocation events that are too small to trigger state unit  involvement may nonetheless receive local rapid response services. In  fact, almost all of the states that had a trigger for state rapid response said  that local staff in their states may have provided rapid response services  for layoffs and plant closings that were too small to trigger rapid response  by the state unit.
Illinois and Massachusetts illustrate different approaches to the use of a  trigger for state unit response. Illinois obligated about $2.4 million for  rapid response and had a unit of state employees that was responsible for  rapid response services statewide. These employees provided direct  services for all layoffs and closures affecting 50 or more workers and  responded to 170 such events during program year 2000. Some local  workforce areas provided rapid response services for dislocation events  affecting fewer than 50 workers, but the state did not require them to serve  these smaller events and did not distribute any rapid response funds to  them for this purpose. On the other hand, Massachusetts obligated about  $1.2 million for rapid response and had a unit of state employees that  attempted to provide rapid response for all layoffs regardless of size.  During program year 2000, the unit responded to 158 events affecting 50 or  more workers and 149 events affecting fewer than 50 workers.
In addition to providing direct rapid response services to workers affected  by a layoff or plant closing, 32 states said that they used a portion of their  rapid response set-aside funds to provide additional assistance to local  areas that experienced an increase in unemployment owing to plant  closings or mass layoffs. In the states for which data were available, more  than half of the $129.6 million that these states set aside for rapid response  was used to provide additional assistance to local workforce areas (see  app. II). Of the 32 states responding that provided additional assistance, 15  states said that they provided additional assistance to local areas only to  help them address specific layoffs and required that local areas spend the  funds exclusively on workers affected by those layoffs. For example,  Maryland provided $250,000 in additional assistance to one local  workforce area that intended to provide training to a small number of  workers laid off from a bottled water plant, and Louisiana provided  $72,531 in additional assistance to a local workforce area to set up a  worker transition center at a clothing plant that was closing. Another eight  states said that they provided additional assistance to local areas that  experienced a general rise in unemployment and did not tie the use of the  funds to specific layoffs. For example, California provided $3 million in  additional assistance to a local workforce area to provide comprehensive  services for its dislocated workers in a region with high job turnover. Nine  other states said that they awarded funds for both rapid response and  additional assistance during program year 2000.
Thirty of the 50 states responding to our survey have not changed the way  they provide rapid response since implementing WIA. The remaining 20  states reported making changes in the way they provide rapid response as  a result of WIA, but few of these changes were significant and none were  required by the act or the regulations. The more significant changes  involved giving the state unit greater responsibility for direct services or  developing new programs to distribute set-aside funds to local workforce  areas. For example, Washington state and Kansas assigned state staff to  each local workforce area to coordinate and deliver rapid response  services. Also, Indiana developed a program to quickly distribute  additional funds within one or two days to local workforce areas  experiencing mass layoffs to help them provide rapid response services.  Other changes included increasing coordination between the state rapid  response unit and other workforce partners, changing the focus of  orientations from training benefits to available job search services, and  shifting state units from one state department to another. (See table 1.)
section_title: States Used Set-Aside Funds to Support a Wide Range of Services and Various Programs
paragraphs: During program year 2000, most states took advantage of the flexibility  under WIA and combined dislocated worker set-aside funds with set-aside  funds from the adult and youth programs to support a variety of statewide  activities. Some activities, such as developing or operating a statewide  management information system, benefited dislocated workers along with  other types of workers such as adults and youths; other activities, such as  career training for at-risk youths, benefited a specific segment of the  population who were not dislocated workers.
During program year 2000, states used their set-aside funds for statewide  activities for various purposes. Under WIA, states can set aside up to 15  percent of their dislocated worker allotment to support some required  statewide workforce investment activities. These activities include  providing additional assistance to local areas that have high  concentrations of eligible youths, assisting in the establishment and  operation of one-stop center systems, disseminating a list of eligible  providers of training services, and operating a management information  system. In addition, the act allows states to use the funds for other  allowable activities such as state administration, research and  demonstration projects, and innovative incumbent worker training  programs (i.e., programs to improve the skills of employed workers). Of  the 50 states responding to our survey, 43 said that they combined set- aside funds for statewide activities from the dislocated worker allotment  with similar funds from the adult and youth programs. Appendix III lists  each state’s allotment for their adult, youth, and dislocated worker  programs and identifies the maximum amount of funds that could be set  aside to support statewide activities. As allowed by the act, these states  combined the funds and used them for a variety of purposes. For example,  41 states reported that they spent, on average, 25.7 percent of the  combined set-aside funds on carrying out general state-level administrative  activities, while 37 states reported spending, on average, 14.8 percent on  assisting the establishment and operation of one-stop centers (see table 2).
Several states are using the flexibility that WIA provides by spending the  majority of their combined set-aside funds on a single activity. For  example, Virginia spent over half of its $5.8 million combined set-aside  funds to operate a fiscal and management accountability information  system. Missouri used over half of its $6.7 million combined set-aside  funds to assist in the establishment and operation of one-stop centers.  Iowa used nearly two-thirds of approximately $900,000 of its combined  set-aside funds to carry out general state-level administrative activities.  Appendix IV shows the percentage of combined set-aside funds that the 43  states dedicated to each activity listed in table 2.
In addition to funding the required and optional activities identified in the  act, 30 states funded other activities. Many of these activities were  directed to programs that benefit a specific group. For example, Arizona  used about 4 percent of its $6.6 million combined set-aside funds for older  worker training and support, Kentucky used about 19 percent of its $6.4  million combined set-aside funds for statewide youth programs, and  Montana used about 5 percent of its $2.2 million combined set-aside funds  for adult literacy and education.
Several of the states that we visited used the flexibility provided by the act  to fund projects that the states determined were most in need of additional  funding. In many instances, these projects were targeted to specific  groups. For example, of its $63 million combined set-aside, California  spent $6 million on a project to train veterans, $15 million on a project to  train caregivers who work with the aging and disabled population, and $20  million to provide job training to targeted groups including at-risk  pregnant teens, homeless individuals, noncustodial parents, and farm  workers. Similarly, Illinois spent $1.3 million of its $13 million set-aside to  help individuals obtain their high school general equivalency diploma over  the Internet; Louisiana spent $1.5 million of its $10 million set-aside on  services for UI claimants who were projected to exhaust their UI benefits  (the projection is known as UI profiling); Maryland spent $330,000 of its $6  million set-aside to train at-risk youths for a career in the merchant marine  service.
section_title: Funding Formula Is Problematic
paragraphs: The dislocated worker funding formula distributes funds that vary  dramatically from year to year and that do not recognize fluctuations in  state dislocated worker populations. State and local officials said that the  volatility in the allotment of formula funds could limit the ability of some  states to provide basic program services to dislocated workers. Without  stable funding levels that are tied to the number of dislocated workers,  states are unable to conduct the meaningful long- or short-term financial  planning that is necessary to develop and deliver high-quality services for  dislocated workers. Information obtained from Labor on state allotments  between program years 1997 and 2001 also raises concerns about the  performance of the current funding formula (see app. V for a detailed  listing of the dislocated workers funding formula allotments by state).  Many states have experienced very substantial changes in funding from  one year to the next over this time period. For example, Mississippi’s  funding for program year 2001, increased nearly 130 percent over that for  program year 2000 (from $13.4 million to $30.7 million), while Arkansas’s  funding dropped by more than 40 percent (from $12.4 million to $7.1  million). Figure 5 displays the ten states with the largest percentage  changes in dislocated worker funding allotments between program years  2000 and 2001. Such changes, which do not seem to be in proportion to the  number of dislocated workers in a state, appear to corroborate concerns  raised by state officials regarding the volatility of the current formula.
The dislocated worker funding formula consists of three factors, each of  which determines one-third of the allotment given to a state. None of the  three factors is directly related to the dislocation activity in a state. Two  parts of this funding formula, however, contribute to the fluctuations in  state funding of the dislocated worker program. An analysis of the funding  formula reveals the primary cause of funding fluctuations to be the result  of the parts of the formula that incorporate the number of excess  unemployed (exceeding 4.5 percent of the total labor force) and the  number of long-term unemployed.
The number of excess unemployed displayed an extremely high degree of  volatility during the 1997 2001 time period. For example, in program year  1997, 36 states had unemployment rates above 4.5 percent and therefore  qualified for funding under this part of the formula. By program year 2001,  only 13 states continued to receive funding under this part of the formula.  Thus, as economic conditions improve, the number of states receiving  funding under this part of the formula decreases (see fig. 6).
The decline in the number of states that received funding under this part  of the formula, in combination with increased funding during this period,  resulted in more funding for states that received funds under this part of  the formula; states falling below the 4.5 percent threshold saw their  allotments reduced substantially. In program year 1997, $345 million was  allotted among 36 states, for an average of $9.5 million per state. By  program year 2001, $424 million was allotted to 13 states, resulting in an  average allotment of $32.6 million per state. The nearly 130 percent  increase in funding between program years 2000 and 2001, reported for  Mississippi in figure 5, was largely the result of a two-thirds reduction in  the number of states that received funding under this criterion.
This volatility in funding will likely persist as unemployment rates rise in  response to the current economic slowdown. Rising unemployment in the  future means that more states will again qualify for funding based on the  excess unemployment criterion and that even as their own unemployment  increases, the 13 states will likely experience substantial funding losses as  more states become eligible for funding based on this criterion.
In addition to the number of excess unemployed, the number of long-term  unemployed also contributed to the fluctuations in program funding for  individual states. For example, the allotments for long-term unemployed in  Minnesota declined by more than 20 percent in program year 2000 and  increased by more than 50 percent the following year. In New Hampshire,  the pattern was the opposite: an increase of more than 85 percent was  followed by a decline of nearly 45 percent (see fig. 7). The funding  fluctuation introduced by the number of long-term unemployed is  particularly problematic in that the number of long-term unemployed is  not necessarily indicative of the number of dislocated workers in a state,  because individuals can be unemployed for 15 weeks or more and not  have been laid off. Furthermore, the long-term unemployed are no longer  included under the definition of a dislocated worker and are therefore not  automatically eligible for the dislocated worker program.
The high degree of volatility in formula allotments has resulted in  increasingly wide disparities in funding across states. In program year  1997, both Texas and Mississippi received the same funding per  unemployed resident. However, because Texas became ineligible for  funding based on excess unemployment in 2001, its funding per  unemployed resident dropped slightly, while Mississippi (one of the  thirteen states still eligible) saw its funding jump more than three-fold. As  shown in figure 8, the program year 2001 funding per unemployed  individual in Mississippi was three times higher than in Texas, even though  in program year 1997, the funding per unemployed individual was nearly  identical. (See table 11 in app. V for a complete listing of each state’s  funding per unemployed resident for program years 1997 through 2001.)
When the Congress passed WIA in 1998, it mandated that the secretary of  Labor undertake a study to improve the formula for the adult program.  This mandate includes the study of the formula used to allot adult program  funds to the states and of the formula used to allocate these funds within  the states. The study has been completed but has not yet been released.  The mandate did not address the formula for allocating dislocated worker  program funds.
section_title: Conclusions
paragraphs: WIA was passed with the intention of providing greater flexibility to states  and local workforce areas, but more detailed guidance could enable local  workforce areas to better use the act’s flexibility. Clearly, WIA intends to  provide state and local areas with the flexibility to design programs that  meet the specific needs of dislocated workers in their areas. Given the  early stage of implementation, it is not surprising that some state and local  officials remain confused about how to put into practice some of the act’s  new requirements, such as when to register individuals in the dislocated  worker program. Although Labor has provided broad guidance and  technical assistance to aid the transition from JTPA to WIA, some  workforce officials have stated that the guidance does not address specific  implementation concerns. Efforts to design flexible programs that meet  local needs could be enhanced if Labor addressed the concerns of  workforce officials with specific guidance regarding the act’s  implementation and disseminated information on best practices in a timely  manner.
Some states have trouble meeting the needs of their dislocated workers,  because the amount of dislocated worker funds they receive varies  dramatically from year to year and is not directly related to the states’  dislocated worker populations. The fluctuation in funding is caused by a  three-part funding formula that incorporates factors that are no longer  relevant to the dislocated worker program, that are highly volatile from  year to year, and that do not reflect the number of dislocated workers in a  state. A dislocated worker formula that incorporates factors more  accurately approximating a state’s dislocated worker population would  provide states with a more relevant level of funding for services to their  dislocated workers.
section_title: Recommendation for Executive Action
paragraphs: We recommend that the secretary of Labor provide local workforce areas  with additional guidance on implementation issues and information on  best practices to facilitate implementation of the dislocated worker  program under WIA and to assist local workforce officials in using the  greater flexibility afforded by the act to design programs and services.  Such guidance would help the local areas further define their policies and  procedures to meet the needs of their dislocated workers. We also  recommend that the secretary identify strategies for disseminating this  information in a timely manner. In particular, Labor should proactively identify areas that emerge as requiring additional guidance to  help state and local areas implement the dislocated worker program; disseminate guidance that is more responsive to the concerns of  workforce officials responsible for implementing the act’s requirements,  including when to register individuals into the dislocated worker program  and how to provide additional assistance to local areas using rapid  response funds; and disseminate timely information on best practices being developed by local  areas to meet the needs of their dislocated workers.
section_title: Matter for Congressional Consideration
paragraphs: We suggest that the Congress consider modifying the existing dislocated  worker funding formula to minimize funding volatility and to ensure that  dislocated worker funds are better distributed to states in relation to their  dislocated worker population. The Congress may wish to direct Labor to  undertake a study of the dislocated worker funding formula to identify  factors that would enable better distribution of program funds to states in  relation to their dislocated worker population.
section_title: Agency Comments
paragraphs: We provided a draft of this report to Labor for review and comment.  Labor noted that the report provided an informative review of how states  have responded to the challenges presented by the implementation of  WIA. Labor generally agreed with our recommendations and identified  steps that it is taking to address them. Labor commented that the report  provided the agency’s first opportunity to review many of the issues  regarding the use of state set-aside funds for rapid response and other  statewide activities and said that analysis of this data will be used to  determine areas requiring more technical assistance and guidance. Labor  also provided technical comments that we incorporated where  appropriate.  Labor’s entire comments are reproduced in appendix VI.
Regarding our recommendation that Labor proactively identify areas  requiring additional guidance, Labor generally agreed, pointing out that it  had organized four WIA readiness workgroups consisting of local, state,  and federal representatives that had identified several potential areas for  additional federal guidance. However, Labor said that it did not want to  interfere with the flexibility that WIA provides to states and localities. We  acknowledge Labor’s efforts and encourage Labor to continue to monitor  emerging issues by facilitating discussions between local, state, and  federal officials on an ongoing basis.
Regarding our recommendation that Labor disseminate more guidance on  issues such as point of registration and use of rapid response funds for  additional assistance, Labor agreed, saying that it plans to issue additional  guidance on establishing the point of registration and believes that a  common point of registration is an integral component of a nationwide  system of performance accountability. Labor also recognizes that  registration guidance cannot be developed in isolation and must reflect the  complexities of WIA’s performance accountability system. Regarding the  issue of guidance on the use of rapid response funds for additional  assistance, Labor said that a lack of guidance on this subject was not  identified previously in its implementation assessments or the  workgroups’. Labor noted that the information in our report would allow  further exploration of this issue and a determination of whether federal  guidance is necessary on this topic. We concur with Labor’s assessment  and agree that such guidance should be developed with input from those  officials responsible for implementing WIA at the local level and should be  consistent with the accountability system established under WIA.
Regarding our recommendation that Labor disseminate timely information  on best practices, the agency stated that it has a contract with the state of  Illinois to develop a Web site to display promising practices. We applaud  Labor’s efforts in this regard, agreeing that a Web site is an excellent  vehicle for providing information to a wide audience. We strongly  encourage Labor to monitor the site’s implementation to ensure that the  information posted to the Web site is kept current.
Finally, regarding our suggestion that the Congress consider modifying the  dislocated worker funding formula, Labor replied that it has been aware of  the severe funding fluctuations and the difficulties such fluctuations  present to states. It believes that resource allocation practices should  ensure that funds are distributed in a manner that puts resources where  they are most needed, and it acknowledged that because worker  dislocations take place after formula funds are allocated, available  resources do not always match need. Labor noted that it has initiated a  review of the WIA dislocated worker funding formula. While we support  Labor’s efforts to review this formula, we believe that it is imperative that  such an initiative be congressionally mandated.
We are sending copies of this report to the Honorable Elaine L. Chao,  secretary of Labor; relevant congressional committees; and others who are  interested. Copies will be made available to others upon request.
Please contact me on (202) 512-7215 if you or your staff have any  questions about this report. Other GAO contacts and staff  acknowledgments are listed in appendix VII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We were asked to determine (1) how the implementation of WIA has  affected the services provided to dislocated workers at the local level, (2)  how funds set aside for rapid response and other statewide activities are  used to assist dislocated workers under WIA, and (3) whether the  distribution of dislocated worker funds is appropriately targeted to states  in relation to their dislocated worker population. To determine how  services are provided to dislocated workers, we visited 14 local workforce  areas located in 6 states and distributed surveys to all 50 states, the  District of Columbia, and Puerto Rico concerning the use of state set-aside  funds for rapid response activities and for other statewide activities. We  also interviewed officials from the U.S. Department of Labor (Labor), the  National Alliance of Business, the National Governor’s Association, and  the National Association of Workforce Boards.
subsections: section_title: Site Visits
paragraphs: In selecting which states to visit, we categorized them according to the  size of each state’s allotment for program year 2000, the number of mass  layoff events during the previous year, and the number of workers affected  by those events. We used three categories for the size of the dislocated  worker allotment: large—more than $50 million; medium—$15 million to  $50 million; and small—less than $15 million. Similarly, we used three  categories for layoff activity: large— more than 200 mass layoff events or  more than 30,000 workers laid off; medium—75 to 200 mass layoff events  or 10,000 to 30,000 workers laid off; and small—fewer than 75 mass layoff  events or fewer than 10,000 workers laid off. We obtained the funding  information from Labor’s Employment and Training Administration and  the mass layoff data from the U.S. Bureau of Labor Statistics. We then  chose states from the different groups to provide variety in terms of  funding size, dislocation activity, and location (see table 3).
Within each state, we picked two local workforce areas, except in  California where we picked four areas. We judgmentally selected these  workforce areas to provide a range funding sizes and types of areas—  specifically, urban versus rural (see table 4 for a list of the selected local  workforce areas).
At each of these locations, we interviewed officials representing the local  workforce area and local workforce board and we toured one or more  one-stop centers. In some of the locations, we also attended orientation  meetings and met with one-stop center staff.
section_title: Surveys
paragraphs: We distributed two surveys to the 50 states, the District of Columbia, and  Puerto Rico. One survey was designed to obtain information on how states  used their set-aside funds for other statewide activities, and the other was  designed to obtain information on how states used their set-aside funds for  rapid response. We sent the survey on other statewide activities to the 52  state agencies responsible for WIA implementation and sent the survey on  rapid response to the 52 state units responsible for rapid response  activities. As of September 27, 2001, we had received 50 responses (96  percent) for the survey on statewide activities and 50 responses (96  percent) to the survey on rapid response. Ohio and Pennsylvania did not  respond to the survey on other statewide activities, and Maine and New  Hampshire did not respond to the survey on rapid response.
section_title: Appendix II: Use of Dislocated Worker Funds for Rapid Response in 42 States
paragraphs: Fifty states responded to our survey on states’ rapid response programs.  Of the 50 respondents, 42 provided program year 2000 financial data that  do not include program year 1999 carryover funds. Table 5 shows, for each  of these 42 states, the total amount of dislocated worker funds set aside  for rapid response activities. Funds obligated for rapid response activities  are further broken down into two categories of obligations: rapid response  services and additional assistance to local areas.
section_title: Appendix III: Combined Set-Aside Funds Available for Statewide Activities in 52 States
paragraphs: The Workforce Investment Act (WIA) permits states to set aside up to 15  percent of the allotments for their adult, dislocated worker, and youth  programs. In addition, the act allows the states to combine these funds to  support a variety of statewide activities. Table 6 lists, for all 50 states, the  District of Columbia, and Puerto Rico, the program year 2000 WIA adult,  dislocated worker, and youth allotments and the maximum allowable  combined set-aside for statewide activities.
section_title: Appendix IV: Percentage of Statewide Set-Aside Funds Used for Various Activities
paragraphs: Forty-three of the 50 states responding to our survey on the use of set- aside funds for statewide activities indicated that they combined set-aside  funds from their adult, youth, and dislocated worker allotments, as  allowed by the act. The following graphs identify the percentage of  statewide set-aside funds that these states spent on various activities. In  some instances, the upper limit (greater than 10 percent) included a wide  range. Accordingly, we have provided more information in the text on  expenditures by states for this category.
One state (North Dakota) spent 30 percent of its set-aside funds on  disseminating a state list of training providers.
Five states spent between 10 percent and 18 percent of their combined set- aside funds on conducting evaluations of programs or activities. In  addition, South Dakota and Arizona spent about 25 percent on this  activity.
Seven states spent between 10 percent and 17 percent of their combined  set-aside funds on providing incentive grants to local areas. In addition,  Illinois spent over 21 percent, Wisconsin spent almost 29 percent, and  Nebraska spent about 38 percent on this activity.
Four states spent between 10 percent and 15 percent of their combined  set-aside funds on providing technical assistance to local areas. In  addition, Mississippi and South Dakota spent 25 percent on this activity.
Seven states spent between 11 percent and 20 percent of their combined  set-aside funds on assisting in the establishment and operation of one-stop  center systems; another nine states spent between 22 percent and 37  percent of their funds on this activity. In addition, Connecticut spent about  41 percent and Missouri spent about 52 percent.
Four states spent between 12 percent and 15 percent of their set-aside  funds on additional assistance for local areas with a high concentration of  eligible youths.
Four states spent between 10 percent and 20 percent of their set-aside  funds on operating fiscal and management accountability information  systems; another eight states spent from 20 percent to 30 percent on this  activity. In addition, Arkansas spent almost 39 percent, Idaho spent about  47 percent, and Virginia spent about 51 percent on this activity.
Nine states spent between 10 percent and 20 percent of their combined  set-aside funds on carrying out general state-level administrative activities,  six states spent between 20 percent and 30 percent on this activity, and 18  states spent between 30 percent and 35 percent. In addition, Texas spent  about 38 percent, Nebraska spent about 45 percent, and Iowa spent about  64 percent of their combined set-aside funds on this activity.
Five states spent between 10 percent and 19 percent of their combined set- aside funds on providing capacity building to local areas through training  of staff, development of exemplary program activities, or both.
Idaho spent 13 percent, Florida spent about 29 percent, and New  Hampshire spent about 35 percent of their combined set-aside funds on  conducting research and demonstration projects.
Four states spent between 10 percent and 20 percent of their combined  set-aside funds on implementing incumbent worker training. In addition,  Vermont spent 30 percent, Florida spent 34 percent, and Indiana spent 37  percent of their combined set-aside funds on this activity.
Virginia spent 19 percent of its set-aside funds on implementing programs  for displaced homemakers.
Vermont spent about 11 percent of its set-aside funds on implementing  training programs for nontraditional employment positions.
Seven states spent between 10 percent and 18 percent of their set-aside  funds on other activities, six states spent between 19 percent and 31  percent, and two states spent between 31 percent and 40 percent. In  addition, Alabama and West Virginia both spent about 47 percent of their  set-aside funds on these activities, while Nevada spent about 73 percent  and California spent about 76 percent.
section_title: Appendix V: Detailed Listing of the Federal Funding Formula for Dislocated Workers
paragraphs: Appendix V presents detailed results of our analysis of the federal funding  formula for dislocated workers and its impact on 50 states, the District of  Columbia, and Puerto Rico (see tables 7 through 11). We obtained  information for the analysis of the funding formula and the state  dislocated worker allotments between program years 1997 and 2001 from  the Department of Labor.
section_title: Appendix VI: Comments From the U.S. Department of Labor
section_title: Appendix VII: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: Arthur Merriam, Joseph Evans, and Lorin Obler made significant  contributions to this report, in all aspects of the work throughout the  review. In addition, Jerry Fastrup and Richard Horte led the analysis of the  dislocated worker funding formula, James Wright and John Smale assisted  in the design of the two national surveys, Jessica Botsford and Richard  Burkard provided legal support, and Corinna Nicolaou assisted in the  message and report development.
section_title: Related GAO Products
paragraphs: Workforce Investment Act: Improvements Needed in Performance  Standards to Provide a More Accurate Picture of WIA’s Effectiveness.  GAO-02-275. Washington, D.C.: February 1, 2002.
Workforce Investment Act: Better Guidance Needed to Address Concerns  Over New Requirements. GAO-02-72. Washington, D.C.: October 4, 2001.
Trade Adjustment Assistance: Experiences of Six Trade-Impacted  Communities. GAO-01-838. Washington, D.C.: August 24, 2001.
Veterans’ Employment and Training Service: Proposed Performance  Measurement System Improved, But Further Changes Needed. GAO-01- 580. Washington, D.C.: May 15, 2001.
Trade Adjustment Assistance: Trends, Outcomes, and Management  Issues in Dislocated Worker Programs. GAO-01-59. Washington, D.C.:  October 13, 2000.
Workforce Investment Act: Implementation Status and the Integration of  TANF Services. GAO/T-HEHS-00-145. Washington, D.C.: June 29, 2000.