IAWP LEGISLATIVE INFORMATION February 2006 Archives Home Page ***Weekly Update*** From Legislative Committee Chair: Todd Kolden, Aberdeen Central Office Week of February 7, 2006 CONGRESS REAUTHORIZES WELFARE PROGRAMS THROUGH 2010 The House last week narrowly approved (216-214) legislation (S. 1932) to extend welfare programs through September 30, 2010. The bill has been transmitted to President Bush and is expected to be signed into law shortly. The Senate approved the bill on a party-line vote late in 2005. The legislation will revise the method used by states to count work participation rates and increase funding for child care programs. The five-year extension of welfare programs will effectively remove consideration of broader welfare program reform in the near term. The newly approved bill will revise the caseload reduction credit and participation rates used to gauge state success in moving individuals from welfare to work. The caseload reduction credit will be based on caseload declines from FY 2005 rather than the current FY 1996. This new provision will mean all states in 2007 would face a 50 percent all-families participation rate, adjusted downward by the number of percentage points by which the caseload falls from 2005 to 2006 for reasons other than changes in eligibility rules. The bill will revise work participation rates by including both families receiving Temporary Assistance for Needy Families (TANF) assistance and families receiving assistance in "separate state programs." States have developed separate state programs to serve families not counted in the state work participation calculations, not on the 5 year time clock, and not subject to all federal TANF rules. States do this because these families usually have a harder time finding jobs and would bring down the state work participation rates. Some states also place two-parent families in separate state programs because two parent families are required to meet a 90 percent participation rate - often a difficult achievement. States may continue to place families in separate state programs if they are ineligible for federally funded assistance and/or do not want federal time limits to apply, but these families will be part of the work participation calculation. Finally, the bill will establish new procedures and internal controls on states for complying with the new requirements regarding activities counting toward participation, counting and verifying hours, and counting individuals in participation rate calculations. The Department of Health and Human Services may impose penalties of up to 5 percent of a state's block grant for failure to establish or comply with procedures. The conference report increases funding for child care by $200 million per year for a total increase of $1 billion over 5 years beginning in FY 2006. USDOL ANNOUNCES REGIONAL ECONOMIC DEVELOPMENT GRANT WINNERS U.S. Secretary of Labor Elaine Chao this week announced grants totaling $195 million to fund economic development efforts in thirteen regions across the country. The grants are provided under the new Workforce Innovation in Regional Economic Development (WIRED) initiative to transform regional economies by enlisting the skills of the numerous and varied players in those economies to research and produce long-term strategic plans that prepare workers for high-skill, high-wage opportunities in the coming years and into the next decade. "We are launching the WIRED initiative to encourage regional communities to partner together and leverage their collective public and private sector assets and resources to develop a more highly skilled workforce that can act as the linchpin to attract new economic development and employers," said Secretary Chao. Each of the following regions will receive $15 million over a three-year period: Coastal Maine (11 counties, including Augusta and Brunswick); Northeast Pennsylvania (nine counties, including Scranton, Allentown and Reading); Upstate New York (nine counties, including Rochester and Finger Lakes region); Piedmont Triad North Carolina (12 counties, including Greensboro and Winston-Salem); Central Michigan (13 counties, including Lansing, Flint and Saginaw); Western Michigan (seven counties, including Grand Rapids); Florida Panhandle (16 counties, including Tallahassee and Pensacola); Western Alabama & Eastern Mississippi (17 counties in Alabama, including Tuscaloosa and Selma and 19 counties in Mississippi, including Meridian and Starkville); North Central Indiana (14 counties, including Lafayette); Greater Kansas City (10 counties in Missouri and eight counties in Kansas, including Topeka); Denver Metro Region (eight counties, including Denver, Boulder and Ft. Collins); Central & Eastern Montana (32 counties covering mostly rural areas); California Coast (13 counties, including Oakland, Los Angeles and San Diego). PRESIDENT'S FY 2007 BUDGET INCLUDES PRA LIKE PROPOSAL Part of the President's FY 2007 Budget request which was released Monday is a program to provide up to $3000 per worker in Career Advancement Accounts (CAA) to obtain training and other employment services. The initiative is part of the President's American Competitiveness Initiative, first referenced during his State of the Union Address this week. The new accounts would, according to a White House fact sheet "offer training opportunities to 800,000 workers annually, more than tripling the number trained under the current system, and give America's workers the resources they need to increase their skills and compete for the jobs of the 21st century economy." NASWA will attend USDOL Budget briefings early next week and will distribute information collected as soon as possible. BOEHNER'S VICTORY PROMPTS COMMITTEE ON EDUCATION AND WORKFORCE REORGANIZATION Representative John Boehner's (R-OH) election last week to the House majority leader post will force an unexpected mid-term reorganization of the House Committee on Education and the Workforce. Representative Boehner has served as the Committee's chair since January 2001 and was responsible for shepherding legislation (H.R. 3010) approved by the House to reauthorize the Workforce Investment Act (WIA). House tradition dictates that the majority and minority leaders of the House not serve on any of the standing committees of the House. The majority leaders is responsible for scheduling legislation for floor consideration, planning the daily, weekly and annual legislative agendas and consulting with members of the majority party to advance their agenda. Many on Capitol Hill expect Representative Boehner's successor to chair the House Committee on Education and the Workforce to be Representative Howard "Buck" McKeon (R-CA). Representative McKeon has served as the Chair of the House Subcommittee on 21st Century Competitiveness and has been a close confidant to Representative Boehner. Representative McKeon has served twelve years in the House, ten of those years as chair of the House Subcommittee on 21st Century Competitiveness. He previously served as mayor of Santa Clarita in California. He has been a strong advocate of local interests throughout his Congressional career. Other House members who may contest the election for chair of the House Committee on Education and the Workforce include Representatives Thomas Petri (R-WI) and Michael Castle (R-DE). NON-FARM EMPLOYMENT INCREASES AND UI RATE FALLS TO 4.7 PERCENT IN JANUARY Nonfarm payroll employment increased by 193,000 in January, and the unemployment rate fell to 4.7 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The unemployment rate ranged from 4.9 to 5.1 percent during most of 2005. The total rise in nonfarm payroll employment by 193,000 in January, followed job gains of 354,000 in November and 140,000 in December. Since January 2005, job gains have averaged 174,000 per month. Week of February 21, 2006 QUESTIONS ON CAAs DOMINATE SECRETARY CHAO'S APPEARANCE BEFORE HOUSE PANEL During her annual appearance before the House panel responsible for approving funding for the operations of her agency and the publicly-funded workforce system, US Department of Labor (USDOL) Secretary Elaine Chao fielded questions about cuts requested in her FY 2007 Budget and how Career Advancement Accounts (CAAs) would fill the void. Chairman of the House Labor, Health and Human Services (HHS) and Education Appropriations Subcommittee Ralph Regula (R-OH) asked Secretary Chao if CAAs would impact adversely the operations of the one-stops and how spending for CAAs would be monitored for performance. Secretary Chao said CAAs would compliment one-stop operations by giving staff another tool to serve workers. On the issue of performance, she said CAAs would be monitored as with all Employment and Training Administration (ETA) programs for performance with placement, retention and earnings measures. Representative Steny Hoyer (D-MD) pressed Secretary Chao to explain how further reductions to workforce system spending could be justified given projected declines of qualified workers and the persistent pressures on the workforce applied from global competition. She said she could not justify spending more on the workforce system because states continue to carryover approximately $1.2 billion in unspent funds each year and that CAAs would reduce administrative costs associated with training workers enabling the system to effectively do more with less. Representative Patrick Kennedy (D-RI) said the importance of the one-stop system is not reflected in the Administration's FY 2007 Budget request. Secretary Chao said the system is "doing well" and she has "much respect for the workforce system," but "we can do better and must challenge ourselves to do more." SENATE APPROVES BILL TO EXTEND DUA FOR VICTIMS OF KATRINA The Senate this week approved legislation (S. 1777) that would extend disaster unemployment assistance benefits (DUA) from the current maximum 26 weeks to 39 weeks and would lengthen the period of time jobless workers could apply for assistance. The legislation was approved last September by the Senate Committee on Homeland Security and Government Affairs. The legislation must be approved by the House before becoming law. When the House might consider the legislation is unknown. FY 2007 BUDGET REQUEST: A CLOSER LOOK AT UI US Department of Labor (USDOL) Secretary Elaine Chao stressed in her statement submitted this week to the House Labor, Health and Human Services (HHS) and Education Appropriations Subcommittee a desire to improve the financial integrity of the unemployment insurance (UI) system. Funding for the Administration's FY 2007 proposals to improve UI program integrity and the daily operations of the UI program are all funded under the $2,640 million budget line-item entitled UI State Operations. This article takes a closer look at the Administration's FY 2007 Budget request for UI by breaking down the UI State Operations appropriation. Of the $2,640 million requested in the Administration's FY 2007 Budget for UI State Operations, $2,282 million would be for the base appropriation granted to states for program operations estimated to cover an Average Weekly Insured Unemployed (AWIU) of up to 2.3 million. The AWIU is the average number of workers filing claims for continuing UI benefits each week and is the driving force of UI program costs. When the AWIU rises above 2.3 million, above base appropriations up to an estimated $174.5 million would be made available. The balance of appropriations in the UI State Operations line-item totaling approximately $183 million would fund the following: $111.8 million for postage; $19 million for support of taking telephone claims and Re-Employment Eligibility Assessments (REAs); $2.1 million for the phasing out of a retirement program used by only a handful of states, travel, and support of accessing the National Directory of New Hires (NDNH); $10 million for identity theft; and $40 million more in support of REAs. The identity theft and additional REA appropriations are new requests for FY 2007. Supplemental Budget Request (SBR) funds are available when states are not forced to draw on above base appropriations as estimated, leaving a reserve. This occurs when the economic assumptions used to formulate the appropriations request improve during the year. Since 1995, appropriations for UI state operations have not been increased to offset inflation. The Office of Management and Budget (OMB) points to improvements in productivity as justification for not requiring additional funds. Although it is true to a certain degree the UI program operates more efficiently today than it did ten years ago, further improvements in productivity are increasingly difficult to reap given the current state of the program. Further rising personnel and service costs without corresponding increases to federal level appropriations are forcing states to seek other sources of funding (see article on supplemental funding survey below). Of note in the Administration's FY 2007 Budget request is a proposal to extend by five years the Federal Unemployment Tax Act (FUTA) 0.2 percent surtax. The surtax is scheduled to sunset on January 1, 2008. The President's FY 2007 Budget would extend through January 1, 2013. The UWC, a representative of the business community on UI issues notified its membership of the Administration's proposal to extend the FUTA surtax asking them to express their concern to the Administration and Congress. HOUSE MAJORITY SELECTS MCKEON TO LEAD COMMITTEE ON EDUCATION AND THE WORKFORCE Members of the House majority party this week elected Howard "Buck" McKeon (R-CA) to serve as Chairman of the House Committee on Education and the Workforce. Representative McKeon replaces John Boehner (R-OH) who was elected recently as the House Majority Leader. Chairman McKeon has served since 1993 on the House Committee on Education and the Workforce and as Chairman of the Subcommittee on 21st Century Competitiveness since 1993. The House Committee on Education and the Workforce and its five subcommittees oversee education and workforce programs including programs authorized under the Workforce Investment Act (WIA) and Temporary Assistance for Needy Families (TANF). Chairman McKeon has been involved deeply in the reauthorization of WIA and it was his subcommittee that was responsible for drafting and approving the House approved version (H.R. 1261) of WIA. ETA ISSUES WOTC & WtWTC GUIDANCE FOR LAPSE PERIOD The US Department of Labor (USDOL) Employment and Training Administration (ETA) issued Training and Employment Guidance Letter (TEGL) 14-05 to provide states guidance on how to process Work Opportunity Tax Credit (WOTC) and Welfare-to-Work Tax Credit (WtWTC) applications since the programs expired on December 31, 2006. The guidance titled, Work Opportunity Tax Credit and Welfare-to-Work Tax Credit Program Guidance for Period of Authorization Lapse, covers the administrative period of January 1, 2006, through September 30, 2006. If the WOTC and WtWTC programs have not been reauthorized by September 30, 2006, additional guidance will be issued by ETA. Although the programs expired on December 31, 2006, it is anticipated Congress will reauthorize the program retroactively to January 1, 2006. For employers to be eligible for the tax credits during the hiatus period, they are required to file requests for certification in a timely manner, and states need to receive and log them in for subsequent approval or denial after legislative provisions reauthorizing the tax credits take effect. Employers who do not file for WOTC or WtWTC certification during the hiatus will be denied the credit. The TEGL provides specific guidance for mandatory and voluntary procedures. According to ETA officials, remaining WOTC and WtWTC funds for FY 2006 will be allocated to states within the next few weeks. States exhausting FY 2005 or 2006 funds to administer the programs during the hiatus may use Wagner-Peyser Act funds, as well as general funding sources, to process any existing backlogs. ETA RELEASES CLARIFICATION GUIDANCE ON TAA AND NAFTA-TAA On February 2, 2006, ETA released a Training and Employment Guidance Letter (TEGL) 13-05, clarifying USDOL's existing policy on serving participants, including those with limited English proficiency, under the Trade Adjustment Assistance (TAA) and North American Free Trade Agreement-Transitional Assistance (NAFTA-TAA) programs. The TEGL discusses what is meant by training goal, training completeness, on-the-job-training, informed choice, and training program development. States are expected to inform all appropriate staff and take appropriate measures to ensure appropriate provision of TAA and NAFTA-TAA to individuals with limited English proficiency. Further inquiries on the TEGL should be directed to your Regional Office. PRIVATE ECONOMISTS SAY CBO DEFICIT PROJECTIONS TOO OPTIMISTIC The Congressional Budget Office (CBO) has projected under current law and policy declining deficits until a surplus of $38 billion is reached in 2012. CBO acknowledged such legally mandated current policy projections are not "realistic," but other economists are adding doses of reality. For example, Business Week's February 20, 2006, issue provided one such dose from Credit Suisse Group, which projected the deficit to grow from $394 billion at the end of fiscal year 2006 to $514 billion by 2012. The problem with current policy projections is CBO must make a number of "unrealistic" assumptions, such as: (1) discretionary spending will grow at the rate of inflation; (2) additional funding for military operations in Iraq and Afghanistan is excluded as well as insurance claims for the damage caused by Hurricane Katrina; and (3) the tax cuts enacted in 2001 and 2003 will expire at the end of 2010. Meanwhile, the baby boomer population begins retiring in 2008, which will add to the budget problems well into the future. Week of February 13, 2006 ADMINISTRATION'S FY 2007 BUDGET REQUEST PROPOSES CUTS TO WORKFORCE SYSTEM AND NEW REFORMS Outlined in the Bush Administration's FY 2007 Budget request this week are reductions to workforce program spending and a new proposal to consolidate at the federal level a number of state grants to create Career Advancement Accounts (CAA). Release of the Administration's Budget request occurs the first Monday in February of each year. It is preceded by the State of the Union Address the week before and marked by a flurry of press announcements. U.S. Secretary of Labor Elaine Chao's press briefing focused on the CAA proposal and she highlighted it as an innovative approach to ensuring more workers receive training. The CAA proposal would save over $500 million from FY 2006 enacted levels according to an Office of Management and Budget (OMB) document released yesterday. The document also lists the America's Job Bank (AJB) as a program proposed to be terminated in FY 2007. The AJB program was appropriated $15 million in FY 2006. The following information summarizes portions of the Employment and Training Administration's (ETA) FY 2007 Budget request. Also, a table comparing FY 2005 actual appropriations to FY 2006 estimated appropriations and the FY 2007 Budget request is provided as an attachment to today's Bulletin. Workforce Investment Act Programs ETA's FY 2007 Budget request would shift a majority of funds authorized under the Workforce Investment Act (WIA) and Wagner-Peyser Act program totaling $3.4 billion to new CAAs. The CAA proposal would consolidate the WIA Adult, WIA Dislocated Worker, WIA Youth, Work Opportunity Tax Credit, Labor Market Information and Employment Service state grants into a single state grant. ETA says the new accounts would be used to pay for expenses directly related to education and training and could be used by states to pay for basic employment services including career assessment, workforce information and job search assistance. Legislation to authorize this proposal is expected to be offered later this year. Congressional staff were first informed of the CAA proposal last week. ETA Assistant Secretary Emily DeRocco indicated the CAA proposal would not derail efforts made already in the House and Senate to reauthorize the Workforce Investment Act (WIA). Rather, she said the Administration's CAA proposal would compliment House WIA reauthorization legislation (H.R. 27) approved last March, though she acknowledged some changes to the House bill would be required. The House proposal would consolidate at the federal level the WIA Adult, WIA Dislocated Worker and ES programs. The WIA reauthorization legislation approved by the Senate HELP Committee approved last May would not consolidate WIA programs at the federal level. Regardless of whether the Administration is successful in acquiring legislative approval to consolidate some WIA programs and create CAAs, its FY 2007 Budget request would reduce by over $500 million those programs CAAs would consolidate. The FY 2007 Budget request of $712 million for the WIA Adult program is $145 million less than was appropriated in FY 2006. The WIA Adult program was appropriated $950 million in FY 2001. The FY 2007 Budget request would reduce the WIA Dislocated Worker and WIA Youth programs by $243 million and $100 million, respectively, from their FY 2006 appropriated levels. The request for the Employment Service (ES) program is $27 million less than was requested in FY 2006 for a total of $689 million. The ES program was appropriated $762 million in FY 2002 - the same level it was appropriated in each of the eight years before. ETA's FY 2007 Budget continues to promote the President's High Growth Job Training Initiative and Community-Based Job Training Grants. The High Growth Job Training Initiative is an effort focused on engaging business, education and the workforce system to work together. This initiative invests in national models and demonstrations of workforce solutions. The Community-Based Job Training Grants is aimed at strengthening community colleges role in training workers for professions most in demand. Both initiatives are funded by the Secretary of Labor's discretionary funds. Veterans' Employment and Training Services (VETS) Appropriations requested for VETS programs in FY 2007 are nearly the same as levels appropriated in FY 2006. The Administration requests FY 2007 appropriations that would restore the one-percent reductions imposed on nearly all spending in FY 2006 in the FY 2006 Defense appropriations bill (P.L. 109-148). The Administration's CAA proposal unlike its WIA-Plus Consolidated Grant program proposed last year, would not give Governors the option to consolidate additional federal job training programs including VETS. Unemployment Insurance (UI) Program Grants to states for administration of the unemployment insurance (UI) program total $2,640 billion. This is $142 million more than was appropriated in FY 2006. ETA requests $30 million in addition to the $10 million appropriated in FY2006 to expand Re-employment and Eligibility Assessments (REAs) for a total of $40 million in FY 2007. Additionally, ETA requests $10 million of the UI state operations budget to prevent and detect fraudulent unemployment benefit claims filed using personal information stolen from workers. This proposal is projected by OMB to result in savings of as much as $77 million in the first year. The Administration renewed its effort in its FY 2007 Budget request to improve UI program integrity in a number of legislative proposals. Its proposals include: authorizing states to use a small amount of overpayments collected and delinquent taxes recovered to reduce improper payments and ensure tax integrity; requiring states impose a 15 percent penalty on individuals who obtain UI benefits from fraudulent collection; and requiring employers to include a "start work" date on new hire reports to improve information stored in state directories of new hires and the National Directory of New Hires (NDNH). The OMB estimates these proposals will save the federal government $1.7 billion through 2011. Labor Market Information (LMI) and the Bureau of Labor Statistics (BLS) The Administration's FY 2007 Budget proposes to reduce the One-Stop/LMI appropriation by approximately $17 million for a total request of $64 million. Of this amount, approximately $39 million is proposed to be consolidated as part of the Administration's CAA initiative. The remaining $25 million is proposed to be spent on workforce information, national electronic tools and system building. The Bureau of Labor Statistics (BLS) issued LMI Administrative Memorandum S-06-03 on February 7, 2006 to inform state agencies on how it would apply the one-percent across-the-board cut. BLS will apply $2.1 million of its total cut to the Labor Force Statistics programs including BLS Employment and Unemployment Statistics and BLS-LMI. America's Job Bank The Administration proposes to eliminate America's Job Bank in its FY 2007 Budget. It justifies the elimination of this $15 million program on increasing use by workers and businesses of privately sponsored and state-run internet-based job search engines. SECRETARY CHAO TO TESTIFY BEFORE HOUSE PANEL ON USDOL FY 2007 BUDGET REQUEST US Department of Labor (USDOL) Secretary Elaine Chao is scheduled to testify before the House Labor, Health and Human Services and Education Appropriations Subcommittee on February 16. ETA RELEASES CLARIFICATION GUIDANCE ON TAA AND NAFTA-TAA On February 2, 2006, ETA released a Training and Employment Guidance Letter (TEGL) 13-05, clarifying USDOL's existing policy on serving participants, including those with limited English proficiency, under the Trade Adjustment Assistance (TAA) and North American Free Trade Agreement-Transitional Assistance (NAFTA-TAA) programs. The TEGL discusses what is meant by training goal, training completeness, on-the-job-training, informed choice, and training program development. States are expected to inform all appropriate staff and take appropriate measures to ensure appropriate provision of TAA and NAFTA-TAA to individuals with limited English proficiency. Further inquiries on the TEGL should be directed to your Regional Office. SD Legislative Session 2006 Pertaining to Labor Signed by the Governor (as of 2/24/06) For complete description of all bills, log onto: 2006 Legislative Session • HB 1165: An Act to establish a workers compensation small claims procedure. • HB 1113: An Act to exempt claims related to wild land fire operations outside the state from certain workers' compensation provisions and to declare an emergency. • SB 0005: An Act to adjust certain participation standards for the South Dakota special pay retirement program. • SB 0006: An Act to define certain terms related to the South Dakota Retirement System. • SB 0007: An Act to clarify certain provisions regarding the level income payment option within the South Dakota Retirement System. • SB 0008: An Act to establish to whom the South Dakota Retirement System may make benefit payments on behalf of minors. • SB 0009: An Act to revise certain beneficiary provisions of the South Dakota Retirement System.