Legislative Analyst's Office Analysis of the 2003-04 Budget Bill

Labor and Workforce Development Agency (0559)

Created in 2002, the Labor and Workforce Development Agency is responsible for overseeing and coordinating the policy directions, activities, and budgets for the state's labor and employment programs. Specifically, the agency consists of the Department of Industrial Relations (DIR), Employment Development Department (EDD), Agricultural Labor Relations Board (ALRB), and Workforce Investment Board (WIB).

The Governor's budget proposes $2.3 million and 17 positions for support of the agency in 2003-04. This includes $1.9 million in reimbursements, $0.3 million General Fund, and $0.1 million from federal funds.

Agency in First Year of Operation

We recommend that the agency report at budget hearings on steps it has taken to meet the goals specified in Chapter 859, Statutes of 2002 (SB 1236, Alarcón), in its first year of operation.

In 2002, the Governor submitted a reorganization plan to the Legislature proposing the creation of a cabinet-level agency that would consolidate the state's labor- and employment-related programs. Chapter 859 establishes the agency in statute.

Chapter 859 identifies several goals for the new agency. These include: 

• Achieving cost efficiencies.
• Matching worker training programs with regional labor market needs.
• Improving accountability for programs to meet the needs of the state's workforce investment system.
• Coordinating enforcement, training, and data collection activities.
• Consolidating the availability of labor and employment information in one-stop service centers.

Agency Required to Have No Net Cost. Chapter 859 also required agency funding to come from a reallocation of existing resources in the departments forming the agency (except ALRB). As a result, the agency began operations in the current year with no net cost to the state. The 2002-03 Budget Act appropriates $1.8 million for the agency. This consists of $1.4 million and 14 positions from EDD, $0.3 million and 3 positions from DIR, and $0.1 million from WIB. Due to late enactment of the budget, however, current-year costs are anticipated to be $1.6 million.

Recommend Report at Budget Hearings. As noted above, Chapter 859 includes particular goals for the agency. We recommend that the agency report at budget hearings on steps it has taken to meet these goals in its first year of operation. For instance: 

• Has the agency identified any cost savings to be achieved by coordination or consolidation of any department functions?
• How will the agency coordinate the separate enforcement programs in DIR and EDD?
• How will the agency coordinate labor market data collection by DIR and EDD?
• How will the agency measure the success and needs of the state's workforce investment system?