Analysis of the 2008-09 Budget Bill: General Government

Employment Development Department (7100)

The Employment Development Department (EDD) is responsible for administering the Unemployment Insurance (UI) and Disability Insurance (DI) programs. The department collects from employers (1) their UI contributions, (2) the Employment Training Tax, and (3) employee contributions for DI. It also collects personal income tax withholding. In addition, it pays UI and DI benefits to eligible claimants.

The department, with the assistance of the state Workforce Investment Board (WIB), also administers the federal Workforce Investment Act (WIA) program, which provides employment and training services. Local area WIBs partner with EDD’s Job Services program to provide job matching and training services to job seekers and employers.

The Governor’s budget proposes expenditures totaling $11.7 billion from all funds for support of EDD in 2008–09. This is an increase of $421 million, or 3.7 percent, above current–year estimated expenditures. The increase is primarily the result of higher estimates of UI and DI benefit payments for the budget year. The budget also proposes $25.4 million from the General Fund in 2008–09, which is a decrease of $5.6 million, 18 percent, compared to the current year. This decrease is primarily the result of the expiration in funding of the Los Angeles County Healthcare Project (LACHP), a five–year federal project in which EDD was required to provide funding for the LACHP to address Los Angeles County’s healthcare workforce training needs.

Reprioritizing WIA Discretionary Funds

The 2008–09 Budget Bill schedules the proposed expenditure of federal Workforce Investment Act (WIA) discretionary funds within broad categories. We compare proposed expenditures for the budget year with the current year and recommend the redirection of $3.9 million in WIA funds proposed for pre–apprenticeship projects and regional collaboratives to instead offset General Fund costs in the parolee employment programs. We further recommend the adoption of budget bill language to allocate funds for these specific purposes.

Background. The federal Workforce Investment Act (WIA) of 1998 replaced the Job Training Partnership Act, which provided employment and training services to unemployed and disadvantaged workers. The goal of WIA is to strengthen coordination among various employment, education, and training programs. Pursuant to federal law, 85 percent of the state’s total WIA funds (an estimated $321.3 million in 2008–09) are allocated to local Workforce Investment Boards (WIB). The remaining 15 percent of WIA funds ($56.7 million in 2008–09) is available for state discretionary purposes such as administration, statewide initiatives, and competitive grants for employment and training programs. Federal law states that all WIA funds “shall be subject to appropriation by the state Legislature.”

Proposal for Discretionary Funds. Figure 1 shows the Governor’s expenditure plan for state discretionary WIA funds. As the figure shows, administration and program services total $24 million for 2008–09. These are for ongoing administration of all WIA programs (such as oversight, financial management, and labor market information services). The remaining $32.7 million is proposed for discretionary grants in three program categories scheduled in the budget bill: Growth Industries, Industries with a Statewide Need, and Removing Barriers for Special Needs Populations.

Comparing 2008–09 Budget to the 2007–08 Appropriation. The administration’s proposal for the three program categories contains significant changes from the programs and projects that were reviewed and approved by the Legislature during the 2007–08 budget process. The administration’s 2008–09 proposal reduces the amount of funds directed to high wage/high skill job training (–$1.3 million), services to long–term unemployed(–$1.6 million), youth grants(–$1.5 million), and parolee services(–$4 million). The budget proposes an additional $0.6 million to regional collaboratives and $0.8 million to incentive grants. Furthermore, the budget proposes a total of $10 million for the at–risk/youthful offender gang prevention initiative (an increase of $7.2 million) and $2.4 million for the pre–apprenticeship Governor’s pilot projects.

Pre–Apprenticeship–Governor’s Pilot Projects. The budget proposes $2.4 million for pre–apprenticeship Governor’s pilot projects. In prior years, WIA discretionary funds have been awarded to similar pre–apprenticeship projects targeting various (1) populations, such as Vietnam War veterans, older workers, youth, and limited English speakers, and (2) industries, such as construction, hotel management, and security. While not an entirely new funding initiative, the pre–apprenticeship program was recently added to the 2007–08 expenditure plan through a notification to the Joint Legislative Budget Committee. At the time this analysis was prepared, the EDD was unable to provide outcome data and evaluations to demonstrate the effectiveness of this program. Moreover, past pre–apprenticeship projects targeted populations and industries that are typically served by other WIA programs. Therefore, we believe there is insufficient justification for the $2.4 million proposed for pre–apprenticeship Governor’s pilot projects.

Regional Collaboratives. The budget also proposes $1.5 million ($1.2 million within Growth Industries and $300,000 within Industries with a Statewide Need) for regional collaboratives. According to EDD, this program funds training projects identified by regional collaboratives of business, labor, private foundations, and other public agencies. As described in the “Employment Development Department” section of our Analysis of the 2007–08 Budget Bill, an evaluation found that, generally, these collaboratives showed no significant advantage over other established workforce development entities in providing effective workforce services. Given this weak evaluation, we believe there is insufficient justification for the $1.5 million proposed for regional collaboratives.

Reduction in Funds for Parolee Programs. A share of WIA discretionary funds also provides funding for several parolee employment programs operated by the Department of Corrections and Rehabilitation (CDCR). As described in the “Judicial and Criminal Justice” chapter of our Analysis of the 2007–08 Budget Bill, we found that these parolee employment programs have value in reducing recidivism for parolees. Investment in effective parolee employment programs is likely to yield some long–term savings from reduced incarceration. For 2008–09, the budget proposes a total of $8.5 million for CDCR parolee programs, with $2.3 million in WIA funds and $6.2 million in General Fund. This is a decrease of $4 million in WIA funds for CDCR parolee programs from the amount that was appropriated for the current year.

Analyst’s Recommendations. Based on our review, we conclude that the pre–apprenticeship pilot projects and regional collaboratives do not have the record of effectiveness demonstrated by parolee employment programs. Therefore, we recommend redirecting a total of $3.9 million—$2.4 million from pre–apprenticeship and $1.5 million from regional collaboratives—in WIA funding to the parolee employment programs in CDCR (Item 5225). This redirection will result in an equal amount of General Fund savings in that item.

Legislative Changes to Discretionary Funds. To the extent that the Legislature wishes to adopt the recommendation to redirect these funds, it will be necessary to adopt budget bill language specifying such allocations from the specific appropriation amounts. Therefore, we further recommend that the Legislature adopt budget bill language specifying that of the WIA discretionary funds available, $6.2 million ($2.3 million proposed plus the redirected $3.9 million) be allocated for parolee services in 2008–09.