oversight

Workforce Investment Act: Issues Related to Allocation Formulas for Youth, Adults, and Dislocated Workers

Published by the Government Accountability Office on 2003-04-25.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to Congressional Requesters




April 2003
             WORKFORCE
             INVESTMENT ACT

             Issues Related to
             Allocation Formulas
             for Youth, Adults, and
             Dislocated Workers




GAO-03-636
Contents


Letter                                                                                                            1


Appendix I             Workforce Investment Act Allocation Formulas                                               6



Appendix II            Current Federal Job Training Allocation Formulas                                          38



Appendix III           Program Year 2002 Youth and Adult Allocations
                       (Increases and Decreases)                                                                 39



Appendix IV            States Have Some Discretion in Substate Allocation
                       Formulas                                                                                  41



Appendix V             State Dislocated Worker Allocations,
                       PY 1997—PY 2002                                                                           42



Related GAO Products                                                                                             44



                       Abbreviations

                       ASU               Area of Substantial Unemployment
                       JTPA              Job Training Partnership Act of 1982
                       WIA               Workforce Investment Act




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                       Page i                                  GAO-03-636 Issues Related to Allocation Formulas
United States General Accounting Office
Washington, DC 20548




                                   April 25, 2003

                                   The Honorable Judd Gregg
                                   Chairman
                                   The Honorable Edward M. Kennedy
                                   Ranking Minority Member
                                   Committee on Health, Education, Labor, and Pensions
                                   United States Senate

                                   The Workforce Investment Act (WIA) of 1998 required states to streamline
                                   employment and training services and established three separate funding
                                   streams for serving youth, adults, and dislocated workers, for which about
                                   $3.3 billion was appropriated for fiscal year 2003. The formulas for
                                   distributing these funds to the states were left largely unchanged from
                                   those used to distribute funds under the Job Training Partnership Act
                                   (JTPA) of 1982, which served a different set of target populations. In
                                   anticipation of the upcoming debates on WIA’s reauthorization, you asked
                                   us to review these formulas in the context of current program goals.
                                   Specifically, you asked us to assess the formulas used to distribute funds
                                   to the states, identifying any mismatches that might exist between the
                                   formulas and WIA’s program goals and populations served and identifying
                                   where the formulas are most vulnerable to wide fluctuations in funding
                                   levels from year to year.

                                   To identify issues associated with the current formulas, we:
                                   (1) summarized relevant provisions of the WIA statute and compared
                                   formula factors with target populations for each program, (2) analyzed the
                                   U.S. Department of Labor’s formula calculations and states’ historical
                                   allocations to identify factors that contribute to fluctuations in yearly
                                   funding levels, and (3) interviewed key experts and program stakeholders
                                   and reviewed relevant literature on federal workforce training policy and
                                   federal funding formulas. We conducted our work from December 2002 to
                                   February 2003 in accordance with generally accepted government auditing
                                   standards.

                                   On February 28, 2003, we briefed your offices on the results of our work.
                                   This report conveys the information provided during that briefing.

                                   We identified issues associated with the current formulas in three areas:
                                   misalignment between some of the formula factors used to allocate funds
                                   and the target populations for these programs, time lags in the data used to
                                   determine these allocations, and excessive funding volatility associated


                                   Page 1                           GAO-03-636 Issues Related to Allocation Formulas
with the Dislocated Worker Program unrelated to fluctuations in the target
populations. As a result, states’ funding levels may not always be
consistent with their underlying need for services.

The first issue we identified is that some of the factors used in the
formulas to allocate funds are not clearly aligned with the programs’
modified target populations. This may limit the ability to achieve a key
goal of federal allocation formulas, which is to distribute program funds to
areas based on their relative shares of people eligible to receive services.
Specifically, the Youth program now serves a more specific group of low-
income youth with certain barriers to employment.1 However, two-thirds
of its funds are distributed based on two factors that measure general
unemployment rather than youth unemployment.2 The remaining third is
distributed according to the number of low-income youth in states, but
even this factor does not measure low-income youth who face barriers to
employment. The target population and formula for the WIA Adult
program also are misaligned. The Adult program under WIA is targeted to
a broader population than was targeted under JTPA—WIA is open to all
adults regardless of income for basic services, while low-income adults
and public assistance recipients have priority for training and other more
intensive services. However, the WIA Adult allocation formula is more
narrowly focused on states’ relative shares of excess unemployment,
unemployment in Areas of Substantial Unemployment (ASUs), and low-
income adults. Finally, the Dislocated Worker Program is targeted to
several specific categories of individuals, including those eligible for
unemployment insurance and workers affected by mass layoffs. The
factors used to distribute Dislocated Worker funds are not, however,
specifically related to these populations. Two-thirds of program funds are
distributed according to factors that measure general unemployment.3
One-third is distributed according to the number of long-term unemployed,
a group that is no longer automatically eligible for the program.




1
 Barriers to employment include being a school dropout; deficient in basic literacy skills;
homeless, runaway, or in foster care; pregnant or a parent; an offender; or requiring help
completing an educational program or securing and holding a job. Up to 5 percent of youth
may be non low-income if they have barriers to school completion or employment.
2
 These two factors are unemployment in ASUs (contiguous areas with populations of
10,000 or more and unemployment greater than 6.5 percent) and excess unemployment
(unemployment greater than 4.5 percent either statewide or in ASUs).
3
 These two factors are total unemployment and excess unemployment.




Page 2                                  GAO-03-636 Issues Related to Allocation Formulas
The second issue is that there are time lags between when the data are
collected and when the allocations are available to states, so that the
allocations may not reflect current labor market conditions. The oldest
data are those used in the Youth and Adult program formulas to measure
the relative numbers of low-income individuals in the states. The decennial
Census is the source for these data, and allocations under this factor
through 20024 are based on data from the 1990 Census.5 The data used to
measure two of three factors for both the Youth and Adult programs are
more recent, but are still as much as 12 months out of date.6 The time lags
for the data used to calculate Dislocated Worker allocations range from
9 months to 18 months. To the extent that they are available, more current
data may reflect more accurately the nationwide shifts in unemployment
and poverty that may affect states’ workloads for these programs.

The third issue we identified is excessive volatility in funding for the
Dislocated Worker Program.7 That funding was significantly more
volatile—as much as 3 times more so—than funding for either the Youth
or Adult program. Some states have reported that this volatility makes
program planning difficult. While some degree of change in funding is to
be expected due to changing dislocations in the workforce, changes in
funding do not necessarily correspond to these changes. For example,
changes in the numbers of workers affected by mass layoffs from year to
year—one measure of dislocation activity—ran counter to changes in
Dislocated Worker allocations in several states we examined. Several
aspects of the Dislocated Worker formula contribute to funding volatility
and to the seeming lack of consistency between dislocation and funding.
The excess unemployment factor has a “threshold” effect—states may or
may not qualify for the one-third of funds allocated under this factor in a
given year, based on whether or not they meet the threshold condition of




4
 Data from the 2000 Census will be used to calculate this factor for the 2003 program year.
However, under current procedures, these data will not be updated for successive program
years until the 2010 Census data become available.
5
 Data collected for the 1990 Census reflect income levels in calendar year 1989.
6
 These factors are excess unemployment and unemployment in ASUs.
7
We initially identified this problem in an earlier report: U.S. General Accounting Office,
Workforce Investment Act: Better Guidance and Revised Funding Formula Would
Enhance Dislocated Worker Program, GAO-02-274 (Washington, D.C.: Feb. 11, 2002).




Page 3                                   GAO-03-636 Issues Related to Allocation Formulas
having at least 4.5 percent unemployment statewide.8 As a result, small
changes in unemployment can cause large changes in funding, and when
the economy is strong and few states have unemployment over
4.5 percent, the states that do qualify for this pot of funds may experience
large funding increases even if their unemployment falls. In addition, the
Dislocated Worker formula is not subject to the additional statutory
provisions that mitigate volatility in Youth and Adult program funding.
These provisions include “hold harmless” and “stop gain” constraints that
limit changes in funding to within 90 and 130 percent of each state’s prior
year allocation and also “small state minimums” that ensure that each
state receives at least 0.25 percent of the total national allocation. While
these provisions prevent dramatic shifts in funding from year to year, they
also result in allocations that may not as closely track changes in the
program target populations.9

Developing alternative funding formulas to address the issues we have
identified is an important but challenging task. This task is complicated by
the need to strike an appropriate balance among various objectives, such
as using formula factors that are best aligned with program target
populations and reducing time lags in data sources, while also using
available data sources to measure these factors as accurately as possible.
In addition, there have been proposals for reauthorizing WIA that would
substantially modify the program target populations and funding streams,
which in turn would have consequences for revising the funding formulas.

We provided a draft of this report to the Department of Labor for technical
review and made changes as appropriate.


We are sending copies of the report to the Secretary of Labor and other
interested parties. We will also make copies available to others upon


8
  In contrast, the threshold condition for excess unemployment in the Youth and Adult
programs can be met either by having at least 4.5 percent unemployment statewide or
4.5 percent unemployment in one or more ASUs. However, the use of ASU unemployment
levels has been criticized by experts as introducing an element of inconsistency in the
formulas for the Youth and Adult programs arising from states’ ability to draw their own
ASU boundaries.
9
 These additional provisions have a significant effect on states’ final allocations for the
Youth and Adult programs, compared to what states would have received in the absence of
these provisions. In 2002, these provisions resulted in allocation adjustments for the Youth
program ranging from an 18-percent reduction to a 379-percent increase; for the Adult
program, adjustments ranged from a 15-percent reduction to a 255-percent increase.




Page 4                                  GAO-03-636 Issues Related to Allocation Formulas
request. The report is also available at no charge on GAO’s Web site at
www.gao.gov. If you or your staff have any questions about this report,
please contact me or Andrew Sherrill at (202) 512-7215. Regina Santucci
and Lorin Obler also made key contributions to this report.




Sigurd R. Nilsen, Director
Education, Workforce, and
  Income Security Issues




Page 5                          GAO-03-636 Issues Related to Allocation Formulas
                Appendix I: Workforce Investment Act
Appendix I: Workforce Investment Act
                Allocation Formulas



Allocation Formulas




            Issues Related to
    Workforce Investment Act Allocation
     Formulas for Youth, Adults, and
           Dislocated Workers
                Briefing for Staff of
        Honorable Judd Gregg, Chairman
         Honorable Edward M. Kennedy,
             Ranking Minority Member
     Committee on Health, Education, Labor, and
         Pensions, United States Senate
                February 28, 2003


                                                                                                  1




                Page 6                                 GAO-03-636 Issues Related to Allocation Formulas
                 Appendix I: Workforce Investment Act
                 Allocation Formulas




Objective


 You asked us to identify problems with the current formulas
   used to allocate funds to states for the Workforce Investment
   Act (WIA) Youth, Adult, and Dislocated Worker Programs.

 We focused on three key areas:

    • Alignment between the factors used to distribute funds
      and the programs’ target populations.

    • Time lags in the data used to allocate funds.

    • Fluctuations in states’ allocations from year to year.
                                                                                                  2




                 Page 7                                 GAO-03-636 Issues Related to Allocation Formulas
                 Appendix I: Workforce Investment Act
                 Allocation Formulas




Methodology



To perform our review of the WIA funding formulas, we


   • examined the formula factors and their associated data
     sources,

   • analyzed historical data on funding levels, and

   • interviewed experts in this area.



                                                                                                  3




                 Page 8                                 GAO-03-636 Issues Related to Allocation Formulas
                  Appendix I: Workforce Investment Act
                  Allocation Formulas




Summary of Findings


• A key goal of federal allocation formulas is to distribute
  program funds based on the relative numbers of people
  eligible to receive services. However, WIA funding allocation
  formulas reflect prior federal policies and have not changed to
  be in better alignment with current target populations.
• Data used in formulas are from 9 months to more than 10
  years old and do not always reflect the current size of the
  eligible population.

• The Dislocated Worker Program formula in particular has led
  to volatility in yearly funding levels that appears to be
  unrelated to changing labor market conditions.

                                                                                                   4




                  Page 9                                 GAO-03-636 Issues Related to Allocation Formulas
                 Appendix I: Workforce Investment Act
                 Allocation Formulas




Background:
Workforce Investment Act of 1998

 Passed in 1998, WIA changed the nation’s workforce
 development system in several ways.
  • Strengthened efforts to integrate employment and training
    services.
  • Required that many employment and training services be
    provided through one-stop centers.
  • Abolished the Job Training Partnership Act (JTPA) programs
    and consolidated year-round and summer youth programs into
    a single funding stream.
  • Authorized three separate funding streams for the Youth, Adult,
    and Dislocated Worker Programs, and revised the eligibility
    requirements for these programs.

                                                                                                  5




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             Appendix I: Workforce Investment Act
             Allocation Formulas




Background:
Funds Appropriated for WIA




                                                                                              6




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            Appendix I: Workforce Investment Act
            Allocation Formulas




Background: WIA Funding Streams for Youth,
Adults & Dislocated Workers




                                                                                             7




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                     Appendix I: Workforce Investment Act
                     Allocation Formulas




Background:
WIA Youth Program Allocation Formula

Funds distributed to states in equal thirds by three measures:
    ƒ Economically Disadvantaged Youth
       Relative numbers of individuals (ages 16 – 21) whose income or
       family income is below either the poverty line or 70 percent of the
       lower living standard income level (LLSIL), whichever is
       higher.

    ƒ Areas of Substantial Unemployment (ASUs)
       Relative numbers of unemployed individuals (ages 16 and older) in
       contiguous areas with populations of 10,000 or more and
       unemployment rates of 6.5 percent or higher.

    ƒ Excess Unemployment
       Relative numbers of unemployed individuals (ages 16 and older) in
       excess of 4.5 percent, either statewide or in ASUs.

                                                                                                      8




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                    Appendix I: Workforce Investment Act
                    Allocation Formulas




Background:
WIA Adult Program Allocation Formula
Funds distributed to states in equal thirds by three measures:
   • Economically Disadvantaged Adults
        Relative numbers of individuals (ages 22 -72) whose income or
        family income is below either the poverty line or 70 percent of
        LLSIL, whichever is higher.
   • Areas of Substantial Unemployment
        Relative numbers of unemployed individuals (ages 16 and older) in
        contiguous areas with populations of 10,000 or more and
        unemployment rates of 6.5 percent or higher.
   • Excess Unemployment
        Relative numbers of unemployed individuals (ages 16 and older) in
        excess of 4.5 percent, either statewide or in ASUs.



                                                                                                     9




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                      Appendix I: Workforce Investment Act
                      Allocation Formulas




Background: Additional Statutory Provisions
Affect Youth and Adult Allocations

Hold Harmless
If appropriations are greater than or equal to
  ¾$   1 billion for the Youth program or
  ¾ $960 million for the Adult program,

then each state receives either
  ¾100 percent of its FY 1998 funding under JTPA or
  ¾ 90 percent of its percentage of WIA funding in the prior year,

whichever is greater.
If appropriations for a program are less than the specified
amounts, JTPA hold harmless provisions (90 percent of prior
year percentage) apply.
                                                                                                      10




                      Page 15                                GAO-03-636 Issues Related to Allocation Formulas
                        Appendix I: Workforce Investment Act
                        Allocation Formulas




Continued: Additional Statutory Provisions Affect
Youth and Adult Allocations

Small State Minimums (subject to Hold Harmless)
If appropriations are greater than or equal to
     ¾ $1 billion for the Youth program or
     ¾ $960 million for the Adult program,

then a state cannot receive less than 0.3 percent of the total appropriation up
to these amounts, plus 0.4 percent of anything over these amounts.
If appropriations for a program are less than the specified amounts, JTPA
minimums apply (at least 0.25 percent of the total appropriation).

Stop Gain
For both programs, no state may receive more than 130 percent of its prior
year WIA allocation percentage.


                                                                                                       11




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                 Appendix I: Workforce Investment Act
                 Allocation Formulas




Background: WIA Dislocated Worker Program
Allocation Formula

Funds distributed to states in equal thirds by three
  measures:
   • Unemployed Individuals
     Relative numbers of unemployed individuals (16 and
     older).
   • Excess Unemployment
     Relative numbers of unemployed individuals (16 and
     older) in excess of 4.5 percent unemployment statewide.
   • Long-Term Unemployment
     Relative numbers of persons 16 and older unemployed for
     15 weeks or longer.

                                                                                                 12




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                   Appendix I: Workforce Investment Act
                   Allocation Formulas




Current Formula Factors Are Carried Over from
Prior Federal Job Training Programs

• The current formula factors have their roots in federal job
  training policies dating back to 1973. (See app. II.)

• A continuing focus on concentrated unemployment in local
  areas reflects Comprehensive Employment and Training Act
  (CETA) program elements:
   • Temporary public service job creation.
   • Allocations to local areas (rather than states).

• Formulas developed for JTPA in 1982 were carried over to
  WIA in an attempt to prevent major shifts in funding among
  states.

                                                                                                  13




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                    Appendix I: Workforce Investment Act
                    Allocation Formulas




 Formula Factors Did Not Change to Reflect WIA
 Target Populations

WIA Youth Program
• Targets disadvantaged youth with barriers to employment, but current
  factors do not measure the relative numbers of youth with these
  barriers.
• Unemployment factors do not isolate youth unemployment.

WIA Adult Program
• While eligibility was broadened from JTPA to include all adults, there
  is no factor that captures the relative size of states’ adult populations.

WIA Dislocated Worker Program
• Although the long-term unemployed are no longer automatically
  eligible as they were under JTPA, this factor continues to be used.
                                                                                                    14




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                              Appendix I: Workforce Investment Act
                              Allocation Formulas




 Youth Formula: Two Factors Are Not Specific to
 Youth Population

      Target populations                                Formula factors

Low-income youth with barriers                     Economically disadvantaged youth
to employment
                                                   Unemployment in ASUsa (state-
Non low-income youth with                          defined areas with populations of
barrier(s) to employment or to                     10,000 or more and unemployment
school completion                                  over 6.5 percent)

Out-of-school youth                                Excess unemploymenta (over 4.5
                                                   percent either statewide or in ASUs)
 aUnemployment of individuals 16 and older.


                                                                                                             15




                              Page 20                                GAO-03-636 Issues Related to Allocation Formulas
                    Appendix I: Workforce Investment Act
                    Allocation Formulas




Adult Formula: Factors Do Not Focus on
Program’s Broad New Target Population

    Target populations                        Formula factors
                                       Unemployment in ASUs (state-defined
                                       areas with populations of 10,000 or
Adults 18 and older (for core          more and unemployment over 6.5
services)                              percent)

                                       Excess unemployment (over 4.5
                                       percent either statewide or in ASUs)
Public assistance recipients/
Low-income adults (have             Economically disadvantaged adults
priority for intensive and training
services where funds are
limited)

                                                                                                   16




                    Page 21                                GAO-03-636 Issues Related to Allocation Formulas
                   Appendix I: Workforce Investment Act
                   Allocation Formulas




Dislocated Worker Formula: Factors Do Not
Directly Measure Dislocation


      Target populations                                  Formula factors

Terminated workers unlikely to
return to previous jobs                         Total unemployment

Workers affected by mass layoffs                Excess unemployment (over 4.5
                                                percent statewide)
Self-employed workers who lose
their jobs due to poor economy
                                                Long-term unemployment
                                                (15 weeks or longer)
Displaced homemakers

                                                                                                   17




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             Appendix I: Workforce Investment Act
             Allocation Formulas




Time Lags in Youth and Adult Formula Data Limit
Their Relevance




                                                                                            18




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             Appendix I: Workforce Investment Act
             Allocation Formulas




Time Lags Also Occur in Data for Dislocated
Worker Formulas




                                                                                            19




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                    Appendix I: Workforce Investment Act
                    Allocation Formulas




Dislocated Worker Funding Is Volatile, in Part,
because Eligible Population Fluctuates

• Dislocated Worker Program allocations are much more volatile from
  year to year than Youth and Adult allocations. (See app. V for
  Dislocated Worker allocations for program years 1997 to 2002.)

• Some degree of volatility is to be expected because, for the most
  part, changes in the populations targeted by the Dislocated Worker
  Program are more volatile than changes in the populations targeted
  by the Youth and Adult programs.

• However, allocations for a given program year may not always
  reflect dislocation activity experienced in that year, as shown in the
  following charts that focus on a single aspect of dislocation:


                                                                                                    20




                    Page 25                                GAO-03-636 Issues Related to Allocation Formulas
            Appendix I: Workforce Investment Act
            Allocation Formulas




Funding Changes Do Not Always Appear to Match
Changes in Dislocation—New York




                                                                                            21




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            Appendix I: Workforce Investment Act
            Allocation Formulas




Funding Changes Do Not Always Appear to Match
Changes in Dislocation–Massachusetts




                                                                                            22




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            Appendix I: Workforce Investment Act
            Allocation Formulas




Funding Changes Do Not Always Appear to Match
Changes in Dislocation—New Hampshire




                                                                                           23




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            Appendix I: Workforce Investment Act
            Allocation Formulas




Funding Changes Do Not Always Appear to Match
Changes in Dislocation–Washington




                                                                                            24




            Page 29                                GAO-03-636 Issues Related to Allocation Formulas
                  Appendix I: Workforce Investment Act
                  Allocation Formulas




Aspects of the Dislocated Worker Formula Further
Contribute to Funding Volatility



• The Excess Unemployment factor has a “threshold” effect—
  states receive funds under this factor only if unemployment
  exceeds 4.5 percent—that results in shifts in funds that are
  not necessarily tied to shifts in levels of eligible populations.

• Whereas additional statutory provisions affect—and
  sometimes stabilize—Youth and Adult allocations, these
  provisions do not apply to Dislocated Worker allocations.



                                                                                                 25




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                    Appendix I: Workforce Investment Act
                    Allocation Formulas




  Excess Unemployment Factor Causes Some
  Volatility Unrelated to Changes in Unemployment

• “Threshold” effect prevents some states from receiving funds
  under the excess unemployment factor.

• The size of each qualifying state’s portion can vary considerably
  from year to year, depending on how many states qualify to
  share these funds. (The number of states sharing funds under
  this factor declined from 36 in PY 1997 to 13 in PY 2001, and
  increased to 18 in PY 2002.)

• More states may qualify for excess unemployment funds in PY
  2003, as unemployment rates nationally are increasing:

                                                                                                    26




                    Page 31                                GAO-03-636 Issues Related to Allocation Formulas
             Appendix I: Workforce Investment Act
             Allocation Formulas




After Years of Decline, National Unemployment
Rates are Increasing




                                                                                             27




             Page 32                                GAO-03-636 Issues Related to Allocation Formulas
                    Appendix I: Workforce Investment Act
                    Allocation Formulas




Excess Unemployment Factor Causes Some
Volatility Unrelated to Changes in Unemployment

• Excess unemployment is calculated differently for the Dislocated
  Worker Program than for the Youth and Adult programs, which
  contributes to volatility because fewer states are likely to meet the
  threshold condition under the Dislocated Worker formula.
    • Under the Youth and Adult programs, states may use
      unemployment in Areas of Substantial Unemployment (ASUs)
      to qualify for excess unemployment funds, increasing their
      likelihood of meeting the threshold condition.
• “Threshold” aspect of this factor assumes that states’ funding needs
  for dislocated worker funds rise or fall sharply when unemployment
  moves above or below 4.5 percent, an assumption that may not be
  valid, and which can result in different treatment of states with
  similar overall changes in unemployment.

                                                                                                    28




                    Page 33                                GAO-03-636 Issues Related to Allocation Formulas
                            Appendix I: Workforce Investment Act
                            Allocation Formulas




“Threshold” Effect: States with Similar Increases
in Unemployment Are Treated Differently




Source: Employment and Training Administration and GAO analysis.


                                                                                                            29




                            Page 34                                GAO-03-636 Issues Related to Allocation Formulas
             Appendix I: Workforce Investment Act
             Allocation Formulas




“Threshold” Effect: States with Similar Decreases
in Unemployment Are Treated Differently




                                                                                             30




             Page 35                                GAO-03-636 Issues Related to Allocation Formulas
                      Appendix I: Workforce Investment Act
                      Allocation Formulas




Additional Statutory Provisions Only Apply to
Youth and Adult Programs

• Additional statutory provisions (90 percent Hold Harmless, Small State
  Minimums, 130 percent Stop Gain), designed to limit funding changes from
  one program year to the next, apply only to Youth and Adult program funds
  and not to Dislocated Worker Program funds.
• PY 2002 Youth and Adult program funds for all 50 states, the District of
  Columbia, and Puerto Rico were adjusted under the stabilization
  provisions.
• While these provisions prevent dramatic shifts in funding from year to year,
  they also result in allocations that may not as closely track changes in the
  program target populations.
• Adjustments to the PY 2002 allocation amounts based on formula data only
  ranged from an 18-percent decrease in NC to a 379-percent increase in
  NH for Youth program funds. Adjustments for Adult program funds ranged
  from a 15-percent decrease in NC to a 255-percent increase in NH. (See
  app. III-A and III-B.)
                                                                                                      31




                      Page 36                                GAO-03-636 Issues Related to Allocation Formulas
                          Appendix I: Workforce Investment Act
                          Allocation Formulas




 Direction of Administration’s Proposed Changes
 Would Affect WIA Formulas

• Consolidation of WIA Adult and Dislocated Worker funds and Wagner-
  Peyser funds (used to fund a nationwide labor exchange linked to state
  unemployment compensation programs) into a single grant.
    ƒ Three funding streams would be combined into a single grant for adult services,
      of which a portion would be reserved for National Emergency Grants, and the
      rest allocated to states and outlying areas.
    ƒ A single formula would be used to distribute funds previously distributed
      according to three separate formulas. (The Wagner-Peyser formula allocates
      2/3 of funds based on states’ relative shares of the total civilian labor force and
      1/3 based on states’ relative shares of total unemployment.)

• Change in focus of Youth program
    ƒ WIA Youth program would focus more on out-of-school youth (now, just 30
      percent of WIA youth funds are dedicated to this population).
    ƒ Formula would be changed to more closely reflect revised focus.
                                                                                                         32




                          Page 37                                GAO-03-636 Issues Related to Allocation Formulas
                 Appendix II: Current Federal Job Training
Appendix II: Current Federal Job Training
                 Allocation Formulas



Allocation Formulas




    Evolution of Current Federal Job Training
    Allocation Formulas




                                                                                                  33




                 Page 38                                GAO-03-636 Issues Related to Allocation Formulas
                                               Appendix III: Program Year 2002 Youth and
Appendix III: Program Year 2002 Youth and      Adult Allocations (Increases and Decreases)



Adult Allocations (Increases and Decreases)




   Increases in PY 2002 Youth and Adult Allocations
   Due to Additional Statutory Provisions
                             Youth program                                                                  Adult program

                        PY 2002 calculated allocation amounts    Increase                        PY 2002 calculated allocation amounts      Increase
                             (a)                (b)              (b-a)/a                             (d)                   (e)              (e-d)/d
                          Based on      Based on formula and                                       Based on        Based on formula and
            States      formula only     additional statutory                         States     formula only       additional statutory
                                             provisions                                                                 provisions

      New Hampshire           715,836                3,430,651       379.3%     New Hampshire            666,862                2,369,063      255.3%
      Vermont                 901,470                3,430,651       280.6%     Vermont                  789,742                2,369,063      200.0%
      Delaware              1,010,397                3,430,651       239.5%     Wyoming                  849,435                2,369,063      178.9%
      Wyoming               1,012,742                3,430,651       238.7%     Delaware                 908,296                2,369,063      160.8%
      Connecticut           2,891,224                9,511,625       229.0%     North Dakota             995,291                2,369,063      138.0%
      North Dakota          1,133,372                3,430,651       202.7%     Connecticut            2,550,540                6,063,908      137.7%
      South Dakota          1,349,655                3,430,651       154.2%     South Dakota           1,129,440                2,369,063      109.8%
      Hawaii                2,641,813                5,519,083       108.9%     Hawaii                 2,472,473                4,900,382       98.2%
      Massachusetts         7,723,255               16,005,091       107.2%     Oklahoma               5,868,886                8,312,084       41.6%
      Rhode Island          2,217,048                3,430,651        54.7%     Massachusetts          7,204,225               10,111,664       40.4%
      Maine                 2,577,114                3,835,799        48.8%     Maine                  2,291,356                2,971,294       29.7%
      Oklahoma              6,618,722                9,427,216        42.4%     Rhode Island           2,011,530                2,369,063       17.8%
      Virginia             11,793,328               16,534,311        40.2%     Virginia              10,169,531               11,230,576       10.4%
      New Jersey           21,170,544               29,273,666        38.3%     Oregon                11,145,418               12,114,474        8.7%
      Nebraska              2,620,410                3,430,651        30.9%     West Virginia          9,064,373                9,502,793        4.8%
      Colorado              5,802,515                7,246,178        24.9%     New York              69,244,689               72,565,836        4.8%
      Indiana              11,693,687               13,604,901        16.3%     Nebraska               2,267,264                2,369,063        4.5%
      South Carolina       13,001,300               14,935,516        14.9%     Texas                 74,967,061               77,919,002        3.9%
      Iowa                  3,536,697                4,026,670        13.9%     Iowa                   3,085,653                3,199,888        3.7%
      Oregon               12,865,869               13,507,227         5.0%     Colorado               5,033,991                5,191,589        3.1%
      Kentucky             16,354,623               17,117,753         4.7%     South Carolina        11,114,720               11,428,536        2.8%
      New York             77,147,928               78,384,460         1.6%     New Jersey            18,615,446               18,844,995        1.2%
      West Virginia        10,454,526               10,601,615         1.4%     Georgia               17,917,927               18,010,587        0.5%
      Texas                91,132,617               91,315,821         0.2%


    Source: Employment and Training Administration and GAO analysis.


                                                                                                                                                        34




                                               Page 39                                  GAO-03-636 Issues Related to Allocation Formulas
                                                  Appendix III: Program Year 2002 Youth and
                                                  Adult Allocations (Increases and Decreases)




Decreases in PY 2002 Youth and Adult Allocations
Due to Stabilization Provisions
                               Youth program                                                                  Adult program
                        PY 2002 calculated allocation amounts     Decrease                               PY 2002 calculated allocation amounts      Decrease
                            (a)                     (b)           (b-a)/a                                      (d)                   (e)            (e-d)/d
                         Based on        Based on formula and                                               Based on       Based on formula and
       States          formula only       additional statutory                            States          formula only      additional statutory
                                                provisions                                                                       provisions

North Carolina            28,568,600                 23,476,656       -17.8%      North Carolina               24,712,125              21,000,594     -15.0%
Alaska                     4,510,355                  4,059,320       -10.0%      Michigan                     35,132,091              31,915,187      -9.2%
Washington                33,931,738                 30,638,767        -9.7%      Alaska                        3,847,515               3,627,608      -5.7%
Illinois                  63,047,026                 57,523,690        -8.8%      Washington                   28,870,814              27,274,610      -5.5%
California               190,278,862                174,352,954        -8.4%      Kansas                        5,851,623               5,563,012      -4.9%
Ohio                      50,665,105                 46,654,314        -7.9%      Illinois                     53,699,596              51,107,313      -4.8%
Kansas                     6,711,582                  6,190,812        -7.8%      California                  158,314,135             150,741,436      -4.8%
Nevada                     5,398,963                  4,983,868        -7.7%      Wisconsin                    11,930,372              11,417,246      -4.3%
Maryland                  14,876,867                 13,734,681        -7.7%      Ohio                         43,506,085              41,709,042      -4.1%
Idaho                      5,094,706                  4,707,720        -7.6%      Idaho                         4,280,568               4,104,687      -4.1%
Michigan                  41,863,602                 38,712,364        -7.5%      Nevada                        4,639,480               4,455,812      -4.0%
Alabama                   22,505,851                 20,901,613        -7.1%      Maryland                     13,008,705              12,516,336      -3.8%
Pennsylvania              42,259,384                 39,258,866        -7.1%      New Mexico                    9,205,460               8,870,823      -3.6%
Tennessee                 22,668,174                 21,110,535        -6.9%      Alabama                      19,259,319              18,567,668      -3.6%
Arizona                   20,103,894                 18,724,084        -6.9%      Arizona                      16,851,628              16,247,051      -3.6%
Louisiana                 29,491,340                 27,488,847        -6.8%      Mississippi                  15,002,565              14,484,593      -3.5%
Puerto Rico               58,968,215                 55,047,926        -6.6%      Louisiana                    25,032,857              24,177,060      -3.4%
Wisconsin                 13,887,145                 12,972,896        -6.6%      Pennsylvania                 37,405,060              36,183,794      -3.3%
Mississippi               18,439,417                 17,273,760        -6.3%      Tennessee                    19,720,921              19,078,725      -3.3%
Arkansas                  11,693,973                 10,968,513        -6.2%      Puerto Rico                  50,786,901              49,163,463      -3.2%
Montana                    4,278,578                  4,029,740        -5.8%      Arkansas                     10,000,690               9,708,232      -2.9%
Missouri                  16,896,799                 15,939,667        -5.7%      District of Columbia          3,679,748               3,574,178      -2.9%
New Mexico                10,871,830                 10,371,230        -4.6%      Missouri                     14,682,377              14,329,577      -2.4%
Minnesota                 11,774,433                 11,286,720        -4.1%      Florida                      36,649,600              35,800,688      -2.3%
District of Columbia       4,251,877                  4,134,267        -2.8%      Montana                       3,839,594               3,753,106      -2.3%
Georgia                   21,265,439                 20,753,889        -2.4%      Indiana                       9,904,977               9,743,186      -1.6%
Florida                   41,124,059                 40,269,848        -2.1%      Minnesota                    10,069,651               9,926,238      -1.4%
Utah                       3,868,355                  3,803,175        -1.7%      Kentucky                     14,492,679              14,391,853      -0.7%
                                                                                  Utah                          2,883,711               2,871,770      -0.4%

Source: Employment and Training Administration and GAO analysis.


                                                                                                                                                               35




                                                  Page 40                                    GAO-03-636 Issues Related to Allocation Formulas
                            Appendix IV: States Have Some Discretion in
Appendix IV: States Have Some Discretion in
                            Substate Allocation Formulas



Substate Allocation Formulas




   Youth and Adult Formulas

    • In allocating funds to local areas, states may follow the same formula used to
      allocate funds to states.
    • Alternatively, they may allocate no less than 70 percent to local areas based on the
      same three factors used to allocate funds to states and up to 30 percent based on
      state-defined factors relating to youth or adult poverty and unemployment.

   Dislocated Worker Formula

    • Allocations to local areas are based primarily on six statutory factors, although
      states have considerable discretion in defining and assigning weights to them, and
      may add or drop factors that they deem irrelevant.
    • States appear to weigh concentrated unemployment, long-term unemployment, and
      insured unemployment most heavily. At least four states have developed additional
      factors, such as Dislocated Worker Program enrollment and eligibility.

                                                                                                          36




                            Page 41                                GAO-03-636 Issues Related to Allocation Formulas
                                           Appendix V: State Dislocated Worker
Appendix V: State Dislocated Worker        Allocations, PY 1997—PY 2002



Allocations, PY 1997—PY 2002




             State                   PY97                PY98           PY99           PY00          PY01             PY02
    Alabama                      $14,887,940          $10,405,271    $11,310,449    $12,337,794    $15,068,548    $22,896,931
    Alaska                        $3,931,646           $5,569,805     $6,053,763     $6,719,943    $11,395,001     $9,671,503
    Arizona                      $10,790,780          $13,481,176     $9,383,103    $11,542,782    $12,879,316    $12,606,123
    Arkansas                      $5,898,001           $9,331,256    $10,872,546    $12,375,366     $7,103,656     $7,550,450
    California                  $226,611,355         $228,452,063   $252,751,353   $297,723,349   $273,391,437   $218,507,541
    Colorado                      $6,569,865           $6,965,327     $6,515,135     $8,967,371     $8,255,862     $7,378,805
    Connecticut                  $12,269,326          $13,972,394    $10,137,244     $8,480,789     $7,406,982     $5,384,702
    Delaware                      $1,966,568           $1,962,967     $1,730,577     $1,664,457     $2,184,617     $2,554,637
    District of Columbia          $5,631,401           $5,710,918     $9,278,408    $10,174,200     $8,433,959     $8,837,081
    Florida                      $47,487,185          $43,088,420    $37,376,186    $41,053,379    $39,311,417    $40,106,859
    Georgia                      $15,447,527          $16,437,304    $17,327,420    $21,970,886    $20,930,127    $19,039,241
    Hawaii                        $5,392,433           $7,124,058     $9,203,634    $12,921,697     $6,477,632     $4,243,014
    Idaho                         $3,203,461           $4,218,044     $5,142,284     $6,033,643     $3,898,217     $6,382,042
    Illinois                     $41,727,268          $38,162,269    $33,944,834    $38,725,943    $41,575,303    $91,853,295
    Indiana                      $11,375,233          $10,887,945     $9,999,244    $10,502,473    $10,682,428    $12,270,152
    Iowa                          $4,209,472           $5,193,070     $4,603,653     $4,984,236     $5,437,368     $4,837,782
    Kansas                        $4,690,124           $5,046,917     $5,107,811     $5,772,856     $5,502,565     $6,395,111
    Kentucky                     $11,913,534          $16,465,202    $10,071,794    $11,423,295    $11,735,435    $11,215,137
    Louisiana                    $22,984,811          $24,467,573    $25,508,779    $24,339,414    $23,158,418    $44,343,903
    Maine                         $4,643,804           $3,812,342     $4,094,611     $3,854,255     $3,214,945     $3,368,375
    Maryland                     $16,322,396          $14,535,456    $19,792,477    $16,806,330    $17,559,765    $16,962,636
    Massachusetts                $18,455,865          $14,048,429    $13,467,578    $13,588,888    $15,134,353    $12,321,163
    Michigan                     $24,798,043          $20,753,875    $21,366,758    $22,130,803    $21,932,071    $27,662,181
    Minnesota                     $8,025,182           $8,655,629     $8,482,964     $8,023,090    $10,473,235    $11,439,858
    Mississippi                  $10,812,972          $11,851,804    $14,148,987    $13,390,794    $30,701,477    $19,710,556
    Missouri                     $10,875,026          $12,288,831    $13,857,280    $15,326,715    $12,374,521    $15,805,346


    Source: Employment and Training Administration


                                                                                                                                37




                                           Page 42                                  GAO-03-636 Issues Related to Allocation Formulas
                                       Appendix V: State Dislocated Worker
                                       Allocations, PY 1997—PY 2002




         State                      PY97               PY98           PY99         PY00          PY01              PY02
Montana                         $3,531,457         $2,892,798     $4,879,006     $6,417,081     $7,084,638     $3,291,112
Nebraska                        $1,594,122         $1,965,472     $1,997,095     $2,388,261     $2,997,707     $2,775,031
Nevada                          $4,632,379         $4,648,561     $3,910,433     $5,076,189     $5,334,057     $6,647,377
New Hampshire                   $2,260,095         $2,272,311     $1,583,448     $2,247,442     $1,877,882     $2,261,165
New Jersey                     $44,679,005        $43,261,829    $36,304,389    $30,833,430    $30,498,439    $26,515,582
New Mexico                      $8,607,771        $12,173,813    $14,447,813    $20,907,033    $21,923,521    $17,696,491
New York                       $91,917,963       $113,707,688   $141,469,827   $142,360,726   $105,559,534    $67,370,751
North Carolina                 $13,056,615        $13,313,849    $14,354,831    $16,906,622    $16,959,265    $27,209,712
North Dakota                      $911,735           $812,799       $791,223     $1,421,909     $1,279,725     $1,198,337
Ohio                           $30,158,145        $30,143,462    $28,150,483    $30,844,022    $34,309,127    $34,226,768
Oklahoma                        $6,134,591         $5,531,341     $6,881,200     $8,085,953     $6,561,865     $6,478,067
Oregon                          $8,292,745        $15,100,295    $17,668,368    $30,420,464    $28,811,913    $29,731,969
Pennsylvania                   $47,736,539        $45,002,996    $36,555,932    $38,179,716    $38,706,830    $41,663,107
Puerto Rico                    $39,306,758        $49,534,488    $82,314,462   $108,278,443   $166,101,676   $122,346,374
Rhode Island                    $4,450,933         $3,588,822     $3,851,636     $2,924,830     $2,885,714     $2,680,620
South Carolina                 $13,502,936        $16,723,308     $8,163,435     $9,726,336    $11,936,257    $11,995,901
South Dakota                      $815,418           $890,691       $986,630     $1,477,871     $1,283,809       $985,071
Tennessee                      $15,412,716        $18,581,291    $14,120,459    $14,194,628    $12,771,543    $13,927,456
Texas                          $81,382,699        $81,009,852    $74,819,227    $74,756,662    $63,747,179    $59,784,453
Utah                            $2,503,785         $2,446,846     $3,229,390     $4,343,544     $4,430,131     $4,334,469
Vermont                         $1,060,691         $1,298,100     $1,391,491     $1,220,468     $1,240,882     $1,306,794
Virginia                       $13,354,807        $14,527,059    $13,872,204    $12,359,788    $12,424,713    $11,111,364
Washington                     $26,317,878        $24,728,657    $13,905,356    $28,220,707    $27,119,437    $68,485,602
West Virginia                  $12,065,944        $13,035,793    $16,082,147    $23,364,426    $25,423,973    $15,231,628
Wisconsin                       $8,791,150         $9,028,070     $9,944,587    $11,506,979    $12,880,353    $15,314,830
Wyoming                           $999,905         $1,299,464     $1,204,056     $1,921,722     $1,663,175     $1,285,545


Source: Employment and Training Administration


                                                                                                                            38




                                       Page 43                                  GAO-03-636 Issues Related to Allocation Formulas
             Related GAO Products
Related GAO Products


             Multiple Employment and Training Programs: Funding and
             Performance Measures for Major Programs. GAO-03-589. Washington,
             D.C.: April 18, 2003.

             Labor Market Information: Trends and Issues in Funding of State
             Programs. GAO-03-336. Washington, D.C.: December 20, 2002.

             Workforce Investment Act: States’ Spending Is on Track, but Better
             Guidance Would Improve Financial Reporting. GAO-03-239. Washington,
             D.C.: November 22, 2002

             Workforce Investment Act: Interim Report on Status of Spending and
             States’ Available Funds. GAO-02-1074. Washington, D.C.: September 5,
             2002.

             Workforce Investment Act: Better Guidance and Revised Funding
             Formula Would Enhance Dislocated Worker Program. GAO-02-274.
             Washington, D.C.: February 11, 2002.

             Workforce Investment Act: Improvements Needed in Performance
             Measures to Provide a More Accurate Picture of WIA’s Effectiveness.
             GAO-02-275. Washington, D.C.: February 1, 2002.

             Formula Grants: Effects of Adjusted Population Counts on Federal
             Funding to States. GAO/HEHS-99-69. Washington, D.C.: February 26, 1999.

             Federal Grants: Design Improvements Could Help Federal Resources Go
             Further. GAO/AIMD-97-7. Washington, D.C.: December 18, 1996.




(130224)
             Page 44                        GAO-03-636 Issues Related to Allocation Formulas
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