Mr. Chairman and distinguished Members of the Subcommittee:

We appreciate the opportunity to appear before you today to present the Department of Labor’s Fiscal Year (FY) 2003 Budget as it relates to the Employment and Training Administration (ETA).

As you know, we are a nation at war. We at the Department of Labor take that war effort very seriously. This means making some choices in how to direct funding governmentwide and ending or reducing funding to some programs. Nevertheless, the Administration is investing a large component of the budget on economic security, and we believe that our budget represents a very substantial commitment to America’s workers. The Administration’s request for workforce preparation, employment services and unemployment insurance totals $10.2 billion, a decrease of $891 million from 2002.

However, the reduction we propose would be more than offset by the large, new investments in flexible National Emergency Grants for dislocated workers that the President proposed last fall and continues to support. His economic security plan would provide substantial new funding for National Emergency Grants and provide flexibility to use this funding not only for training and employment services, but also for paying health care costs. It also would extend unemployment insurance benefits in all states. This high level of commitment to helping America’s workforce is unprecedented.

I share the President’s commitment to America’s workforce. One of my first actions in ETA was to redefine our mission and vision statements and our guiding principles. ETA’s mission is to provide high quality job training, employment, labor market information, and income support services through state and local workforce investment systems. Our vision is to promote pathways to economic liberty for individuals and families working to achieve the American Dream. We can and will carry out our mission and vision fully through the President’s budget request.

UI/ES Reform

Before I discuss the details of the President’s budget, I want to highlight our proposal to reform the Unemployment Insurance and the Employment Service programs. We have developed a proposal that will address short-term needs and provide long-term changes to spur economic growth, promote flexibility, and strengthen the critical services that states provide America’s workers and businesses. In the short term, a federally funded 13-week extension of unemployment benefits would be available to unemployed workers who have used up their regular benefits, and $9.2 billion would be transferred from the federal accounts in the Unemployment Trust Fund to state accounts. The extra benefits would help workers immediately, and the transfer of federal funds to states would help them shore up their trust funds, expand services and benefits to workers, or cut employer taxes.

In the long term, the proposal would make significant improvements including:

• Making extended unemployment benefits available earlier, in more states, and to more unemployed workers in future recessions, thereby assisting unemployed workers and stabilizing the economy sooner;
• Reducing federal unemployment taxes by 75%. The cut would be phased in from 2003 to 2007, and employers would save over $36 billion in FUTA taxes in the next 10 years; and
• Allowing states to determine funding levels and finance unemployment insurance and employment services administration. This transfer of funding authority from the federal to state level would be phased in from 2005-2007 and substantial federal funds would be provided for the transition.

Now is the time to reform the UI/ES programs. We should address our current economic situation by extending benefits and helping states shore up their trust funds and expand benefits and services while positioning these programs to be more responsive to the needs of workers and businesses in the future.

Highlights of the FY 2003 Budget Request

The President’s FY 2003 request is a responsible one that balances wartime needs with economic security.

• For Job Corps, we propose a budget of almost $1.54 billion, a $78 million increase, to continue expansion of the highly successful program. Job Corps is a residential job training program for disadvantaged youth, and our proposal will permit the Job Corps to enroll more than 73,000 new students. Job Corps is an example of a program that works. A thorough, objective impact evaluation found that the dollar value of benefits generated by Job Corps for society is more than twice the taxpayer investment. The increase will fund:

A high school accreditation initiative to help Job Corps centers achieve status as accredited high schools;

The second year cost of construction of two new Job Corps centers;

Operating costs for 815 new training slots for 4 Job Corps centers that are due to open; and

Targeted salary increases to attract and retain qualified teachers and other staff.

• We are requesting $3.284 billion for the Workforce Investment Act State Formula Programs. Even though we expect increases in spending this year and next, we estimate that large amounts of unexpended formula grant funds will be carried into 2003 from previous years. Our current estimate of this carryover is more than $1.3 billion. This carryover, in conjunction with our 2003 request, will support service levels exceeding those in FY 2002.
• Our request for Youth Formula Funds is $1.001 billion. This is $127 million below the funding level for 2002. However, this level, coupled with expected carryover funds from 2002 of $394 million, could support more than 553,000 youth, compared to the 465,000 youth expected to participate.
• Our request for Adult Employment and Training Activities is $900 million, $50 million below our 2002 level. Again, with estimated carryover funds of $383 million from 2002, we will be able to support up to 510,000 participants compared to the anticipated level of 415,000 adults.
• For Dislocated Workers, our request is $1.383 billion. This is $166 million below the funding level in 2002. However, this level, combined with carryover funds of $578 million, will be sufficient to assist almost 1.1 million dislocated workers, compared to the 902,000 dislocated workers projected to receive assistance in 2002. If the new National Emergency Grants funding that the President supports were enacted in 2002, hundreds of thousands more dislocated workers could be served in 2002 and 2003.

We have proposed phasing out some programs that were short-term in nature or are duplicative.

Youth Opportunity Grants are intended to provide a large infusion of cash into selected areas to serve at-risk youth. However, given the cost of replicating the Youth Opportunity Grants approach and the uncertainty of local sustainability beyond federal spending, we decided to finance five-year grants to the 36 existing grantees with $44.5 million in 2003 to complete the program. We will work with existing grantees to connect them with the workforce investment system in their communities and sustain relationships that they have developed with youth.

We will transition assistance for youth offenders, formerly funded separately as the Responsible Reintegration for Young Offenders program, to the mainstream formula-funded youth program and to Job Corps. Through our existing grants, we are learning what works for these young people; we will help states and local communities integrate that know-how into the youth activities formula program and Job Corps to ensure that these youth receive the services they need to return successfully to their communities.

We are not requesting funds for the Migrant and Seasonal Farmworkers program. This population is eligible for services under our WIA Adult and Youth Activities programs, and could continue to receive WIA intensive services from existing Migrant and Seasonal Farmworker providers using that funding. I have started to talk with providers of these services and believe they have a lot to teach our state and local One-Stop delivery systems. Although traditionally these groups have not always worked with one another closely, I am committed to bringing these groups together to ensure that the knowledge is shared and partnerships are extended to include well-performing organizations.

We will propose to redirect fees previously used to fund the H-1B training grants to reduce the growing backlog of permanent foreign labor certification applications. Over 300,000 employer applications are pending processing, 78% of which were received between January and April 30, 2001, when Congress extended section 245(i) of the Immigration and Nationality Act. An estimated $137.5 million will be available for this purpose. The H-1B grants were authorized to increase training for American workers for jobs in which labor shortages have caused employers to hire high skilled foreign workers. We have no evidence that spending $100 million to $200 million annually will have any measurable impact on reducing the reliance of American employers on workers with H-1B visas.

Under the Training and Employment Services account we are requesting:

• $55 million for Native Americans (a $2 million decrease to return to the 2001 level), to serve approximately 22,200 adult Native Americans.
• $59.1 million for National Activities under the Workforce Investment Act, including Incentive Grants; Technical Assistance; Pilots, Demonstrations and Research; and Evaluation activities. This is the FY 2002 level without Congressional earmarks ($62.4 million) and emergency funds for responding to the terrorist attacks ($32.5 million).
• $1 million, the FY 2002 level, for Women in Apprenticeship. This activity is administered by the Women’s Bureau.
• We will not be requesting funds for the National Skill Standards Board (NSSB). This program’s authorization expired in 1999, and the voluntary partnerships created will transition to self-sustaining operations.

In the Community Service Employment for Older Americans account, we are asking for $440.2 million. We expect that funding at this level will allow the program to assist 92,000 older Americans with employment opportunities. The FY 2002 funded level is $445.1 million.

For State Unemployment Insurance and Employment Service Operations, our request is $3.687 billion, a decrease of $93 million.

For the Unemployment Insurance Program, our request is $2.73 billion and includes program increases for the detection of fraud and collection of overpayments ($10 million) and for administrative costs relating to the Administration’s Economic Security package which, if passed, would establish a temporary extended unemployment benefit program ($76.2 million).

Our request is the same as the FY 2002 level for Employment Service Allotments to States ($761.7 million) and Re-employment Services Grants ($35 million).

The request for appropriated funds to administer Foreign Labor Certification Programs is $5.54 million, with the balance of state program activities to be financed with redirected H-1B fees, as discussed above.

We request $113 million, $7 million below FY 2002, for the One-Stop Career Centers line-item, as several of the investments are being scaled back to maintenance-level operations. These funds, which support the One-Stop system as the foundation for workforce services to business and individual customers, will increase accessibility to the One-Stop system in many ways through: better connections with community and faith-based organizations; electronic tools that promote self-service and new service delivery options; and professional development of front-line one-stop staff. Additionally, these funds support the development of quality workforce information to guide local systems, and they promote accountability by investing in management information systems and technology assistance.

For Federal Unemployment Benefits and Allowances, we request $461.7 million, $46 million above the FY 2002 funded level for Trade Adjustment Assistance and NAFTA-Transition Adjustment Assistance. We are working with Congress to extend and improve trade adjustment assistance for workers adversely affected by international trade.

In the ETA Program Administration account, we request $179.8 million (1,328 FTE from direct appropriations), $18.4 million above FY 2002. Our request includes 60 FTE (to be financed with redirected H-1B fees) to eliminate the backlog in the foreign labor certification permanent program; $1.9 million to improve program performance and financial accountability; and $5.5 million for 75 FTE for National Emergency Grants administration that are contingent upon enactment of the Administration’s Economic Security package. We are proposing several restructuring changes that involve redirecting existing staff for increased oversight and performance accountability activities. The staffing proposal redeploys 38 FTE to program performance and financial management activities from staff activities in less critical activities. We also propose a reduction in staffing (29 FTE) and then would use that funding to out-source trade petition investigations and audit/closeout activities.

WIA/TANF Reauthorization

As you know, Congress will take up this year the reauthorization of the Temporary Assistance to Needy Families (TANF) program, and next year is the final year of authorization for the Workforce Investment Act (WIA). Because WIA creates the One-Stop delivery system and TANF provides training and employment services to a targeted population, there is a critical need to link these two programs. The Department of Labor is actively preparing for the reauthorization of both pieces of legislation and, in doing so, is part of a broad Administration effort to engage the Department of Labor, the Department of Health and Human Services, the Department of Education, and other federal partners. We are gathering input from states and localities, the business community, service providers, and other stakeholders and interested parties in the workforce investment system. We will incorporate lessons learned since enactment of WIA and TANF as we work to enhance linkages between these two programs, further reform job training programs, based on performance, and reauthorize WIA.

Program Performance and The Government Performance and Results Act (GPRA)

During his State of the Union Address, President Bush summed up his economic security plan in one word: “jobs.”The Administration continues to support a large near-term increase in funds for dislocated worker assistance as the President proposed in his Back-to-Work Relief package last fall. At the same time, the 2003 Budget is launching a long-term reform of the federal government’s many training and employment programs to ensure that they truly help people find and keep work and increase their earnings. This multi-year effort will target resources to programs with documented effectiveness and eliminate funding for ineffective, duplicative, and overlapping programs.

In order to meet this national priority, the Employment and Training Administration has heightened the focus on performance and improvements to accomplish our goals, as reflected in our key guiding principle, “We will be faithful to the American taxpayer and support programs that are outcome-focused and results-oriented.” I believe that we owe it to our fellow Americans to deliver the best results that we can with the resources that are entrusted to this agency.

In keeping with this principle, I recently instituted a review with this agency’s senior leadership of the program and management performance goals for Fiscal Years 2002 and 2003. As a result, we are committed to:

• Developing strategies to enhance ETA’s and the workforce system’s response to the needs of business, with special attention to addressing skill shortages;
• Addressing the key areas of the President’s management agenda; and
• Improving the manner in which ETA addresses performance accountability.

In PY 2000, the Employment and Training Administration’s programs continued to meet or substantially meet the majority of their established performance targets. For example, based on fourth quarter data, the WIA adult and dislocated worker programs, run through the national one-stop system in partnership with state and local workforce investment areas, exceeded goals for employment retention and earnings. Seventy-eight percent of adults and 83 percent of dislocated workers were still working in the third quarter following employment against respective targets of 77 percent and 82 percent. Adults increased their average earnings by $3,684 and dislocated workers averaged 95 percent of their pre-dislocation earnings – far exceeding the targets of $3,264 for adults and 90 percent for dislocated workers.

Over 74 percent of older youth ages 19 to 21 were working six months after they obtained employment, meeting our retention goal. However, only forty-six percent of younger youth ages 14 to 18 years old youth were employed or enrolled in advanced training, post secondary education, military service or apprenticeships six months after exiting the program, less than the target of 50 percent. We will closely monitor future performance results in the youth formula program.

The Job Corps also performed strongly, meeting its average hourly wage at placement target of $7.97. The 90-day job retention rate after initial placement was 67 percent for Job Corps students, slightly below the target of 70 percent. Because a high school diploma is critical to long-term participation and promotion in the workforce, the Departments of Education and Labor recently announced a new joint commitment to expand the number of students who acquire diplomas. Job Corps is establishing a baseline for a new performance measure this year based on the number of students who attain high school diplomas while enrolled in the program. We will increase this baseline annually over the next few years.

However, ETA is unwilling to settle for current performance levels for workforce investment programs. We fully support and will help lead the long-term reform launched in the budget to improve the performance and accountability of the many federal training and employment programs, which currently number at least 48. An important part of this reform will be the development of a common performance measure or measures to compare results across programs on important outcomes like landing and keeping a job or increasing one’s earnings, then to base further budget and management decisions on programs’ performance.

In FY 2001, the Unemployment Insurance system continued its progress toward making quality eligibility determinations, despite having to absorb the rising claims loads of the country’s first recession in ten years, and many states making the transition to remote claims-taking systems. The national percentage of quality eligibility determinations edged upward from 70 percent to 71 percent and the number of states reaching the Department’s criterion advanced by one, to 25. Overall a greater percentage of payments were made timely – an increase from 89 percent to 90 percent. However the number of states making payments at a standard of 87 percent within 21 days decreased from 47 to 42, also reflecting the impact of the recession and the change in claims-taking.

Detailed performance information on these measures may be found in the Department of Labor’s annual Performance Report. We will continue our work on data validation to ensure we have complete and accurate data to report.

Conclusion

Mr. Chairman, we believe our budget request fully supports the President’s goal of revitalizing our economy and creating jobs. Thank you for the opportunity to testify before you today. I will be happy to answer any questions you may have about our FY 2003 budget request.