This is the accessible text file for GAO report number GAO-03-1043 
entitled 'Workforce Investment Act: Potential Effects of Alternative 
Formulas on State Allocations' which was released on August 28, 2003.

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Report to Congressional Requesters:

United States General Accounting Office:


August 2003:

Workforce Investment Act:

Potential Effects of Alternative Formulas on State Allocations:




Appendix I: Briefing Slides:

Related GAO Products:


AFCARS: Adoption and Foster Care Analysis and Reporting System:

ASU: Area of Substantial Unemployment:

CPS: Current Population Survey:

JTPA: Job Training Partnership Act:

LAUS: Local Area Unemployment Statistics:

MLS: Mass Layoff Statistics:

NVSS: National Vital Statistics System:

SAIPE: Small Area Income and Poverty Estimates:

TANF: Temporary Assistance for Needy Families:

UI: Unemployment Insurance:

WIA: Workforce Investment Act:

United States General Accounting Office:

Washington, DC 20548:

August 28, 2003:

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

About $3.3 billion in funds were allocated to states in fiscal year 
2003 for Youth, Adult, and Dislocated Worker employment and training 
programs under the Workforce Investment Act (WIA) of 1998. The formulas 
used to distribute these funds are generally the same as those used to 
distribute funds under the Job Training Partnership Act (JTPA) of 1982, 
although WIA target populations and program goals differ from those of 
JTPA. In anticipation of the reauthorization of WIA, you asked us to 
assess current and proposed formulas for allocating funds to states for 
these programs and identify potential alternative allocation formulas. 
We identified various issues with the current funding formulas in our 
April 2003 report.[Footnote 1]

For this review, we focused on three questions: (1) Are there 
alternative formula factors that are better aligned with current 
programs and are based on reliable and more current data? (2) How might 
changes to the current formulas affect the distribution of WIA funds 
among the states? (3) What are the implications of proposed program and 
formula changes in the House's WIA reauthorization bill (H.R. 1261) for 
state allocations and what are some alternatives to these formulas? Our 
review was limited to assessing the formulas for allocating funds to 
the states and did not include an assessment of formulas used by states 
to allocate funds to local areas.

To identify alternatives to the current formulas, we interviewed 
experts and reviewed relevant literature and data sources. To determine 
how formula changes might affect the distribution of WIA funds, we 
calculated how various alternative formulas might have affected states' 
allocations and funding volatility over the last 5 program 
years[Footnote 2] (program years 1999 - 2003). Finally, we analyzed the 
provisions of H.R. 1261[Footnote 3] and interviewed Department of Labor 
officials to obtain further information about these provisions. We 
conducted our field work from December 2002 to July 2003. Our work was 
conducted in accordance with generally accepted government auditing 

On July 9, 2003, we briefed your offices on the results of our work. 
This report conveys the information provided in that briefing.

We identified a set of formula factors that are more clearly aligned 
with WIA target populations and are based on reliable and more timely 
data than those in the current and proposed formulas. We used these 
factors to develop potential alternative formulas that would better 
target funds to eligible populations.[Footnote 4] In general, these 
alternatives would result in some redistribution of funds due to the 
elimination of two factors that measure concentrated 
unemployment,[Footnote 5] which tend to skew allocations, and less 
year-to-year funding volatility than the current formulas. Finally, we 
found that the formulas proposed in H.R. 1261 would not address most of 
the issues we identified; in fact, most program funds would continue to 
be allocated according to the current rather than the proposed 
formulas, because of provisions that limit the use of the proposed 

In our assessment of the current and proposed formulas, we identified 
several formula factors that were not well aligned with WIA Youth, 
Adult and Dislocated Worker program target populations or were based on 
data with long time lags. We then identified several potential formula 
factors that would be better aligned with current WIA target 
populations and for which more timely and reliable data are available. 
Specifically, the relative numbers of low-income youth and adults (key 
target populations for the Youth and Adult programs) could be better 
measured with more timely data from the Census Bureau's Small Area 
Income and Poverty Estimates (SAIPE).[Footnote 6] Other potential 
factors for the Youth Program formula--jobless out-of-school youth, 
high school dropouts, births to teens,[Footnote 7] and youth in foster 
care--would be more direct measures of specific target groups for that 
program, although the first two of these potential factors would 
require averaging over several years to meet a reasonable level of 
reliability for some small states. Additional potential factors for the 
Adult Program formula that we identified include measures of the 
civilian labor force, which would reflect the broader group of adults 
eligible for core services; total unemployment, which would reflect the 
majority of those actually served; and public assistance recipients, 
who may receive priority for intensive and training services. The 
alternative Dislocated Worker factors that we identified--"insured 
unemployment,"[Footnote 8] "permanent job losers,"[Footnote 9] and 
"workers affected by mass layoffs"--are more direct measures of 
dislocated workers than the currently used total unemployment and 
excess unemployment factors.

Using these factors, we developed several alternative formulas for each 
of the three WIA programs and assigned relative weights to these 
factors that reflect, to a limited extent, what is known about the 
relative costs of serving different target groups and their likely 
participation rates. In general, we found that these alternatives would 
have resulted in a reduction in year-to-year funding volatility for all 
three programs and a redistribution of funds from several states that 
have unemployment that is more concentrated in Areas of Substantial 
Unemployment (ASUs), to a higher number of states where unemployment is 
not concentrated in ASUs. States are allowed to define ASUs, which they 
do in a way that maximizes the number of unemployed who are counted as 
being in ASUs, which then enables them to receive more funds based on 
the concentrated unemployment factors. The redistribution of funds is 
due primarily to the exclusion of these factors, which rely to a great 
extent on how ASUs are defined and which are now used to distribute 
two-thirds of Youth and Adult funds and one-third of Dislocated Worker 
funds.[Footnote 10] However, because our calculations of the effects of 
alternative funding formulas are based on historical employment and 
demographic data, these outcomes are examples of potential outcomes 
rather than definitive predictions. If the distribution of unemployment 
or poverty were to change in the future, the actual outcomes for states 
under these alternatives could be very different from the potential 
outcomes reported here.

H.R. 1261 would significantly change the structure of current WIA 
programs and the formulas used to allocate program funds to the states, 
although these changes will probably not result in large shifts in the 
distribution of funds among states. Generally, the proposed formulas 
are better aligned with the proposed target populations. However, 
provisions that limit the amount of funds subject to the proposed 
formulas and instead allow some states to have their allocations 
determined by the old formulas would limit the impact of the new 

For the Youth Program, H.R. 1261 proposes that a majority of program 
funds, no less than 70 percent, be spent on out-of-school youth with 
barriers to employment and the remaining percentage spent on low-
income, in-school youth. The proposed formula includes three, equally 
weighted factors: total unemployment, disadvantaged youth, and youth 
civilian labor force. Overall, the proposed formula is better aligned 
with the program's target population because two of the proposed 
formula factors would specifically reflect the youth population, and it 
eliminates the two concentrated unemployment factors. However, the 
total unemployment factor does not specifically measure youth 
unemployment, and none of the proposed factors would directly measure 
the primary target group: out-of-school youth. Also, the disadvantaged 
youth factor continues to rely on infrequently updated decennial census 
data.[Footnote 11] However, even with the proposed changes, most 
program funds would continue to be allocated based on the current Youth 
Program formula, because the new formula would only apply to funds in 
excess of fiscal year 2003 state allocations.[Footnote 12] We 
identified several potential alternative formulas for the proposed 
Youth Program that address the issues cited above.

H.R. 1261 would consolidate the WIA Adult, WIA Dislocated Worker, and 
Wagner-Peyser[Footnote 13] programs into a single Comprehensive Program 
for Adults. Dislocated workers would no longer be a designated target 
group, although unemployed individuals, including those who are 
unemployed due to dislocations, would have priority for some services. 
The bill proposes a two-part formula for the Comprehensive Program for 
Adults that generally simplifies and consolidates the current formulas 
and is better targeted to the proposed target populations. The first 
part of the formula essentially replaces the current Wagner-Peyser 
formula, whereas the second part of the formula consolidates the 
formulas for the Adult and Dislocated Worker programs into a single, 
combined formula. The first part of the proposed formula would 
distribute 26 percent of program funds to states according to their 
share of fiscal year 2003 Wagner-Peyser funds; amounts in excess of the 
fiscal year 2003 level would be distributed based on their relative 
shares of the civilian labor force.[Footnote 14] The second part of the 
formula would distribute 74 percent of funds based on states' relative 
shares of total unemployment (60 percent), excess unemployment (25 
percent), and disadvantaged adults (15 percent). Three of the proposed 
factors--civilian labor force, total unemployment, and economically 
disadvantaged adults--measure groups that would be eligible for basic 
services or prioritized for intensive and training services. However, 
the formula retains the statewide excess unemployment factor that is 
most problematic in the current Dislocated Worker formula, and the 
disadvantaged adults factor would continue to rely on decennial census 
data, which are updated only once a decade.

As with the proposed Youth formula, the bill limits the impact of the 
proposed formulas. The phase-in provision for the Adult program would 
ensure that no state would receive a smaller allocation than it would 
under the current WIA Adult, WIA Dislocated Worker, and Wagner-Peyser 
formulas. The provision also provides that any state that would receive 
more under the proposed formulas than it would under the current 
formulas will receive the new formula amount, but only up to 3 percent 
over what it would have received under the current formulas. We 
identified several potential alternative formulas for the Comprehensive 
Program for Adults that do not include the phase-in provision or the 
excess unemployment factor.

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 
request. The report is also available at no charge on GAO's Web site at If you or your offices have any questions about this 
report, please contact me or Andrew Sherrill at (202) 512-7215. Regina 
Santucci, Lorin Obler, and Jerry Fastrup also made key contributions to 
this report.

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

Signed by Sigurd R. Nilsen: 

[End of section]

Appendix I: Briefing Slides:

[See PDF for images]

[End of figure]

[End of section]

Related GAO Products:

Workforce Investment Act: Exemplary One-Stops Devised Strategies to 
Strengthen Services, but Challenges Remain for Reauthorization. GAO-03-
884T. Washington, D.C.: June 18, 2003.

Workforce Investment Act: One-Stop Centers Implemented Strategies to 
Strengthen Services and Partnerships, but More Research and Information 
Sharing is Needed. GAO-03-725. June 18, 2003.

Workforce Investment Act: Issues Related to Allocation Formulas for 
Youth, Adults, and Dislocated Workers. GAO-03-636. Washington, D.C.: 
April 25, 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, 

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


[1] U.S. General Accounting Office, Workforce Investment Act: Issues 
Related to Allocation Formulas for Youth, Adults, and Dislocated 
Workers, GAO-03-636 (Washington, D.C.: Apr. 25, 2003).

[2] A program year runs from July 1 to June 30. For example, program 
year 2003 began on July 1, 2003.

[3] The Workforce Reinvestment and Adult Education Act of 2003 (H.R. 
1261) was passed by the House of Representatives on May 8, 2003.

[4] Some of the data sources suggested as alternatives for use in 
national to state allocations might not be available at the local level 
for use in state to local allocations.

[5] These factors are excess unemployment and unemployment in Areas of 
Substantial Unemployment.

[6] The SAIPE provides estimates of the number of children under age 18 
in poverty but does not provide estimates for the specific target group 
of the current WIA Youth Program--youth ages 14 to 21. We relied on the 
estimated number of children under age 18 in poverty as a proxy for the 
number of youth in poverty. Labor officials told us that the Census 
Bureau would have to develop new estimation models for the SAIPE to 
estimate the number of low-income youth in the age group targeted for 
the WIA Youth Program.

[7] We used data on the number of births to teens ages 14 to 19 as a 
proxy for the WIA target group of parenting youth. These data do not 
directly measure the number of parenting youth, but rather, the number 
of teen births in a given year.

[8] Insured unemployment measures individuals who successfully applied 
for Unemployment Insurance benefits in the past year, remain 
unemployed, and have not exhausted benefits.

[9] Permanent job losers are defined as unemployed individuals who have 
some attachment to the workforce, are not on temporary layoff, and did 
not leave their jobs voluntarily.

[10] One of these factors, excess unemployment, may or may not rely on 
how ASUs are defined, depending on the program. For the Dislocated 
Worker Program, excess unemployment is calculated based on statewide 
unemployment; for Youth and Adult programs, excess unemployment may be 
based on either statewide or ASU unemployment. 

[11] The Census Bureau has proposed that beginning in 2010 the 
decennial census long-form questionnaire, which collects unemployment 
and income data, would be replaced by the American Community Survey. If 
approved, this new survey would provide state-level unemployment and 
poverty data annually.

[12] The amount of funds allocated to states by formula in fiscal year 
2003 is $976,945,172.

[13] The Wagner-Peyser program funds a variety of labor exchange 
services, including vocational assessments, job search assistance, and 
job referrals and is an integral part of the one-stop service delivery 
system established by WIA. 

[14] This partly reflects the current Wagner-Peyser formula, which 
allocates two-thirds of program funds based on states' relative shares 
of the total civilian labor force and one-third based on states' 
relative shares of unemployment.

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