Workforce Investment Act:

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

GAO-03-636: Published: Apr 25, 2003. Publicly Released: Apr 25, 2003.

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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 of 1982, which served a different set of target populations. In anticipation of the upcoming debates on WIA's reauthorization, Congress asked us to review the formulas in the context of current program goals. Specifically, we assessed 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.

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. 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 2002 are based on data from the 1990 Census. 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. The time lags for the data used to calculate Dislocated Worker allocations range from 9 months to 18 months. The third issue we identified is excessive volatility in funding for the Dislocated Worker Program. 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. 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.

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