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entitled 'Workforce Investment Act: Issues Related to Allocation 
Formulas for Youth, Adults, and Dislocated Workers' which was released 
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Report to Congressional Requesters:

United States General Accounting Office:


April 2003:

Workforce Investment Act:

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




Appendix I: Workforce Investment Act Allocation Formulas:

Appendix II: Current Federal Job Training Allocation Formulas:

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

Appendix IV: States Have Some Discretion in Substate Allocation Formulas:

Appendix V: State Dislocated Worker Allocations, PY 1997--PY 2002:

Related GAO Products:


ASU: Area of Substantial Unemployment:

JTPA: Job Training Partnership Act of 1982:

WIA: Workforce Investment Act:

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United States General Accounting Office:

Washington, DC 20548:

April 25, 2003:

The Honorable Judd Gregg
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 

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 

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 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 

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.[Footnote 1] However, two-thirds of its funds are 
distributed based on two factors that measure general unemployment 
rather than youth unemployment.[Footnote 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.[Footnote 3] One-third is distributed according to the 
number of long-term unemployed, a group that is no longer automatically 
eligible for the program.

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[Footnote 4] are based on data from the 1990 
Census.[Footnote 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.[Footnote 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 

The third issue we identified is excessive volatility in funding for 
the Dislocated Worker Program.[Footnote 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 having at least 4.5 percent 
unemployment statewide.[Footnote 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.[Footnote 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 
request. The report is also available at no charge on GAO's Web site at 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:

Signed by Sigurd R. Nilsen

[End of section]

Appendix I: Workforce Investment Act Allocation Formulas:

[See PDF for image]

[End of figure]

[End of section]

Appendix II: Current Federal Job Training Allocation Formulas:

[See PDF for image]

[End of figure]

[End of section]

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

[See PDF for image]

[End of figure]

[End of section]

Appendix IV: States Have Some Discretion in Substate Allocation 

[See PDF for image]

[End of figure]

[End of section]

Appendix V: State Dislocated Worker Allocations, PY 1997--PY 2002:

[See PDF for image]

[End of figure]

[End of section]

Related GAO Products:

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

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.

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.


[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 

[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.

[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).

[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. 

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