ANALYSIS OF THE NEW JERSEY BUDGET DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT

Transcription

1 ANALYSIS OF THE NEW JERSEY BUDGET DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT FISCAL YEAR PREPARED BY OFFICE OF LEGISLATIVE SERVICES NEW JERSEY LEGISLATURE APRIL 2004

2 NEW JERSEY STATE LEGISLATURE SENATE BUDGET AND APPROPRIATIONS COMMITTEE Wayne R. Bryant (D), 5th District (Parts of Camden and Gloucester), Chairman Sharpe James (D), 29th District (Parts of Essex and Union), Vice-Chairman Martha W. Bark (R), 8th District (Part of Burlington) Anthony R. Bucco (R), 25th District (Part of Morris) Barbara Buono (D), 18th District (Part of Middlesex) Joseph Coniglio (D), 38th District (Part of Bergen) Glenn D. Cunningham (D), 31st District (Part of Hudson) Walter J. Kavanaugh (R), 16th District (Parts of Morris and Somerset) Thomas H. Kean, Jr. (R), 21st District (Parts of Essex, Morris, Somerset and Union) Bernard F. Kenny, Jr. (D), 33rd District (Part of Hudson) Leonard Lance (R), 23rd District (Warren and part of Hunterdon) Robert E. Littell (R), 24th District (Sussex and parts of Hunterdon and Morris) Paul A. Sarlo (D), 36th District (Parts of Bergen, Essex and Passaic) Stephen M. Sweeney (D), 3rd District (Salem and parts of Cumberland and Gloucester) Shirley K. Turner (D), 15th District (Part of Mercer) GENERAL ASSEMBLY BUDGET COMMITTEE Louis D. Greenwald (D), 6th District (Part of Camden), Chairman William D. Payne (D), 29th District (Parts of Essex and Union), Vice-Chairman Francis J. Blee (R), 2nd District (Part of Atlantic) Joseph Cryan (D), 20th District (Part of Union) Linda R. Greenstein (D), 14th District (Parts of Mercer and Middlesex) Joseph R. Malone III (R), 30th District (Parts of Burlington, Mercer, Monmouth and Ocean) Alison Littell McHose (R), 24th District (Sussex and parts of Hunterdon and Morris) Kevin J. O'Toole (R), 40th District (Parts of Bergen, Essex and Passaic) Joan M. Quigley (D), 32nd District (Parts of Bergen and Hudson) Joseph Vas (D), 19th District (Part of Middlesex) Bonnie Watson Coleman (D), 15th District (Part of Mercer) OFFICE OF LEGISLATIVE SERVICES David J. Rosen, Legislative Budget and Finance Officer Frank W. Haines III, Assistant Legislative Budget and Finance Officer Glenn E. Moore, III, Director, Central Staff Thomas K. Musick, Section Chief, Commerce, Labor and Industry Section This report was prepared by the Commerce, Labor and Industry Section of the Office of Legislative Services under the direction of the Legislative Budget and Finance Officer. The primary author was Sonya S. Hough. Gregory L. Williams was the primary author of the background paper entitled The Unemployment Insurance (UI) Trust Fund. Questions or comments may be directed to the OLS Commerce, Labor and Industry Section ( ) or the Legislative Budget and Finance Office ( ).

3 DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT Budget Pages... C-15; C-23 to C-24; C-31; C-35; D- 241 to D-255; F-6; H-26; H-29; H- 31; H-33; and H-43. Fiscal Summary ($000) Adjusted Percent Expended Appropriation Recommended Change FY 2003 FY 2004 FY State Budgeted $116,957 $94,191 $94, % Federal Funds $316,754 $368,102 $373, % Other $143,187 $150,554 $152, % Grand Total $576,898 $612,847 $620, % Personnel Summary - Positions By Funding Source Percent Actual Revised Funded Change FY 2003 FY 2004 FY State % Federal 2,852 2,947 3, % Other % Total Positions 3,492 3,657 3, % FY 2003 (as of December) and revised FY 2004 (as of September) personnel data reflect actual payroll counts. FY 2005 data reflect the number of positions funded. Introduction On January 13, 2004, the Governor issued Reorganization Plan Number to transfer, consolidate and reorganize the State's workforce development system in the Department of Labor. Pursuant to the Plan and proposed legislation, all workforce development programs will transfer to the department from the Departments of Human Services and Education. As a result of these changes, the Department will change its name to the Department of Labor and Workforce Development effective July 1, As currently structured, the Department of Labor is responsible for programs that provide employment, as well as employment-related training and education, for the State's citizens. The department's specific responsibilities include ensuring safe and equitable working conditions for workers and the public; providing job training and job placement services for employed, underemployed and displaced workers, as well as the unemployed; overseeing income 1

4 Introduction (Cont'd) maintenance for unemployed and temporarily disabled persons; adjudicating disability claims under the State's workers' compensation/special compensation statutes and the federal Social Security Act; vocational rehabilitation of persons with disabilities; labor relations; and labor market planning and research. Key Points! As proposed, the workforce development system will consolidate under the department in FY However, the Governor's FY 2005 budget does not reflect the changes that are expected to result from the consolidation and reorganization.! The FY 2005 recommendation for the Department of Labor and Workforce Development totals $94.2 million in State funding. Most of the department's programs are supported by federal (60 percent) and dedicated State and "Other" funds, such as trust funds (24.6 percent).! The Budget Recommendation anticipates that the Unemployment Compensation Fund (page H-43) will have a $1.1 billion balance at the end of FY 2005, a $296 million decrease over the FY 2004 estimated balance of $1.4 billion. The decreased balance reflects the shift of $325 million in FY 2004 and $100 million in FY 2005 to the Health Care Subsidy Fund for charity care in lieu of payment to the Unemployment Compensation Fund.! The Governor's Budget proposes language (page D-250) stating that, of the $242 million in Reed Act funds authorized in the Federal Economic Stimulus legislation and deposited in the Unemployment Compensation Fund, $32.5 million may be expended by the department to improve service to claimants by modernizing the benefit payment system, continuing development of One-Stop Career Center Offices and further upgrading technology investments to enhance employment opportunities. In FY 2004, $30 million in Reed Act funds were authorized for these purposes.! Proposed language in the Governor's Budget (page D-228 and D-239) recommends the transfer of $35.5 million from the Workforce Development Partnership (WDP) fund to the Department of Human Services (DHS) for Work First New Jersey and the New Jersey Youth Corps, a decrease of $26.9 million, or 43 percent, from the FY 2004 transfer of $62.4 million. The WDP fund, which is funded through employer and employee payroll tax contributions, is used to provide workforce training grants to disadvantaged workers, displaced workers and employers. Upon approval of this recommendation, a total of $354 million will have been transferred from the WDP fund to DHS since FY 1995.! The Budget Recommendation estimates that federal funds will increase to $373.5 million in FY 2005, up 1.5 percent or $5.4 million, from the FY 2004 adjusted appropriation of $368.1 million. Divisions anticipating increases in federal aid include: Unemployment Insurance ($5.3 million or 4 percent), Vocational Rehabilitation Services ($2.3 million or 4.7 percent), and Employment Services ($504,000 or 1.3 percent).! The Budget Recommendation anticipates that the State Disability Benefits Fund (SDBF) will have a $140.6 million balance at the end of FY 2005, a $74.4 million decrease from the FY 2004 balance of $215 million. The decreased balance is a result of the proposed transfer of $110 million from the SDBF to the General Fund as State revenue. The SDBF (also known as the fund for Temporary Disability Insurance), which is supported by employee 2

5 Key Points (Cont'd) and employer payroll tax contributions, provides wage replacement benefits to workers as a result of unemployment due to sickness or injury which is not job-related.! The Governor's Budget recommends another $4 million for the John J. Heldrich Center for Workforce Development. Budget language provides that if the Center receives funding from the New Jersey Economic Development Authority (EDA) the General Fund appropriation will be reduced accordingly. Revenue totaling $2.2 million is anticipated from the EDA in FY2005 (page C-17) to partially support this grant. The Center is a university-based organization which works towards transforming the workforce development system at local, State and federal levels. The Center is also a component of a major redevelopment project in New Brunswick.! The Governor's Budget continues a special purpose appropriation of $2 million for the Workforce Literacy and Basic Skills Program, representing a 10 percent administrative allowance, pursuant to the Supplemental Workforce Fund for Basic Skills, P.L. 2001, c.12 (C.34:15D-21 et seq.). The Supplemental Workforce Fund for Basic Skills is financed by the redirection of employer and worker unemployment compensation contributions, estimated to be $1.3 million in FY 2005 (page H-31). Eight million dollars from this fund is recommended for transfer to the General Fund for operating aid to County Colleges (Department of Treasury, page D-399), an increase of $3 million, or 60 percent, from the FY 2004 transfer of $5 million. Background Paper:! The Unemployment Insurance (UI) Trust Fund p. 18 3

6 Program Description and Overview (Cont'd) Reorganization On January 13, 2004, the Governor issued Reorganization Plan Number to transfer, consolidate and reorganize the State's workforce development system in the Department of Labor. Pursuant to the Plan and proposed legislation, all workforce development programs will transfer to the department from the Departments of Human Services and Education. As a result of these changes, the Department will be renamed the Department of Labor and Workforce Development effective July 1, As proposed, the workforce development system will consolidate under the department in FY However, the Governor's FY 2005 budget does not reflect the changes that are expected to result from the consolidation and reorganization. Department Overview As currently structured, the Department of Labor administers a comprehensive array of programs dealing with employment and the physical and economic well-being of workers in New Jersey, including workplace standards; unemployment insurance; temporary disability insurance; workers' compensation; the determination of disability claims under the Social Security Act; vocational rehabilitation; job training and placement; labor relations; and planning and research. The department administers more than $4.9 billion in benefit payments which are not included as part of the department's appropriation. During FY 2004 for example, the department administered $2.2 billion in unemployment insurance benefits, $423 million in temporary disability insurance benefits, and $2.3 billion in federal Social Security disability benefit payments. As part of these functions and in conjunction with administering benefit payments and programs, the department oversees the following funds: Second Injury Fund The Second Injury Fund (SIF), also known as the Special Compensation Fund, was established pursuant to R.S. 34:15-94 and provides workers' compensation benefits to totally and permanently disabled workers with prior, work-incurred disabilities. Revenue is provided for the SIF through an assessment on self-insured employers and workers' compensation insurers. The total amount of this assessment is required by statute to equal 125 percent of the amount estimated by the Commissioner of Labor as necessary to pay benefits and any other costs from the fund in the following calendar year, minus any prior year-end net assets in the fund above $5 million. Thus, the fund is designed to maintain, through assessments and unexpended balances from the previous year, approximately 125 percent of what is needed to pay benefits and other costs in the next calendar year. State Disability Benefits Fund The State Disability Benefits program (also known as the Temporary Disability Insurance program) provides up to 26 weeks of income replacement to workers who become unemployed due to no-occupational sickness or injury. Under the State program, worker and employer contributions are deposited into the State Disability Benefits Fund, from which payments are made to eligible claimants. The fund balance was $217 million on June 30, It is estimated to be $140.6 million on June 30, Supplemental Workforce Fund for Basic Skills 4

7 Program Description and Overview (Cont'd) The Supplemental Workforce Fund for Basic Skills (SWBS) was established in the department to provide basic skills training pursuant to P.L. 2001, c.152 (C.34:15D-21 et seq.). The SWFBS is financed by the redirection of a percentage of employer and worker unemployment insurance (UI) taxes. The total contributions or revenues to the SWFBS is allocated by P.L. 2001, c.152 as follows: 24 percent to support basic skills training delivered by State civil service employees a the State's One-Stop Career Centers; 28 percent for Workforce Investment Boards to give grants to individuals needing basic skills training; 38 percent for the Office of Customized Training to give grants to consortia of labor, business and community groups providing basic skills training; and 10 percent for administrative costs. In FY 2003 and FY 2004 amounts of $20 million and $5 million, respectively, were transferred to the General Fund for operating aid to County Colleges. Unemployment Compensation Fund The Unemployment Compensation (UI) fund provides wage benefits to workers who have become involuntarily unemployed. These benefits and UI fund revenues are provided from payroll tax contributions of employers and employees and any amounts credited or advanced by the federal government. The UI Fund is estimated to have a $1.1 billion balance by the end of FY The federal "Job Creation and Worker Assistance Act of 2002," (JCWAA) includes a one-time distribution of $8 billion of previously accumulated federal "Reed Act" funds, the federal funds normally used to support State costs of administering the Employment Service (ES) and UI Programs. Under the JCWAA, the $8 billion may be used by states, not only for ES and UI administration, but also to fund increased unemployment insurance benefits. The New Jersey share of the $8 billion is $242.8 million. From FY 2003 to FY 2004, $67 million in Reed Act funds were authorized for expenditure by the department to improve service to claimants by modernizing the benefit payment system, continuing development of One-Stop Career Center Offices and further upgrading technology investments to enhance employment opportunities. Workforce Development Partnership Fund The Workforce Development Partnership (WDP) Program provides training grants to disadvantaged and displaced workers, as well as to employers to provide training to their employees. The WDP program is funded by worker and employer payroll taxes on wages subject to UI taxes, which is deposited to the WDP fund. Transfers of varying amounts have been made by the appropriation acts of each fiscal year from FY 1995 through FY 2004, transferring a total of $380.4 million from WDP to the Department of Human Services for Work First New Jersey and the New Jersey Youth Corps. The Work First New Jersey Program provides evaluation, referral and training services to participants, including those in the Food stamp Employment and Training and General Assistance programs. The New Jersey Youth Corps is a year-round voluntary program designed for young adults, ages 16 to 25, who have left high school before earning a diploma. The Youth Corps is a program designed to help break the cycle of limited opportunity by providing youth with a second chance to earn a diploma while developing employment skills through meaningful community service. 5

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9 Fiscal and Personnel Summary AGENCY FUNDING BY SOURCE OF FUNDS ($000) General Fund Adj. Expended Approp. Recom. Percent Change FY 2003 FY 2004 FY Direct State Services $81,111 $60,472 $60,171 (25.8)% (0.5)% Grants-In-Aid 33,406 31,279 31,561 (5.5)% 0.9% State Aid % 0.0% Capital Construction % 0.0% Debt Service % 0.0% Sub-Total $114,517 $91,751 $91,732 (19.9)% 0.0% Property Tax Relief Fund Direct State Services $0 $0 $0 0.0% 0.0% Grants-In-Aid % 0.0% State Aid % 0.0% Sub-Total $0 $0 $0 0.0% 0.0% Casino Revenue Fund $2,440 $2,440 $2, % 0.0% Casino Control Fund $0 $0 $0 0.0% 0.0% State Total $116,957 $94,191 $94,172 (19.5)% 0.0% Federal Funds $316,754 $368,102 $373, % 1.5% Other Funds $143,187 $150,554 $152, % 1.2% Grand Total $576,898 $612,847 $620, % 1.2% PERSONNEL SUMMARY - POSITIONS BY FUNDING SOURCE Actual Revised Funded Percent Change FY 2003 FY 2004 FY State % 0.0% Federal 2,852 2,947 3, % 3.1% All Other % 25.0% Total Positions 3,492 3,657 3, % 2.5% FY 2003 (as of December) and revised FY 2004 (as of September) personnel data reflect actual payroll counts. FY 2005 data reflect the number of positions funded. AFFIRMATIVE ACTION DATA Total Minority Percent 41.4% 38.7% 41.1%

10 Significant Changes/New Programs ($000) Adj. Approp. Recomm. Dollar Percent Budget Budget Item FY 2004 FY 2005 Change Change Page FEDERAL FUNDS ECONOMIC PLANNING AND DEVELOPMENT Unemployment Insurance $133,200 $138,500 $5, % D-249 According to the Office of Management and Budget, the $5.3 million increase is based on the estimated availability of federal funds, including Reed act funds earmarked by language for UI system and One-Stop Center improvements. Disability Determination $48,000 $47,020 ($980) (2.0)% D-249 According to the Office of Management and Budget, the $980,000 decrease is based on the estimated availability of federal funds. DIRECT STATE SERVICES MANPOWER AND EMPLOYMENT SERVICES Workplace Standards $5,317 $5,087 ($230) (4.3)% D-253 The Boiler Pressure program salary funding will be totally or partially replaced by non-state resources in FY 2005, resulting in a $230,000 reduction under the Workplace Standards program class. GRANTS-IN-AID (Vocational Rehabilitation Services) Cost of Living Adjustment - Sheltered Workshops $0 $182 $182 D-254 Independent Living Centers $525 $625 $ % D-254 The cost-of-living adjustment ($182,000) will provide third party service providers at the Sheltered Workshops an increase in their wages. The budget recommendation proposes an increase of $100,000 for Independent Living Centers. This increase will provide additional assistance and services to individuals who utilize Independent Living Centers. Twenty-three Independent Living Centers provide independent-living skills training to persons with disabilities across the State. According to the Evaluation Data in the proposed Budget, these centers will serve 7,300 persons in FY 2004 at a cost of $110 per person per year. 8

11 Significant Changes/New Programs ($000) (Cont'd) Adj. Approp. Recomm. Dollar Percent Budget Budget Item FY 2004 FY 2005 Change Change Page Overall, the Governor's Budget proposes $30 million in State Grants-In-Aid (GIA) funding to support Vocational Rehabilitation Services, an increase of 1 percent or $282,000 over the current year. FEDERAL FUNDS Vocational Rehabilitation Services $49,030 $51,330 $2, % D-254 Employment Services $38,110 $38,614 $ % D-254 Employment and Training Services $86,345 $84,778 ($1,567) (1.8)% D-254 Workplace Standards $4,065 $3,977 ($88) (2.2)% D-254 While the federal funds for Employment and Training Services and Workplace Standards are anticipated to decrease, an increase is anticipated in Vocational Rehabilitation Services of $2.3 million, and in Employment Services of $504,000. Two million dollars of the projected federal increase for Vocational Rehabilitation Services is attributed to a Community Care Waiver from the Department of Human Services. According to the Office of Management and Budget, this money will be available for eligible clients in the Sheltered Workshop program. Sheltered workshops offer long-term training and rehabilitation services to individuals with disabilities who might otherwise be confined to their homes or institutions. Overall, the FY 2005 recommended budget anticipates a total increase in federal funds for Manpower and Employment Services of $1.1 million or 0.6 percent above the FY 2004 adjusted appropriation. ALL OTHER FUNDS Employment Services $1,930 $2,335 $ % D-254 This increase in "off budget" funding of $405,000 is due to increases in anticipated revenues available to Employment Services. 9

12 Language Provisions 2004 Appropriations Handbook 2005 Budget Recommendations p. B-115 p. D-250 From the funds made available to the State under section 903(d)(4) of the Social Security Act (42 U.S.C. s.1103 et seq.), as amended, the sum of $30,000,000, or so much thereof as may be necessary, is to be used for the improvement of services to unemployment insurance claimants through the improvement and modernization of the benefit payment system and other technology improvements and to employment service clients through the continued development of one-stop offices throughout the State and other investments in technology and processes that will enhance job opportunities for clients. From the funds made available to the State under section 903(d)(4) of the Social Security Act (42 U.S.C. s.1103 et seq.), as amended, the sum of $32,500,000, or so much thereof as may be necessary, is to be used for the improvement of services to unemployment insurance claimants through the improvement and modernization of the benefit payment system and other technology improvements and to employment service clients through the continued development of one-stop offices throughout the State and other investments in technology and processes that will enhance job opportunities for clients. Explanation In March 2001, $242.8 million was made available to the State Unemployment Compensation Fund under section 903 of the Social Security act (42 U.S.C. s et seq.), as amended. New Jersey can use these funds, referred to as federal Reed Act funds, to pay compensation or, subject to legislative appropriation, for administrative expenses. The recommended budget language would authorize use of $32.5 million of Reed Act funds for the improvement and modernization of the benefit payment system, continued development of One-Stop Offices and other investments in technology and processes that will enhance job opportunities for clients. If approved, this would result in a three-year total authorization of about $100 million for these purposes. p. B Appropriations Handbook 2004 Budget Recommendations An amount not to exceed $5,669,000 shall be transferred form the Department of Human Services to be used as a State match to the federal Welfare-to-Work Grant program, subject to the approval of the Director of the Division of Budget and Accounting. No comparable language Explanation The language is discontinued pursuant to federal recision of the Welfare-to-Work State formula program. 10

13 Language Provisions (Cont'd) 2003 Appropriations Handbook 2004 Budget Recommendations p. D-255 No comparable language. From the appropriation provided hereinabove in support of office leases, and notwithstanding the provisions of N.J.S.A. 52:18A et seq, the Treasurer in consultation with the Commissioner of Labor, is hereby authorized to enter into cost-sharing agreements with any authorized partner in the State's one-stop centers for the purpose of co-locating such partner in an office with the Department of Labor providing rent costs shall be equitably shared in accordance with a cost allocation plan approved by the Commissioner of Labor. Explanation The proposed FY 2005 language would allow the department to enter into cost-sharing agreements with one-stop partners that are not State agencies. According to the Office of Management and Budget, the language provides the department with the ability to efficiently process agreements with local governments that are sharing one-stop office space in a State rented facility. 11

14 Discussion Points 1. On January 13, 2004, the Governor issued Reorganization Plan No to transfer, consolidate and reorganize the State's workforce development system in the State Department of Labor (DOL). The plan transfers into the DOL various programs now located in the State Department of Human Services (DHS) and the State Department of Education (DOE). The transferred programs focus on assisting students, youth and welfare recipients to make transitions to work. In his testimony of January 26, 2004 to the Assembly Labor Committee regarding the reorganization, the Commissioner of Labor indicated that the reorganization would transfer a total of "approximately $150 million" and "between 25 and 30" State staff positions from the DHS and DOE to the DOL.! Questions: a. How many of the approximately 25 to 30 personnel transferred under the reorganization plan are DHS personnel (other than New Jersey Youth Corps personnel) and what is the total appropriation for the support of those personnel? How many of them are managers? How many of them are counselors or case workers?! b. How much of the $150 million transferred to DOL will be used to support staff at the local level, such as personnel employed by One Stop Career Center operators or county or local governments and how many employees would be supported that way?! c. How much of the $150 million transferred to DOL will be used for direct services or benefits to Work First New Jersey (WFNJ) clients, including benefits for community work experience program and alternative work experience participants?! d. How much of the $150 million transferred to DOL will be used to pay vendors of employment and training services or other services? 2. The April 4, 2004 Times states that the Governor expects that the number of people trained by the State will increase from 60,000 per year to 100,000 per year as a result of the reorganization.! Question: Please indicate for each of the following programs, how many individuals are currently being trained annually and how many are expected to be trained annually after the reorganization has been implemented: Workforce Development Partnership (WDP) individual training grants (ITA's) for dislocated workers; WDP ITA's for disadvantaged workers; WDP customized training grants; WDP occupational safety and health training; WDP Youth Transitions to Work; Workforce Investment Act (WIA) dislocated worker training; WIA Adult training; WIA youth training; WFNJ Temporary Assistance for Needy Families (TANF) recipient training; WFNJ Food Stamp recipient training; and WFNJ General Assistance recipient training. Please indicate any overlap between the categories. 3. The main transfer from the DHS to the DOL is employment and job readiness activities and programs in the State's Work First New Jersey (WFNJ) program and the federal Personal Responsibility and Work Opportunity Reconciliation Act and Food Stamp Act programs (pages 2 and 6 of the plan). These activities include career guidance, labor market information, employability assessment and plan development, case management, subsidized and unsubsidized public and private sector employment, on-the-job training, career advance vouchers, community work experience and alternative work experience programs, job search, vocational training, job skills, literacy, employment and training-related expenses, and determination of need and referral to support services (page 2). In the proposed FY 2005 budget, $12.9 million is appropriated for "Work First New Jersey - Training Related Expenses" and $106.0 million is appropriated for "Work First New Jersey - Work Activities" (page D-226 of the budget). Of the total $118.9 million 12

15 Discussion Points (Cont'd) appropriated for those purposes, $8.2 million is recommended in budget language for transfer from the State DOL's Workforce Development Partnership (WDP) program. In addition to the indicated $139.4 million, another $25.5 million in WDP funds is recommended for transfer to the two indicated components of WFNJ, bringing the total State funds for these purposes to $164.9 million (page D-228).! Questions: a. How much of the $164.9 million in funds appropriated under the proposed FY 2005 budget for DHS training related and work activity programs will be transferred to DOL under the reorganization plan?! b. How will the various kinds of counseling and case work be coordinated between DOL and DHS? Is it planned to have each welfare office co-located in One Stop Career Centers? If so, what is the time schedule for that occurring?! c. How will the impact of the transfers be monitored and evaluated? Will reports on the impact be provided to the Legislature and the public? 4. The other transfer from DHS to DOL involves the transfer of the entire New Jersey Youth Corps program. The program, which assists high-school drop-outs to complete their education and find work, is supported by an appropriation of $3 million, of which $1.9 million is currently supported by a transfer of WDP funds (pages D-238 and D-239 of the budget).! Questions: a. How many employees that will be transferred under the reorganization plan are New Jersey Youth Corps personnel and how much is appropriated for them? How many of them are managers?! b. What, if any, changes are expected in the operation of the New Jersey Youth Corps program as a result of the transfer? 5. The plan transfers from the DOE to the DOL the Adult Basic Education/English as a Second Language (ABE/ESL) programs authorized by Title II of the federal Workforce Investment Act (WIA)(pages 3, 4 and 7 of the plan). This represents an undisclosed portion of the $6 million in federal funds provided to the State under Title II of WIA. The larger State appropriation of $17 million for Adult Basic Education is not transferred (page D-86 of the budget). Additional support for ABE/ESL programs is provided at the local level.! Questions: a. Why is the WIA funded ABE/ESL program transferred but not the larger State-funded program? How many individuals are served by each of the two programs?! b. How much of the Title II WIA funds are involved in the transfer? How many of the personnel supported by those funds are transferred? 6. The current DOE function of approving private proprietary vocational schools will be transferred to DOL, along with the enforcement of the laws that govern the operation of such schools and the responsibility to "establish and approve training providers' programs" (pages 4 and 8 of the plan). Curriculum review and instructor certification will remain with DOE.! Questions: a. What is the current responsibility of DOE to "establish and approve training providers' programs"? How will that, and the approval and regulation of private vocational schools, be changed by the transfer? 13

16 Discussion Points (Cont'd)! b. Why is curriculum review and instructor certification being separated from the approval of the schools? Will the quality of the curriculum and instructors be taken into account in the approval of a training provider?! c. What, if any, changes will be made in the criteria used to determine whether to approve a training provider?! d. How many of the approximately 25 to 30 personnel transferred under the reorganization plan are personnel of the DOE who work on the approval of training provider's programs and what is the total appropriation for the support of those personnel? How many of them are managers?! e. Will all training providers and vendors, including those who now contract with the DHS and the Departments of Education (DOE), be subject to evaluations and criteria for approval at least as rigorous as those which currently apply to providers and vendors of services for the DOL? 7. The plan transfers the State role in registering and approving apprenticeship programs from the DOE to the DOL, but leaves the review of curricula in such programs with the local apprenticeship coordinators (pages 4, 5 and 8 of the plan).! Question: How many of the approximately 25 to 30 personnel transferred under the reorganization plan are personnel of the DOE who work on the registration and approval of apprenticeship programs and what is the total appropriation for the support of those personnel? How many of them are managers? 8. The FY 2005 budget includes a proposal to redirect $100 million in UI tax revenues from the UI trust fund to the Health Care Subsidy Fund (HCSF)(page B-6). This is in addition to $325 million in UI taxes diverted to the HCSF in FY 2002, the $325 million to the HCSF in FY 2003, pursuant to P.L.2002, c.13, and another $325 million to the HCSF in FY 2004 pursuant to P.L.2003, c.107. This is particularly important for employers, because the UI tax rates imposed on each employer are calculated on the basis of a combination of the employer's own "reserve ratio" (the amount of UI taxes paid by the employer minus the benefits paid to workers laid off by the employer as a percentage of UI taxable wages paid by the employer) and "reserve ratio" for the entire UI trust fund (the fund balance as a percentage of the total UI taxable wages in the State). As explained at greater length in the background paper on the finances of the UI fund (see page ), the balance of the State's UI fund ($2.136 billion at the end of FY 2003) has been high enough for the last four years to keep employers in the "A" tax schedule, which provides the lowest UI tax rates for employers. The budget, however includes estimates (on page H-43) that the UI trust fund balance will fall to $1.132 billion by June 30, In recent years, the fund balance on March 31, the date used to calculate the reserve ratio to determine which tax schedule is used, has been more than $200 million lower than the fund balance on June 30, suggesting that the fund balance on March 31, 2005 may be less than $1.4 billion. If that occurs, it is likely that the "C" UI tax schedule will take effect, which imposes higher UI tax rates on employers than either the "A" or "B" schedules.! Question: If the proposed budget is adopted and the proposed diversion of $100 million of UI tax revenues to the HCSF is carried out, what will be the estimated UI fund balance on March 31, 2005?...on March 31, 2006? What UI tax schedule will be put into effect as a result? Please provide the actual "Unemployment Compensation Fund Reserve 14

17 Discussion Points (Cont'd) Rate Calculation" for FY 2002 and FY 2003 and estimates for FY 2004 and FY 2005, based on the assumption that the budget and the $100 million diversion will be enacted as proposed. Also provide the assumptions made regarding unemployment rates as the basis and the anticipated payment for those estimates. 9. The $1.512 billion balance of the UI fund on December 31, 2003 represented a decline of $1.610 billion, or more than 50%, from the UI fund's historic high balance of $3.122 billion on December 31, 2001, just two years earlier. In addition to possible increases in employer UI tax rates, this declining balance may also result in a termination of certain additional UI benefits provided by the State to laid off workers enrolled in approved job training programs. The program, called "additional benefits during training" (ABT), which was established by P.L.1992, c.47, provided a total of $244 million in additional UI benefits to more than 75,000 laid off workers while they were in job training programs from 1993 to The law provides, however, that whenever the total ABT benefits for a year exceed 1.5% of the UI fund balance on December 31 of the preceding year, no additional individuals would start receiving ABT benefits for the remainder of the year. Based on the $1.512 billion balance on December 31, 2003, new ABT benefits will stop during calendar year 2004 once $22.7 million has been paid in ABT benefits. With $36.6 million in ABT benefits paid during CY 2003, it appears likely that the 1.5% threshold will be triggered sometime during 2004.! Question: Please provide an estimate of when the 1.5% threshold will be triggered and an estimate of how much will be paid in ABT benefits during each month of CY What will be the estimated balance of the fund on December 31, 2004, and what impact would that balance have on the availability of ABT benefits during CY 2005? 10. The law which created project labor agreements (PLA's), P.L. 2002, c.44 (C.52:38-1 et seq.), states that on or before December 31, 2003: "The Commissioner of Labor shall make an annual report to the Governor and the Legislature on the effectiveness of all project labor agreements entered into pursuant to this act in advancing the purposes of this act and in meeting the requirements of this act, including any recommendations deemed necessary by the commissioner to better effectuate those purposes. The report shall include a reporting, review and analysis of the information obtained from the monitoring conducted pursuant to...this act, an analysis of the effectiveness of the project labor agreements in meeting the objectives of...this act, and a comparison of the performance of public works projects with project labor agreements to the performance of public works projects without project labor agreements."! Question: What is the status of the first annual report on PLA's required by the act? Please provide a list of every PLA entered into which is subject to the provisions of the act, indicating: the cost of the project covered by the PLA; the number of construction jobs covered under the PLA, including the number of apprenticeships; the number and share of the jobs and apprenticeships which have gone to minority group members and women; the agreements entered into pursuant to the act regarding shares of employment and apprenticeships for women and minorities; and information on the effectiveness of the PLA in advancing the interest of the public body. What, if any, recommendations does the department have to strengthen the program? 11. The federal "Job Creation and Worker Assistance Act of 2002," (JCWAA) included a onetime distribution of $8 billion of previously accumulated federal "Reed Act" funds, the federal funds normally used to support State costs of administering the Employment Service (ES) and Unemployment Insurance (UI) programs. Under the JCWAA, the $8 billion may be used by states, 15

18 Discussion Points (Cont'd) not only for ES and UI administration, but also to fund increased unemployment insurance benefits. The New Jersey share of the $8 billion is $242.8 million. The department's FY 2005 budget request recommend that $32.5 million, "or so much as may be necessary," of the indicated "Reed Act" funds be used for "the improvement of services to unemployment insurance claimants through the improvement and modernization of the benefit payment system and other technology improvements and to employment service clients through a continued development of one-stop offices throughout the State and other investments in technology and processes that will enhance job opportunities for clients." Thirty-seven million dollars and $30 million were appropriated in the FY 2003 and FY 2004, respectively.! Question: How much of the $30 million for FY 2004 and the $32.5 million for FY 2005 appropriation of "Reed Act" funds will be spent on modernizing the UI benefit payment system? How much for improvements to employment services? In addition, how much will be spent on retraining or upgrading the skills of department personnel? 12. The proposed budget appropriates $110 million from the State Disability Benefits Fund (SDBF) for transfer to the General Fund as revenue (page F-6). This is in addition to the $30 million transferred from the SDBF to the General Fund in FY The SDBF is used by the State's Temporary Disability Insurance (TDI) program to provide partial wage replacement for workers who become disabled due to injury or illness unrelated to work and pay for the administration of the benefits.! Questions: a. Please provide the value of revenues, benefits and administrative expenditures, and the cash balance in the SDBF for each month in calendar year 2003 and as many months as possible for calendar year 2004.! b. Please provide a month-by-month estimate of what impact the department expects the $110 million transfer of SDBF moneys to the General Fund will have on the cash and fund balances of the SDBF during FY The Second Injury Fund (SIF), also known as the Special Compensation Fund, was established pursuant to R.S. 34:15-94 and provides workers' compensation benefits to totally and permanently disabled workers with prior, work-incurred disabilities. Revenue is provided for the SIF through an assessment on self-insured employers and workers' compensation insurers. The total amount of this assessment is required by State law to equal 125 percent of the amount estimated by the Commissioner of Labor as necessary to pay benefits and any other costs from the fund in the following calendar year, minus any prior year-end net assessments and unexpended balances from the previous year.! Question: Please provide, for calendar year 2003: the total amount expended from the Second Injury Fund for benefits; the total amount expended for other costs, such as administration; the total amount of revenue from assessments; the total amount carried forward in the fund from the previous year; the total amount of other revenues in the fund; and the total amount of unexpended balances at the end of the calendar year. Please provide an estimate of this information carrying forward into FY The Workforce Development Partnership (WDP) Program provides training grants to disadvantaged and displaced workers, as well as to employers to provide training to their employees. The WDP program is funded by worker and employer payroll taxes on wages subject to unemployment (UI) taxes. The proposed FY 2005 budget estimates that these payroll tax revenues, plus investment earnings, will generate approximately $93.2 million in FY 2005 (page H-26). The proposed FY 2005 budget includes language (pages D-228 and D-239) transferring $35.6 million from the WDP fund to the Department of Human Services (DHS), of which $1.9 16

19 Discussion Points (Cont'd) million is for the New Jersey Youth Corps, but most, $33.7 million is for the Work First New Jersey Program.! Question: For FY 2003, please provide the following actual data for each component of the WDP program (customized training, displaced worker training, disadvantaged worker training, youth training, occupational safety and health training, program administration, and transfers to programs other than WDP) and provide estimates of the same information for FY 2004 and FY 2005, based on the assumption that the percentages which are required by P.L. 2001, c.152 to be deposited in accounts for each component will remain in effect: C C C C The amount the department was required to spend under the WDP law's mandated allocations (from FY 2004 forward, the amounts required to be deposited in the accounts for each allocation), and the amount actually spent; The amount transferred out of the fund for each purpose not indicated in the WDP law (such as the Work First New Jersey and New Jersey Youth Corps programs); The balance at the end of the year; and the amount encumbered as a reserve for future payments of multi-year grants for each WDP program component; From FY 2004 forward, estimates of any amount anticipated to remain in the account at the end of the fiscal year exceeding 20 percent of the amount deposited for the year and thus required, pursuant to P.L. 2001, c.152, to be deposited into the unemployment compensation fund. 17

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29 OFFICE OF LEGISLATIVE SERVICES The Office of Legislative Services provides nonpartisan assistance to the State Legislature in the areas of legal, fiscal, research, bill drafting, committee staffing and administrative services. It operates under the jurisdiction of the Legislative Services Commission, a bipartisan body consisting of eight members of each House. The Executive Director supervises and directs the Office of Legislative Services. The Legislative Budget and Finance Officer is the chief fiscal officer for the Legislature. The Legislative Budget and Finance Officer collects and presents fiscal information for the Legislature; serves as Secretary to the Joint Budget Oversight Committee; attends upon the Appropriations Committees during review of the Governor's Budget recommendations; reports on such matters as the committees or Legislature may direct; administers the fiscal note process and has statutory responsibilities for the review of appropriations transfers and other State fiscal transactions. The Office of Legislative Services Central Staff provides a variety of legal, fiscal, research and administrative services to individual legislators, legislative officers, legislative committees and commissions, and partisan staff. The central staff is organized under the Central Staff Management Unit into ten subject area sections. Each section, under a section chief, includes legal, fiscal, and research staff for the standing reference committees of the Legislature and, upon request, to special commissions created by the Legislature. The central staff assists the Legislative Budget and Finance Officer in providing services to the Appropriations Committees during the budget review process. Individuals wishing information and committee schedules on the FY 2005 budget are encouraged to contact: Legislative Budget and Finance Office State House Annex Room 140 PO Box 068 Trenton, NJ (609) Fax (609)