The Bush Administration's FY 2007 Budget Overview WIA and Employment Service Programs Career Advancement Accounts (CAAs) Cuts to the Trade Adjustment Assistance Programs New Funding for the Community College Program Comes at the Expense of Other Job Training Programs Proposed Cuts and Policy Changes Weaken our Nation's Employment Security and Unemployment Insurance Safety Net Labor Department Programs to Audit, Investigate and Prosecute Unions Wage and Hour: Basic Labor Standards Enforcement The Bush Budget for Worker Safety and Health Program

Overview

Good jobs that support families are the foundation of a strong economy and a strong nation, and creating and sustaining good jobs is the number one economic priority for Americans. Effective and meaningful job training programs and income support for jobless workers combined with job search assistance are key components of a comprehensive good jobs strategy. This has never been truer, as the nation has struggled with two years of job loss followed by three years of inadequate growth, real wages that are lower today than they were four years ago and the loss of millions of good paying jobs to trade and offshoring. 

These troubling labor market trends have only re-emphasized the importance of and the need for aggressive investment in our national job training and jobless worker programs. Unfortunately, President George W. Bush’s 2007 budget proposal not only fails to make these pro-jobs programs a priority, it once again calls for major cuts and consolidation in the nation’s major employment and training programs.

Key features of the Bush cut and consolidation plan for job training and employment programs include:

• Cutting total inflation-adjusted funding for job training and placement programs for adults, dislocated workers and youth, including the 70-year-old Employment Service, by 14.3 percent over the prior year and more than 31 percent since he took office. 
• Dismantling the Employment Service program—the backbone of our nation’s employment security system aimed at connecting workers needing jobs with employers who need workers.
• Eliminating funding for Workforce Investment Act (WIA) programs designed to help unemployed workers, disadvantaged adults, and at-risk young people.
• Diverting the funding for the eliminated Employment Service and WIA programs to pay for unproven individual Career Advancement Accounts (CAAs) that will provide less, not more, help to workers in need.
• Imposing changes to the federal-state unemployment insurance (UI) program that will undermine the safety net for unemployed workers and lead to the contracting out of important UI functions.
• Cutting, once again, funding for Trade Adjustment Assistance programs that benefit workers who have lost their jobs due to trade.

WIA and Employment Service Programs

Cuts to Current WIA and Employment Service Programs

• Total inflation-adjusted cuts during the Bush Administration:  - $2.4 billion (-31.3 percent)
• Total inflation-adjusted cuts compared to FY 2006: -$895 million (-14.3 percent)

The U.S. Department of Labor invests in job training and provides assistance to unemployed workers through a number of important broad-based and targeted programs administered by the Employment and Training Administration.  The president’s fiscal year (FY) 2007 budget will eliminate several of these programs and cut the total commitment to all training and assistance programs immediately.  Additionally, the president is asking Congress to eliminate many of the remaining programs and divert the reduced funding amounts to new individual Career Advancement Accounts.

Chart
See chart for an overview of the funding cuts to WIA and employment service programs.

If his FY 2007 budget is adopted, President Bush will have cut inflation-adjusted investment in training and assistance programs to help unemployed and underemployed workers by 31.3% ($2.4 billion) since he took office, including cuts in WIA programs for adults and dislocated workers and youth as well as the Employment Service.

Despite the administration’s recent rhetoric about increasing job training resources, the president’s FY 2007 budget cuts total inflation-adjusted funding for job training and Employment Service programs by $895 million (14.3 percent) compared to FY 2006, even taking into account those few programs for which additional or restored funding is proposed.  

• For example, funding for state dislocated worker grants under WIA that provide Rapid Response, job search and training assistance to companies and workers facing plant closings would be slashed by 27 percent in 2007 (inflation adjusted).The Bush budget also calls for reducing the WIA National Emergency Grants that have been so important in helping workers affected by natural disasters such as Hurricanes Katrina and Rita by 16.4 percent compared to FY 2006.  WIA programs that help disadvantaged adults, including welfare recipients, are cut by $163 million in real dollars in the FY 2007 budget.

• Our nation’s Employment Service, the bedrock of our workforce system, helped over 14 million workers look for jobs in 2005.  The Bush budget calls for reductions of $42.5 million in real dollars in FY 2007, further eroding the ability of our workforce system to help employers seeking workers and workers seeking jobs.

These cuts are having and will have a profound impact on disadvantaged and unemployed workers.

Impact of Cuts on Disadvantaged Workers

Our nation’s workforce training programs are often the last resort for low income and disadvantaged workers who have been neglected by their employers and the underfunded student financial aid system.

Unfortunately, since President Bush has taken office the number of adults who have received WIA training has declined and, of particular concern, the share of training recipients who are low-income adults has declined. From 2000 to 2003 there was a 14-percentage-point decline in the share of low-income, disadvantaged adults receiving training, from 82.4 percent in 2000 to 68.4 percent in 2003.[i]

Impact of Cuts on Unemployed and Dislocated Workers

The president’s continued cutting of job training funding and assistance for unemployed workers compounds the labor market problems working families have experienced since 2001 and worsens their economic anxiety.  Contrary to official rhetoric that paints a picture of a strong economy, American workers have faced a weak job market, increased long-term unemployment and significant declines in living standards for those who have been displaced.

Millions of Americans who want to work do not have jobs.  Seven million Americans are officially unemployed—1 million more than when President Bush took office—and 5.1 million additional people want jobs, but are not counted among the unemployed.  Another 4.1 million people work part time because of the weak job market. The unemployment rate would be 8.4 percent if those workers were included in the unemployment rate.

Long-term unemployment has nearly doubled under President Bush.  About one in six unemployed workers (1.2 million workers) has been jobless for more than 26 weeks, the maximum number of weeks for receiving regular unemployment insurance benefits.

Displaced workers continue to struggle.  The consequences of job loss are profound for workers and their families.  The majority—particularly those who lose long-held jobs—will see their living standards decline substantially—some permanently.  Those laid off from good-paying manufacturing jobs suffer particularly long lasting economic hardship.

• Two-thirds (66.3 percent) of the long-tenured workers (3+ years) who lost jobs between 2001 and 2003 but subsequently found a full-time job were being paid less than that they had been at their prior job.  Over one-third (36.4 percent) took a pay cut of 20 percent or more at their new job.
• In the manufacturing sector, almost one in ten long-tenured workers (9.8 percent) lost a job between 2001 and 2003.  Almost three quarters (73.2 percent) of re-employed full-time manufacturing workers experienced a real-wage cut at their new job, and nearly 40 percent saw their inflation-adjusted weekly earnings drop 20 percent or more.[ii]

Funding for training unemployed workers is declining.  Despite the jobs crisis of the last few years, the Bush administration has invested less in helping unemployed workers find new positions.  In 2004 only 94,672 dislocated workers received training through WIA, compared to 102,415 in 2003.  Under the president’s FY 2007 budget, average inflation-adjusted expenditures for WIA job training and job search assistance will be $136 less per dislocated worker than in FY 2001, when unemployment was markedly lower.

Career Advancement Accounts (CAAs)

• FY 2006 funding for WIA and Employment Service and related programs to be replaced by CAAs: $4,033,900,000
• Proposed FY 2007 Funding for CAAs: $3,412,600,000
• Total cut: -$621,300,000

The Bush administration has asked Congress to eliminate current WIA programs for adult workers, dislocated workers and youth as well as the Employment Service and transfer the funding for those programs to state block grants to pay for unproven Career Advancement Accounts (CAAs).  Under President Bush’s plan, each eligible individual will receive a maximum yearly CAA contribution of $3,000 but no longer have access to the more valuable existing training programs and employment services.

CAAs steal resources from current programs.  The Bush Labor Department is shifting existing WIA and Employment Service funds to create CAAs despite the fact that earlier legislative proposals to establish similar accounts have gone nowhere in Congress.  This is the fourth budget in which President Bush has proposed eliminating these worker benefits and creating individual accounts.

CAAs provide fewer benefits.  The benefit from CAAs would be very limited, and workers receiving CAAs would actually experience reduced rather than expanded services and benefits relative to what they get now.

• Current law imposes no caps on reemployment services or job training services unemployed workers may access through the WIA system.  For the first time, CAAs create a $3,000 federal cap on the combined amount of reemployment services and job training.  Under the current WIA system, states offer job training help through training accounts of up to $10,000 with an average value of roughly $5,000 to $6,000.[iii]
• Bush Administration officials have touted CAAs as a program that will triple the number of workers receiving training.  This maneuver is really a cruel ruse. Fewer dollars will be spread among more workers–leaving workers with less funding and less help.
• Workers who chose WIA individual training accounts under current law receive intensive counseling and support services so they can make appropriate training choices.  Such intensive counseling and support services would be eliminated under the Bush CAA proposal.

CAAs eliminate Rapid Response Programs for companies and displaced workers.  Rapid Response services under the Workforce Investment Act would be eliminated in favor of CAAs.  States and communities would no longer have the resources to provide early intervention assistance to companies and workers facing mass layoffs and plant closings.

CAAs will severely restrict industry and workplace based training programs.  Current WIA funding can be used to support sector partnerships with employers, unions and educational institutions to identify skill needs and develop customized training programs that meet worker and employer needs.  The Bush proposal requires that at a minimum states spend 75 percent of their funding on CAA individual training vouchers, which would preclude the use of these funds to support work-based training programs.

CAAs are a back door to school vouchers.  Current WIA programs for high school dropouts, the homeless and runaway youth would be eliminated. The in-depth counseling and linkages to alternative education and training programs would be eliminated. Instead, these most vulnerable at-risk youth would be given CAA vouchers to purchase education and/or training with no support systems available to ensure they connect with quality secondary and post-secondary education programs.

Cuts to the Trade Adjustment Assistance Programs

• Total inflation-adjusted TAA cuts since FY 2004: -$589,537,523 (-38.6 percent)
• Total inflation-adjusted TAA cuts compared to FY 2006:  -$48,602,390 (-4.9 percent)

Rrenewed in 2002, and combined with the NAFTA Transitional Adjustment Assistance Program, the new Trade Adjustment Assistance (TAA) program  combined NAFTA-TAA and TAA, and significantly increased the number of workers potentially eligible for training and, income support when they lose jobs because of international trade.  It also extended some health care coverage to eligible participants.  Lack of resources and ineffective administration, however, have resulted in significant problems in the adequacy and efficacy of the program.  The President’s FY 2007 budget proposal will only worsen those problemsand lacks The The. 

The Bush Administration has presided over the worst job growth since the Hoover Administration more than 70 years ago. The manufacturing sector, a source of some of our nation’s best jobs, has lost nearly 2.9 million jobs since the start of the Bush Administration.

Bad trade policies are shrinking the middle class and fostering the flight of good jobs overseas. The TAA program was designed to provide income support and training to workers who lose their jobs due to trade, but failure to adequately fund it and poor administration of it are crippling the program’s capacity to ameliorate the impact of trade policies on working families.program,

The demand for TAA services is increasing. The number of workers in TAA training doubled from 2001 to 2004 (from 24,843 to 50,929) and the number of workers receiving Trade Adjustment Allowances almost tripled during that same period – from 31,459 to 81,246.[iv]  Yet, many states exhaust their training funds before the end of each fiscal year, precluding numerous workers from being able to take advantage of training programs to which they are entitled.  According to GAO, 35 states expected that available TAA training funds for FY 2004 would not cover the amount they would obligate and spend for TAA-eligible workers (18 states estimated the gap at over $1 million).

TAA resources are decreasing.  With the country facing large trade-related job losses, President Bush should be calling on Congress to amend the TAA legislation to provide for greater assistance for trade-affected workers.  Instead, his FY 2007 budget proposes inflation-adjusted cuts of $48,602,390 in TAA training and benefits funding—a nearly five percent cut in funding over the prior year and an almost two-fifths reduction since FY 2004. 

Despite the increase in trade related layoffs, TAA certifications have dropped by half since 2002.  Despite the increasing need for TAA, the Bush Labor Department has consistently declined to push for adequate resources or to conduct effective outreach to train state agencies and ensure that workers are aware of and receive needed benefits. 

• The number of TAA certifications has declined by half.  In 2002 there were 243,957 workers certified for TAA. In 2005, only 116,586 workers were certified for TAA
• This is at odds with the loss of nearly 2.9 million manufacturing jobs over the same period and the explosive growth in the nation’s trade deficit, which will likely reach well over $700 billion in 2005.

There is little question that the TAA certification numbers reflect DoL’s inadequate program administration.  In the past 5 years, courts have entered numerous orders directing the Department of Labor to reconsider erroneous denials of TAA income and training assistance to hundreds of trade-affected workers.  Workers have suffered protracted delays in getting assistance as a result of these errors.  Many more are too discouraged or lack the resources to pursue appeals.

Help for secondary workers is minimal.  The new TAA program was expanded to cover secondary workers, such as parts manufacturing workers who lose their jobs when a client-manufacturing firm moves its operations to another country.  Poor program design and inadequate guidance to identify affected workers, however, have meant that few secondary workers are receiving benefits. 

• Just over 2 percent of workers covered by TAA were secondary workers in FY 2003. 

• No state has developed procedures to identify workers who are secondarily affected by a trade-related layoff in another state.[v]

New Funding for the Community College Program Comes At the Expense of Other Job Training Programs

The Bush budget proposes an inflation-adjusted increase of $23.5 million in funding for training programs administered by community colleges.  While community colleges undoubtedly need more resources, this additional funding is paid for with cuts to WIA adult programs, leaving this important program severely short of funds to help hard-pressed workers and communities.

The proposed funding is also grossly inadequate when measured against the needs of a nationwide community college system that until recently was staggering under the weight of the worst state budget crises in 60 years. States dealt with their crises by cutting funds for community colleges and universities, leading to hikes in tuition and fees, reduced admissions and more limited course offerings

Proposed Cuts and Policy Changes Weaken our Nation’s Employment Security and Unemployment Insurance Safety Net

Inflation-adjusted Cuts in Employment Service Programs Compared to FY 2006

• Grants to States: -$42.6 million
• National Activities: -$1.2 million
   

The Employment Service and Unemployment Insurance programs are federal-state partnerships created more than 70 years ago to provide income protections and job search assistance to unemployed workers.  The federal government funds the Employment Service to match job seekers to employers looking for workers and provides the UI system with administrative resources.  The president’s 2007 budget cuts Employment Service programs and proposes policy changes that would erode the integrity of the UI system.

Large cuts in Employment Service programs are proposed for FY 2007.  President Bush is proposing to cut Employment Service programs that support state Job Service activities, national activities and one-stop/labor market information programs.  (See Chart 1, above.)  These inflation-adjusted cuts will total $63 million in FY 2007.  Such cuts will significantly impair the ability of our nation’s workforce system to provide career information to jobless workers and reduce the capacity to link effectively employers and jobseekers.

Eliminating the U.S. Employment Service will hurt millions of jobless workers.  The Employment Service is a 70-year-old federal-state partnership that helps match job seekers to employers looking for workers and whose operation is fundamental to the U.S. labor market.  Despite consistent budget cuts, the Employment Service provides help to millions of job seekers.  In 2005, the Employment Service helped 14 million workers look for jobs.

• President Bush’s plan to eliminate the Employment Service will undermine the principle of an unbiased, nonpartisan agency to administer job referrals and assist in the payment of UI benefits
• The president’s plan will lead to the privatization and contracting out of vitally important employment security functions, thereby compromising control over and accountability for federal resources.

Proposed re-employment and eligibility assessments privatize important UI functions.  The Bush administration proposes to shift responsibility for major unemployment insurance activities, such as eligibility assessments, to the WIA One-Stop System, using $30 million in proposed funding. 

• This move would transfer resources available through the Unemployment Insurance Trust Fund to privatized WIA operations, setting the stage for outsourcing of UI administration to private contractors instead of reserving them to public agency staff. 

Proposals to prevent and detect UI fraud must be balanced.  Monitoring the UI system to ensure that jobless workers receive their UI benefits and employers pay UI taxes is appropriate.  

• Erroneous overpayments of benefits to workers and deliberate or negligent failure to make employer contributions on behalf of covered employees, along with erroneous underpayments and mistaken denials should be tracked and corrected. 
• The Bush FY 2007 budget, however, lacks important details on how it plans to achieve a balanced approach that addresses workers, employers and programmatic error. 

• At a time when UI administrative budgets are regularly cut, states should receive the full administrative resources necessary to help detect employer fraud and claimant overpayments. 
• The Department of Labor should provide funding to states to track down employers who are cheating.  It should give states more tools to detect fraud on the part of employers and their accounting firms, including employer misclassification of employees as independent contractors. 

• The Department of Labor should not require states to use the federal income tax system to recover overpayments, as the FY 2007 budget proposes.
• Many states have implemented overpayment collection systems that reflect the unique circumstances of the overpayment and individual workers’ financial situations.  Mandating reliance on the federal tax system would undermine these carefully tailored programs and unfairly penalize workers. 

• The president’s plan to allow states to use private collection agencies to collect “uncollectible” fraud overpayments and delinquent employer taxes is also deeply troubling. 
• Privatizing the collection function, coupled with the powerful financial incentive the budget proposes for private collection agencies, will lead to abusive and potentially fraudulent collection practices that compromise the privacy of UI claimant and employer records and undermine the work of the state workforce agency. 
• States should receive adequate resources for collection activities, and they should be allowed to dedicate a portion of their overpayment funds to support increased detection and auditing functions.

Labor Department Programs to Audit, Investigate and Prosecute Unions

As it has since FY 2002, the Bush Labor Department seeks funding increases in its FY 2007 budget for programs that audit, investigate and prosecute unions.  Increases would go to the department’s Office of Labor Management Standards (OLMS), which has union oversight and investigation authority, receives and publishes statutorily required union reports, sets standards governing union elections and finances and conducts both civil and criminal investigations into unions’ finances and elections.  The Department has also asked for increased funding for its Office of Inspector General (OIG). 

Office of Labor–Management Standards (OLMS)

The FY 2007 budget proposal of $52.4 million would provide a $6.7 million increase in funding for OLMS.  This represents a 14.6 percent increase from FY 2006 (a 12.1 percent increase in real dollars) and an increase of 71.8 percent from the beginning of the first Bush administration in FY 2001 (a 46.9 percent increase in real dollars). 

The significant increase in proposed funding for the FY 2007 OLMS budget highlights the priority placed by the Bush administration on investigating and prosecuting unions.  Overall, the Bush administration has proposed an inflation-adjusted 7.3 percent cut in discretionary spending for the Department of Labor, and OLMS’s 12.1 percent increase in inflation-adjusted funding far outstrips proposed changes in funding for other important enforcement agencies and functions. 

• At a time when workers face serious concerns about their retirement and health security, enforcement of programs protecting workers’ pensions and health benefits would receive only a 5.9 percent increase in FY 2007 funding, in inflation adjusted terms. 
• Funding for workers’ safety and health enforcement would increase by only 2 percent, and funding for enforcement of mine workers safety and health in coal mining would increase by only 0.6 percent, after accounting for inflation. 

The FY 2007 budget request would increase the number of OLMS Full Time Equivalent (FTE) positions by 40 percent over its FY 2001 level, from 290 in FY 2001 to 406 in FY 2007.  In comparison, MSHA staffing will have been cut by 9.4 percent over the same period, from 2,357 FTEs in FY 2001 to 2,136 FTEs in FY 2007. 

Office of Inspector General (OIG)

The FY 2007 budget proposal would increase OIG funding by $2.7 million dollars, to $74.1 million, up from $71.4 million in FY 2006.  The FY 2007 proposal represents a rise of 15.8 percent since FY 2001, in dollars adjusted for inflation.  While the president’s FY 2007 budget would not change the number of positions (450) over the prior year, OIG has received an additional 22 FTEs since FY 2001, a 5.1 percent increase.

Wage and Hour: Basic Labor Standards Enforcement

The Wage and Hour Division enforces basic worker protection laws that cover virtually every American workplace and apply to nearly all workers.  Enforcement responsibilities include the nation's minimum wage, overtime, child labor and other employment standards under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act, the Migrant and Seasonal Agricultural Worker Protection Act, certain provisions of the Immigration and Nationality Act and other basic worker protection statutes.

The FY 2007 budget request for the Wage and Hour Division is $177.6 million [vi], an increase ($11.9 million) in current dollars over the FY 2006 appropriation and an $8.3 million increase when adjusted for inflation.  However, the FY 2007 budget request is still lower than the FY 2001 funding level, after accounting for inflation.  The FY 2007 budget request is 0.3 percent less than the FY 2001 funding level. [vii]

Although the Bush administration requests an increase of 39 FTEs, this request for 1,339 FTEs in FY 2007 represents a 12.4 percent cut in staffing over FY 2001 levels, when staffing was at 1,528 FTE positions. 

The Wage and Hour Division budget request does not appear to include any additional funds to increase enforcement in the Gulf Coast region, where there have been many troubling reports of wage and hour violations by contractors performing post-Katrina reconstruction work.  According to the Southern Poverty Law Center’s Immigration Justice Project, which has filed class action lawsuits on behalf of thousands of immigrant workers employed by these contractors, the Department of Labor’s enforcement efforts in New Orleans “are completely ineffective.”(Link to the SPLC news release at: http://www.splcenter.org/legal/news/article.jsp?aid=160&site_area=1  ) 

The Labor Department's FY 2007 budget calls for increased civil penalties for willful violations of child labor laws.  Workers need far stronger enforcement of all aspects of the FLSA, including minimum wage and overtime rules.  Unfortunately, the Bush Administration has taken a narrow and selective approach to this critical issue.

OFCCP: Federal Contractor Equal Employment Opportunity

The Office of Federal Contract Compliance Programs (OFCCP) is responsible for administering a range of laws and executive orders that prohibit employment discrimination and require affirmative action by businesses contracting with the federal government. Collectively, these laws ban discrimination based on race, sex, religion, color, national origin, disability or veteran status. Bush proposes to fund OFCCP at $83.7 million in FY 2007. The FY 2007 proposal is a slight increase over the FY 2006 appropriation but a real dollar cut of $5.5 million from the beginning of President Bush's first term in FY 2001. The budget proposes 670 Full-Time Equivalent (FTE) employees for FY 2006, a 17.6 percent staffing cut since FY 2001, when OFCCP had 813 FTE employees.

The Bush Budget for Worker Safety and Health Programs