[Federal Register Volume 71, Number 244 (Wednesday, December 20, 2006)]
[Proposed Rules]
[Pages 76558-76569]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21766]



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Part V





Department of Labor





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Employment and Training Administration



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20 CFR Parts 652, 661, et al.



Workforce Investment Act Amendments; Proposed Rule

  Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / 
Proposed Rules  

[[Page 76558]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Parts 652, 661, 662, 663, 664 and 667

RIN 1205-AB46


Workforce Investment Act Amendments

AGENCY: Employment and Training Administration (ETA), Labor.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Labor (DOL) is issuing a Notice of Proposed 
Rulemaking to implement several important policy changes to the 
Workforce Investment Act and Wagner-Peyser Act Regulations in volume 20 
of the Code of Federal Regulations (CFR). Through these regulations, 
the Department implements these two laws and provides guidance for 
statewide and local workforce investment systems that have as their 
goals increasing the employment, retention and earnings of 
participants. By achieving these goals, the systems strive to improve 
the quality of the workforce, meet business needs for a skilled 
workforce, help participants achieve their career aspirations, reduce 
welfare dependency, and enhance the productivity and competitiveness of 
the nation. The changes set forth in this proposed rulemaking address 
some long-standing issues that have arisen under the current WIA 
regulations, such as problems associated with the large size of State 
and Local Workforce Investment Boards; the sequence of core, intensive 
and training services; the governor's authority over eligible training 
providers, and the availability of Individual Training Accounts to 
youth. In addition, the changes set forth in this proposed rulemaking 
address the method of delivery of Wagner-Peyser Act-funded services.

DATES: To be assured of consideration, comments must be in writing and 
must be received on or before February 20, 2007.

ADDRESSES: Electronic mail is the preferred method for submittal of 
comments. Comments by electronic mail must be clearly identified as 
pertaining to this proposed rulemaking and sent to 
[email protected]. Electronic comments may also be submitted 
through the Federal eRulemaking portal at http://www.regulations.gov by 
following the directions at that site. Brief comments (maximum of five 
pages) clearly identified as pertaining to this proposed rulemaking may 
be submitted by facsimile machine (FAX) to (202) 693-2766. Please note 
that this is not a toll-free number.
    Written comments should be sent to Ms. Maria Flynn, Administrator, 
Office of Policy Development and Research, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room N5641, Washington, DC 20210. Please be advised that U.S. mail 
delivery in the Washington, DC area has been slow and erratic due to 
security concerns. Commenters should consider the possibility of delay 
when deciding to submit comments by mail. If you would like to receive 
notification that we have received your comments, you should include a 
self-addressed stamped postcard.
    Comments received will be available for public inspection during 
normal business hours at the above address. Persons who need assistance 
to review the comments will be provided with appropriate aids such as 
readers or print magnifiers. Copies of this rule will be made 
available, upon request, in large print and electronic file on computer 
disk. Provision of the rule in other formats will be considered upon 
request. To schedule an appointment to review the comments and/or 
obtain the proposed rule in an alternate format, contact Maria Flynn's 
office at (202) 693-3700 (VOICE) or 887-889-5627 (TTY/TDD). Please note 
that these are not toll-free numbers. You may also contact Ms. Flynn's 
office at the addresses listed above.

FOR FURTHER INFORMATION CONTACT: Ms. Maria Flynn, Administrator, Office 
of Policy Development and Research, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room N-5641, Washington, DC 20210, Telephone: (202) 693-3700 (VOICE) or 
887-889-5627 (TTY/TDD) Please note that these are not toll-free 
numbers.

SUPPLEMENTARY INFORMATION: The preamble to this proposed rule is 
organized as follows:

    I. Background--provides a brief description of the statutory and 
regulatory background of this proposed rule.
    II. Overview of the Proposed Amendments--describes the 
amendments that would be accomplished by this proposed rule and 
explains the reasons for the amendments.
    III. Regulatory Procedure--sets forth the applicable regulatory 
requirements.

I. Background

    The Workforce Investment Act (WIA), enacted in August 1998, 
reformed Federal job training programs and created a new, comprehensive 
workforce investment system. WIA was a groundbreaking piece of 
legislation that replaced the Job Training Partnership Act and amended 
the Wagner-Peyser Act. WIA sparked improvements in the delivery of 
employment and training services nationwide, but after a number of 
years of operation it has become clear that changes to regulations and 
legislation are needed The authorization of appropriations for WIA 
expired on September 30, 2003. As discussed below, during the 108th 
Congress legislation to reauthorize and reform WIA was considered but 
not enacted, and again in the 109th Congress, legislation was 
considered and is still pending. Because Congressional action on 
reauthorization reforms has been delayed, the Department of Labor 
decided to move forward with limited reforms that could be undertaken 
without changes in the statute. More significant reforms will require 
Congressional action.
    For three years, the Bush Administration has been working with 
Congress to reform the workforce investment system by advancing changes 
that would: (1) Streamline services in order to promote more effective 
programs; (2) reduce bureaucracy and duplicative infrastructure in 
order to achieve cost savings; and (3) dedicate more funds directly to 
worker training. While these critical reforms have not been enacted, 
the realization of all three goals is vital to assuring that the 
workforce investment system is an asset in assisting workers and 
fostering U.S. economic competitiveness in a global environment.
    Anticipating reauthorization, in 2002 and early 2003, the 
Department of Labor undertook extensive consultations with stakeholders 
and the public on how the workforce investment system could be 
strengthened to address the challenges of globalization, technological 
advances, and the demographic changes of the American workforce. Based 
on this and other input, the Department developed the Administration's 
WIA reauthorization proposal to build on the reforms that were 
contained in the Act in order to make WIA even more effective and 
responsive to the needs of local labor markets, to strengthen the One-
Stop Career Center system to better serve businesses and individuals 
with workforce needs, and to promote further innovation. The 
Administration's reauthorization proposal addressed six key areas:

[[Page 76559]]

     Creating a more effective governance structure;
     Strengthening the One-Stop Career Center system;
     Improving comprehensive services for adults;
     Creating a targeted approach to serving youth;
     Improving performance accountability; and
     Promoting State flexibility.
    Following hearings and Committee action, both the House of 
Representatives and the Senate passed versions of WIA reauthorization 
legislation, incorporating many features of the Administration's 
proposal. A House-Senate conference to resolve differences between the 
two bills was not convened during the 108th Congress. In the 109th 
Congress, WIA reauthorization legislation passed the House in 2005 and 
the Senate in 2006, but there has been no further action. Congress 
appropriated funds for WIA activities in the FY 2004, FY 2005 and FY 
2006 Department of Labor Appropriations Acts, but substantive reforms 
have not been made. In addition, language in the appropriations act has 
proscribed the Department from amending through regulation (until WIA 
reauthorization legislation is enacted): (1) The definition and 
functions that constitute administrative costs under WIA, and (2) the 
procedure for re-designation of local areas.
    This proposed rulemaking addresses changes that can be made under 
current law. Further reforms that require statutory changes are still 
needed, and the Administration is committed to working with Congress to 
achieve further reforms. In his FY 2007 Budget Request, the President 
has proposed to establish Career Advancement Accounts and make other 
reforms to WIA. Career Advancement Accounts are self-managed accounts 
of up to $3,000 (renewable for a second year) that individuals may use 
to pay for expenses directly related to education and training that are 
necessary to obtain or retain employment or advance in their careers. 
Career Advancement Accounts are expected to triple the number of 
workers trained under WIA.
    This rulemaking does not implement changes to WIA made by the Trade 
Adjustment Assistance Reform Act of 2002. These changes, which pertain 
to Rapid Response and National Emergency Grants (particularly for 
Health Coverage Tax Credit grants) will be addressed in a separate 
rulemaking. Other technical changes will be made as part of a 
consolidated effort to update all Department of Labor regulations.
    The changes set forth in this proposed rulemaking address some 
long-standing issues under the current WIA regulations, such as 
problems associated with the large size of State and Local Workforce 
Investment Boards; the sequence of core, intensive and training 
services; the governor's authority over eligible training providers, 
and the availability of Individual Training Accounts to youth. In 
addition, the changes in this proposed rulemaking address the method of 
delivery of Wagner-Peyser Act-funded services.

A. Delivery of Wager-Peyser Act-Funded Services

1. Integration of Wagner-Peyser Act Funded Services at One-Stop Career 
Centers
    The Secretary is charged with assisting in the coordination and 
development of the public labor exchange which is required by sec. 7(e) 
of the Wagner-Peyser Act (as amended by WIA sec. 305) to be carried out 
as part of the One-Stop service delivery system. To this end, current 
Wagner-Peyser Act regulations, at 20 CFR 652.202, state that local 
Employment Service offices may not exist outside the One-Stop service 
delivery system, but provide States with flexibility to permit 
Employment Service offices to operate as affiliated sites provided that 
certain conditions are met. The intent of the law and regulations is to 
closely tie Employment Service offices and services to One-Stop Career 
Centers. However, in some states the two offices continue to exist 
side-by-side; sometimes with very little coordination. Through informal 
surveys conducted of ETA staff, we found that 19 States still operate 
stand-alone Employment Services offices and 13 States operate parallel 
systems to a substantial degree. Such disconnects at the local level 
result in confusion for individuals and employers and promote 
duplication of effort and an inefficient use of resources.
    These problems demonstrate that our original interpretation of sec. 
7(e) of the Wagner-Peyser Act did not effectively integrate Wagner-
Peyser Act-funded labor exchange and reemployment services with WIA-
funded One-Stop Career Center services. To address this, we propose to 
more definitively mandate that Employment Service offices be fully 
integrated into comprehensive One-Stop Career Centers. Therefore, this 
NPRM modifies Sec.  652.202 to make clear that local Employment Service 
offices must be located in comprehensive One-Stop Career Centers, and 
that the customer employment services under the Wagner-Peyser Act must 
be fully integrated with services in comprehensive One-Stop Career 
Centers. In addition, we propose to amend Sec.  662.100 to provide that 
stand-alone Employment Service offices will no longer qualify as 
affiliated One-Stop Career Centers.
    Employment Service offices which are operating apart from 
comprehensive One-Stop Career Centers will no longer be allowed. States 
and Local areas will need to look at the distribution of services in 
their area and consider options such as moving those offices into 
comprehensive One-Stop Career Centers or expanding the services of 
Employment Service offices into comprehensive One-Stop Career Centers. 
Real property requirements may be an issue in some areas.
    Given that many Wagner-Peyser Act-funded reemployment services are 
also authorized as core services under WIA, better integrating 
Employment Service services into the One-Stop Career Centers under 
these regulations will provide States and local areas with the 
opportunity to more efficiently manage the costs of such services and 
eliminate duplication in order to free up other funds for intensive and 
training services.
2. Use of Section 7(c) Funds
    This NPRM makes a technical change to Sec.  652.205(b)(1) by adding 
the word ``otherwise'' to more closely track the statutory language in 
sec. 7(c) of the Wagner-Peyser Act. The statute provides that sec. 7(c) 
funds may be used to provide additional funds to activities carried out 
under WIA if certain conditions are met; one of which is that the 
program ``otherwise'' meet the requirements of Wagner-Peyser and WIA. 
This NPRM adds the term ``otherwise'' to the regulation to avoid a 
mistaken conclusion that the regulation is intended to differ from the 
statutory standard.
3. Merit Staffing
    In the interest of providing maximum flexibility to all States, and 
to encourage innovative and creative approaches to delivering 
employment services with limited resources, we are changing our 
interpretation of the Wagner-Peyser Act to extend the option of using 
non-merit-staffed employees to all States. Current Wagner-Peyser Act 
regulations, at Sec.  652.215, require that job finding, placement, and 
reemployment services funded under the Wagner-Peyser Act be delivered 
by State merit-staffed employees. The Wagner-Peyser Act does not 
explicitly impose this requirement, but rather the Secretary of Labor

[[Page 76560]]

previously issued the requirement through the exercise of the 
Secretary's authority under sections 3(a) and 5(b)(1) of the Act to 
develop and prescribe minimum standards of efficiency for State public 
Employment Services and promote uniformity in their administrative 
procedure. We have reconsidered the necessity of this requirement. 
States operating demonstration projects using non-merit-based staff 
systems have shown positive performance outcomes and have provided 
similar quality services under WIA using non-merit-staffed employees. 
While we continue to promote uniformity in administrative procedure, we 
find that variation from delivery by State merit-staffed does not 
negatively affect the effectiveness and efficiency of the Wagner-Peyser 
Act-funded Employment Service program.
    Under our authority to develop and prescribe minimum standards of 
efficiency for the provision of State public Employment Services, we 
will no longer require that these services only be delivered by State 
merit-staffed employees. Accordingly, we propose to remove 20 CFR 
652.215 and 652.216 and replace them with a new Sec.  652.215 that 
specifically authorizes States to deliver Wagner-Peyser Act-funded 
Employment Services through methods in addition to State merit-staffed 
delivery systems.
    The requirement under the current regulation is reflected in Office 
of Personnel Management (OPM) regulations under the Intergovernmental 
Personnel Act, which identifies the Wagner-Peyser Act as among the 
Federal programs containing statutory merit-staffing requirements. (5 
CFR part 900, subpart F, Appendix A). Because we no longer interpret 
the Wagner-Peyser Act as containing a mandatory merit-staffing 
requirement, there are no longer any functions and duties relating to 
the Wagner-Peyser Act to be transferred to the Director of OPM under 
the sec. 208 of the Intergovernmental Personnel Act (Pub. L. 91-648). 
We have consulted with OPM on our determination to no longer require 
that Wagner-Peyser Act-funded services be delivered only by State 
merit-staffed employees. The Director concurs that this determination 
is within the scope of the Secretary's authority to administer the 
Wagner-Peyser Act. The OPM intends to amend Appendix A to remove the 
Wagner-Peyser Act from the list of programs identified as having a 
merit system of personnel. Guidance on services to veterans provided 
under 38 U.S.C. Chapter 41 will be issued separately by the Office of 
the Assistant Secretary for Veterans' Employment and Training Service.
    The Department made this determination based on a number of 
factors. Eliminating merit staffing requirements provides maximum 
flexibility to all States, and encourages innovative and creative 
approaches to delivering employment services with limited resources. 
The policy of requiring all Wagner-Peyser services to be delivered by 
State merit-staffed employees is an anachronism that creates rigidity 
and severely limits flexibility in the delivery of services. It does 
not take into account the intended integration of employment services 
into the One-Stop delivery system, nor the wide variety of State and 
local arrangements for delivering these services. This change allows 
States to deliver services in the manner they feel is most effective 
and efficient. Some States have taken the initiative to achieve greater 
flexibility already.
    Three demonstrations have showed that it is possible to deliver 
Wagner-Peyser services efficiently and effectively using non-State 
merit-staffed employees. Under section 3(a) of the Wagner-Peyser Act, 
beginning in the early 1990s, the Department authorized demonstrations 
of the effective delivery of Wagner-Peyser Act services utilizing non-
State agency employees in the States of Colorado, Massachusetts, and 
Michigan. These three demonstrations were permitted as exceptions to 
the merit staffing regulations in order to assess the effectiveness of 
alternative delivery systems--specifically, whether using non-State 
agency employees was an effective and efficient way to deliver Wagner-
Peyser services. While a formal evaluation of the three Wagner-Peyser 
demonstrations has not been completed, the Department believes the 
three demonstration states are performing successfully based on their 
performance outcomes and the absence of customer or stakeholder 
complaints. Performance for the three states for the Program Year 
ending June 30, 2005 was similar to the national average performance 
under Wagner-Peyser.
    In addition, the Department has found that similar services are 
effectively delivered through systems without merit staffing 
requirements. States have had experience administering similar services 
through non-merit staff personnel dating back to 1982 under the Job 
Training Partnership Act and WIA. WIA formula programs provide similar 
services using non-merit staffed employees (WIA has no merit-staffing 
requirement). Examples of similar services include: job search 
assistance, job referral and placement assistance for job seekers, re-
employment services to unemployment insurance claimants, and 
recruitment services to employers with job openings. WIA outcomes for 
the Adult and Dislocated Worker Programs for the Program Year ending 
June 30, 2005 were higher than those for the Wagner-Peyser program. 
Although WIA and Wagner-Peyser placement and retention rates might not 
be directly comparable given the differences in the populations served 
under the programs, the data do show that non-merit staff WIA employees 
are effectively delivering similar services.
    Given the demonstrations have shown that efficient administration 
of the Employment Service program can be achieved through alternate 
service delivery systems, and that under a similar program, similar 
services are delivered by non-merit staff, the Department believes it 
should provide maximum flexibility to the States by changing our 
interpretation of the Wagner-Peyser Act to extend the option of using 
non-merit-staffed employees to all States. States could, at their 
discretion, continue to have merit staff employees carry out such 
activities.

B. Changes to WIA Regulations

Part 661--Statewide and Local Governance of the Workforce Investment 
System Under Title I of the Workforce Investment Act
    Part 661 establishes the governance structure for the workforce 
investment system at the Federal, State and local levels. This NPRM 
proposes changes to this part to provide States and local areas with 
additional flexibility to design workforce investment systems that are 
demand-driven and are responsive to the needs of business and workers.
1. Role of the Department of Labor as the Federal Partner
    Section 661.110 describes the Department of Labor's role in 
providing leadership and guidance to the workforce investment system. 
The proposed rule would revise this section to emphasize that the 
workforce investment system should be demand-driven, meeting the needs 
of businesses and workers for high-demand occupations in the 21st 
century, and to emphasize the linkage of resources devoted to 
employment, education, and economic development.
2. State and Local Workforce Investment Board Membership
    We propose to amend the State Workforce Investment Board membership 
requirements to improve

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coordination between the workforce investment system and the State 
Vocational Rehabilitation (VR) program. Current WIA regulations allow 
another State Board member to represent VR (if, for example, the VR 
program falls under another umbrella agency). Section 661.200(h)(3) 
would be amended to specify that the director of the State VR program 
must be a member of the State Board if that director is not on the 
State Board as a lead official of a One-Stop partner program. This 
emphasizes the importance of having the VR program represented on the 
State Board regardless of the organizational arrangements in a 
particular State. VR is a key One-Stop partner program that shares 
common employment-related goals as part of the nation's workforce 
investment system. It is critical that programs work together in a 
seamless, coordinated manner to maximize Federal resources to serve 
individuals with disabilities. This coordination would be facilitated 
by VR representation on the State Board. The rule would also specify 
that, in those States where there is more than one VR director, the 
director of the unit that serves the most individuals with disabilities 
in the State must be the representative unless the VR directors agree 
to permit a different VR director to be the representative. However, 
only one VR director can sit on the board. This change stems from 
growing concerns about the number of representatives on State Boards 
and their ability to operate effectively as described in the next 
paragraph. However, the appointed representative will be expected to 
provide input for both units.
    In addition, we are seeking comments regarding the ability of State 
and Local Workforce Investment Boards to function efficiently and 
effectively under existing Board membership requirements. One of the 
key concerns raised by stakeholders during the implementation of WIA 
was the size and workability of the State and Local Workforce 
Investment Boards. As a result of stakeholder briefings on the 
legislation and the comments received during the development of the 
rule currently in effect, the August 2000 Final Rule's preamble 
indicates, ``the greatest number of comments on part 661 related to the 
State and Local Board membership requirements. * * * We received a 
large number of comments about the requirement, at 661.200(b) and 
661.315(a), that at least two or more members of the State and Local 
Boards be selected to represent the membership categories. * * * The 
comments reflect a tension between the need to provide States and Local 
areas with the flexibility to keep these boards a manageable size with 
the need for specificity as to what level of participation is 
guaranteed to stakeholders.''
    ETA has continued to hear this concern through stakeholder 
briefings. For example, ETA continues to hear that there are state 
boards that have approximately 50 members and as a result are very 
difficult to manage and often have little strategic value. In many 
instances, the impact of the membership requirements has seriously 
constrained the Boards' ability to perform their duties. In particular, 
several stakeholders have reported that the provisions in Sec. Sec.  
661.200(b) and 661.315(a), specifying that the State and Local Boards 
must contain ``two or more members'' representing certain categories 
results in large, unwieldy Boards, which has made planning and 
decision-making difficult, impeding the flexibility needed to adapt to 
dynamic State and local economies. We have also been informed that the 
size of the Boards has deterred the participation of some individuals 
as Board members. In particular, the reluctance of individuals from the 
business community to serve as Board members makes it difficult to 
develop the business-led Boards envisioned by Congress. We are 
interested in exploring how many Boards are encountering these 
problems. We invite comments from stakeholders regarding their 
experience with the existing Board membership requirements and on any 
possible changes to these requirements, such as our suggestion 
described below.
    In an effort to give States and local areas the opportunity to 
reorganize their Boards to a more manageable and productive size, we 
are considering whether to reassess our determination that the law 
mandates that each Board contain two or more members representing the 
groups specified in WIA secs. 111(b)(1)(C) (iii)-(v) and 
117(b)(2)(A)(ii)-(v). We are considering whether to revise the 
regulations to require a minimum of one member representing these 
groups, to provide State and Local Boards with the option to reduce 
their size, if necessary, to improve the effectiveness of the Board.
    Current WIA regulations, at Sec.  661.200(b), specify that the 
State Workforce Investment Board must contain ``two or more members'' 
representing the categories described in WIA sec. 111(b)(1)(C)(iii)-
(v). These categories relate to: labor, youth experts, and experts in 
the delivery of workforce investment activities (including chief 
executive officers of community colleges and community-based 
organizations in the State). For Local Boards, the current WIA 
regulations, at Sec.  661.315(a), specify the Local Workforce 
Investment Board must contain ``two or more members'' representing the 
categories described in WIA sec. 117(b)(2)(A)(ii)-(v). These categories 
relate to: education entities, labor, community-based organizations, 
and economic development agencies. These regulations implement 
provisions in WIA stating that the Boards must contain 
``representatives'' of these organizations and groups.
    We are considering a change to the regulations that would delete 
language requiring that ``two or more representatives'' of these 
membership categories serve on the Board. During the public comment 
period following the publication of the WIA Interim Final Rule, a 
commenter suggested that 1 U.S.C. 1 provides legal support for the 
interpretation that WIA sec. 111(b)'s and 117(b)(2)(A)'s use of the 
word ``representatives'' does not necessarily mean that Congress 
intended to use the word as a plural of each category, but rather as a 
collective reference. The commenter suggested that 1 U.S.C. 1 provides 
that in determining the meaning of an Act of Congress, ``words 
importing the plural include the singular.'' In the final rule, we did 
not adopt the commenter's suggestion. Instead, we interpreted the 
language as signifying only the plural in an attempt to serve the 
interest of broad representation, while acknowledging the potential 
effects on Board size. 65 FR 49294, 49300 (August 11, 2000). In light 
of the several Board management problems described above, we are 
reconsidering the commenter's suggestion.
    In reassessing the meaning of the word ``representatives'' in WIA 
sec. 111(b) and 117(b)(2)(A), we are seeking comments on whether it is 
reasonable, as a matter of law and statutory construction, to conclude 
that Congress did not intend to require more than one representative 
from each enumerated category. Is there anything in the context of 
these provisions that indicates that the terms are meant only to import 
the plural, particularly when such an interpretation has resulted in 
Boards that are too large to effectively carry out their statutory 
duties? It appears that when Congress indeed intended to require 
multiple member representation it did so in a more clearly unambiguous 
manner. For example, section 111(b)(1)(B) specifically provides that 
the State legislature is to be represented by ``2 members of each

[[Page 76562]]

chamber.'' In light of this, we are considering whether to change our 
interpretation of WIA's Board membership requirements to conclude that 
they mandate a minimum of one representative of each category rather 
than two or more.
    We invite comments on whether to change Sec. Sec.  661.200(b) and 
661.315(a) to require a minimum of one representative from each 
specified membership category to give States flexibility to reduce the 
size of the Boards. Under such a rule, only one member would be 
required to represent each of these categories on the State Board and 
Local Boards. However, Boards would continue to have the option of 
appointing more than one representative in any category.
3. State and Local Workforce Investment Board Functions
    Sections 661.205 and 661.300 set forth the roles and 
responsibilities of State and Local Workforce Investment Boards, 
respectively. This NPRM proposes adjustments to these responsibilities 
to provide States flexibility to undertake more extensive and 
sophisticated policy-making activities and to provide the leadership 
needed to guide the workforce system in becoming more demand-driven and 
responsive to the needs of business. We also propose a change to 
emphasize Local Board functions with respect to oversight and 
management of Federal WIA funds.
    In particular, we propose to add a new paragraph to Sec.  661.205 
to add as a State Board function, the development and review of 
statewide policies for the One-Stop Career Center system. We propose to 
add this function as part of the Board's responsibility for developing 
and improving a statewide system of activities carried out through the 
One-Stop delivery system under WIA sec. 111(d)(2). The proposed change 
will help focus the State Board on system-wide leadership for the One-
Stop Career Center system rather than on local operations. Local Boards 
will continue to have operational responsibility for their One-Stop 
Career Centers.
    These policies may include policies for the development of criteria 
and issuance of certifications for One-Stop Career Centers, policies 
relating to the appropriate roles of One-Stop operators, approaches to 
facilitating equitable and efficient cost allocation in One-Stop 
delivery systems, and strategies for effective outreach to individuals 
and employers who could benefit from One-Stop services and policies. 
Giving the State Board responsibility for developing criteria and 
issuing certifications of One-Stop Career Centers will ensure that all 
One-Stop Career Centers in the State meet minimum State criteria, which 
in turn will promote a higher level of uniformity and consistency of 
service delivery across the State. It will also provide the State with 
explicit authority to address deficiencies where they exist. WIA sec. 
111(d)(2) provides that the State Board is responsible for developing 
and continuously improving a statewide system of workforce investment 
activities carried out by a One-Stop service delivery system. This 
regulation implements this provision by giving states the option to 
develop certification standards for One-Stop Career Centers to carry 
out this responsibility, which is allowable under the statute.
    In general, providing an increased State role in the One-Stop 
system is intended to promote more consistent and better program and 
system performance. Through the State Board, the State administrators 
of One-Stop partner programs would also have greater involvement in 
setting policies for the One-Stop system, resulting in increased 
participation of the One-Stop partner programs in the system.
    This NPRM also proposes to amend Sec. Sec.  661.300 and 661.305 to 
emphasize the Local Board's role in the proper administration of funds 
under WIA title I. This would clarify that one of the Local Board's 
responsibilities is to oversee the appropriate use and management of 
funds. The Department believes this change will strengthen 
accountability at the local level and reinforce the significant role of 
the Local Board in overseeing the local workforce investment system. 
The provision is intended to fill a gap in existing regulations with 
regard to the responsibilities of the Local Board and chief elected 
official. The relationship between the Local Board and the chief 
elected official with regard to fiscal management is touched on in 
several places, but is not clearly expressed in the current 
regulations. Under WIA sec. 117(d)(3)(B)(i)(III) and 20 CFR 667.705, 
the chief elected official is the grant recipient and is liable for 
misuse of funds, but he or she must disburse WIA funds at the direction 
of the Local Board (unless the disbursement would violate the act). The 
proposed regulation will make clear that with the Local Board's 
authority to direct the expenditure of funds comes the responsibility 
to oversee the appropriate use and management of the funds. This 
strengthens accountability at the local level and reinforces the 
significant role of the Local Board in overseeing the local workforce 
system. This amendment is not intended to change the relationship 
between the Local Board and chief elected official or to change the 
local grant recipient's liability for misuse of funds.
4. State and Local Plan Submission Requirements
    Sections 661.220 and 661.230 provide the requirements for 
submission and modification of the State Workforce Investment Plan. WIA 
section 112 required the submission of a single five-year plan in order 
to be eligible to receive funding under title I of WIA and the Wagner-
Peyser Act. Several State Plans expired at the end of PY 2003 (June 30, 
2004) and the remaining State Plans expired by the end of PY 2004 (June 
30, 2005). Because we expect a new round of strategic planning will be 
necessary when WIA is reauthorized, we did not require the early 
implementing states with expiring plans to submit a new five-year plan, 
but instead we permitted them three options: to extend their current 
plan for one year, to modify the current plan, or to submit only the 
first year of a new five-year plan. Because these unusual circumstances 
continue, we did not require States to submit full five-year plans for 
PY 2005. For PY 2005, States were required to submit plans covering 
only the first two years of a five-year plan. (70 FR 19206 (Apr. 12, 
2005)). We propose to amend Sec.  661.220 to codify the planning 
options available to States to qualify for funding while WIA 
reauthorization is pending. As amended, this section provides that the 
Secretary has authority to permit States to submit plans covering a 
portion of a five-year planning period or to establish other plan 
submission options (such as extensions) in unusual circumstances. To 
provide Governors with authority to provide similar options for local 
plan submission, we have added new language to Sec.  661.350(d) setting 
forth specific options for local plan submission, in place of language 
addressing PY 2000 transitional plans. We intend that the State and 
local plan submission options will be available for PY 2005 and until 
such time as WIA is reauthorized. If WIA is reauthorized late in a 
particular program year, we will reassess the options for transition 
planning in light of the reauthorized statute.
    We also propose changing Sec.  661.240, to permit States to revise 
existing unified plans by filing a new portion of the plan to replace 
the expiring portions covering WIA and Wagner-Peyser. Under Sec.  
661.240(b)(2)(i), the Department

[[Page 76563]]

issued new planning guidelines to provide instructions on submitting 
such plans. (70 FR 19222 (Apr. 12, 2005)).
5. Regional Planning
    Section 661.290 describes the circumstances in which the State may 
require Local Boards to take part in regional planning activities. This 
provision permits States to undertake methods to improve performance 
across area boundaries by requiring local areas to engage in a regional 
planning process to share employment-related information and to 
coordinate the provision of local services pursuant to that regional 
planning. We have reassessed the requirement in paragraph (d) that 
regional planning may substitute for or replace local planning only 
when the Governor and all affected local chief elected officials agree. 
While this requirement was meant to ``strike a balance,'' in effect, it 
may have led to duplicative planning at both the local and regional 
level and is counter to the intent of the regional planning provisions. 
Since the Act clearly authorizes the State to require local areas to 
participate in regional planning activities, this NPRM proposes to 
strike section 661.290(d) to avoid the possibility of such duplication. 
Where the State requires local areas to participate in regional 
planning, those local areas are not required to undertake local 
planning activities.
6. Youth Councils for Alternative Entities
    Under current regulations, an alternative entity is not required to 
have a youth council. However, it is required to perform the duties of 
a youth council specified in WIA sec.117(h)(4). We propose to amend 
Sec.  661.335 to clarify that, while it need not have a youth council, 
an alternative entity must have a process for ensuring that the broader 
youth representation envisioned in WIA is fully afforded the 
opportunity to participate in carrying out the responsibilities of the 
youth council. An alternative entity could fulfill these 
responsibilities in a number of ways, such as:

--By forming a subcommittee, in the form of a youth council, assigning 
members of the Local Board with particular interest or expertise in 
youth policy, to address the specific needs of youth;
--By ``grandfathering'' in a local youth entity that is substantially 
similar to a youth council, to carry out youth council 
responsibilities; or
--By adding members who have specific youth experience (as long as it 
does not result in a significant change in the membership structure of 
the alternative entity).
7. Waivers
    Section 661.410 specifies the scope of the Secretary's waiver 
authority under WIA sec. 189(i). Paragraph (c) provides a higher 
standard of review for requests to waive provisions that are essential 
to the key reform principles of WIA; ``extremely unusual circumstances 
where the provision can be demonstrated as impeding reform.'' In 
practice, we have found that this regulatory provision is an 
unnecessary burden. Most State requests relating to key principles have 
been for provisions not essential to the principles, or the State has 
met the burden for waiver approval. In order to eliminate this 
unnecessary burden, we propose to remove this provision. Accordingly, 
under the proposed regulation, waivers of provisions relating to key 
reform principles will be considered under the standards of section 
661.420(e) in the same manner as requests to waive other provisions.
Part 662--Description of the One-Stop System Under Title I of the 
Workforce Investment Act
1. Provision of Core Services Under the One-Stop System
    Currently, Sec.  662.250 describes where and to what extent One-
Stop partner programs must make core services available. Section 
662.250(a) requires the WIA Adult and Dislocated Worker programs to 
make all of the core services available in at least one comprehensive 
One-Stop Career Center in each local workforce investment area. This 
requirement holds these two programs to a different level of 
responsibility than other One-Stop partner programs, which are only 
required to provide core services that are in addition to the basic 
labor exchange services traditionally provided in the local area under 
the Wagner-Peyser Act. This NPRM proposes to drop the last sentence of 
paragraph (a), eliminating the requirement that WIA Adult and 
Dislocated Worker program partners make all of the core services 
available at the center. This change would mean Wagner-Peyser funds 
could be used to provide most necessary core services, freeing WIA 
funds for use in providing intensive and training services. All three 
services (core, intensive and training) must be available in a local 
area. However, this change will result in less overlap between WIA 
title I and Wagner-Peyser activities. We also propose to amend Sections 
663.100(b)(1), 663.145(a) and 663.150 to reflect this change.
Part 663--Adult and Dislocated Worker Activities Under Title I of the 
Workforce Investment Act
1. Use of Title I Funds
    Section 663.145 of the regulations requires local areas to ensure 
that all three types of WIA funded services (i.e., core, intensive and 
training) are made available to adults and dislocated workers in the 
local area, but gives the Local Boards discretion to determine the 
appropriate mix of the three types of services. There exists some 
ambiguity as to whether this provision is intended to preclude States 
from having input over the appropriate mix of services provided in 
local areas. The provision is not intended to do that. The intent of 
the provision is to ensure that funds are used for all services while 
allowing for an appropriate level of discretion in determining the mix 
of services. Where a State wishes to develop a policy regarding the mix 
of services to be provided throughout the State, such as setting a 
minimum percentage level of expenditure for training services, we find 
that is an appropriate policy decision for the State to make.
    Our regulations generally give States the authority to set 
statewide policies and procedures governing the workforce investment 
system. We see no compelling reason why a State cannot set similar 
policies regarding the mix of services, provided that it ensures that 
all three services are available within a local area for adults and 
dislocated workers. Accordingly, so as not to preclude State 
policymaking in this area, this NPRM proposes to modify Sec.  
663.145(a) by adding the phrase ``subject to policies established by 
the State'' at the beginning of the third sentence.
2. Sequence of Services
    This NPRM would change the provisions of the current regulations at 
Sec. Sec.  663.160, 663.220, 663.240, and 663.310(a) to clarify the 
sequence of service requirement. As drafted, the current regulations 
may unintentionally lead some States and local program operators to 
interpret the regulations to require that all participants must 
participate first in core services for a specified period of time 
before moving to intensive services; must then participate in intensive 
services for a specified period of time before moving to training 
services; with the test for each move being whether the participant 
could obtain suitable employment through the services

[[Page 76564]]

received during that time period. This interpretation has sometimes 
resulted in needed services being denied or delayed.
    This NPRM clarifies that a local area must make a determination 
that in order to obtain employment more than core services are needed 
for an individual to receive intensive services, or that more than 
intensive services are needed for an individual to receive training 
services. However, this requirement does not mean that the individual 
must go through layers of service to prove that need; the determination 
of need itself can be a core and/or intensive service, such as an 
assessment or development of an Individual Employment Plan. Thus, a 
case worker could initially sit down with a participant at a One-Stop 
Career Center, assess his or her skills and the labor market, and 
determine that the core or intensive services will not be enough to 
lead to employment. The provision of training or other needed services 
can then be provided sequentially, concurrently, or in whatever order 
makes the most sense for the individual. This is less prescriptive than 
current rules because it provides more flexibility to enroll 
individuals in intensive and training services without going through a 
cumbersome process of sequential services.
    The resources of all of the One-Stop partner programs should be 
taken into account when determining the appropriate mix of activities 
and services to be provided. Once a participant has become part of the 
WIA system, she/he should be able to receive whatever services are 
needed to reach an employment goal.
3. Subpart E Eligible Training Providers
    Subpart E describes the methods by which organizations qualify as 
eligible providers of training services under WIA. It also describes 
the roles and responsibilities of Local Boards and the State in 
managing this process. The establishment of an Eligible Training 
Provider system under WIA was intended to promote the concept of 
consumer choice in the selection of providers, based on performance 
information collected on providers, which would determine their 
eligibility to provide training to WIA participants and receive funding 
through Individual Training Accounts. In order to ensure the strong 
relationship between the eligible provider process and program 
performance, Sec.  663.530 established a maximum eighteen-month period 
for an organization's initial determination as an eligible training 
provider.
    During the first five years of WIA implementation, there has been 
ongoing frustration throughout the system regarding the ETP 
requirements. In some cases entire Statewide educational systems, such 
as community colleges, considered opting out of providing training to 
WIA participants due to the requirements for continued performance data 
on all students, including non-WIA participants. Through a recent 
report being developed for the Department of Labor, we understand that 
San Diego does not have any community colleges on the Eligible Training 
Provider list because they had all opted out of the system. Further 
evidence of this problem comes from waiver requests, which show that of 
353 State requests for waivers during the first five years of WIA, 86 
were requests related to the Eligible Training Provider requirements, 
which led the Department to revisit its interpretation of the statutory 
language in these provisions. Based on this experience, it appears that 
regulatory provisions may have led to limiting the availability of 
qualified training providers to WIA training participants, which is 
contrary to the intent of customer choice. Until statutory amendments 
can be considered in a reauthorization bill, we have determined that 
certain regulatory relief is needed.
    Current law, at WIA Section 122, provides that the Governor must 
establish levels of initial determination of eligibility and the 
criteria for all subsequent eligibility determinations, and such 
criteria may require the Local Board to maintain performance outcomes 
for training institutions it uses, as well as requiring information 
from the providers themselves. This NPRM would revise the regulation at 
Sec.  663.530 by removing references to time limits on initial 
eligibility to clarify that the Governor has maximum flexibility within 
the law to establish methods of applying for and maintaining the 
eligibility of providers on a State-approved list of Eligible Training 
Providers, with input from Local Boards. Specific time periods for 
initial and/or subsequent eligibility reviews are no longer provided, 
but are to be determined in the Governor's procedures.
    The WIA statute, in section 122(b)(2), describes the procedures to 
establish initial eligibility and the role that Local Boards must play 
in the development of the application criteria, as well as in the 
development of procedures to establish subsequent eligibility under 
section 122(c). Governors must continue to ensure that the applicable 
procedures for determining provider eligibility comply with these 
provisions.
Part 664--Youth Activities Under Title I of the Workforce Investment 
Act
1. Individual Training Accounts for Youth
    Section 664.510 prohibits participants in the youth program from 
accessing Individual Training Accounts unless the individual is over 18 
and is co-enrolled in the WIA Adult or Dislocated Worker program. This 
regulation is amended to allow youth participants from 16 to 17 years 
of age to use Individual Training Accounts (ITAs). Such accounts may be 
appropriate for certain youth participants and removing this 
prohibition provides States and local areas with the flexibility to 
expand the range of services available to all youth participants and 
increase the amount of youth training. The Department of Labor has 
approved waivers of this regulatory prohibition, which would no longer 
be necessary under this proposed amendment.
    We originally prohibited ITAs for youth participants based on a 
narrow reading of the allowable activities for youth. In particular, we 
contrasted the market-based nature of ITAs with the requirement that 
providers of youth services be competitively selected based on the 
providers' ability to meet the needs of youth and found them 
incompatible. At this time, based upon nearly eight years of experience 
in administering the youth program, we have reconsidered this narrow 
reading. The adult and dislocated worker programs have shown that when 
provided the right information and properly advised, participants make 
intelligent choices regarding their training needs.
    The Department has issued 23 waivers of the prohibition on use of 
ITAs for youth. States receiving waivers have shown that when offered 
as part of a comprehensive program of youth services, properly advised 
youth participants can also benefit from consumer choice. Accordingly, 
we have changed our interpretation of WIA to find that it does not 
prohibit the use of ITAs for youth participants and propose to remove 
the regulatory prohibition to that effect. Consistent with current 
waivers, we expect that ITAs would be used for those youth who, after 
assessment, show they have the maturity and information to make good 
decisions about their training options. We are particularly interested 
in comments from the waiver States about whether their experience with 
Youth ITAs has shown that participating youth

[[Page 76565]]

have demonstrated the ability to make successful training decisions.
Part 667--Administrative Provisions Under Title I of the Workforce 
Investment Act
1. General Fiscal and Administrative Rules Applicable to Title I of WIA
    We propose to amend Sec.  667.200 to more clearly express our 
policies regarding certain grant-making issues. These provisions 
clarify the Department's authority to permit grantees to enter into 
sub-grants with other organizations, our authority to require 
recipients of discretionary grants under WIA title I to contribute a 
portion of cash or in-kind contributions to the project (e.g., matching 
funds), and our authority to enter into interagency agreements to 
transfer and receive funds from other Federal agencies. WIA gives the 
Department the discretion to include such terms in our discretionary 
grants. As the agency charged with administering WIA, we find that the 
purposes of WIA are generally better served when our funding efforts 
result in sustainable ongoing projects. For our direct grants, one way 
to achieve this goal is to require that recipients of WIA funds commit 
to contribute a portion of resources toward the project. This 
requirement derives from our authority as a grant making agency, and is 
consistent with WIA requirements for demonstration grants under WIA 
sec. 171(b)(2)(A), which contemplates that recipients of such funds 
will provide joint funding. We have relied on this authority to require 
a grantee share in projects that are designed to develop ongoing, 
sustainable results, and propose to formalize this interpretation by 
adding a new paragraph (h) to Sec.  667.200.
    The overall funding structure of WIA is based upon the 
relationships between grantor, grantee and subgrantee, as primarily 
evidenced through the formula funding mechanisms. As part of the 
Secretary's responsibility for testing the effectiveness of innovative 
pilot and demonstration programs, it is often useful to replicate this 
relationship in discretionary grants.
    This strategy has proven especially effective when used to fund 
intermediary organizations, which are able to increase the 
participation of smaller organizations in the workforce investment 
system by entering into subgrants with such organizations. For the past 
several years, ETA has made demonstration grants to intermediary 
organizations in order to oversee and provide administrative assistance 
to projects from small faith- and community-based organizations. Our 
Office of Faith-Based and Community Initiatives views these projects as 
effective in increasing the participation of these smaller 
organizations. The intermediary can manage the grant and provide 
technical assistance, freeing up the small nonprofit to do what it does 
best: accessing and serving underserved populations in the community 
with which it has ties. An evaluation of some of these projects is in 
process. The report Compassion at Work: Promising Practices, available 
at http://www.dol.gov/cfbci/Promising_Practices.pdf, provides examples 
of these intermediary grants at work. Also, currently one of ETA's most 
effective Youth Offender Grants operates as an intermediary model, with 
the Latino Coalition acting as an intermediary to dozens of smaller 
FBCOs. Thanks to this model, organizations that otherwise would not 
have been able to access government funds are providing effective 
services to adjudicated and at risk youth. We propose to formalize this 
authority by adding a new paragraph (i) to Sec.  667.200.
    An important part of the Secretary's responsibilities as 
administrator of WIA is to promote and encourage participation of other 
Federal agencies in the workforce investment system and the 
coordination of other Federal programs with services provided through 
the One-Stop system. To perform these duties, it is often advantageous 
to the agencies to enter into a formal agreement to coordinate and work 
together to a common purpose. Under WIA sec. 189, the Secretary has the 
authority to transfer funds to, or to receive funds from, another 
agency under such agreements. Section 189(b) authorizes the Secretary 
to accept funds in furtherance of the purposes of WIA title I; sec. 
189(c) authorizes the Secretary to enter into such agreements and make 
such payments as are necessary to carry out WIA title I; and under sec. 
189(e) the Secretary is authorized to use the facilities and services 
of other Federal agencies. Read together, these provisions authorize 
the Secretary to enter into an interagency agreement under sec. 189(c) 
to either accept an interagency transfer of funds under sec. 189(b) or 
to transmit an interagency transfer of funds under sec. 189(e) to 
purchase the services of another Federal agency. We propose to 
formalize this authority by adding a new paragraph (j) to Sec.  
667.200.
2. Definition of Administrative Costs
    In anticipation of WIA reauthorization, we are seeking comments on 
the way we define the WIA functions and activities that constitute the 
costs of administration subject to the administrative cost limit. The 
current WIA regulations, at Sec.  667.220(b), enumerate the specific 
functions associated with administrative costs. However, there is 
evidence that under the current regulations, program funds are being 
used for what would normally be considered administrative costs. 
Current regulations specify that awards to subrecipients and vendors 
that are solely for the performance of administrative functions are 
classified as administrative costs, but do not allocate all the costs 
incurred by subrecipients or vendors which perform administrative 
functions as well as programmatic services or activities between those 
two cost categories, which could lead to abuse of funds. To the extent 
that this occurs, it reduces the amount of funding that is used to 
provide training and other direct services to individuals.
    We believe that program operations will improve and levels of 
service will increase if we more broadly and accurately define 
administrative costs to minimize the extent that overhead and 
administrative functions are charged to the program cost category. We 
expect that WIA reauthorization will take steps toward such reform, and 
we seek stakeholder input to inform the reauthorization process. One 
approach to reform would be to more extensively enumerate the items 
that should be considered administrative costs, making clear that this 
is not an exhaustive list. An additional measure would be to clarify 
that administrative cost limits apply to subrecipients and vendors just 
as they do to primary grant recipients. Although we propose no 
regulatory amendment at this time, we invite comments from stakeholders 
regarding their experience with the existing definition of 
administrative costs, and the impact it has on program services. We are 
particularly interested in input on our suggested approaches and other 
ideas for developing a more accurate definition.
3. Grievance Procedures
    A basic principle of administrative law holds that an executive 
agency cannot be sued in Federal or State court unless the party 
bringing the suit has first exhausted the administrative remedies made 
available by the agency. (See Myers v. Bethlehem Shipbuilding Corp., 
303 U.S. 41, 50-51 (1938); McKart v. United States, 395 U.S. 185 
(1969); Pierce. Administrative Law Treatise sec. 15.2, 4th Ed.) This 
holds true for cases arising under WIA. In

[[Page 76566]]

order to avoid any potential misconceptions, we propose to amend Sec.  
667.600(h) and to add a new paragraph (e) to Sec.  667.610 to clearly 
state this principle.

V. Administrative Information

Effect on Family Well-Being

    The Department certifies that this notice of proposed rulemaking 
has been assessed in accordance with 5 U.S.C. 601, note, [section 
101(h), title VI, section 654 of Pub. L. 105-277], for its effect on 
family well-being. The Department concludes that the rule will not 
adversely affect the well-being of the nation's families.

Executive Order 12866, Regulatory Planning and Review

    The Department of Labor has determined that this proposed rule is 
not an economically significant regulatory action under sec. 3(f)(1) of 
Executive Order 12866. While this rule modifies existing rules that 
provide terms and conditions governing the expenditure of Federal funds 
by the States, the rule itself will not: (1) Have an annual effect on 
the economy of $100 million or more, or adversely affect in a material 
way the economy, a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities; (2) create a serious inconsistency, 
or otherwise interfere, with an action taken or planned by another 
agency; or (3) materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs, or the rights and obligations of 
recipients thereof. Because this NPRM may raise novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in Executive Order 12866, this is a 
significant regulatory action, which has been reviewed by the Office of 
Management and Budget for the purposes of Executive Order 12866.

Executive Order 13132, Federalism

    In the August 2000 Final Rule implementing WIA regulations, we 
determined that 20 CFR 652.215 has Federalism implications because it 
may have a direct effect on the States' personnel management policies. 
The existing regulation places restrictions on the States to the extent 
it requires all employees providing services under the Wagner-Peyser 
Act to be subject to a system of merit-staffing. Because of this, we 
engaged in extensive consultations with representatives of State 
government in the development of the current rule. Based in part on 
those consultations and on the general consultations described below, 
we have decided to ease the restrictions imposed by the current rule. 
Under the proposed rule, States are no longer required to use merit 
staff employees to provide Wagner-Peyser funded services. The intent of 
the provision is to return authority and responsibility to State 
governments. Therefore, we have found it unnecessary to engage in 
additional issue-specific consultations at this time.
    With respect to this NPRM as a whole, many of the changes proposed 
in this rule are in response to concerns raised by States and other 
stakeholders since WIA's enactment in August 1998. The Department of 
Labor has become aware of these issues through its continuous contact 
with States and other workforce investment system partners, which takes 
place through meetings, conferences, forums, correspondence, and 
individual interactions. As noted above, we undertook extensive 
consultative efforts with our stakeholder partners, including officials 
from State and local governments and their respective organizations, as 
part of our efforts to improve the workforce investment system through 
reauthorization. We have identified one provision that potentially has 
federalism implications. In amending Sec. Sec.  652.202 and 662.100 to 
require that Employment Service offices exist within comprehensive One-
Stop Career Centers we have had to narrow state flexibility in order to 
achieve national policy goals. We intend to continue to work closely 
with State government officials and others in the implementation of the 
proposed rule.

Paperwork Reduction Act

    This proposed rule does not contain information collection 
requirements that are subject to review by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1995.

Regulatory Flexibility and Regulatory Impact Analysis

    The Regulatory Flexibility Act of 1980, as amended in 1996 (5 
U.S.C. chapter 6), requires the Federal government to anticipate and 
minimize the impact of rules and paperwork requirements on small 
entities. ``Small entities'' are defined as small businesses (those 
with fewer than 500 employees, except where otherwise provided), small 
non-profit organizations (those with fewer than 500 employees, except 
where otherwise provided), and small governmental entities (those in 
areas with fewer than 50,000 residents). We have assessed the potential 
impact of this proposed rule on small entities. This proposed rule 
implements policy changes to the regulations governing the expenditure 
of Federal grant funds by States. Because the rule only modifies 
existing rules that provide terms and conditions governing the 
expenditure of Federal funds by the States, we have determined that it 
will not have a significant impact on a substantial number of small 
governments or other small entities. We are transmitting a copy of our 
certification to the Chief Counsel for Advocacy for the Small Business 
Administration.
    While this proposed rule governs the administration and expenditure 
of funds appropriated by Congress, the rule itself does not result in 
an annual effect on the economy of $100,000,000 or more; a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies, or geographic regions; or 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets. Accordingly, under the Congressional Review Act, 
subtitle E of the Small Business Regulatory Enforcement Fairness Act 
(SBREFA) (5 U.S.C. Chapter 8), the Department has determined that this 
is not a major rule, as defined in 5 U.S.C. 804(2).

Unfunded Mandates

    This proposed rule modifies existing rules that provide terms and 
conditions governing the expenditure of Federal funds by the States. 
For purposes of the Unfunded Mandates Reform Act of 1995, as well as 
Executive Order 12875, it does not include any Federal mandate that may 
result in increased expenditures by any State, local, and tribal 
governments.

List of Subjects in 20 CFR Parts 652, 661 Through 664 and 667

    Employment, Grant programs--Labor, Reporting and recordkeeping 
requirements, Youth.

    Signed at Washington, DC this 12th day of December.
Emily Stover DeRocco,
Assistant Secretary of Labor.

    For the reasons provided in the preamble, 20 CFR Chapter V is 
proposed to be amended as follows:

PART 652--ESTABLISHMENT AND FUNCTIONING OF STATE EMPLOYMENT 
SERVICES

    1. The authority for part 652 continues to read as follows:

    Authority: 29 U.S.C. 49k.

[[Page 76567]]

    2. Section 652.202 is revised to read as follows:


Sec.  652.202  May local Employment Service Offices exist outside of 
Comprehensive One-Stop Career Centers?

    No, local Employment Service Offices may not exist outside of 
comprehensive One-Stop Career Centers. Local Employment Service Offices 
must be located at, and fully integrated into, each comprehensive One-
Stop Center established under 20 CFR 662.100(c).
    3. Section 652.205 is amended by revising paragraph (b)(1) to read:


Sec.  652.205  May funds authorized under the Act be used to supplement 
funding for labor exchange programs authorized under separate 
legislation?

* * * * *
    (b) * * *
    (1) The activity otherwise meets the requirements of the Act, and 
its own requirements.
* * * * *
    4. Section 652.215 is revised to read as follows:


Sec.  652.215  Must Wagner-Peyser Act-funded services be provided by 
merit-staff employees?

    No, Wagner-Peyser Act-funded services are not required to be 
provided by merit-staff employees.


Sec.  652.216  [Removed]

    5. Section 652.216 is removed.

PART 661--STATEWIDE AND LOCAL GOVERNANCE OF THE WORKFORCE 
INVESTMENT SYSTEM UNDER TITLE I OF THE WORKFORCE INVESTMENT ACT

    1. The authority citation for part 661 is revised to read as 
follows:

    Authority: Sec. 506(c), Pub. L. 105-220 (20 U.S.C. 9276(c)); 20 
U.S.C. 2939(a).

    2. Section 661.110 is amended by revising paragraph (b) to read as 
follows:


Sec.  661.110  What is the role of the Department of Labor as the 
Federal governmental partner in the governance of the workforce 
investment system?

* * * * *
    (b) The Department of Labor sees as one of its primary roles 
providing leadership and guidance to support a system that meets the 
objectives of title I of WIA, and in which State and local partners 
have the flexibility to implement systems and deliver services in a 
manner designed to best achieve the goals of WIA based on their 
particular needs. This system should involve the private sector to 
ensure that it meets the needs of business customers by providing 
adults and youth with the necessary educational, occupational, and 
other skills training and services needed for high-demand occupations 
in the 21st century. The underlying vision of the Department is to 
bring together resources devoted to employment, education and economic 
development, and use them strategically to create opportunities for 
current and future workers while building the skilled workforce that 
American industries need to remain globally competitive. The WIA 
regulations provide the framework in which State and local officials 
can exercise flexibility within the confines of the statutory 
requirements. Wherever possible, system features such as design options 
and categories of services are broadly defined, and are subject to 
State and local interpretation.
* * * * *
    3. Section 661.200 is amended by revising paragraph (i)(3) to read 
as follows:


Sec.  661.200  What is the State Workforce Investment Board?

* * * * *
    (i) * * *
    (3) The director of the designated State unit, as defined in 
section 7(8)(B) of the Rehabilitation Act, as representative of the 
State Vocational Rehabilitation Services program (VR program). In a 
State with more than one designated State unit, the VR program director 
of the unit serving the greatest number of individuals with 
disabilities in the State must be appointed as the representative of 
the VR program, unless the VR program directors agree to permit a 
different Vocational Rehabilitation director to be the representative. 
Only one VR program director may sit on the Board, but that program 
director must represent both units.
* * * * *
    4. Section 661.205 is amended by adding paragraph (b)(3) to read as 
follows:


Sec.  661.205  What is the role of the State Board?

* * * * *
    (b) * * *
    (3) Development and review of statewide policies for the One-Stop 
Career Center system, which may include:
    (i) Criteria for issuing certifications of the One-Stop Centers;
    (ii) Policies relating to the appropriate roles of One-Stop 
operators;
    (iii) Approaches to facilitating equitable and efficient cost 
allocation in One-Stop delivery systems; and
    (iv) Strategies for effective outreach to individuals and employers 
who could benefit from One-Stop services and policies.
* * * * *
    5. Section 661.220 is amended by adding paragraph (f) to read as 
follows:


Sec.  661.220  What are the requirements for submission of the State 
Workforce Investment Plan?

* * * * *
    (f) Upon expiration of a five-year plan submitted under the 
Workforce Investment Act of 1998, a State may meet the plan submission 
requirements of paragraph (a) by filing a plan covering a portion of a 
five-year planning period in accordance with planning guidelines issued 
under paragraph (b). In unusual circumstances, the Secretary may, 
through appropriate guidance, provide other options by which a State 
may meet the plan submission requirements of paragraph (a) of this 
section.
    6. Section 661.240 is amended by revising paragraph (b)(2) to read 
as follows:


Sec.  661.240  How do the unified planning requirements apply to the 
five-year strategic WIA and Wagner-Peyser plan and to other Department 
of Labor plans?

* * * * *
    (b)(2)(i) Subject to paragraph (b)(2)(ii) of this section, a State 
may submit a unified plan meeting the requirements of the Interagency 
guidance entitled State Unified Plan, Planning Guidance for State 
Unified Plans Under Section 501 of the Workforce Investment Act of 
1998, in lieu of completing the individual State planning guidelines of 
the programs covered by the unified plan.
    (ii) Following the expiration of the five-year WIA and Wagner-
Peyser portion of a unified plan, a State may submit a new WIA and 
Wagner-Peyser portion of such plan in accordance with planning 
guidelines issued by the Secretary of Labor.
* * * * *


Sec.  661.290  [Amended]

    7. Section 661.290 is amended by removing paragraph (d).
    8. Section 661.300 is amended by revising paragraph (b) to read as 
follows:


Sec.  661.300  What is the Local Workforce Investment Board?

* * * * *
    (b) In partnership with the chief elected official(s), the Local 
Board sets policy for the portion of the statewide workforce investment 
system within the local area and oversees the proper

[[Page 76568]]

administration of funds under title I of WIA.
* * * * *
    9. Section 661.305 is amended by redesignating paragraph (c) as 
paragraph (d) and adding a new paragraph (c) to read as follows:


Sec.  661.305  What is the role of the Local Workforce Investment 
Board?

* * * * *
    (c) In cooperation with the chief elected official, the Local Board 
oversees the proper administration of funds in local areas under title 
I of WIA.
* * * * *
    10. Section 661.335 is amended by adding paragraph (e) to read as 
follows:


Sec.  661.335  What is a youth council, and what is its relationship to 
the Local Board?

* * * * *
    (e) An alternative entity is not required to have a youth council. 
However, it is required to perform the duties of a youth council 
specified in WIA section 117(h)(4).
    11. Section 661.350 is amended by revising paragraph (d) to read as 
follows:


Sec.  661.350  What are the contents of the local workforce investment 
plan?

* * * * *
    (d) Upon expiration of a five-year plan submitted under the 
Workforce Investment Act of 1998, the Governor may permit local areas 
to:
    (1) Submit a new plan, which may be met by filing a plan covering a 
portion of a five-year planning period;
    (2) Modify its existing plan for an additional year; or
    (3) Extend its existing plan for an additional year.


Sec.  661.410  [Amended]

    12. Section 661.410 is revised by removing paragraph (c).

PART 662--DESCRIPTION OF THE ONE-STOP SYSTEM UNDER TITLE I OF THE 
WORKFORCE INVESTMENT ACT

    1. The authority citation for part 662 is revised to read as 
follows:

    Authority: Sec. 506(c), Pub. L. 105-220 (20 U.S.C. 9276(c)); 20 
U.S.C. 2939(a).

    2. Section 662.100 is amended by revising paragraph (d) 
introductory text and adding paragraph (f), to read as follows:


Sec.  662.100  What is the One-Stop delivery system?

* * * * *
    (d) While each local area must have at least one comprehensive 
center (and may have additional comprehensive centers), WIA section 
134(c) allows for arrangements to supplement the center. Except as 
provided in paragraph (f) of this section, these arrangements may 
include:
* * * * *
    (f) A stand-alone Employment Service office is not permitted to 
qualify under paragraph (d) of this section as an affiliated site; a 
component of a network of One-Stop partners; or a specialized center.
    3. Section 662.250 is amended by revising paragraph (a) to read as 
follows:


Sec.  662.250  Where and to what extent must required One-Stop partners 
make core services available?

    (a) At a minimum, the core services that are applicable to the 
program of the partner under Sec.  662.220, and that are in addition to 
the basic labor exchange services traditionally provided in the local 
area under the Wagner-Peyser program, must be made available at the 
comprehensive One-Stop Center. These services must be made available to 
individuals attributable to the partner's program who seek assistance 
at the center.
* * * * *

PART 663--ADULT AND DISLOCATED WORKER ACTIVITIES UNDER TITLE I OF 
THE WORKFORCE INVESTMENT ACT

    1. The authority citation for part 663 is revised to read as 
follows:

    Authority: Sec. 506(c), Pub. L. 105-220 (20 U.S.C. 9276(c)); 20 
U.S.C. 2939(a).

    2. Section 663.100 is amended by revising the first sentence of 
paragraph (b)(1) to read as follows:


Sec.  663.100  What is the role of the Adult and Dislocated Worker 
programs in the One-Stop delivery system?

* * * * *
    (b) * * *
    (1) Core services for adults and dislocated workers must be made 
available, as required by 20 CFR 662.250(a), in at least one 
comprehensive One-Stop Center in each local workforce investment area. 
* * *
* * * * *
    3. Section 663.145 is amended by revising paragraph (a) to read as 
follows:


Sec.  663.145  What services are WIA title I Adult and Dislocated 
Workers formula funds used to provide?

    (a) WIA title I formula funds allocated to local areas for Adults 
and Dislocated Workers must be used to provide core, intensive and 
training services through the One-Stop delivery system. Under 20 CFR 
662.250, WIA Adult and Dislocated Worker funds must be used to make 
available core services that are in addition to the basic labor 
exchange services traditionally provided in the local area under the 
Wagner-Peyser Act. Subject to policies established by the State, Local 
Boards determine the most appropriate mix of these services, but all 
three types must be available for both adults and dislocated workers. 
There are different eligibility criteria for each of these types of 
services, which are described at Sec. Sec.  663.110, 663.115, 663.220 
and 663.310.
* * * * *
    4. Section 663.150 is amended by revising paragraph (a) to read as 
follows:


Sec.  663.150  What core services must be provided to adult and 
dislocated workers?

    (a) At a minimum, all of the core services described in WIA section 
134(d)(2) and 20 CFR 662.240 must be provided in each local area 
through the One-Stop delivery system. Under 20 CFR 662.250, WIA Adult 
and Dislocated Worker funds must be used to make available core 
services that are in addition to the basic labor exchange services 
traditionally provided in the local area under the Wagner-Peyser Act.
* * * * *
    5. Section 663.160 is revised to read as follows:


Sec.  663.160  Are there particular core services an individual must 
receive before receiving intensive services under WIA section 
134(d)(3)?

    No. To be eligible for intensive services, WIA requires that the 
local area determine that an individual is unlikely or unable to obtain 
or retain employment through core services and is in need of intensive 
services in accordance with the requirements of Sec.  663.220. The 
determination of the need for intensive services under Sec.  663.220 
must be contained in the participant's case file.
    6. Section 663.220 is revised to read as follows:


Sec.  663.220  Who may receive intensive services?

    There are two categories of adults and dislocated workers who may 
receive intensive services:
    (a) Adults and dislocated workers who are unemployed, and who are 
determined by a One-Stop operator to be unlikely or unable to obtain 
employment through core services and to be in need of intensive 
services to obtain employment; and
    (b) Adults and dislocated workers who are employed, and who are 
determined by a One-Stop operator to be in need of intensive services 
to obtain

[[Page 76569]]

or retain employment that leads to self-sufficiency, as described in 
Sec.  663.230.
    7. 663.240 is revised to read as follows:


Sec.  663.240  Are there particular intensive services an individual 
must receive before receiving training services under WIA section 
134(d)(4)(A)(i)?

    No. To be eligible for training services, WIA requires that the 
local area determine that an individual is unlikely or unable to obtain 
or retain suitable employment through intensive services and is in need 
of training services as provided in Sec.  663.310. The determination of 
the need for training services under Sec.  663.310 may be established 
through an individual employment plan, a comprehensive assessment or in 
any other manner, but documentation of the determination must be 
contained in the participant's case file.
    8. Section 663.310 is amended by revising paragraph (a) to read as 
follows:


Sec.  663.310  Who may receive training services?

* * * * *
    (a) Have met the eligibility requirements for intensive services 
under Sec.  663.220 and have been determined unlikely or unable to 
obtain or retain employment through such services.
* * * * *
    9. Section 663.530 is revised to read as follows:


Sec.  663.530  Is there a time limit on the period of initial 
eligibility for training providers?

    Yes, under WIA section 122(c)(5), the Governor must require 
training providers to submit performance information and meet 
performance levels annually in order to remain eligible providers 
following the expiration of the period of initial eligibility. As part 
of the procedures developed under Sec.  663.515(c)(1), the Governor 
must establish the period of initial eligibility. Such procedures may 
include a process for extending the period of initial eligibility in 
appropriate circumstances.

PART 664--YOUTH ACTIVITIES UNDER TITLE I OF THE WORKFORCE 
INVESTMENT ACT

    1. The authority citation for part 664 is revised to read as 
follows:

    Authority: Sec. 506(c), Pub. L. 105-220 (20 U.S.C. 9276(c)); 20 
U.S.C. 2939(a).

    2. Section 664.510 is revised to read as follows:


Sec.  664.510  Are Individual Training Accounts allowed for youth 
participants?

    Yes, a local program may choose to provide the occupational skills 
training element through an Individual Training Account or similar 
mechanism. In addition, individuals age 18 and above, who are eligible 
for training services funded under the Adult and Dislocated Worker 
programs, may receive Individual Training Accounts through those 
programs. Requirements for concurrent participation requirements are 
set forth in Sec.  664.500. To the extent possible, in order to enhance 
youth participant choice, all youth participants should be involved in 
the selection of educational and training activities.

PART 667--ADMINISTRATIVE PROVISIONS UNDER TITLE I OF THE WORKFORCE 
INVESTMENT ACT

    1. The authority citation for part 667 is revised to read as 
follows:

    Authority: Sec. 506(c), Pub. L. 105-220 (20 U.S.C. 9276(c)); 20 
U.S.C. 2939(a).

    2. Section 667.200 is amended by adding paragraphs (h), (i), and 
(j) to read as follows:


Sec.  667.200  What general fiscal and administrative rules apply to 
the use of WIA title I funds?

* * * * *
    (h) Grantee's share. Where appropriate, the Secretary may require 
recipients of discretionary grants under WIA title I to contribute a 
portion of cash or in-kind contributions to the project. For 
competitive grants, the amount of the contribution will be specified in 
the Solicitation for Grant Applications.
    (i) Subgrants. Where appropriate, the Secretary may authorize 
recipients of discretionary grants under WIA title I to distribute 
grant funds to other organizations through subgrants. For competitive 
grants, the conditions under which grantees may enter into such 
subgrants will be specified in the Solicitation for Grant Applications.
    (j) Interagency agreements. Where appropriate, the Secretary may 
enter into a memorandum of understanding, interagency agreement or 
other agreement with other Federal agencies under which the Secretary 
may transfer funds to, or accept funds from, the other agencies.
    3. Section 667.600 is amended by revising paragraph (h) to read as 
follows:


Sec.  667.600  What local area, State and direct recipient grievance 
procedures must be established?

* * * * *
    (h) Nothing in this subpart precludes a grievant or complainant 
from pursuing a remedy authorized by other Federal, State of local law. 
However, the Department of Labor may not be made a party to another 
lawsuit until the administrative remedies under this section have been 
exhausted.
    4. Section 667.610 is amended by adding paragraph (e) to read as 
follows:


Sec.  667.610  What processes do we use to review State and local 
grievances and complaints?

* * * * *
    (e) The Department of Labor may not be made a party to another 
lawsuit until the applicable administrative remedies under subparts F 
and G of this part have been exhausted.

[FR Doc. E6-21766 Filed 12-19-06; 8:45 am]
BILLING CODE 4510-30-P