Labor Market Information: Trends and Issues in Funding of State  
Programs (20-DEC-02, GAO-03-336).				 
                                                                 
Labor market information is used to help make and assess social  
and monetary policies, tax and budget projections, and private	 
investment decisions. Produced under cooperative agreements	 
between states and the Bureau of Labor Statistics (BLS), labor	 
market information helps provide an up-to-date picture of the	 
U.S. economy and generate closely watched economic indicators,	 
such as unemployment rates and the Gross Domestic Product. In	 
addition, decisions about the distribution of billions of federal
dollars to states and local governments depends, in part, on	 
labor market information. In summary, GAO found that (1) funding 
for the Covered Employment and Wages (ES-202) and Current	 
Employment Statistics (CES) programs declined in real terms over 
the past 7 years; (2) BLS estimates the funding needs of states  
by adjusting prior year funding and uses formulas to allocate	 
funds to states; and (3) workload and cost increases outpaced	 
funding increases in the ES-202 program, which could result in	 
data quality problems, according to state Labor Market		 
Information (LMI) officials. BLS estimates LMI budget needs for  
states by making adjustments to the past year's funding and	 
allocates appropriated funds to states by using allocation	 
formulas. Specifically, in estimating the amount of funding	 
needed for state LMI offices, BLS starts with the past year's	 
funding, and adds an adjustment for cost inflation. In addition, 
for the ES-202 program that has a continuously growing workload, 
BLS adds an amount for expected workload increases. However,	 
BLS's requests for funding increases to cover growing costs and  
workloads are not always approved. In developing its budget	 
estimates, BLS does not collect information from state LMI	 
offices to determine what those offices' costs or budget needs	 
are because, according to BLS officials, BLS cannot readily	 
verify such information.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-336 					        
    ACCNO:   A05744						        
  TITLE:     Labor Market Information: Trends and Issues in Funding of
State Programs							 
     DATE:   12/20/2002 
  SUBJECT:   Appropriated funds 				 
	     Employment or training programs			 
	     Federal aid to states				 
	     Federal funds					 
	     Federal/state relations				 
	     Labor costs					 
	     Labor statistics					 
	     Program evaluation 				 
	     State programs					 
	     BLS Covered Employment and Wages Program		 
	     BLS Current Employment Statistics			 
	     Program						 
                                                                 
	     BLS Labor Market Information Program		 
	     BLS Local Area Unemployment Statistics		 
	     Program						 
                                                                 
	     Medicaid Program					 

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GAO-03-336

Report to Congressional Requesters

United States General Accounting Office

GAO

December 2002 LABOR MARKET INFORMATION

Trends and Issues in Funding of State Programs

GAO- 03- 336

Page i GAO- 03- 336 Labor Market Information Letter 1

Appendix I Briefing Slides 7

Appendix II Programs That Use LMI Data in Decisions about the Distribution
of Federal Funds or Other Benefits 37

Appendix III Change in States* Allocations 40

Appendix IV States Ranked by Size 42

Abbreviations

BLS Bureau of Labor Statistics CES Current Employment Statistics LAUS
Local Area Unemployment Statistics LMI Labor Market Information Contents

Page 1 GAO- 03- 336 Labor Market Information

December 20, 2002 The Honorable Edward M. Kennedy Chairman The Honorable
Judd Gregg Ranking Minority Member Committee on Health, Education, Labor
and Pensions United States Senate

The Honorable Michael B. Enzi Ranking Minority Member Subcommittee on
Employment, Safety and Training Committee on Health, Education, Labor and
Pensions United States Senate

The Honorable Daniel K. Inouye United States Senate

Labor market information is used to help make and assess social and
monetary policies, tax and budget projections, and private investment
decisions. Produced under cooperative agreements between states and the
Bureau of Labor Statistics (BLS), labor market information helps provide
an up- to- date picture of the U. S. economy and generate closely watched
economic indicators, such as unemployment rates and the Gross Domestic
Product. In addition, decisions about the distribution of billions of
federal dollars to states and local governments depends, in part, on labor
market information.

BLS defines the work that state Labor Market Information (LMI) programs
must perform and the amount of money they will receive for that work*
about $80 million in fiscal year 2002. 1 You asked us to look at issues
regarding BLS*s funding of state LMI programs because of your interest in
the quality of data used to distribute federal funds under the Workforce
Investment Act of 1998. Our objectives were to (1) describe changes over
time in federal funding to states for LMI programs, (2) describe how BLS
estimates LMI budget needs for states and allocates appropriated funds to

1 This $80 million was allocated for the operation of base programs; BLS
provided additional funding to states for special projects.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 336 Labor Market Information

the states, and (3) identify issues regarding federal funding of state LMI
programs.

Of the five LMI programs, we focused our work on the two that receive the
most funds from BLS* the Covered Employment and Wages (referred to as the
ES- 202 program) and the Current Employment Statistics (CES) programs.
Both the ES- 202 and CES programs produce data on employment, such as
numbers of employees and average wages by industry, but with key
differences. The ES- 202 program produces data quarterly based on its file
on about 8 million business establishments, covering most employment in
the United States. 2 The CES program produces more timely data (monthly)
based on a survey of about 350,000 business establishments. The ES- 202
and CES programs are linked because the CES survey sample is selected from
the ES- 202 file and the CES estimates are adjusted (* benchmarked*) by
the ES- 202 data. Data from these programs greatly affect the distribution
of billions of federal dollars to states and local entities. For example,
data from both the ES202 and CES programs are used by another LMI program*
the Local Area Unemployment Statistics (LAUS) program* to generate
estimates used by various federal programs, including some under the
Workforce Investment Act of 1998, to make decisions about the distribution
of federal funds. 3 Also, ES- 202 data, such as those on average wages,
are used directly by other federal programs to make decisions about the
distribution of federal funds. (See appendix II for a list of federal
programs that use LMI data directly in decisions about the distribution of
federal funds.) Further, ES202 data are a significant factor in the
calculation of state per capita personal income, which is used in the
distribution of federal funds under programs such as Medicaid and Foster
Care. 4

2 The ES- 202 program covers approximately 97 percent of employment in the
United States. Groups that are not covered include members of the armed
forces and the self- employed. 3 In addition to ES- 202 and CES data, the
LAUS program uses data from other sources, most notably the Current
Population Survey conducted by the Bureau of the Census for BLS. 4 See
pages 33, 40, 57, 77, 82, and 102 of U. S. General Accounting Office,
Formula Grants: Effects of Adjusted Population Counts on Federal Funding
to States, GAO/ HEHS- 99- 69 (Washington, D. C.: Feb. 26, 1999) for more
information on programs using state per capita personal income in their
funding formulas.

Page 3 GAO- 03- 336 Labor Market Information

To describe changes over time in federal funding to states for LMI
programs, we obtained and analyzed data from BLS*s budget office on base
program funding provided to states for the ES- 202 and CES programs from
fiscal year 1996 through fiscal year 2002. To describe how BLS estimates
LMI budget needs for states and allocates appropriated funds to states, we
interviewed BLS budget officials and reviewed documents on the allocation
formulas. To identify issues regarding federal funding of state LMI
programs, we interviewed officials from the LMI offices in six states*
California, Florida, Minnesota, Montana, New York, and Wyoming. We
selected these states because they represent a range in the number of
business establishments in each state and a range of outcomes from a
recent change in state allocations. We also met with BLS officials to
obtain their views on the funding of state LMI programs.

We did not independently assess the validity of states* or BLS*s views
about the adequacy of BLS funding of state LMI programs because of a lack
of clear and objective criteria for determining whether current funding
levels are adequate to produce quality data and for determining the extent
of any over- or under- funding. Instead, we developed descriptions of
conditions relevant to states* and BLS*s views by using data from BLS on
funding and workload and data from the six surveyed states on cost
increases. We conducted our work from June through November 2002 in
accordance with generally accepted government auditing standards. We
provided briefings on the results of our work to staff of the Subcommittee
on Employment, Safety and Training of the Senate Committee on Health,
Education, Labor and Pensions on October 24, 2002, and to staff of Senator
Inouye on November 22, 2002. This report formally conveys the information
provided during those briefings plus additional information you requested.

In summary, we found that (1) funding for the ES- 202 and CES programs
declined in real terms over the past seven years; (2) BLS estimates the
funding needs of states by adjusting prior year funding and uses formulas
to allocate funds to states; and (3) workload and cost increases outpaced
funding increases in the ES- 202 program, which could result in data
quality problems, according to state LMI officials.

Our review of changes over time in federal funding to states for LMI
programs found that from fiscal year 1996 through fiscal year 2002, the
ES202 program*s base funding for states, when adjusted for cost-
inflation, declined 5 percent. In addition, the CES program*s base funding
for the same period declined 17 percent.

Page 4 GAO- 03- 336 Labor Market Information

BLS estimates LMI budget needs for states by making adjustments to the
past year*s funding and allocates appropriated funds to states by using
allocation formulas. Specifically, in estimating the amount of funding
needed for state LMI offices, BLS starts with the past year*s funding and
adds an adjustment for cost inflation. In addition, for the ES- 202
program that has a continuously growing workload, BLS adds an amount for
expected workload increases. However, BLS*s requests for funding increases
to cover growing costs and workloads are not always approved. In
developing its budget estimates, BLS does not collect information from
state LMI offices to determine what those offices* costs or budget needs
are because BLS cannot readily verify such information, according to BLS
officials. After BLS*s budget is approved and BLS receives its
appropriation from Congress, BLS distributes funds among the states using
a different allocation formula for each of the five LMI programs. BLS
recently changed the source of salary data it factors into these formulas
because the previously used data were not readily verifiable and BLS
wanted to make the allocation process more objective and open. 5 This
change will result in funding increases over time for some, mostly larger
states. 6 Funding for other states, mostly smaller, that would have
decreased, will remain flat under a hold- harmless approach. 7

Although the change in the allocation formulas has raised concerns among
some small states, the broader issue regarding BLS*s funding of state LMI
programs is whether the overall amount of funds available for allocation
to states is sufficient to produce high quality data. All six states we
spoke with and BLS agreed that funding provided to states has not kept
pace with the continuously growing workload in the labor- intensive ES-
202 program. In addition, states said that funding has not kept up with
increases in costs in the ES- 202 program, such as increases resulting
from

5 In fiscal year 2002, BLS began using average state government salaries
from a BLS publication instead of data submitted by states on the salaries
of LMI office staff. 6 We determined a state*s size based on the number of
business establishments in the state, as shown in appendix IV. 7 The hold-
harmless approach will result in a gradual phase- in of changes to states*
allocations. Under this approach, states whose funding would have declined
under the allocation change will have their base program funding held at
or about the fiscal year 2001 level. Also, states whose funding would have
increased under the allocation change will get all increases available
under future appropriations. The potential future impact of the allocation
change on individual state*s funding levels can be seen by looking at the
funding changes that would have occurred if the hold harmless approach
were not used. See appendix III.

Page 5 GAO- 03- 336 Labor Market Information

pay raises for state LMI office staff. 8 A comparison of changes in the
nationwide base funding for the ES- 202 program with changes in indicators
for workload and costs, for the period from fiscal year 1996 to fiscal
year 2002, reveals that funding increases have been outpaced by the
combined increase in workload and costs. Specifically, while funding (not
inflation adjusted) increased 13 percent, the total number of business
establishments with ES- 202 program records* a key indicator of workload*
increased about 11 percent and average state salaries and benefits* an
indicator of a key cost component* increased about 19 percent. Five of the
six states we spoke with believe that the quality of their ES- 202 data
will suffer in the future under current funding trends. 9 In contrast to
the ES- 202 program, there is no simple indicator of workload trends for
the CES program, and states differed in their views about the adequacy of
CES funding. 10 Three of the six states believe that CES funding is
generally adequate given their current workloads under the CES program,
while the other three believe their funding is inadequate. BLS program
officials say that states are delivering their CES products on time and in
compliance with the requirements of the cooperative agreement and, thus,
are adequately funded for the work they must perform under the CES
program.

We provided a draft of this report to the Department of Labor and BLS for
review and made changes based on their technical comments as appropriate.

We are sending copies of the report to relevant congressional committees;
the Secretary, Department of Labor; the Commissioner, Bureau of Labor
Statistics; the Director, Office of Management and Budget; and other
interested parties. We will make copies available to others upon request.
The report is also available at no charge on GAO*s Web site at www. gao.
gov. If you and your staff have any questions about this report,

8 According to BLS officials, salaries account for 70 to 80 percent of the
expenses for state LMI programs. 9 The five states include two states*
Minnesota and New York* that expect to receive funding increases because
of the allocation change and three states* Florida, Montana, and Wyoming*
that expect to have their funding held at past levels without increases
because of the allocation change.

10 According to BLS officials, BLS has taken various actions, such as
centralizing some of the monthly data collection and taking over the
systems development and support work, that have reduced state workloads in
the CES program.

Page 6 GAO- 03- 336 Labor Market Information

please contact Sigurd Nilsen or Andrew Sherrill at (202) 512- 7215. Kathy
Peyman, Cathy Pardee, and Pat Elston also made key contributions to this
report.

Sigurd R. Nilsen, Director Education, Workforce, and

Income Security Issues

Appendix I: Briefing Slides Page 7 GAO- 03- 336 Labor Market Information

Appendix I: Briefing Slides

1

Trends and Issues in Funding of States for Labor Market

Information Programs

Briefing for Staff of Chairman and Ranking Member, Subcommittee on
Employment, Safety and Training, Committee on Health, Education, Labor,
and

Pensions, United States Senate, October 24, 2002, and Senator Daniel K.
Inouye, November 22, 2002

Appendix I: Briefing Slides Page 8 GAO- 03- 336 Labor Market Information

2

Objectives

* Describe changes over time in federal funding to states for Labor Market
Information (LMI) programs.

 Describe how the Bureau of Labor Statistics (BLS) estimates LMI budget
needs for states and allocates appropriated funds to the states.

 Identify issues regarding federal funding of state LMI programs.

Appendix I: Briefing Slides Page 9 GAO- 03- 336 Labor Market Information

3

Scope We focused on two of five Labor Market Information programs:

Covered Employment and Wages (ES- 202) Current Employment Statistics (CES)

 The two largest LMI programs with 61 percent of funding in fiscal year
2002

 ES- 202 forms foundation for other LMI programs  Sources of concern to
state officials

Six states provided information on issues regarding federal funding:
California, Florida, Minnesota, Montana, New York, Wyoming

Selected for differences in size of workload and funding outcomes under
recently changed allocation formulas

Appendix I: Briefing Slides Page 10 GAO- 03- 336 Labor Market Information

4

Methodology Obtained data on state LMI funding, workload and costs for
fiscal years 1996 through 2002

Reviewed documents on the funding formulas used by BLS to allocate funds
to states

Interviewed BLS program and budget office officials and LMI officials in
the six selected states

Because the objective of our initial work was to provide a descriptive
overview, we did not independently assess claims regarding the adequacy of
funding for LMI programs.

Conducted work from June to November 2002 in accordance with generally
accepted government auditing standards

Appendix I: Briefing Slides Page 11 GAO- 03- 336 Labor Market Information

5

Summary of Results Base program funding (not including funding for special
projects) for two key programs declined in real terms during fiscal year
1996 to 2002:

Base program funding for Covered Employment and Wages (ES- 202):  Without
cost inflation adjustment-- increased 13%  With cost inflation
adjustment-- decreased 5% Base program funding for Current Employment
Statistics (CES):

 Without cost inflation adjustment-- decreased 2%  With cost inflation
adjustment-- decreased 17%

Appendix I: Briefing Slides Page 12 GAO- 03- 336 Labor Market Information

6

Summary of Results (cont*d) BLS budget estimate and allocation methods:

 For budget requests, BLS estimates state funding needs based on the
prior year*s funding adjusted for inflation -- not on cost information
from state LMI offices. For the ES- 202 program, BLS adds an amount for
expected workload increases. However, BLS does not always receive the full
amount it requests, according to BLS budget officials.

 To allocate appropriated funds among the states, BLS uses formulas that
factor in differences among states, such as average salary levels and
proportionate share of a program*s workload, according to BLS budget
officials.

 A recent change designed to make the allocation formulas based on
verifiable information will result in funding increases for some states
and in funding to be held at the fiscal year 2001 level without increases
for other states. Those getting increases are mostly larger states.

Appendix I: Briefing Slides Page 13 GAO- 03- 336 Labor Market Information

7

Summary of Results (cont*d) Issues: Rising workload and costs:

 Workload and state salary increases have outstripped funding states
receive for ES- 202, according to officials in BLS and six states.

 There is no simple indicator of workload trends in CES, and states*
concerns about CES funding are mixed.

Data quality:

 Quality of data provided by states will likely suffer if current funding
trends continue, according to officials in five of the six states.

Appendix I: Briefing Slides Page 14 GAO- 03- 336 Labor Market Information

8

Background Significance of LMI Programs

For a budget of $148. 5 million in fiscal year 2002 for states and BLS,
the five LMI programs have a significant impact.  Produce information on
national, state, and local employment,

including

- number of people employed, by industry and gender. - average salaries
for each occupation. - unemployment rates.

 Provide essential economic data used to

- develop key economic indicators, such as personal income and Gross
Domestic Product. - guide public and private sector policy and investment
decisions. - allocate billions of federal dollars to states and
localities.

Appendix I: Briefing Slides Page 15 GAO- 03- 336 Labor Market Information

9

Background Cooperative Agreements

BLS has cooperative agreements with states that specify the work required
and federal funding for each of the five LMI programs.

 States collect and analyze data.  BLS defines the products states must
deliver, the time frames for

delivery, and the performance requirements.  Federal funding is intended
to fully cover state costs to meet

cooperative agreement requirements, according to BLS officials. - Some
states have supplemented the effort with state dollars.

Appendix I: Briefing Slides Page 16 GAO- 03- 336 Labor Market Information

10

Background Five LMI Programs

Covered Employment and Wages (ES- 202)

 A near census of over 8 million business establishments in the United
States, covering 97 percent of all employees  Provides data quarterly on
employment and wages by industry and county  Time lag for data issuance
is several months after the quarter covered

Current Employment Statistics (CES)

 A monthly survey of a sample of 350, 000 business establishments in the
United States  Provides monthly estimates on employment by industry 
Very timely data issuance * one to three weeks after the month

covered

Appendix I: Briefing Slides Page 17 GAO- 03- 336 Labor Market Information

11

Background Five LMI Programs (cont*d)

Occupational Employment Statistics (OES)

Surveys samples of employers semi- annually to obtain occupational
employment and wages by industry.

Local Area Unemployment Statistics (LAUS)

Develops estimates of monthly employment and unemployment rates for 6, 900
geographic areas.

Mass Layoff Statistics (MLS)

Measures plant closings and mass layoffs using unemployment insurance
claim filings and employer information (program is funded by the
Employment and Training Administration through BLS).

Appendix I: Briefing Slides Page 18 GAO- 03- 336 Labor Market Information

12

BLS Fiscal Year 2002 Base Program Funding to States for Five LMI Programs

Note: Base program funding does not include funds for special projects.
Shading indicates programs reviewed by GAO. Source: BLS budget office
data.

Background

Occupational Employment Statistics Mass Layoff Statistics

Local Area Unemployment Statistics

Current Employment Statistics Covered Employment and Wages (ES- 202)
Millions of dollars. Total = $80.2 million.

$18.8 $22.1 $26.8

   $7.8

  $4.7

Appendix I: Briefing Slides Page 19 GAO- 03- 336 Labor Market Information

13

Background BLS Budget and State LMI Funding

BLS Budget

Funds to state LMI programs accounted for 16% of BLS fiscal year 2002
budget.

Sources of federal funds to states for LMI programs:

 82% appropriated from the Unemployment Trust Fund to BLS.  12% from
other BLS appropriations.  6% from Employment and Training Administration
appropriations.

Fiscal year 2002 change to state funding formula

 To be phased in over several years  Raises concerns, especially among
some small states

Appendix I: Briefing Slides Page 20 GAO- 03- 336 Labor Market Information

14

BLS Base Program Funding to States for ES- 202 and CES, Fiscal Years 1996-
2002 (adjusted for inflation)

Note: Funding adjusted for cost inflation using the Employment Cost Index.
Base program funding does not include funding for special projects.
Source: BLS budget office data.

Millions (expressed in FY 2001 dollars)

$21 $22

$23 $24

$25 $26

$27 $28

$29 1996 1997 1998 1999 2000 2001 2002 Fiscal year

ES- 202 CES

$20 $0

Appendix I: Briefing Slides Page 21 GAO- 03- 336 Labor Market Information

15

BLS Budget Estimates of State Funding Needs

 BLS does not obtain information on costs from state LMI offices to
develop budget estimates because BLS cannot readily verify such data,
according to BLS budget officials.

 BLS budget officials said they estimate state funding needs by starting
with last year*s funding and adding an inflation adjustment for cost-
ofemployment. For the ES- 202 program, BLS also makes an adjustment for
changes in workload.

 BLS- requested increases for inflation and workload in state LMI
programs have not always been approved, according to BLS budget officials.

Appendix I: Briefing Slides Page 22 GAO- 03- 336 Labor Market Information

16

BLS Allocation Method for States' Funds

BLS allocates funds among states using a separate allocation formula for
each LMI program.

Allocation formulas compute each state*s pro rata share of total program
funds by using factors such as

- a minimum staffing level per state, - the state*s portion of the
national workload, and - the state*s average salary for state government
workers.

Appendix I: Briefing Slides Page 23 GAO- 03- 336 Labor Market Information

17

Fiscal Year 2002 Change in Allocation Formulas

The share of funds each state received changed when BLS began using
different salary data in the formulas.

 In fiscal year 2002, BLS began using average state government salaries
from published sources instead of unverified state LMI salaries submitted
by state officials.

 The change was intended to ensure a more objective and open allocation
process, according to BLS.

A hold- harmless provision phases in the redistribution of funds among
states and is expected to continue for several years, according to BLS.

 States whose funding would have decreased under the changed formula will
be kept at or about their fiscal year 2001 funding level.

 The other states will receive any increases that are available under
future appropriations.

Appendix I: Briefing Slides Page 24 GAO- 03- 336 Labor Market Information

18

Changes in State Allocations If Formula Implemented Without Hold Harmless
Approach

Note: GAO interviewed officials in shaded states. Graph shows percentage
change in base program allocations for CES and ES- 202 from fiscal year
2001 to fiscal year 2002 if formula change were implemented without using
the hold- harmless approach.

Source: GAO analysis of BLS funding data.

-40 -30

-20 -10

10 20

30 40

50 Percent -50

Appendix I: Briefing Slides Page 25 GAO- 03- 336 Labor Market Information

19

Formula Change Impact on *Large* versus *Small* States

States ranked by size (based on number of business establishments) Funding
change (based on change from FY2001 to FY2002 if hold harmless approach
were not used) 25 largest states 26 smallest states Increase over 5 % 10 4

Between 5% increase and 5% decrease 9 7

Decrease over 5 % 6 15 Larger states tend to gain; smaller states tend to
lose share of ES 202 and CES funds over time.

Appendix I: Briefing Slides Page 26 GAO- 03- 336 Labor Market Information

20

Formula Change Anticipated Impact on Six States

According to officials in the three states losing shares of funds under
the new formula:

 Florida will face more severe staffing shortages in ES- 202.  Montana
and Wyoming have been facing deficits in their LMI programs and

will have difficulty maintaining the programs if they have to reduce
staffing below current, minimal levels.

According to officials in three states gaining shares of funds under the
new formula:

 In California, the additional funds may be sufficient to address data
quality problems.

 In New York, funding shortages will be reduced but not eliminated. 
Minnesota will see little impact from the slight funding increase.

Appendix I: Briefing Slides Page 27 GAO- 03- 336 Labor Market Information

21

Issues Rising Workload and Costs in ES- 202

Officials we interviewed in all six states said funding for ES- 202 has
not kept pace with increases in workload and expenses. BLS officials
concurred that funding to states has not kept pace with workload increases
in the labor- intensive ES- 202 program and with inflation in average
state salaries. Data show that base program funding (not adjusted for
inflation) rose about 13% between fiscal year 1996 and fiscal year 2002,
while

 a key indicator of workload* total business establishments covered by
the ES- 202 program* increased about 11%.  an indicator of a key expense*
an index for state white collar workers* salaries and benefits* increased
about 19%.

Appendix I: Briefing Slides Page 28 GAO- 03- 336 Labor Market Information

22

Nature of ES- 202 Workload Labor Intensive  Maintenance of a file on all
businesses in the state

 Identification of new businesses using unemployment insurance employer
filings and additional data sources  Assignment of codes to new
businesses  Collection of additional data on each site of multi- site

businesses  Annual surveys of a third of all businesses to verify
industry classification, geographic location and addresses  Determination
of which businesses no longer exist  Numerous edits to identify possible
errors in the data  Comparison of employment data with CES employment

estimates

Appendix I: Briefing Slides Page 29 GAO- 03- 336 Labor Market Information

23

Workload in ES- 202 Factors Affecting Increased Workload Changes in
business establishments, such as

- Continuous increases in the number of business establishments whose
records must be updated and edited

- Creation and dissolution of businesses and other changes that require
records to be added or discontinued

Program changes made by BLS

- A change to a more complex industry classification system - Shortened
reporting timeframes - Increased emphasis on the accuracy of business
establishment

addresses

Appendix I: Briefing Slides Page 30 GAO- 03- 336 Labor Market Information

24

Workload in ES- 202 Increase in Business Establishments

Source: BLS ES- 202 program office data.

Millions of establishments 6.0 6.5

7.0 7.5

8.0 8.5

1996 Year

1997 1998

1999 2000

2001

7.19 7.37

7.63 7.82 7.88 7.99

0

Appendix I: Briefing Slides Page 31 GAO- 03- 336 Labor Market Information

25

Workload in ES- 202 Two Million New and Discontinued Records Annually

Source: BLS ES- 202 program office data.

Millions of records 0 0.5

1.0 1.5

2.0 2.5

Discontinued New

1996 Year

1997 1998

1999 2000

2001

Appendix I: Briefing Slides Page 32 GAO- 03- 336 Labor Market Information

26

Costs in ES- 202 Examples of Increases in Three States

 Montana*s ES- 202 program staff costs increased 25%, rent increased over
200%, and computer server costs increased about 140% from fiscal year 1997
to fiscal year 2002. ES- 202 base program funding increased 4%.

 New York*s average staff salary increased 22% from fiscal year 1997 to
fiscal year 2002. ES- 202 base program funding increased 18%.

 Wyoming*s LMI staff received significant pay raises in fiscal years 1999
and 2001. The pay raises averaged about 9% and 13%, while ES- 202 base
program funding increased 0. 3% and 9% in those years, respectively.

Appendix I: Briefing Slides Page 33 GAO- 03- 336 Labor Market Information

27

Changing Workload and Funding in CES Changes BLS has made to the CES
program in recent years have affected workload, although there is no
simple indication of trends.  BLS phased in a new type of survey sample
and (because of increased costs) reduced the sample size, which may have
reduced

the workload in some states.  Automation, new information systems, and
some centralized data collection have improved efficiency and reduced
state workloads, according to BLS officials. Five of the six surveyed
states have cut CES staffing; some state officials say the volume of work
has not increased, but work has become more analytically complex and
demand for interpretation of survey results has increased. According to
BLS program officials, states are delivering their products on time and in
compliance with BLS requirements and, thus, are adequately funded for the
work they are asked to do under the CES program.

Appendix I: Briefing Slides Page 34 GAO- 03- 336 Labor Market Information

28

CES Funding Views of Six States Interviewed

Officials interviewed in three states believe their states* current
funding levels for CES are too low.

 California officials said CES is severely underfunded.  Wyoming and
Montana officials said all LMI programs, including CES,

are underfunded. Officials in the other three states -- Florida,
Minnesota, and New York -- said, given their current workloads, CES
funding for their states is generally adequate.

Regardless of CES funding levels in their states, some officials expressed
concern that inadequate funding for the national program had led to a
reduction in the sample size and, thus, reduced the usefulness of CES data
for local labor market analysis.

Appendix I: Briefing Slides Page 35 GAO- 03- 336 Labor Market Information

29

Quality of ES- 202 Data

BLS officials believe the overall quality of ES- 202 data is high.
However, there are no simple indicators to assess the quality of the data,
and according to BLS officials, BLS does not have the ability to readily
identify all data quality problems.

Officials in five of the six states * Florida, Minnesota, Montana, New
York, and Wyoming * predicted that, under current funding trends, data
quality is likely to decline or not improve as much as desired, because of
 missing data from employers, and

 uncorrected data errors. Quality of ES- 202 data affects the reliability
of data from other LMI programs.

 ES- 202 file is used to select samples for CES and OES surveys.  ES-
202 data are used to benchmark CES estimates.

Appendix I: Briefing Slides Page 36 GAO- 03- 336 Labor Market Information

30

Quality of CES Data

Issues exist with the quality of CES data that are not necessarily linked
to state funding levels, according to BLS and state officials.

A quality issue linked to funding levels is the CES survey sample size
that BLS reduced due to funding problems.

 According to some state officials, the sample reduction results in less
data on local areas and specific industries.

 According to BLS officials, the CES program is not intended to provide
the extensive local level data desired by states, and the sample reduction
does not reduce the quality of national CES estimates.

California officials said insufficient funds have affected CES data
quality* its survey response rate has been below BLS standards because of
insufficient staff to follow up on nonresponses.

Appendix II: Programs That Use LMI Data in Decisions about the
Distribution of Federal Funds or Other Benefits

Page 37 GAO- 03- 336 Labor Market Information

Table 1: Programs That Use Data from the Local Area Unemployment
Statistics (LAUS) Program Federal agency Program or activity that uses
LAUS data a

Catalog of Federal Domestic Assistance

number Federal funding

in fiscal year 2002 b (in millions)

Food Stamps * Waivers of Time Limits on Receipt by Able- Bodied Adults
Without Dependents 10.551 $ 349.4 c Agriculture Department:

Food and Nutrition Service Emergency Food Assistance Program 10.569 190.0
Grants for Public Works and Economic Development Facilities 11.300 250.0
Commerce Department: Economic Development Administration

Economic Adjustment Assistance 11.307 40.9 Defense Department: Defense
Logistics Agency

Procurement Technical Assistance for Business Firms 12.002 18.2 d Housing
and Urban Development Department: Community Planning and Development

Youthbuild Program 14.243 59.8 Employment Service 17.207 987.4
Unemployment Insurance * Federal/ State Extended Unemployment Benefits
17.225 207.0 d Dislocated Workers * Workforce Investment Act 17.260 1,
549. 0 Adult Program - Workforce Investment Act 17.258 950.0 Youth
Activities - Workforce Investment Act 17.259 1, 128.0 Labor Department:

Employment and Training Administration

Youth Opportunity Grants - Workforce Investment Act 17.263 225.1 Treasury
Department: Community Development Financial

Institutions Bank Enterprise Awards 21.021 23.0

Treasury Department: North American Development Bank

NADBank Community Adjustment and Investment Program None 9.3 Appalachian
Regional Commission Distressed County Non- Highway Program 23.002 14.4
Federal Emergency Management Agency Emergency Food and Shelter Program
83.523 140.0

Contingency Fund - Temporary Assistance for Needy Families 93.558 2, 000 e
Health and Human Services Department: Administration for Children and
Families

Extension of Time in Job Search Temporary Assistance for Needy Families
93.558 f Small Business Administration Historically Underutilized Business
Zones

(HUBZones) None 2.0 Justice Department: Immigration and Naturalization
Service

Employment Creation Visas (EB 5) None None g

Total $8,143.5

Source: BLS*s LAUS program, the federal agencies listed, and the Catalog
of Federal Domestic Assistance. a Programs listed are those identified by
BLS that use LAUS data to allocate shares of federal funds or

achieve other purposes, such as qualifying applicants, establishing
eligibility of individuals or geographic areas, or setting thresholds or
federal match rates.

Appendix II: Programs That Use LMI Data in Decisions about the
Distribution of Federal Funds or Other Benefits

Appendix II: Programs That Use LMI Data in Decisions about the
Distribution of Federal Funds or Other Benefits

Page 38 GAO- 03- 336 Labor Market Information

b Unless otherwise noted, dollars shown are amounts available for the
program from fiscal year 2002 appropriations. The full amount shown is not
necessarily subject to distribution based on LAUS data. c Dollars shown
are an estimate provided by a Food and Nutrition Service official of the
portion of the

$21.9 billion in appropriations for the Food Stamp program that could be
affected by the LAUS data. d Dollars shown are estimated obligations.

e Dollars shown were available for the period fiscal year 1997 through
fiscal year 2002. f LAUS data do not directly affect the amount of funds
that states receive from the $16.7 billion in appropriations for the
Temporary Assistance for Needy Families (TANF) program. However,
unemployment data affect how long states can count job search as a work
activity for TANF recipients when determining whether the states meet
federal work participation rate requirements. g Program distributes visas
to eligible immigrant entrepreneurs who establish or sustain an investment
of $1 million in a commercial enterprise within the U. S. For those who
invest in targeted employment areas with high rates of unemployment, the
investment threshold is $0. 5 million.

Appendix II: Programs That Use LMI Data in Decisions about the
Distribution of Federal Funds or Other Benefits

Page 39 GAO- 03- 336 Labor Market Information

Table 2: Examples of Programs That Use Data from the Covered Employment
and Wages (ES- 202) Program Federal agency Program or activity that uses
ES- 202 data a

Catalog of Federal Domestic Assistance

number Federal

funding in fiscal year

2002 b (in millions)

Supportive Housing for the Elderly (202) 14.157 $783.3 Supportive Housing
for Persons with Disabilities (Section 811) 14.181 240.9 Housing and Urban
Development Department:

Housing Section 8 Housing Assistance Payments Program 14.195 4, 500.0 c
Entitlement Grants - Community Development Block Grants 14.218 3, 038.7
States* Program - Community Development Block Grants 14.228 1, 297.1
Housing and Urban Development Department:

Community Planning and Development HOME Investment Partnerships Program
14.239 1, 846.0 Public and Indian Housing - Operating Fund 14.850 3, 494.9
Section 8 Housing Choice Vouchers 14.871 11,900.0 c Housing and Urban
Development Department:

Public and Indian Housing Public Housing - Capital Fund 14.872 2, 843.4
Health and Human Services Department: Centers for Medicare and Medicaid
Services

State Children*s Insurance Program (CHIP, SCHIP) 93.767 3, 150.0

Total $33,094.3

Source: BLS*s ES- 202 program, the federal agencies listed, and the
Catalog of Federal Domestic Assistance. a Table includes significant
examples of the numerous programs that use ES- 202 data directly to
allocate shares of federal funds or for other purposes, such as
establishing eligibility for federal funds. The table does not include
programs that use ES- 202 data indirectly, such as Medicaid and Foster
Care, that have funding formulas that include state per capita personal
income, which is based in part on ES- 202 data. b Unless otherwise noted,
dollars shown are amounts available for the program from fiscal year 2002

appropriations. The full amount shown is not necessarily subject to
distribution based on ES- 202 data. c Dollars shown are estimated
obligations.

Appendix III: Change in States* Allocations Page 40 GAO- 03- 336 Labor
Market Information

Table 3: Change in States* ES202 and CES Base Program Allocations from
Fiscal Year 2001 to Fiscal Year 2002 if Formula Change Were Implemented
Without Hold- Harmless.

If hold- harmless not applied State Actual fiscal year 2001

allocation dollars Fiscal year

2002 allocation dollars

Change in allocation

dollars Change in

allocation percentage

Alabama $651,442 $805,652 $154,210 24 Alaska 445,721 339,296 -106,425 -24
Arizona 682,469 620,753 -61,716 -9 Arkansas 533,447 542,147 8, 700 2
California 5,104,176 5,696,468 592,292 12 Colorado 996,109 886,112
-109,997 -11 Connecticut 1,007,596 1,007,722 126 0 Delaware 413,981
371,495 -42,486 -10 District of Columbia 458,445 430,069 -28,376 -6
Florida 2,023,622 1,851,538 -172,084 -9 Georgia 1,125,664 1,167,146 41,482
4 Hawaii 387,485 357,628 -29,857 -8 Idaho 440,896 368,827 -72,069 -16
Illinois 1,955,505 1,964,536 9,031 0 Indiana 936,385 1,057,557 121,172 13
Iowa 605,320 858,101 252,781 42 Kansas 600,500 579,899 -20,601 -3 Kentucky
526,316 687,175 160,859 31 Louisiana 936,220 749,823 -186,397 -20 Maine
465,699 383,300 -82,399 -18 Maryland 702,998 880,340 177,342 25
Massachusetts 1,407,056 1,608,121 201,065 14 Michigan 1,849,127 1,722,081
-127,046 -7 Minnesota 1,067,680 1,106,007 38,327 4 Mississippi 468,317
412,343 -55,974 -12 Missouri 765,600 899,487 133,887 17 Montana 429,537
302,580 -126,957 -30 Nebraska 512,838 455,117 -57,721 -11 Nevada 480,369
471,458 -8,911 -2 New Hampshire 430,394 403,759 -26,635 -6 New Jersey
1,414,929 1,938,089 523,160 37 New Mexico 654,155 419,001 -235,154 -36 New
York 3,086,205 3,374,734 288,529 9 North Carolina 1,173,253 1,195,728
22,475 2 North Dakota 385,447 293,770 -91,677 -24 Ohio 1,676,778 2,035,305
358,527 21 Oklahoma 752,529 504,815 -247,714 -33 Oregon 792,278 760,165
-32,113 -4 Pennsylvania 1,894,611 2,334,158 439,547 23

Appendix III: Change in States* Allocations

Appendix III: Change in States* Allocations Page 41 GAO- 03- 336 Labor
Market Information

If hold- harmless not applied State Actual fiscal year 2001

allocation dollars Fiscal year

2002 allocation dollars

Change in allocation

dollars Change in

allocation percentage

Rhode Island 409,078 400,585 -8,493 -2 South Carolina 610,665 609,430
-1,235 0 South Dakota 323,127 307,735 -15,392 -5 Tennessee 702,615 762,572
59,957 9 Texas 2,641,843 2,553,351 -88,492 -3 Utah 435,415 476,680 41,265
9 Vermont 338,113 342,604 4, 491 1 Virginia 1,264,184 1,155,528 -108,656
-9 Washington 1,017,738 1,032,268 14,530 1 West Virginia 531,741 452,190
-79,551 -15 Wisconsin 1,120,267 1,110,028 -10,239 -1 Wyoming 433,169
259,130 -174,039 -40

Totals $50,069,054 $51,304,403 $1,235,349

Source: GAO analysis of BLS funding data.

Appendix IV: States Ranked by Size Page 42 GAO- 03- 336 Labor Market
Information

Table 4: States Ranked by Size (from Largest to Smallest) Based on Number
of Business Establishments in ES- 202 Data

State Average number

of establishments for 2001 Percentage of total

establishments

California 1, 084,308 13.4 New York 539,709 6. 7 Texas 491,907 6. 1
Florida 460,048 5. 7 Pennsylvania 334,747 4. 1 Illinois 319,595 4. 0 Ohio
287,264 3. 6 Michigan 258,750 3. 2 New Jersey 256,594 3. 2 Georgia 239,426
3. 0 North Carolina 225,387 2. 8 Washington 220,225 2. 7 Virginia 197,936
2. 4 Massachusetts 191,685 2. 4 Missouri 163,670 2. 0 Minnesota 156,025 1.
9 Colorado 154,196 1. 9 Indiana 150,921 1. 9 Wisconsin 147,743 1. 8
Maryland 145,861 1. 8 Tennessee 125,593 1. 6 Arizona 119,279 1. 5 South
Carolina 115,432 1. 4 Louisiana 115,223 1. 4 Oregon 113,487 1. 4 Alabama
111,007 1. 4 Connecticut 108,725 1. 3 Kentucky 108,375 1. 3 Iowa 92,817 1.
1 Oklahoma 90,328 1. 1 Kansas 81,325 1. 0 Arkansas 73,031 0. 9 Utah 68,668
0. 8 Mississippi 63,749 0. 8 Nebraska 52,649 0. 7 Nevada 51,515 0. 6 New
Mexico 48,833 0. 6 Idaho 46,657 0. 6 West Virginia 46,566 0. 6

Appendix IV: States Ranked by Size

Appendix IV: States Ranked by Size Page 43 GAO- 03- 336 Labor Market
Information

State Average number

of establishments for 2001 Percentage of total

establishments

Maine 46,546 0. 6 New Hampshire 46, 406 0. 6 Montana 40,553 0. 5 Hawaii
35,428 0. 4 Rhode Island 33,624 0. 4 District of Columbia 28,561 0. 4
South Dakota 27,342 0. 3 Delaware 25,190 0. 3 Vermont 24,060 0. 3 North
Dakota 23,258 0. 3 Wyoming 21,429 0. 3 Alaska 19,410 0. 2 Source: BLS ES-
202 data.

(130129)

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