Workforce Training: Almost Half of States Fund Employment	 
Placement and Training through Employer Taxes and Most Coordinate
with Federally Funded Programs (13-FEB-04, GAO-04-282). 	 
                                                                 
As technological and other advances transform the U.S. economy,  
many of the nation's six million employers may have trouble	 
finding employees with the skills to do their jobs well. Some	 
experts indicate that such a skill gap already affects many	 
employers. To help close this skill gap, both federal- and	 
state-funded programs are providing training and helping	 
employers find qualified employees. In 2002, the federal	 
government spent about $12 billion on workforce programs, and	 
there are various studies on these programs. States also raised  
revenues in 2002--from taxes levied on employers--to fund their  
own workforce programs. However, little is known about these	 
state programs. GAO was asked to provide information on how many 
states use these employer taxes to fund their own employment	 
placement and training programs, what services are provided, the 
extent to which these state programs coordinate with federal	 
programs, and how states assess the performance of these	 
programs.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-282 					        
    ACCNO:   A09242						        
  TITLE:     Workforce Training: Almost Half of States Fund Employment
Placement and Training through Employer Taxes and Most Coordinate
with Federally Funded Programs					 
     DATE:   02/13/2004 
  SUBJECT:   Employment or training programs			 
	     Federal funds					 
	     Federal grants					 
	     Federal/state relations				 
	     Labor force					 
	     Program evaluation 				 
	     State programs					 
	     State taxes					 
	     HHS Temporary Assistance for Needy 		 
	     Families Program					 
                                                                 
	     California 					 
	     Louisiana						 
	     Rhode Island					 
	     DOL Unemployment Insurance Program 		 
	     DOL H-1B Technical Skills Training Grant		 
	     Program						 
                                                                 

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GAO-04-282

United States General Accounting Office

GAO

                       Report to Congressional Requesters

February 2004

WORKFORCE TRAINING

 Almost Half of States Fund Employment Placement and Training through Employer
            Taxes and Most Coordinate with Federally Funded Programs

GAO-04-282

Highlights of GAO-04-282, a report to congressional requesters

As technological and other advances transform the U.S. economy, many of
the nation's six million employers may have trouble finding employees with
the skills to do their jobs well. Some experts indicate that such a skill
gap already affects many employers.

To help close this skill gap, both federal- and state-funded programs are
providing training and helping employers find qualified employees. In
2002, the federal government spent about $12 billion on workforce
programs, and there are various studies on these programs. States also
raised revenues in 2002-from taxes levied on employers-to fund their own
workforce programs. However, little is known about these state programs.

GAO was asked to provide information on how many states use these employer
taxes to fund their own employment placement and training programs, what
services are provided, the extent to which these state programs coordinate
with federal programs, and how states assess the performance of these
programs.

www.gao.gov/cgi-bin/getrpt?GAO-04-282.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Sigurd R. Nilsen at (202)
512-7215 or [email protected].

February 2004

WORKFORCE TRAINING

Almost Half of States Fund Employment Placement and Training through Employer
Taxes and Most Coordinate with Federally Funded Programs

Twenty-three states reported using employer tax revenues in 2002 to fund
their own employment placement and training programs, and states most
often provided job-specific training for workers. States used various
types of employer taxes and reported spending a total of $278 million to
address state-specific workforce issues. States invested in a variety of
industries, but manufacturing was the most frequently targeted.

Most states with employment placement and training programs funded through
employer taxes reported some coordination with federal workforce programs
in 2002. States were most likely to coordinate with federal workforce
programs by jointly promoting programs through outreach and referrals.
According to most state officials, coordination with federal workforce
programs raised awareness of their state-funded programs. Some state
officials also reported that coordination improved the quality and
availability of services.

Twenty-two of the 23 states reported assessing the performance of their
programs in 2002. However, none have used sufficiently rigorous research
designs to allow them to make conclusive statements about the impact of
their programs, such as their effect on worker wages or company earnings.
Because these programs contribute to our nation's ability to provide
comprehensive workforce development services to meet employers' needs for
skilled workers, it would be helpful to have information on the impact of
these efforts. The Department of Labor has valuable resources that might
help states evaluate the impact of their programs.

Twenty-three States Reported Using Employer Taxes to Fund Their Own
Employment Placement and Training Programs in 2002

Source: GAO's survey of states that used employer taxes to fund their own
workforce programs in state fiscal year 2002.

Contents

  Letter

Results in Brief
Background
Nearly Half of All States Used Employer Taxes to Fund Their Own

Employment Placement and Training Programs, and States Most
Often Provided Job-Specific Training

Most States with Employment Placement and Training Programs
Funded through Employer Taxes Reported Some Coordination
with Federal Workforce Programs

Almost All States Reported Regularly Assessing the Performance of

Their Programs, but Program Impact Cannot be Determined
Concluding Observations
Agency Comments

                                       1

                                      3 4

10

23

29 32 32

  Appendix I Objectives, Scope, and Methodology 34

Survey 35
Review of State Program Assessments 37
Site Visits 38

Appendix II	Employer Tax Collections and Employer Tax-Funded Program
Budgets in 2002, as Reported by States

Appendix III	Employer Tax-Funded Programs' Primary Emphasis,
Expenditures and Numbers Served, in 2002

Appendix IV	Coordination between Federal Workforce Programs
and State Programs Funded through Employer
Taxes in 2002

  Appendix V	Assessment Approaches Used in 2002, as Reported by
  States 44

              Appendix VI Indicators Used in State Assessments 45

  Appendix VII GAO Contacts and Staff Acknowledgments 46

GAO Contacts 46 Staff Acknowledgments 46

Tables                                                                  
                    Table 1: One-Stop Center Mandatory Partners             5 
           Table 2: Types of Employer Taxes States Reported Collecting and 
                           Using to Fund Employment Placement and Training 
                                  Services in 2002                         15 
          Table 3: Select Outcome Indicators Used by States in Assessments 31 
              Table 4: The Year Employer Taxes Were First Used to Fund     
                             Employment Placement and Training Programs by 
                                  Selected States                          36 
                          Table 5: Site-Selection Criteria                 38 

  Figures

Figure 1: Relationship between State Workforce Investment Boards, Local
Workforce Investment Boards, and One-Stop Centers 7

Figure 2: States that Reported Funding Their Own Employment Placement and
Training Programs with Employer Taxes in 2002 12

Figure 3: Total Expenditures of Employer Tax-Funded Programs in 2002, as
Reported by States 13 Figure 4: Year that States First Used Employer Taxes
to Fund Employment Placement and Training Services 16 Figure 5: Industries
Targeted by Most Employer Tax-Funded Programs in 2002, as Reported by
States 18

Figure 6: Size of Employers Targeted for Training Services by Employer
Tax-Funded Programs in 2002, as Reported by States 19

Figure 7: Primary Service Focus of Employer Tax-Funded Programs in 2002,
as Reported by States 20 Figure 8: Employer Tax-Funded Program
Expenditures by Service Area in 2002, as Reported by States 21

Figure 9: Populations Targeted by Employer Tax-Funded Programs for
Training in 2002, as Reported by States 21 Figure 10: Types of Training
Services Provided in 2002, as Reported

by States 22 Figure 11: Coordination Activities in 2002, as Reported by
States 24 Figure 12: Number of States Reporting Coordination between Their

Employer Funded Programs and Various Federal Workforce Programs, 2002 26
Figure 13: States Report on the Results of Their Coordination with Federal
Workforce Programs, 2002 28 Figure 14: Evaluators of State Programs, as
Reported by States 30

Abbreviations

TANF Temporary Assistance for Needy Families
UI Unemployment Insurance
WIA Workforce Investment Act

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United States General Accounting Office Washington, DC 20548

February 13, 2004

The Honorable Edward M. Kennedy
Ranking Minority Member
Committee on Health, Education, Labor and Pensions
United States Senate

The Honorable Patty Murray
Ranking Minority Member
Subcommittee on Employment, Safety, and Training
Committee on Health, Education, Labor and Pensions
United States Senate

As technological and other advances transform the U.S. economy, many of
the nation's six million employers may have trouble finding employees
with the necessary skills. A recent study found that 46 percent of
employers who participated in a workforce survey had difficulty recruiting
qualified job applicants.1 To help close the gap between employer needs
and employee skills, both federal-and state-funded workforce programs
are providing skills training and helping employers find qualified
employees. Although many studies provide information on federally
funded programs operating throughout the country, little is known about
the state-funded programs. These state programs have the potential to
enhance the federal workforce system and upgrade the skills of the
nation's workers.

The federal government funds 44 employment and training programs, such
as the Workforce Investment Act programs, that serve adults, dislocated
workers, and youth. Some of the services provided through federally
funded programs include: employment counseling and assessment, job
search and placement activities, and basic skills such as GED preparation
and basic adult literacy. In 2002, the federal government spent about
$12 billion on employment and training activities. States have also raised
their own funds to help upgrade the skills of their workforces and match
employers with qualified employees. States often raise revenues for these

1Dixon, K.A., Duke Storen, and Carl E. Van Horn. John J. Heldrich Center
for Workforce Development, Rutgers University, Standing on Shaky Ground:
Employers Sharply Concerned in Aftermath of Recession and Terror, (New
Jersey, February 2002).

programs through taxes levied on employers. While some states use these
revenues to supplement federally funded services, like job training
provided through the Workforce Investment Act, other states use these
revenues to fund their own employment placement and training programs.

Because of your interest in these state-funded employment and training
efforts, and their relationship with those that are federally funded, you
requested that we determine

o  	how many states use employer taxes to fund their own employment
placement and training programs, and what type of services do they
provide;

o  	the extent to which these state employment placement and training
programs are coordinating with federal workforce programs; and

o  	how states are assessing the performance of their employment placement
and training programs.

To address these questions, we surveyed all 50 states, the District of
Columbia, and Puerto Rico to determine how many used employer taxes to
fund their own employment placement and training programs in 2002.2 We
conducted a follow-up survey of the states that had these programs to
determine what services were provided, how they are assessed, and the type
and extent of coordination with federal workforce programs. To learn more
about state program assessments of the performance of the programs, we
analyzed recent assessments from the states that could provide them to us.
To gather more information about coordination, we surveyed staff from
workforce investment boards in 6 states that began to fund their
employment placement and training programs through employer taxes in the
1980s. In addition, we visited 3 states-California, Louisiana, and Rhode
Island-where we interviewed officials from both state and federally funded
workforce programs. We selected these states because they are
geographically diverse and their employer-funded programs vary in age and
funding levels. We also reviewed existing studies and literature on state
employment and training programs. We conducted our work between February
and November 2003 in accordance with

22002 is used throughout this report and covers the time period defined as
state fiscal year 2002, as reported by states. (For a complete description
of the time periods reported by states for state fiscal year 2002, see
app. I.)

  Results in Brief

generally accepted government auditing standards. (For a complete
description of our scope and methodology, see app. I.)

Twenty-three states reported using a variety of employer tax revenues in
2002 to fund their own employment placement and training programs, and
states most often provided job-specific training for workers. State
officials reported several reasons why these state-funded employment
placement and training services were offered in addition to those offered
through federally funded programs. Some states reported establishing their
programs as a way to address a variety of specific workforce and economic
issues, such as chronic shortages of skilled workers. For example,
Louisiana's program used employer tax revenues to fund emergency medical
services training after one of the state's largest providers of paramedics
and emergency medical care staff reported needing to hire most of its
staff from out of state due to a lack of qualified workers. In addition,
other states noted that their employment placement and training programs
address service and eligibility gaps in federally funded workforce
programs. States reported spending a total of $278 million to provide
these training and employment placement services. California pioneered
this use of employer taxes in 1982, and most recently New Hampshire passed
legislation in 2001 to create its program. States invested funds in a
variety of industries, but manufacturing was the most frequently targeted,
while accommodation and food service industries were least likely to be
targeted. The primary focus of these state programs was worker training,
in particular job-specific training, such as instruction on computer
software and new production methods. States were less likely to use
employer taxes to provide training services for nonjobspecific skills,
including conflict resolution and team building.

Twenty-one of the 23 states with employment placement and training
programs funded through employer taxes reported some coordination with
federal workforce programs in 2002. States were most likely to coordinate
with federal workforce programs by jointly promoting programs through
outreach and referrals. For example, officials in Louisiana provided
information packets to employers about how to upgrade their employee's
skills or fill job openings using state and federally funded workforce
programs. Other common coordination activities involved the exchange of
technical assistance and the sharing of administrative resources. For
example, California staff from both state and federal workforce programs
worked together on a task force and provided each other with technical
assistance to improve services to small businesses. Similarly, several
states reported that they shared office space,

staff, and other administrative resources. Fewer states noted that they
cofunded employment placement and training services or jointly developed
policies with federal workforce programs. According to most state
officials, coordination with federal workforce programs raised awareness
of their state-funded programs. Some state officials also reported that
coordination improved the quality and availability of services. For
example, a state official in Michigan noted that as a result of
coordination between the state program and federally funded career
centers, workers were exposed to a broader range of employment and
training services and job opportunities.

While 22 of the 23 states reported assessing the performance of their
programs in 2002, none have used sufficiently rigorous research designs to
allow them to make conclusive statements about the impact of their
programs, such as their effect on worker wages or company earnings. States
used a range of approaches to assess their employment placement and
training programs, including variations in who conducted the assessments,
the data collection methods used for the assessments, and the frequency of
the assessments. Most states used a combination of data collection methods
for their assessments. For example, Tennessee's assessment was based on
data collected from site visits to training locations and surveys
administered to employers, while self-reported feedback and a fiscal audit
were the data sources used for Texas's assessment. Of the 18 states that
could provide us with assessments of their individual employment placement
and training programs, we found that 4 states assessed their programs
exclusively using process-oriented indicators, such as the number and type
of workers and businesses served and the services offered. The 14 other
states also included outcomeoriented indicators along with
process-oriented indicators in their assessments, though none used
appropriate comparison groups to allow them to conclusively attribute
outcomes to their programs.

Background 	Technological advances continue to transform the U.S.
workforce, and workers must improve their skills to meet employers'
changing needs. Many employers report difficulties in finding qualified
workers, and many unemployed workers lack the skills they need to find
jobs. Training programs can help workers gain the skills needed for
today's jobs, and employment placement programs can help employers find
qualified employees.

    Federally Funded Employment and Training Programs

In 2002, the federal government funded 44 employment and training programs
that provided services, such as job search assistance, employment
counseling, basic adult literacy, and vocational training, to over 30
million people at a cost of approximately $12 billion.3 Although these
programs were administered by nine federal agencies, many of the programs
provided services to the public through one-stop centers in communities
throughout the country. When the Congress passed the Workforce Investment
Act (WIA) in 1998, it mandated that at least 17 federally funded programs
provide employment and training services through a one-stop center system
(see table 1).

  Table 1: One-Stop Center Mandatory Partners Federal agency Mandatory partner

                              Department of Labor

WIA Adult
WIA Dislocated Worker
WIA Youth
Employment Service (Wagner-Peyser)
Trade Adjustment Assistance Programs
Veterans' employment and training programs
Unemployment Insurance
Job Corps

a

Welfare-to-Work Program
Senior Community Service Employment Program
Employment and training for migrant and seasonal farm workers
Employment and training for Native Americans

Department of Education 	Vocational Rehabilitation Program Adult Education
and Literacy Vocational Education (Perkins Act)

Department of Health and Human Services Community Services Block Grant

  Department of Housing and Urban Development HUD-administered employment and
                                    training

                     Source: 1998 Workforce Investment Act.

3See U.S. General Accounting Office, Multiple Employment and Training
Programs: Funding and Performance Measures for Major Programs, GAO-03-589
(Washington, D.C.: Apr. 18, 2003).

aThe Welfare-to-Work Program provides a variety of services to move
welfare recipients, custodial parents with incomes below the poverty line,
and noncustodial parents of low-income children into employment. These
services include transitional employment, wage subsidies, job training and
placement, and post-employment services.

WIA also established workforce investment boards. Each state workforce
investment board is responsible for developing statewide workforce
policies and overseeing its local workforce investment boards. The local
workforce investment boards, in turn, are responsible for developing local
workforce policies and overseeing one-stop center operations (see fig. 1).

Figure 1: Relationship between State Workforce Investment Boards, Local
Workforce Investment Boards, and One-Stop Centers

                   Source: GAO-03-353,GAO-03-725, and Labor.

Some of the federal employment and training programs are not required to
provide services through the one-stop centers. These include the Temporary
Assistance for Needy Families program (TANF) and the H-1B Technical Skills
Training Grant Program. The TANF program is administered by the Department
of Health and Human Services and assists needy adults with children in
finding and retaining employment. The H-1B Technical Skills Training
Grants are administered by the Department of Labor, and the funds are
distributed to select local workforce investment boards to increase the
supply of skilled workers in occupations identified as needing more
workers.

    State-Funded Employment and Training Programs

In addition to federally funded programs, states use their own revenues to
expand employment placement and training opportunities.4 For example,
states create unemployment insurance (UI) tax offsets by decreasing the UI
tax amount paid by employers and at the same time imposing a separate tax
on employers for the same amount as the UI tax deduction. In addition,
states use other employer taxes, and revenues from each states' UI
interest fund or from UI penalty fees imposed on employers. Employers may
be charged UI penalty fees for late payments, for failing to file a UI
return for an employee, or for failing to report an employee's wages.
While all of these revenues are generated through employer taxes, states
also commit general revenue funds to expand employment placement and
training opportunities. A study for the National Governors' Association
Center for Best Practices found that state-funded worker training programs
are operating in 48 states.5

States have increased the availability of employment placement and
training opportunities in various ways. Some states have used their
revenues to expand federally funded programs. In fact, a recent national
study by National Association of State Workforce Agencies found that 19
states used these revenues to supplement WIA job training services. Other
states have used their revenues, including employer tax funds, to create
their own employment placement and training programs; however, little is
known about these programs.

4NASWA State Supplemental Funding Survey - Estimated Data for 2002.

5Regional Technology Solutions, A Comprehensive Look at State-Funded,
Employer-Focused Job Training Programs National Governors' Association,
Center for Best Practices (Washington, D.C.: 1999).

Employer-Funded Training Some employers invest their own resources in
training their workers. The

Programs 	exact amount of money that employers spend every year to train
their workers is difficult to estimate; a study of trends in
employer-provided training suggests that employers' financial commitment
to training has recently increased.6 Some individuals, as well, invest
their own funds for training as a way to either upgrade their job-related
skills or to become employable.

    Types of Impact Evaluations for Public Programs

Impact evaluations for public programs, like employment and training
programs, produce findings that allow conclusions about the effectiveness
of the programs to be made. These evaluations may be implemented using a
few different design strategies. Two designs that are used to isolate a
program's effects, such as those on participants, are experimental designs
and quasi-experimental designs.

o  	Experimental designs. These are characterized by the use of random
selection and control groups. All individuals have an equal chance of
being assigned to either the intervention group or the control group. The
intervention group contains individuals who will receive the intervention,
or program's services, while the control group does not receive the
intervention or services. This research design produces findings that
allow conclusions about the effectiveness, or impact, of the intervention
to be made. However, conducting experimental designs may be problematic
because of the need to treat intervention and control groups differently.
For example, to determine the impact of a training program on workers'
wages, a program would need to randomly provide services to some and
randomly deny services to others, and track subsequent earnings for both
groups of people. This approach requires services to be denied to some
workers who qualify for training. Due to these difficulties, as well as
the amount of time and money it takes to conduct experimental designs,
quasiexperimental research designs are often preferable for their
practicality.

o  	Quasi-experimental designs. These designs are characterized by
comparison groups that are not randomly selected. For training programs, a
quasi-experimental design would compare a group of people who have elected
to take the training courses with nonparticipants who may have
characteristics, such as wage or education levels, that are comparable to
the group receiving services. Comparing the two groups allows

6ASTD, State of the Industry: ASTD's Annual Review of Trends in
Employer-Provided Training in the United States (February 2002).

researchers to account for other factors, such as the local economy, that
may have influenced outcomes.

    Evaluation Resources at the Department of Labor

  Nearly Half of All States Used Employer Taxes to Fund Their Own Employment
  Placement and Training Programs, and States Most Often Provided Job-Specific
  Training

The Department of Labor's Employment and Training Administration (ETA)
Office of Policy Development, Evaluation and Research has valuable
resources related to designing and implementing evaluations. Labor has
established evaluation coordination liaisons in each state to help with
evaluations of federal programs. These liaisons can help states access
logistical support and technical assistance for program evaluations. Such
resources include ETA's recent review of alternative research
methodologies, which contains guidance on conducting experimental and
quasi-experimental evaluations of workforce programs to determine the
social and economic values of the programs.7

Twenty-three states reported using employer tax revenues in 2002 from a
variety of employer taxes to fund their own employment placement and
training programs. States most often provided job-specific training for
workers. States reported spending a total of $278 million to provide these
training and employment placement services. Some states established their
programs as a way to address a variety of specific workforce and economic
issues, such as chronic shortages of skilled workers.

States Used a Variety of Twenty-three states reported using a variety of
employer taxes in 2002 to Employer Taxes to Provide fund employment
placement and training services to address specific Services to Address
workforce issues (see fig 2). These states reported spending a total of
$278

million on their workforce programs. Expenditures in 2002 variedUnique
State Workforce dramatically from state to state, ranging from $100,000 in
Kansas to overIssues $84 million in California (see fig. 3). In 18 of the
states, employer tax

7U.S. Department of Labor, Employment and Training Administration, The
Five-Year Strategic Plan for Pilots, Demonstrations Research and
Evaluations July 2000-June 2005.

revenues completely funded these employment and training programs, while
in 3 of the states employer tax revenues made up at least 50 percent of
the funding for these programs. Only 1 state reported that employer tax
dollars constituted less than 50 percent of its program's funds.8 (For
more information on individual state employment placement and training
program budgets in 2002, see app. II.)

8In addition, 1 state reported that employer tax revenues did not
completely fund its program, but did not specify the portion of its
program budget that was funded by employer tax revenues.

Figure 2: States that Reported Funding Their Own Employment Placement and
Training Programs with Employer Taxes in
2002

Figure 3: Total Expenditures of Employer Tax-Funded Programs in 2002, as
Reported by States

Notes: This figure is based on the survey question responses of 22 states.
Montana did not provide us with expenditure data. Delaware, Indiana,
Michigan, and South Dakota reported that their program budgets included
funds from other sources, making it difficult to isolate expenditures from
their state employer tax revenues. While Oregon also reported that its
program budget included funds from other sources, Oregon provided us with
additional data. Oregon's expenditures included in this figure are those
that were solely funded through employer tax revenues.

States used various types of employer taxes to fund employment placement
and training services (see table 2). Eleven states reported using a UI tax
offset. Eight states funded their programs through a separate state
employer tax. For example, Delaware employers were taxed $12.75 for the
first $8,500 of each employee's annual salary. Similarly, Massachusetts's
employers were taxed up to $8.10 per employee annually. Five states used
UI penalty and interest funds. One state, California, reported combining
funds from more than one employer tax source and funded its program
through revenues generated by a UI tax offset and a separate state
employer tax of up to $7 per employee. (For more information on the total
funds collected by states through these employer taxes in 2002, see app.
II.)

Table 2: Types of Employer Taxes States Reported Collecting and Using to
Fund Employment Placement and Training Services in 2002

                                              UI penalty or    Separate state 
                      State  UI tax off-set   interest fund      employer tax 
                    Alabama        o                         
                 California        o                                o         
                   Delaware                                         o         
                     Hawaii                                         o         
                      Idaho        o                         
                    Indiana                        o         
                     Kansas                        o         
                  Louisiana        o                         
              Massachusetts                                         o         
                   Michigan                        o         
                    Montana                                         o         
                   Nebraska                        o         
                 New Jersey        o                         
              New Hampshire        o                         
                   New York                                         o         
                     Nevada                                         o         
                     Oregon                        o         

                 Rhode Island                                      o  
                 South Dakota               o         
                  Tennessee                 o         
                    Texas                   o         
                  Washington                o         

Wyoming  o  Source: GAO's survey of states that use employer taxes to fund
their own workforce programs.

Note: All 23 states that reported having these programs responded to our
survey.

California was the first state to use employer taxes for employment
placement and worker training in 1982 and other states have followed suit
(see fig. 4). In addition to California, 6 other states started using
employer taxes to fund employment placement and training services by the
end of the 1980s. New Hampshire most recently started to use these tax
revenues to fund its program in 2001. Texas is the only state in our
survey of programs operating in 2002 that has since terminated its worker
training program.

state due to a lack of qualified workers. Similarly, to increase the
supply of elder care providers, California funded training to certified
nurses' assistants so that they could become vocational nurses.

In addition, other states noted that their employment placement and
training programs address service and eligibility gaps in federally funded
workforce programs. For example, Rhode Island officials said that because
federal funds could not be used to provide training to employed workers
prior to the passage of WIA, their employer tax-funded program provided
employers with training funds specifically to improve employed worker
skills.9 New Jersey and Washington officials also noted that their states
used employer tax funds to provide employment placement and training
services that are not offered through federally funded workforce programs.
Other states, such as Louisiana, used employer taxes to fund training
services for individuals who do not meet the income eligibility
requirements used in WIA programs.10

Most states focused on certain industries, particularly manufacturing,
because of their overall benefit to the state's economy. California's
worker training program specifically targets manufacturing industries
because these industries tend to offer high-paying, stable employment.
Other industries that were also frequently targeted for training include:
information; health care or social assistance; professional, scientific,
or technical; and construction. Our earlier study examining how states and
local areas are training employed workers found similar results:
manufacturing along with health care and social assistance are two of the
most commonly targeted economic sectors for training workers.11 Our survey
of employer tax-funded state programs also showed that industries that
were least often targeted included wholesale and retail trade, finance and
insurance, and accommodation and food service (see fig. 5).

9Prior to the passage of federal workforce initiatives like TANF in 1996
and the WIA in 1998, states generally did not use federal funds for
employed worker training, because most federally funded services were not
primarily intended for employed workers.

10In areas where adult WIA funds are limited, priority for in-depth
services, such as training, must be given to recipients of public
assistance and other low-income individuals.

11U.S. General Accounting Office, Workforce Training: Employed Worker
Programs Focus on Business Needs, but Revised Performance Measures Could
Improve Access for Some Workers, GAO-03-353 (Washington, D.C.: Feb. 14,
2003).

Figure 5: Industries Targeted by Most Employer Tax-Funded Programs in
2002, as Reported by States

Notes: This figure is based on survey question responses from the 17
states that reported providing training services in 2002. Each state could
target multiple industries, therefore, bars will not sum to 17 states. Six
states reported that they did not provide training services and were not
included in this analysis.

States also targeted their services to certain employers as part of their
workforce and economic development strategies. Over 11,000 employers were
provided training services, and most states provided services for
employers with 100 or fewer employees (see fig. 6). Rhode Island, for
example, offered employers with 100 or fewer employees training grants of
up to $10,000. Rhode Island officials said that they targeted smaller
employers because these employers often do not have the resources to
provide their workers with training and that smaller employers make up the
majority of the companies in the state.

Figure 6: Size of Employers Targeted for Training Services by Employer
Tax-Funded Programs in 2002, as Reported by States

Notes: This figure is based on survey question responses from 15 states.
Two states reported, "don't know" to this survey question. Six states
reported that they did not provide training services and were not included
in this analysis.

States provided services in a variety of ways. States reported providing
worker training either directly or through grants awarded to employers or
training providers. For example, Louisiana generally awarded grants in
amounts that covered an employer's entire training costs. Employers could
use these funds to provide training themselves, hire private training
contractors, or contract with public training providers. Funded training
could occur either during normal working hours or off the clock. Louisiana
officials noted that they encouraged employers to use public training
providers, most often the state's technical colleges. On the other hand,
California required employers to contribute to training-related costs.
Employers were expected to match up to 100 percent of the training grant
to pay for related expenses, such as worker wages during training or
training materials. Officials from California reported that most training
grants are awarded contingent upon workers being trained on the job, as
opposed to off the clock. States funding employment placement services,
such as interview technique and resume writing workshops, provided
services directly or through other service providers.

Training Services More States most often reported that worker training was
the primary emphasis Often Funded Than of their employer tax-funded
programs and spent more on worker training Employment Placement services
than on employment placement services (see fig. 7). Fourteen Services
states reported that worker training was the primary emphasis of their

programs, and 10 of these states funded worker training exclusively.
States

spent approximately $202 million on worker training services; this

represents 72 percent of the total funds spent on employment placement and
training services (see fig. 8).12 States used these funds to provide a
variety of training services. For example, in Louisiana funds were used to
provide training related to automobile services and repairs, welding,
painting, and sandblasting. Funds were also used in Louisiana to purchase
training equipment, such as a Bridge Resource Management Simulator, which
was used for river navigation training. States reported providing training
services to about 200,000 people and were more likely to focus on the
provision of training services to employed workers as opposed to
dislocated workers or those receiving UI benefits (see fig. 9).13 (For a
detailed review of states' primary service focus, expenditures by service
area, and the number of individuals served in 2002, see app. III.)

Figure 7: Primary Service Focus of Employer Tax-Funded Programs in 2002,
as Reported by States

Notes: This figure is based on survey question responses from 23 states.
One state reported its primary service focus as "other."

12By way of comparison, the 23 states with employment placement and
training programs funded by employer taxes received $1.15 billion in WIA
adult and dislocated worker allocations in 2002.

13Survey data capture the number of individuals that were provided
employment placement and training services. However, the data do not
describe the extent to which some individuals may have received both
employment placement and training services. This does not affect our
discussion about the total amount of people that received each service.

Figure 8: Employer Tax-Funded Program Expenditures by Service Area in
2002, as Reported by States

Notes: This figure is based on survey question responses from 22 states.
Delaware, Indiana, Michigan, and South Dakota reported that their program
budgets included funds from other sources, making it difficult to isolate
expenditures from their state employer tax revenues. While Oregon also
reported that its program budget included funds from other sources, Oregon
provided us with additional data. Oregon's expenditures included in this
figure are those that were solely funded through employer tax revenues.

Figure 9: Populations Targeted by Employer Tax-Funded Programs for
Training in 2002, as Reported by States

States were most likely to provide job-specific training-such as on new
production methods and computer software-and 17 states reported funding
these types of services with employer tax revenues (see fig. 10).
Officials from Louisiana said that they focus on job-specific training
because this type of training contributes to increased worker productivity
and company growth. State officials also noted that fostering company
growth creates new jobs that can lower state unemployment rates.

Note: Twenty-three states responded to this survey question.

States were less likely to use employer taxes to provide nonjob-specific
training, including conflict resolution, team building, or how to dress
appropriately for the workplace. Twelve of the 23 states reported
providing this type of training. These findings echo our previous study on
worker training that found similar trends: states were more likely to
focus state and federal funds on occupational training as compared to
nonjobspecific training.14 Basic skills training-such as math, GED
preparation, and English as a second language-is least often provided,
with only 10 states reporting they used employer tax revenues to fund this
type of training.

Fewer state employer tax-funded programs emphasized employment placement
services, such as career counseling, skill assessments, and selfaccess
employment services like Internet job listings and career planning

14U.S. General Accounting Office, Workforce Training: Employed Worker
Programs Focus on Business Needs, but Revised Performance Measures Could
Improve Access for Some Workers, GAO-03-353 (Washington, D.C.: Feb. 14,
2003).

videos. Eight states reported that employment placement was their primary
focus, and 6 of these states funded employment placement services
exclusively. States reported spending approximately $77 million to provide
employment placement services to approximately 1.17 million individuals.
Despite the fact that fewer states reported emphasizing employment
placement services, the total number of individuals receiving employment
placement services is approximately six times as great as the total number
of individuals receiving training services.15 The difference in the number
of people served may be attributed to the time and resource intensity of
training services compared with employment placement services. For
example, Louisiana awards training grants that are up to 2 years in
length. In comparison with training services, many of the employment
placement services that states reported providing are far less time- and
resource-intensive.

  Most States with Employment Placement and Training Programs Funded through
  Employer Taxes Reported Some Coordination with Federal Workforce Programs

Twenty-one of the 23 states with employment placement and training
programs funded through employer taxes reported some coordination with
federal workforce programs in 2002. The most common coordination activity
reported by states was the joint promotion of state and federally funded
workforce programs through outreach or referrals (see fig. 11). These
promotion activities occurred in various ways. For example, in California,
a local workforce investment board and its one-stop center hired staff to
make cold calls to companies advertising the benefits of participating in
the state-funded training program. In Louisiana, on the other hand, state
officials provided information packets to employers about how to upgrade
their employees' skills or fill job openings using state and federally
funded workforce programs.

15As noted previously, survey data capture the number of individuals that
were provided employment placement and training services. However, the
data do not describe the extent to which some individuals may have
received both employment placement and training services. This does not
affect our discussion about the total amount of people that received each
service.

Note: A coordination activity was counted if a state reported it for at
least one federal partnership.

In addition, many states reported that they coordinated with federal
workforce programs by sharing technical assistance and administrative
resources. Technical assistance involves the exchange of program
information to improve program practices. For example, in California,
staff from both state and federally funded workforce programs worked
together on a task force and provided each other with technical assistance
to improve services to small businesses. Sharing administrative resources,
on the other hand, can involve activities such as using a common
management information system, or sharing office space or staff. In Rhode
Island, for example, staff at the local workforce investment boards were
responsible for administering some of the training grants funded by the
state program. Fewer states reported co-funding employment and training
services or jointly developing policies with federal workforce programs.

The number of partnerships between employer tax-funded programs and the
federal workforce system varied from state to state. Some state programs
coordinated with only one federal partner. For example, New Hampshire's
program chose to coordinate exclusively with its state workforce
investment board. Other state programs coordinated with many federal
partners. For example, Delaware's program coordinated with a one-stop
center, TANF, the H1-B technical skill grants program, and other

federal workforce programs. (For additional information on each state's
partnerships with federal programs, see app. IV.)

Although state employer tax-funded programs vary in their relationships
with federal workforce programs, some patterns are evident regarding the
most common federal partners. The majority of the states (19) reported
coordinating with at least one one-stop center during 2002. However,
several one-stop centers can operate in a state, and we do not know if
states coordinated with more than one of these centers. Thus, it is
difficult to gauge the degree of coordination between state-funded
programs and one-stop centers within each state. Nevertheless, we do know
that many states also reported coordinating with state workforce
investment boards, of which there is only one per state (see fig. 12). The
number of federal partners that state employer-funded programs have does
not seem to be closely associated with the number of years that the state
programs have operated. Although Delaware's program is older than New
Hampshire's and coordinated with more federal workforce programs, this is
not a consistent pattern across the country. For example, Kansas reported
fewer federal partners than Louisiana, despite the fact that Kansas's
employer tax-funded program has been in existence for about a decade
longer.

Notes: All 23 states that reported having these programs responded to the
survey questions regarding coordination with state workforce investment
boards, TANF, other federal employment and training programs, Department
of Education employment and training programs, and the Welfare-to-Work
program. In addition, 22 states responded to the survey questions
regarding coordination with one-stop centers and the H1-B program, while
20 states responded to the question regarding coordination with local
workforce investment boards.

The Welfare-to-Work program is a mandated partner of one-stop centers.
While all states that reported coordinating with the Welfare-to-Work
program also reported coordinating with a one-stop center, not all states
that reported coordinating with a one-stop center also reported
coordinating with the Welfare-to-Work program. States had the option to
list multiple programs under both the "Department of Education Employment
and Training" category and the "Other Federal Employment and Training
program" category. For the "Department of Education" category, states
noted programs such as Adult Education and Literacy and Vocational
Education. For the "Other Federal Employment and Training program"
category, programs ranged from Veterans' Employment and Training Service
to Job Corps. Both the Department of Education category and the Other
Federal Employment and Training category included some programs that are
mandated one-stop partners.

As a result of their various partnerships with workforce investment boards
and one-stop centers, almost all states reported an increase in awareness
of their employer tax-funded programs. In addition, some state officials

noted that coordination had improved service quality and availability. For
example, officials from Michigan and New Jersey's state programs, as well
as an official from an Oregon workforce investment board, noted that
colocating staff from the state-funded programs at the one-stop centers
improved the services delivered to individuals. By co-locating these
programs, state officials said that they can help these individuals learn
about a broader range of employment and training services and job
opportunities. The Oregon official also pointed out that such co-location
can reduce transportation and child care barriers for clients.
Coordination can also assist states in improving services to employers.
For example, a state official from Idaho reported that having staff
members who are knowledgeable about both the state-funded program and WIA
programs enables them to better meet the needs of employers looking to
expand their businesses or move to the state. Although many state
officials noted that coordination had improved services, they were less
likely to report increases in funding for employment and training services
as a result of these collaborative relationships (see fig. 13).

Notes: All 23 states that reported having these programs responded to our
survey. Of these states, all 19 that reported coordinating with at least
one one-stop center answered the survey questions on awareness, quality,
and amount of services, while 18 of these states answered the funding
question. In addition, 15 of the 17 states that reported coordinating with
a state workforce investment board answered these survey questions. All 11
states that reported coordinating with at least one local workforce
investment board also answered the questions related to awareness,
quality, and amount of services, while 10 of these states responded to the
survey question regarding funding results.

  Almost All States Reported Regularly Assessing the Performance of Their
  Programs, but Program Impact Cannot be Determined

Twenty-two of the 23 states with employer-funded employment placement and
training programs reported assessing the performance of their programs in
2002, though program impacts could not be determined. States reported
using a range of approaches to assess their employment placement and
training programs, including variations in who conducted the assessments,
data collection methods used for the assessments, and the frequency of the
assessments. Of the 18 states that could provide assessments of their
individual employment placement and training programs, 4 assessed their
programs exclusively using process-oriented indicators, while the other 14
used outcome-oriented indicators in their assessments. However, none of
the states used sufficiently rigorous research designs to allow them to
make conclusive statements about the impact of their programs.

    Almost All States Reported Regularly Assessing the Performance of Their
    Programs in 2002

Twenty-two of the 23 states with employer-funded employment placement and
training programs reported assessing the performance of their programs in
2002. States reported using a variety of data collection methods for their
assessments, and most states used a combination of data sources for their
assessments. For example, Tennessee's assessment was based on data
collected from site visits to training locations and surveys administered
to employers, while self-reported feedback and a fiscal audit were the
data sources used for Texas's assessment. The most commonly used data
sources were: surveys, self-reported feedback, and on-site visits. Only 2
states relied solely on quantitative data, such as program expenditures
and employment statistics. For example, Alabama used its UI wage database
to track how program participants fared in finding jobs.

Most states used a combination of internal and external evaluators for
their assessments (see fig. 14).16 For example, California used both
inhouse program staff and external evaluators from several state
universities to evaluate its program. On the other hand, 9 states used
in-house evaluators exclusively, while only 1 state, Indiana, used
external evaluators exclusively.

16For a detailed review of each state's assessment approach, including the
frequency, scope, and conductors of their assessments, see app. V.

Notes: Some states reported using combinations of evaluators, which may
include in-house program staff and external evaluators. Percentages do not
total to 100 due to rounding.

Furthermore, states conducted their assessments at varying intervals.
About two-thirds of the states (14) regularly conducted assessments-
annually, quarterly, and monthly. Eight states conducted assessments once
training contracts were completed. For example, Tennessee sent surveys to
employers once the contracts it awarded were completed.

Results Regarding None of the state assessments used sufficiently rigorous
research designs Program Impact from to allow them to make conclusive
statements about the impact of their States' Assessments programs. We
asked states to provide us with copies of recent

assessments of their programs.17 Although 5 states could not provide
usCannot Be Determined by with assessments of their individual employment
and training programs,Methodologies Used 18 of the 23 states shared recent
assessments with us. On the basis of the

28 assessments received from 18 states, we examined indicators used by

17While New Jersey's most recent evaluation was included in our analysis
of state assessments, New Jersey is the only state that reported it did
not regularly assess its program in 2002. The evaluation from New Jersey
is based on data collected between 1994 and 2001.

the states and found that 4 assessed their programs exclusively using
process-oriented indicators.18 For example, Hawaii and New Hampshire
collected data on the number of businesses served. Likewise, Alabama and
Texas both collected data on how many people participated in their
programs. Process-oriented indicators help assess a number of factors,
including who uses the program, how funds are spent, and how well a
program is being implemented.

Fourteen states included outcome-oriented indicators along with
processoriented indicators in their assessments, with 11 states measuring
worker wages (see table 3). States also used a variety of other
outcome-oriented indicators, including job placement and retention rates
of trainees. Outcome-oriented indicators provide important data for states
related to changes, such as those in: worker wages, employment stability,
and advancement rates.

        Table 3: Select Outcome Indicators Used by States in Assessments

                Wage    Retention    Job     Return on  Employment Advancement   Use of 
                                                                                     UI 
              increases   rates   placements investment stability     rates    benefits 
 California      o         o                     o          o          o          o     
    Idaho        o                                                             
Indiana       o                                                             
Kansas        o                                                             
  Louisiana      o                                                     o       
Massachusetts    o                                                             
Montana                                       o                             
  Nebraska       o                                                             
Nevada        o                                                             
 New Jersey      o                                                             
  New York                                                                        o     
Oregon                             o                                        
South Dakota     o                                                             
Wyoming       o                                                             

Source: GAO's content analysis of assessments provided.

Although 14 states used outcome-oriented indicators, none used
sufficiently rigorous research designs to allow them to make conclusive

18For a detailed review of the indicators used in state assessments, see
app. VI.

Concluding Observations

statements about the impact of their programs. Twelve of the 14 states
that used outcome-oriented indicators did not use comparison groups in
their evaluation design. Without comparing a program's participants to
similar nonparticipants, it is not possible to account for other factors,
such as an upturn in the local economy, which may have influenced
participant outcomes. While 2 states used comparison groups, their
methodological design did not allow for the identification of conclusive
impacts of these programs because their comparison groups were not
comparable enough to their participant groups.

To help close the gap between employer needs and employee skills, both
federal-and state-funded workforce programs are providing skills training
to employees and helping employers find qualified employees. Twentythree
states used employer taxes in 2002 to fund their own employment placement
and training programs. These state programs have the potential to enhance
the federal workforce system by filling service and eligibility gaps.
However, the impact of these programs is unknown because states have not
adequately studied them. Because these programs contribute to our nation's
ability to provide comprehensive workforce development services to meet
employers' needs for skilled workers, it would be helpful to have
information on the impact of these efforts.

The Department of Labor's Employment and Training Administration (ETA)
Office of Policy Development, Evaluation and Research has valuable
resources related to designing and implementing evaluations that might
help address this lack of information. Labor has established evaluation
coordination liaisons in each state and, although this position was
designed to help with evaluations for federal programs, the liaison may be
able to direct state program administrators to resources such as ETA's
recent review of alternative research methodologies. Furthermore, this
liaison could help state administrators access other program evaluation
expertise, such as logistical support and technical assistance.

Agency Comments 	We provided a draft of this report to the Department of
Labor for its review, and Labor provided technical comments. Labor
expressed an interest in state employment placement and training programs
funded by employer taxes. In addition, Labor acknowledged the importance
of collaboration between these state-funded programs and federally funded
programs, by noting that it may seek opportunities to better assist states
in coordinating their programs with federal Workforce Investment Act
programs.

We will send copies of this report to the Secretary of Labor, relevant
congressional committees, and other interested parties. Copies will be
made available to others upon request. In addition, the report will be
available at no charge on GAO's Web site at http://www.gao.gov. Please
contact me on (202) 512-7215 if you or your staffs have any questions
about this report. Other major contributors to this report are listed in
appendix VII.

Sigurd R. Nilsen Director, Education, Workforce, and Income Security
Issues

Appendix I: Objectives, Scope, and Methodology

We were asked to determine (1) How many states use employer taxes to fund
their own employment placement and training programs, and what type of
services do they provide;1 (2) The extent to which these state employment
placement and training programs are coordinating with federal workforce
programs;2 and (3) How states are assessing the performance of their
employment placement and training programs.

To address these questions, we conducted three surveys, reviewed program
evaluations, and visited 3 states. First, we surveyed all 50 states and
the District of Columbia and Puerto Rico to identify those that were using
employer tax revenues to provide their own employment placement or
training programs in 2002.3 We then conducted a follow-up survey with the
23 states that reported using employer taxes to fund their own programs
during state fiscal year 2002.4 Specifically, we surveyed the state
programs that reported receiving the largest portion of employer tax
revenues collected in their state to provide employment placement and
training services.5 To gain a perspective on service coordination with
federally funded workforce programs, we surveyed staff from workforce
investment boards in 6 states that began to fund their employment
placement and training programs through employer taxes in the 1980s.6 We
also requested recent assessments from the 23 states we surveyed and
reviewed the assessments from the 18 states that could provide them to

1When we surveyed states, we asked if they provided employment placement
and training services independent of the federal workforce system in 2002.

2We asked states if they collaborated with federally funded workforce
programs in 2002. We use the term coordinate in place of collaborate
throughout this report.

3Nineteen states reported that their state fiscal year 2002 covered July
1, 2001 to June 30, 2002; 2 states reported October 1, 2001 to September
30, 2002; 1 state reported September 1, 2001 to August 31, 2002; and 1
state reported April 1, 2002 to March 31, 2003. When we refer to 2002
throughout this report, we mean state fiscal year 2002, as reported by
states.

4Washington, D.C., did not report using employer taxes to fund their own
employment placement and training program. While Puerto Rico did report
using employer taxes to fund its own employment placement and training
program, Puerto Rico did not respond to our follow-up survey.

5Two states reported that they did not know if their employment placement
and training program received the largest portion of employer taxes
collected in their respective state.

6Although Delaware's program began in 1986, a separate survey of
Delaware's workforce investment board was unnecessary because the state's
employer-funded program also functions as Delaware's only workforce
investment board. All coordination questions in our workforce investment
board survey were answered by an official from Delaware in our survey of
employer-funded state employment placement and training programs.

Appendix I: Objectives, Scope, and Methodology

  Survey

us.7 Finally, we conducted site visits to 3 states-California, Louisiana,
and Rhode Island.

To determine how many states used employer taxes to fund their own
employment placement and training programs, we surveyed workforce
officials from the 50 states, the District of Columbia, and Puerto Rico.
This structured survey was administered via e-mail and the telephone and
had a 100 percent response rate. Twenty-three states reported that they
used employer tax revenues to fund their own employment placement and
training programs in state fiscal year 2002.8

To determine the types of employment placement and training services
states offered, we conducted a second survey of the 23 states that
reported using employer taxes to fund these services in our first survey.
This survey was designed to obtain information related to program mission,
services provided, populations served (individuals and industries), budget
size, and expenditures. To determine if states assessed their programs, we
also asked questions related to the frequency of program performance
assessments and the types of methods used to measure program performance.
In addition, we requested copies of recent program assessment reports.

To determine the extent to which state programs coordinated with federal
workforce programs, we also asked states to report how their employment
placement and training programs worked with federal organizations and
programs, including workforce investment boards, one-stop centers, TANF,
Welfare-to-Work, H1-B grants, employment placement and training programs
administered by the U.S. Department of Education, and other federally
funded programs. In addition, we asked states how these coordination
efforts affected program awareness, quality of service, available funding,
and the amount of employment placement and training services available.

To gain the perspective of officials from federally funded programs on
coordination with these state programs, we administered a structured

7We obtained additional assessments while conducting our preliminary
research on employer tax-funded state employment placement and training
programs.

8Puerto Rico also reported using employer tax revenues to fund its own
program; however, Puerto Rico did not respond to our follow-up survey.

Appendix I: Objectives, Scope, and Methodology

telephone survey to representatives from workforce investment boards
operating in 6 states that began their employer tax-funded employment
placement or training programs during the 1980s (see table 4).9 We chose
these states with older programs, because we believed that they would have
more established partnerships with federal programs and would be able to
provide in-depth information on coordination. We surveyed representatives
from 5 of the state workforce investment boards.10 We also surveyed a
total of 10 purposively and randomly selected local workforce investment
boards. At least one local workforce investment board was surveyed from
each state that began operating its employer tax-funded program during the
1980s.

Table 4: The Year Employer Taxes Were First Used to Fund Employment
Placement and Training Programs by Selected States

Year employer taxes first State used to fund services

                                  Alabama 1989

                                California 1982

a

                                 Delaware 1986

                                  Kansas 1986

                                  Nevada 1989

                                  Oregon 1987

                                Washington 1985

Source: GAO's survey of states that use employer taxes to fund their own
workforce programs.

aAs previously noted, although Delaware's program began in 1986, a
separate survey of Delaware's workforce investment board was unnecessary
because the state's employer-funded program also functions as its only
workforce investment board. All coordination questions in our workforce
investment board survey were answered by an official from Delaware in our
survey of employerfunded state employment placement and training programs.

9As previously noted, although Delaware's program began in 1986, a
separate survey of Delaware's workforce investment board was unnecessary
because the state's employerfunded program also functions as its only
workforce investment board. All coordination questions in our workforce
investment board survey were answered by an official from Delaware in our
survey of employer-funded state employment placement and training
programs.

10Representatives from Oregon's state workforce investment board did not
respond to our survey request.

                 Appendix I: Objectives, Scope, and Methodology

We included steps in both the survey data collection and data analysis
stages to account for and minimize the variability that occurs when
respondents interpret questions differently or have different information
available to them. For example, survey specialists along with subject
matter specialists designed each questionnaire, and we pre-tested each
questionnaire with the appropriate target audience to ensure that
questions were clear. We pre-tested our workforce investment board survey
with representatives from state workforce investment boards and a local
workforce investment board. We also reviewed survey questionnaire
responses for consistency and in several cases contacted respondents to
resolve inconsistencies. However, we did not otherwise verify the
information provided in the responses. In order to increase our response
rate for each survey, we followed up with program officials through e-mail
and telephone contact. We analyzed these survey data by calculating
descriptive statistics.

We reviewed recent assessments from the 18 states that could provide them
to us.11 Two of those states shared more than one recent assessment with
us, all of which we used in our analysis. The assessments we collected
ranged from annual reports to budget briefings to strategic plans to
external evaluations.

We analyzed these reports by performing a content analysis in which we
coded the assessment indicators as outputs (process-oriented data) or
outcomes (outcome-oriented data). Furthermore, when provided, we analyzed
the research designs states used to assess their programs against standard
evaluation research design characteristics as described by Rossi and
Freeman (1993)12 and McBurney (1994).13

  Review of State Program Assessments

11The remaining 5 states did not share their assessments for a variety of
reasons. For example, some states did not have evaluations of their
program exclusive of assessments of the federal workforce system, and
others did not have evaluations that assessed the program as a whole.

12Rossi, Peter H., and Howard E. Freeman. Evaluation: A Systematic
Approach, 5th ed. Newbury Park, CA: SAGE Publications, Inc., 1993.

13McBurney, Donald H. Research Methods, 3rd ed. Pacific Grove, CA:
Brooks/Cole Publishing Company, 1994.

Appendix I: Objectives, Scope, and Methodology

  Site Visits

We selected 3 states for site visits according to several criteria,
including the year employer taxes were first used to fund their employment
placement and training program. We chose states that were early, mid-and
late implementers. Site selection was also based on diverse program
funding levels and geographic diversity (see table 5). In each state, we
interviewed officials responsible for administering each state's employer
tax-funded employment placement or training program to gain further
insight into the types of services provided and populations served by
these programs. To learn more about the extent to which these state-funded
employment placement and training programs coordinate with federally
funded workforce programs, we also interviewed officials from each state's
workforce investment board. We also interviewed officials from two
one-stop career centers operating in each state we visited. We purposively
selected these one-stop career centers because they coordinated with
employer-funded state programs.

                        Table 5: Site-Selection Criteria

                                      Year employer taxes were     Geographic 
                   State       Budget first used to fund services   location  
              California $94,000,000                          1982       West 
               Louisiana $50,000,000                          1997      South 
            Rhode Island  $8,000,000                          1993 Northeast  

Source: GAO's survey of states that use employer taxes to fund their own
workforce programs.

Appendix II: Employer Tax Collections and Employer Tax-Funded Program Budgets in
2002, as Reported by States

                      Total funds collected                  
                                      through                  Program solely 
                          employer taxes       2002 program    funded through 
         State         to be used in 2002a       budgets       employer taxes 
        Alabama                    $8,200,000   $5,000,000         Yes        
      California                 $148,900,000  $94,000,000         Yes        
       bDelaware                   $3,600,000  $10,300,000          No        
        Hawaiib                    $2,000,000   $6,800,000         Yes        
         Idaho                     $3,400,000   $3,400,000         Yes        
       bIndiana                    $1,000,000   $4,000,000          No        
        Kansas                     $1,000,000    $100,000          Yes        
       Louisiana                  $50,000,000  $50,000,000         Yes        
    bMassachusetts                $22,200,000  $24,000,000         Yes        
       Michigan                             c   $1,500,000          No        
        Montana                    $6,200,000    $286,000          Yes        
       Nebraska                    $1,900,000   $1,900,000         Yes        
        bNevada                    $8,400,000   $9,400,000         Yes        
     New Hampshire                          c    $500,000          Yes        
      New Jersey                  $92,400,000  $81,400,000         Yes        

New Yorkb $35,000,000 $40,800,000 Yes

b

Oregon $9,800,000 $1,189,400,000 No

Rhode Island $8,000,000 $8,000,000 Yes

c

South Dakota $1,800,000 No

b

Tennessee $8,200,000 $19,112,400 Yes

c

Texas $1,200,000 Yes

b

Washington $9,700,000 $10,700,000 Yes

Wyomingb $1,300,000 $3,828,366 Yes

Source: GAO's survey of states that use employer taxes to fund their own
workforce programs.

aEleven states reported that their employer tax was collected in 2002, and
3 states reported that their employer tax was collected in 2001. Four
states reported that employer tax funds used in 2002 were collected in
2001 and 2002. One state noted that tax funds collected in 2002 and from
previous years were used in 2002. One state noted that employer tax funds
used in 2002 were collected in 1991 and 1995, and another state noted that
employer tax funds used in 2002 were collected in 1997. Two states were
unable to specify in which year the employer taxes used to fund their
programs in 2002 were collected.

Appendix II: Employer Tax Collections and Employer Tax-Funded Program
Budgets in 2002, as Reported by States

bThese states' program budgets for state fiscal year 2002 were greater
than the amount collected through each state's employer tax. Reasons for
this disparity varied and included rollovers of unspent funds from
previous years. Some states, specifically Delaware, Indiana, Michigan,
Oregon, and South Dakota, also used other funding sources in addition to
employer tax revenues to pay for these programs. In Indiana, Michigan, and
South Dakota at least 50 percent of the funding for these programs came
from employer taxes. However, in Oregon employer taxes constituted less
than half of the funds used for the program. Delaware did not specify the
portion of its program budget funded by employer taxes.

cOur survey permitted states to report "DK" or "Don't Know."

Appendix III: Employer Tax-Funded Programs' Primary Emphasis, Expenditures and
Numbers Served, in 2002

Primary emphasis Numbers serviced by service Expenditures by service

                             State Worker training

Employment placement Training

Employment placement Training

Employment placement

       Alabama             o       N/Aa  122,447            N/A    $5,000,000 
      California     o           75,000   5,000    $84,200,000              b 
      cDelaware            o      1,666   1,666    $3,142,000        $360,000 
        Hawaii       o           10,000       N/A  $3,300,000             N/A 
        Idahoe                        b         b  $2,600,000               b 
      cfIndiana      o            2,780         b  $33,000,000    $14,000,000 
        Kansas             o        N/A   1,134             N/A      $100,000 
      Louisiana      o           17,564       N/A  $18,610,000            N/A 
    Massachusetts    o           27,000       N/A  $21,700,000            N/A 
      cfMichigan           o        N/A       185           N/A    $2,820,000 
       Montana       o            1,100       N/A             b           N/A 
       Nebraska      o           16,732       N/A  $1,800,000             N/A 
        Nevada             o      4,256   8,310    $1,000,000      $1,000,000 
    New Hampshire    o              939       N/A      $180,000           N/A 
      New Jersey     o           34,685         0  $11,800,000              b 
       New York            o        N/A  332,000            N/A   $39,700,000 
       cOregon             o          b  462,549   $5,500,000g     $4,300,000 

b b

Rhode Island  o  $3,000,000 $560,000

c

South Dakota  o  2,051 N/A $1,100,000 N/A Tennessee  o  4,200 N/A
$8,600,000 N/A

                                       d

Texasd  o  N/A $390,000 N/A Washington  o  N/A 252,487 N/A $8,800,000

b

Wyoming  o  1,081 0 $1,920,000

Source: GAO's survey of states that use employer taxes to fund their own
workforce programs.

aWe use the not applicable notation "N/A" for states that did not provide
this service.

bApplicable data not provided.

cDelaware, Indiana, Michigan, and South Dakota reported that their program
budgets included funds from other sources, making it difficult to isolate
expenditures from their state employer tax revenues. While Oregon also
reported that its program budget included funds from other sources, Oregon
provided us with additional data. Oregon's expenditures included in this
figure are those that were solely funded through employer tax revenues.

dTexas was unable to provide us with the number of individuals that
received training services in 2002.

eIdaho reported its program emphasis as "other."

fIndiana and Michigan reported expenditures that exceeded their program
budgets.

gOregon, however, noted in our survey that it did not provide training in
2002.

Appendix IV: Coordination between Federal Workforce Programs and State Programs
Funded through Employer Taxes in 2002

                                                                      Department  
                                                                      of          
                State      Local                     H1-B             Education,       Other 
                                                                                     Federal 
              Workforce  Workforce                 Technical          Employment, Employment 
              Investment Investment One-Stop        Skills   Welfare- & Training  & Training 
    State       Board     Board(s)  Center(s) TANF  Grants   to-Work   Programs    Programs  
Alabama                             o       o                o         o           o      
 California       o          o         o                                              o      
  Delaware        o         N/A        o       o      o         o         o           o      
Hawaii         o          o         o                                              o      
    Idaho         o          o         o       o                          o       
Indiana                   o                                                    
Kansas                              o                                          
  Louisiana       o          o         o                                          
Massachusetts     o          o         o              o                           
  Michigan                             o                                  o           o      
Montana        o                    o       o                o         o       
  Nebraska        o                    o                                          
Nevada         o          o         o       o                o         o           o      
New Hampshire     o         N/A                                                   
 New Jersey       o          o         o                                          
  New York        o          o         o       o                o         o           o      
Oregon         o          o         o       o      o         o                     o      

                                       a

Rhode Island  o   o   o   o   o   o

South Dakota  o  N/A  o

Tennessee

                                       a

Texas

a

Washington  o   o   o

Wyoming  o  N/A  o   o   o

Totals 17 11 19 10 3 7 8 9

Source: GAO's survey of states that use employer taxes to fund their own
workforce programs.

Notes: All 23 states that reported having these programs responded to the
survey questions regarding coordination with state workforce investment
boards, TANF, other federal employment and training programs, Department
of Education employment and training programs, and the Welfare-to-Work
program.

In addition, 22 states responded to the survey questions regarding
coordination with one-stop centers and the H1-B program, while 20 states
responded to the question regarding coordination with local workforce
investment boards.

N/A signifies not applicable and is listed for Del, N.H., S.Dak., and Wyo.
These are states that have a single workforce investment board, which
functions as both the state and local board.

Appendix IV: Coordination between Federal Workforce Programs and State
Programs Funded through Employer Taxes in 2002

The Welfare-to-Work program is a mandated partner of the one-stop centers.
While all states that reported coordinating with the Welfare-to-Work
program also reported coordinating with a one-stop center, not all states
that reported coordinating with a one-stop center also reported
coordinating with the Welfare-to-Work program. States had the option to
list multiple programs under both the "Department of Education Employment
and Training" category and the "Other Federal Employment and Training"
category. For the "Department of Education" category, states noted
programs such as Adult Education and Literacy, and Vocational Education.
For the "Other Federal Employment and Training" category, programs ranged
from Veterans' Employment and Training Service to Job Corps. Both the
"Department of Education" category and the "Other Federal Employment and
Training" category included some programs that are mandated one-stop
partners.

aDenotes that a state did not respond to this question.

Appendix V: Assessment Approaches Used in 2002, as Reported by States

       State          Frequency         Scope             Evaluator           
      Alabama          Monthly         Program      In-house program staff    
    California   Quarterly, annually             In-house program staff and   
                       and as        Program and external evaluators          
                    contracts are     contracts  
                      completed                  
     Delaware                                      In-house program staff and 
                      Quarterly      Program and     contract recipient staff 
                                      contracts  
      Hawaii          Quarterly       Contract     In-house program staff and 
                                                     contract recipient staff 
       Idaho                                       In-house program staff and 
                       Monthly       Program and     contract recipient staff 
                                      contracts  
      Indiana         Quarterly       Contract       External evaluators      
      Kansas      As contracts are     Program      In-house program staff    
                      completed                  
     Louisiana   Quarterly, annually               In-house program staff and 
                       and as        Program and     contract recipient staff 
                    contracts are     contracts  
                      completed                  
Massachusetts  As contracts are               External evaluators and      
                      completed      Program and contract recipient staff     
                                      contracts  

     Michigan        Annually           a          In-house program staff     
      Montana    As contracts are                                             
                    completed      Program and     In-house program staff
                                    contracts   
     Nebraska    As contracts are                     In-house program staff, 
                    completed      Program and        external evaluators and 
                                    contracts     contract recipient staff    
      Nevada         Monthly         Program       In-house program staff     
New Hampshire As contracts are   Contract       In-house program staff and 
                    completed                        contract recipient staff 
    bNew Jersey   Not available   Not available         Not available         
     New York        Monthly         Program       In-house program staff     
                   Annually and                                               
      Oregon         monthly         Program       In-house program staff

Rhode Island     Annually      Contract         In-house program staff and 
                                                     contract recipient staff 
South Dakota As contracts are  Contract         In-house program staff and 
                   completed                         contract recipient staff 
    Tennessee   As contracts are  Contract   In-house program staff, external 
                   completed                                  evaluators, and 
                                                 contract recipient staff     
      Texas     As contracts are                   In-house program staff and 
                   completed     Program and         contract recipient staff 
                                  contracts  
    Washington     Quarterly       Program        In-house program staff      
     Wyoming       Quarterly     Program and      In-house program staff      
                                  contracts  

Source: GAO's survey of states that use employer taxes to fund their own
workforce programs.

aMichigan's performance assessments were conducted against agreed upon
goals and objectives for each of the program's local areas.

bNew Jersey is the only state that reported it did not regularly assess
its program in 2002.

Appendix VI: Indicators Used in State Assessments

                                   Indicators

                            State   Process-oriented         Outcome-oriented 
                          Alabama          o            
                       California          o                     o            
                         Delaware     Not available             Not available 
                           Hawaii          o            
                            Idaho          o                     o            
                          Indiana          o                     o            
                           Kansas          o                     o            
                        Louisiana          o                     o            
                    Massachusetts          o                     o            
                         Michigan     Not available             Not available 
                          Montana          o                     o            
                         Nebraska          o                     o            
                           Nevada          o                     o            
                    New Hampshire          o            
                       New Jersey          o                     o            
                         New York          o                     o            
                           Oregon          o                     o            

Rhode Island Not available Not available
South Dakota  o   o 
Tennessee Not available Not available
Texas  o 
Washington Not available Not available
Wyoming  o   o 

Source: GAO's content analysis of assessments provided.

Appendix VII: GAO Contacts and Staff Acknowledgments

GAO Contacts

  Staff Acknowledgments

(130232)

Joan Mahagan (617) 788-0521 Melissa Emrey-Arras (617) 788-0534

Irene J. Barnett and Holly C. Ciampi made significant contributions to
this report, in all aspects of the work throughout the assignment. In
addition, Debra Waterstone and Shirley Hwang contributed to the
administration of our survey of state programs and Kevin Murphy assisted
in the initial planning of the assignment. Avrum Ashery, Michele Fejfar,
Alison Martin, Corinna Nicolaou, Audrey Ruge, Daniel Schwimer, and Shana
Wallace provided key technical assistance.

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