State of California LITTLE HOOVER COMMISSION April 29, 2002 The Honorable Gray Davis Governor of California The Honorable John Burton The Honorable James L. Brulte President pro Tempore of the Senate Senate Minority Leader and members of the Senate The Honorable Herb Wesson The Honorable Dave Cox Speaker of the Assembly Assembly Minority Leader and members of the Assembly Dear Governor and Members of the Legislature: The Little Hoover Commission has reviewed the Governor’s plan to put the Department of Industrial Relations, the Employment Development Department, the Workforce Investment Board and the Agricultural Labor Relations Board into a new Labor and Workforce Development Agency. While the new agency would have the potential to better coordinate these operations, the plan does not contain the details necessary for the Commission to conclude with significant confidence that the plan will improve service delivery. The Commission recommends that the Legislature allow the plan to go into effect, but subject to lawmakers receiving a firm commitment from the administration to develop a detailed plan, with specific goals and priorities, and a means of measuring progress. By far the most significant challenge before the State in this policy area is to improve the effectiveness of the vast workforce development efforts that are essential to the success of many individual Californians and the state’s overall prosperity. While the plan establishes the new agency to coordinate these efforts, the administration appears to have shelved the ambitious goals outlined in the Governor’s budget to reorganize and streamline the actual programs. Instead, the administration has created a task force that is focused on coordination and accountability, avoiding the turf-related controversies inherent in the January budget proposal. While reallocating funding may be difficult – and it may not even be the right first step – the commitment should be to improve performance, even if that means reallocating funding to the institutions or agencies that provide the greatest return on investment. The plan also asserts that the new agency will improve enforcement efforts that aim to make California a safe and profitable place to work. But with no changes to the actual programs or their organization, there is little evidence that enforcement activities will be more effective than they could be today. Similarly, the administration asserts that the new agency will link the data collection and research activities of the Employment Development Department and the Department of Industrial Relations, bringing these resources to bear by more accurately describing the economy and guiding public policy and private investment. This effort does not necessarily require a new agency, and a new agency alone will not erase the legal, technical or even cultural hurdles that thwart cooperation today. Milton Marks Commission on California State Government Organization and Economy ? http://www.lhc.ca.gov/lhc.html 925 L Street, Suite 805 ? Sacramento, CA 95814 ? 916-445-2125 ? fax 916-322-7709 ? e-mail [email protected] Finally, some adjudicatory bodies related to the workplace are included in the new agency, while others are left out. For instance, the administration could not provide a specific rationale for including the Agricultural Labor Relations Board in the new agency, but not the Public Employment Relations Board. Moreover, the plan does not consider whether the administrative operations of these boards could be reorganized to improve efficiency while maintaining independent decision-making. One argument presented on behalf of this new agency is that California is the only large state without a labor agency. The Commission’s research shows that there is no standard model among the large states for what to include in a labor-related organization. But the analysis does show that many states have integrated their workforce development programs – which this plan does not do at this stage. Perhaps the most glaring shortcoming is the missing element: the integration of workforce development and economic development. Over the last dozen years, some progress has been made toward integrating workforce development programs. But cutting-edge policy has moved on to the next step in this evolution – fusing efforts to develop skilled workers with efforts to attract, retain, and expand high-quality jobs. The Reorganization Plan barely hints at the challenge of aligning the $4.6 billion the State spends each year on workforce development and the billions more it spends on economic development. Every witness who testified before the Commission supported the plan, but most of that support was based on the potential for a new agency to exert leadership rather than the attributes of the plan itself. Importantly, many of the consumers of these state services – local workforce and economic development agencies, and the businesses and workers they serve – advocated that the new agency be focused on improving outcomes for them rather than improving efficiency at the state level. In short, the reorganization plan by itself is hardly an improvement. But it is an important opportunity. Each new organization – with good leadership and clear goals – has the opportunity to break down traditional barriers and reinvigorate the people involved to pursue a common purpose. The mission of the new Labor and Workforce Development Agency is an essential one. Other executive branch agencies and the Legislature should support it. But it also will be essential for the agency to develop a meaningful business plan with clear goals, the right priorities and a commitment to publicly measure progress based on performance as valued by the customer. Assuming the new agency begins operation on July 1, 2002, the fundamental components of the plan should be in place for the Legislature to review when it returns in January 2003. The 2003-04 budget for the agency should include performance measures and other details implementing a more complete plan. The Commission appreciates the cooperation of the public officials and subject matter experts who testified and were consulted in this review. It submits the enclosed report with great respect for those striving to make California a safe, profitable and fulfilling place to work. Only A Beginning The Proposed Labor & Workforce Development Agency April 2002 Table of Contents The Reorganization Process................................................................................................... 1 The Reorganization Plan.......................................................................................................... 2 More Details in the Budget...................................................................................................... 3 The Commission's Review...................................................................................................... 6 Workforce Development ............................................................................................................6 Workplace Enforcement ............................................................................................................9 Data Collection / Research......................................................................................................10 Adjudicatory Boards .................................................................................................................11 Economic Development...........................................................................................................14 Conclusions and Considerations........................................................................................16 Appendices & Notes................................................................................................................19 Appendix A - Little Hoover Commission Public Hearing Witnesses.......................................21 Appendix B - Governor's Reorganization Plan No. 1 of 2002.................................................23 Appendix C - Labor Agencies in Other States ........................................................................31 Appendix D – History of Labor Agency Proposals ..................................................................33 Appendix E – Commissioner Dissent......................................................................................35 Notes ...........................................................................................................................................37 Table of Sidebars The Reorganization Statute.............................................................................................................1 On the Web......................................................................................................................................3 Objectives of Labor and Workforce Development Agency .............................................................4 Table of Charts & Graphs Current Organization of State Agencies Involved in the Governor's Reorganization Plan ............5 New Labor Organization Structure ..................................................................................................5 Current Job Training Programs in California ...................................................................................7 Job Training Programs after the Reorganization.............................................................................7 PROPOSED LABOR & WORKFORCE DEVELOPMENT AGENCY The Reorganization Process