Labor vs. labor in debate over Employment Training Fund

With money tight and getting tighter, a scramble is underway in the Capitol for the special funds that are set aside to train California workers.

The dispute is over whether the money should be used primarily to train and retrain employees, or whether the money can be tapped by the strapped state for other purposes, including the CalWorks work-to-welfare program. To some extent, the issue divides two traditional Democratic constituencies – unionized workers and low-income residents. And within labor, there is a subdivide of unions representing privately employed workers and those representing public employees.

Significant money, collected from employers in the form of a special tax, is at stake: The Employment Training Fund has captured roughly $100 million annually for most of the past decade, although in the current and upcoming fiscal years that amount is slipping. The ETF provides the funding for the Employment Training Panel, which administers training grants for California companies.

 “It is the only state program we have to retool our current employees and keep our employees competitive,” said Republican Assemblyman Curt Hagman of Chino. Hagman has authored a bill, AB 1804 to block the diversion of the training money to other purposes.  

The alignment of the political forces surrounding Hagman’s bill is unusual.

On one side, supporting the bill are the Teamsters, the Chamber of Commerce, the manufacturers, the Aerospace and Technology Association and an array of unions, including the transit, food processors, longshoremen, and building workers.

On the other side are the County Supervisors Association, the welfare directors, and some public-employee unions, including AFSCME and SEIU, both of whom represent government employees whose jobs could be at risk if the funds are diverted.

“This is a long standing issue,” said Sacramento lobbyist Barry Broad, who represents the California Council of Teamsters.

“When welfare reform came down in the 1990s, the Legislature decided to take the money temporarily in order to pay for the training costs of the expected influx of people coming off welfare and going to work. That (transfer) would have been illegal, so they passed a statute to permit it, so the Legislature could take it for whatever purpose it wanted to take it,” Broad said.

But, he said, the money comes from employers and should flow back to employers. “The funds being transferred to social services are a special tax levied on employers for the express purpose of training eligible employees.”

But there is sharp disagreement over the best destination of the funds.

In a time of unprecedented budget shortages, the state needs every penny it can get for its most important programs, say opponents of Hagman’s proposal. Money that helps welfare recipients off the assistance rolls and into jobs boosts the state’s income tax revenues. Diverting the funding to local jurisdictions protects jobs and makes it easier for the state to balance its books. Tying the state’s hands by forcing it to give scarce money to workers’ training when it could be used for other purposes does not make fiscal sense.

“The bottom line issue here is that the state needs sufficient revenue so it can fulfill its worthwhile programs,” said Frank Mecca of the California Welfare Directors Association. “We’re talking about a million children, 500,000 adults (on CalWorks). Labor groups represent many of the people who benefit from the training and are helped, who move their families up to a better place.”

Capitol veterans say it is rare – although not unheard of — for the Teamsters and the Chamber of Commerce to be on the same side of an issue. Similarly, the county supervisors are rarely aligned politically with the public employee unions.

The ETF is fueled through a tax on employers of .1 percent of a worker’s first $7,000 in annual wages. The money is intended to pay for worker training in a state program that by some is considered the nation’s largest and most effective. Companies compete for the grants, which are intended to train and retrain employees, either to help them do their current jobs better or enable them to get new jobs in the event of layoffs. Companies compete for the grants, which are decided by the ETP.

Over the years, the panel’s share of the ETF has decreased steadily. A decade ago, the ETF received $100 million and nearly two-thirds, more than $60 million, went to the training panel. Five years ago, the ETF got nearly $85 million, but about $38 million – roughly 45 percent – went to the panel.  That percentage held true during the 2008-09 fiscal year, when the ETF received about $101 million and the panel received less than $47 million.

Meanwhile, the ETF money that goes to other programs, particularly CalWorks, has fluctuated wildly, according to an Assembly analysis.  

Over time, CalWorks has received roughly $20 million to $30 million annually, but those numbers don’t give a true picture of the money flow year to year. In 2004-05, some $37.4 million went to CalWorks, while during the following fiscal year that level was cut nearly in half – to $20 million. In 2007-08, some $45 million went to CalWorks, then that was cut to $35 million the following year, and it was cut still further to $20 million in the current budget year. The 2010-11 spending is expected to be similar to this year’s.

This year the ETF fund is expected to dip to about $84 million, and in the new fiscal year beginning July 1 it is likely to drop to $60 million. The shrinking dollars make the fight for the remaining money even more intense.

CalWorks isn’t the only contender for the money. The Employment Development Department gets about $5 million annually to collect the training tax on employers, some $3 million goes to apprenticeship programs, the state auditor gets a small amount to pay for audits and money is set aside for the grants.

Meanwhile, Hagman’s bill was heard in the Assembly Insurance Committee – the committee has jurisdiction because it hears bills related to EDD – and the committee approved a compromise. The money could be diverted to CalWorks, but the funds would have to be repaid within three years. Its next stop is Appropriations.

“I’m hoping we get bipartisan support,” Hagman said.