Trade Adjustment Assistance: States Have Fewer Training Funds Available than Labor Estimates When Both Expenditures and Obligations Are Considered

Manufacturing workers face an uncertain future as manufacturing employment declines--more than 3 million manufacturing jobs have been lost in this country since 2000 because of international trade as well as other factors. The Trade Adjustment Assistance (TAA) program, administered by the Department of Labor (Labor), is the nation's primary program providing income support, job training, and other benefits for manufacturing workers who lose their jobs as a result of international trade. During the 3-year period from fiscal years 2004 through 2006, Labor certified nearly 4,700 petitions for TAA covering an estimated 400,000 workers. For fiscal year 2006, Congress appropriated about $966 million for TAA, of which about $220 million was for training trade-affected workers. Each year, Labor initially allocates 75 percent of the training funds, or $165 million, to states according to a formula developed by Labor. Labor holds the remaining 25 percent in reserve to distribute to states throughout the year as the need arises because of unexpected layoffs. To minimize year-to-year fluctuations in state funding, Labor uses a "hold harmless" policy that ensures that each state's initial allocation is at least 85 percent of the initial allocation received in the previous year. States have 3 years to spend TAA funds--fiscal year 2006 funds must be used by the end of fiscal year 2008. In addition, to cover administrative costs, Labor allocates to each state an additional 15 percent of its training allocation. Labor can also provide states with supplemental funding to assist TAA participants through National Emergency Grants (NEG)--discretionary awards intended to temporarily expand service capacity in response to major layoffs. During hearings held in June 2007, Labor asserted that, based on reported expenditures, all states had sufficient funds to provide training benefits to trade-affected workers. We reported in May 2007 that, in fact, 13 states used virtually none of their fiscal year 2006 training funds, even when considering both expenditures and obligations--that is, funds that have been committed but not yet paid. On the other hand, we also reported that nine states had used virtually all of their fiscal year 2006 training funds. Our prior work on another key employment and training program--the Workforce Investment Act--found that expenditures by themselves do not provide a complete picture of spending activity. Obligations must be considered to accurately gauge how much is available to provide services--such as training--to participants, and we recommended that Labor use obligations when estimating available funds. Recently, Labor's Office of Inspector General has also concluded that obligations provide a more useful measure for assessing states' funding status if the obligations accurately reflect legally committed funds and are consistently reported. Because TAA reauthorization is rapidly approaching, Congress must have accurate information on whether current funding levels are meeting TAA training needs. Congress asked that we assess (1) the total amount of TAA training funds states actually had available in fiscal year 2007, (2) the process states use to obligate training funds and how they manage these obligations, and (3) the amount of National Emergency Grants (NEG) funds that have been awarded for TAA during the past 3 fiscal years.