Trade Adjustment Assistance
Changes Needed to Improve States' Ability to Provide Benefits and Services to Trade-Affected Workers Gao ID: GAO-07-995T June 14, 2007The 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 to manufacturing workers who lose their jobs as a result of international trade. In fiscal year 2006, Congress appropriated about $900 million for TAA, including about $220 million for training. GAO has conducted a number of studies on the TAA program since the program was last reauthorized in 2002. This testimony draws upon the results of two of those reports, issued in 2006 and 2007, as well as ongoing work, and addresses issues raised and recommendations made regarding (1) Labor's administration of the TAA program, (2) the challenges states face in providing services to trade affected workers, (3) the factors that affect workers' use of the wage insurance and health coverage benefits, and (4) the impact of using industrywide certification approaches on the number of workers potentially eligible for TAA.
Labor could improve the way it administers the program in two key areas--the process it uses to allocate training funds and its tracking of program outcomes. Labor's process for allocating training funds presents two significant challenges to states. First, the amount states receive at the beginning of the fiscal year does not adequately reflect the current demand for training services in the state. Second, Labor distributes a significant amount of funds to most states on the last day of the fiscal year, even to states that have spent less than 1 percent of the current fiscal year training allocation. Regarding program outcomes, TAA nationwide performance data are incomplete and may be inaccurate. We recommended that Labor develop procedures to better allocate the training funds and improve data. Labor recently noted that it would examine its processes. States face challenges in providing services to workers, including the lack of flexibility to use training funds to provide trade-affected workers with case management services, such as counseling to help them decide whether they need training and which training would be most appropriate. States receive no TAA program funds for case management and must either use their limited administrative funds or seek resources from other programs, such as those funded by the Workforce Investment Act. States also reported that their efforts to enroll workers in training are sometimes hampered by the training enrollment deadline and that workers find the deadline confusing. We have suggested that Congress consider providing states the flexibility to use training funds for case management and simplifying the training enrollment deadline. Few TAA participants take advantage of the wage insurance and health coverage benefits, and several factors limit participation. For example, several states reported that the requirement that workers must find a job within 26 weeks to receive the wage insurance benefit was the major factor preventing more workers from taking advantage of the benefit. Regarding the health coverage benefit, several states told us that high out-of-pocket costs may discourage workers from using the benefit. Furthermore, states also reported that the health coverage benefit can be complicated and difficult to understand. We have suggested that the Congress may wish to consider increasing the length of time workers have to become eligible for wage insurance. In addition, we also recommended that a centralized resource be developed to assist workers with their questions about health coverage. In response, the agency has developed new simplified materials. Finally, an industry certification approach based on three petitions certified within any 180-day period would likely increase the number of workers eligible for TAA, potentially doubling those eligible. The approach also presents some design and implementation challenges.
GAO-07-995T, Trade Adjustment Assistance: Changes Needed to Improve States' Ability to Provide Benefits and Services to Trade-Affected Workers
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Testimony before the Committee on Ways and Means, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, June 14, 2007:
Trade Adjustment Assistance:
Changes Needed to Improve States' Ability to Provide Benefits and
Services to Trade-Affected Workers:
Statement of Sigurd R. Nilsen, Director:
Education, Workforce, and Income Security Issues:
GAO-07-995T:
GAO Highlights:
Highlights of GAO-07-995T, a testimony before the Committee on Ways and
Means, House of Representatives
Why GAO Did This Study:
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 to manufacturing
workers who lose their jobs as a result of international trade. In
fiscal year 2006, Congress appropriated about $900 million for TAA,
including about $220 million for training. GAO has conducted a number
of studies on the TAA program since the program was last reauthorized
in 2002. This testimony draws upon the results of two of those reports,
issued in 2006 and 2007, as well as ongoing work, and addresses issues
raised and recommendations made regarding (1) Labor‘s administration of
the TAA program, (2) the challenges states face in providing services
to trade affected workers, (3) the factors that affect workers‘ use of
the wage insurance and health coverage benefits, and (4) the impact of
using industrywide certification approaches on the number of workers
potentially eligible for TAA.
What GAO Found:
Labor could improve the way it administers the program in two key
areas”the process it uses to allocate training funds and its tracking
of program outcomes. Labor‘s process for allocating training funds
presents two significant challenges to states. First, the amount states
receive at the beginning of the fiscal year does not adequately reflect
the current demand for training services in the state. Second, Labor
distributes a significant amount of funds to most states on the last
day of the fiscal year, even to states that have spent less than 1
percent of the current fiscal year training allocation. Regarding
program outcomes, TAA nationwide performance data are incomplete and
may be inaccurate. We recommended that Labor develop procedures to
better allocate the training funds and improve data. Labor recently
noted that it would examine its processes.
States face challenges in providing services to workers, including the
lack of flexibility to use training funds to provide trade-affected
workers with case management services, such as counseling to help them
decide whether they need training and which training would be most
appropriate. States receive no TAA program funds for case management
and must either use their limited administrative funds or seek
resources from other programs, such as those funded by the Workforce
Investment Act. States also reported that their efforts to enroll
workers in training are sometimes hampered by the training enrollment
deadline and that workers find the deadline confusing. We have
suggested that Congress consider providing states the flexibility to
use training funds for case management and simplifying the training
enrollment deadline.
Few TAA participants take advantage of the wage insurance and health
coverage benefits, and several factors limit participation. For
example, several states reported that the requirement that workers must
find a job within 26 weeks to receive the wage insurance benefit was
the major factor preventing more workers from taking advantage of the
benefit. Regarding the health coverage benefit, several states told us
that high out-of-pocket costs may discourage workers from using the
benefit. Furthermore, states also reported that the health coverage
benefit can be complicated and difficult to understand. We have
suggested that the Congress may wish to consider increasing the length
of time workers have to become eligible for wage insurance. In
addition, we also recommended that a centralized resource be developed
to assist workers with their questions about health coverage. In
response, the agency has developed new simplified materials.
Finally, an industry certification approach based on three petitions
certified within any 180-day period would likely increase the number of
workers eligible for TAA, potentially doubling those eligible. The
approach also presents some design and implementation challenges.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-995T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Sigurd Nilsen at (202)
512-7215 or nilsens@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the challenges states have
faced in implementing some aspects of the Trade Adjustment Assistance
Act (TAA) program. We have conducted a number of studies on the TAA
program since the program was last reauthorized in 2002, and my
testimony today will focus primarily on the results of that work as
well as from our ongoing work.[Footnote 1] Today I'll be talking about
issues we identified and our recommendations for improving the program.
The Trade Adjustment Assistance program, established in 1962 and
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. In fiscal year 2006, Congress appropriated about
$655 million for income support payments and another $220 million for
training for trade-affected workers. In 2002, Congress made a number of
key changes designed to expand benefits and decrease the time it takes
to get workers into services. Among the changes, the act:
* established a deadline for workers to enroll in training, after they
have been laid off or their petition has been approved, in order to
maintain eligibility for extended income support payments;
* created a wage insurance benefit for workers age 50 and older,
subsidizing the difference between the prior and new wages of some
trade-affected workers who find reemployment quickly; and:
* created a health coverage tax credit to help trade-affected workers
pay for health insurance.
In order for workers to receive TAA benefits and services, Labor must
certify that workers in a particular layoff have been adversely
affected by international trade. The certification process begins when
a petition is filed with Labor on behalf of a group of laid-off
workers. Labor then surveys the firm undergoing the layoff and its
customers and also reviews data on the firm's industry to determine
whether it meets the criteria for certification. Congress is now
considering approaches that would facilitate certifying entire
industries for TAA. One approach being considered would make an
industry eligible to be investigated for possible certification when
Labor certifies three petitions from that industry within 180 days. An
investigation would determine whether the entire industry has been
affected by trade and, therefore, whether workers in any future layoff
in that industry should automatically be eligible for TAA.
In preparation for reauthorizing the program, you asked us to provide
information on some of the key issues identified in our work that
should be addressed in reauthorization. In addition, you asked us to
analyze the impact of an alternative industrywide approach to
certifying TAA petitions. My testimony today will provide information
and highlight our recommendations on (1) Labor's administration of the
TAA program, (2) the challenges states face in providing services to
trade-affected workers, (3) the factors that affect workers' use of the
wage insurance and health coverage benefits, and (4) the impact of
using industrywide certification approaches on the number of workers
potentially eligible for TAA.
To address the first objective, we drew upon our most recent report and
a 2006 report on TAA performance data.[Footnote 2] Our recent report
was based, in part, on a survey of the 46 states that received an
initial allocation of TAA training funds in federal fiscal year 2006,
and a supplemental survey to collect additional financial information
on fiscal year 2006 training expenditures and obligations. Information
on performance data is based primarily on a survey of 46 states
conducted between November 2005 and January 2006 and on site visits to
five states--California, Iowa, Ohio, Texas, and Virginia. To answer the
second and third objectives, we interviewed Labor and Internal Revenue
Service (IRS) officials and visited state and local officials in four
states--California, Massachusetts, Michigan, and North Carolina. We
also analyzed Labor's quarterly activity reports and IRS's data on the
health coverage benefit. To address the fourth objective, we
interviewed officials at Labor and the International Trade Commission
and analyzed Labor's data on TAA petitions from calendar year 2003 to
2005, the Bureau of Labor Statistics' Mass Layoff Statistics data, and
the Census Bureau's data on trade and production, as well as the
International Trade Commission's data on trade remedies. We conducted
our work in accordance with generally accepted government auditing
standards.
In summary, our work shows that Labor could improve the way it
administers the program in two key areas--the process it uses to
allocate training funds to states and its tracking of program outcomes.
Labor's process for allocating training funds does not adequately
reflect the current demand for training services in the state, and
Labor distributes additional funds to states regardless of whether they
need them. Regarding program outcomes, we found that TAA performance
data are incomplete and may be inaccurate. For example, only half the
states are including all participants, as required by Labor. States
face challenges in providing services to workers, including the lack of
flexibility to use training funds to provide trade-affected workers
with case management services, such as counseling to help them decide
whether they need training and which training would be most
appropriate. States receive no TAA program funds for case management
and must either use their limited administrative funds or seek
resources from other programs, such as those funded by the Workforce
Investment Act (WIA). States also reported that their efforts to enroll
workers in training are sometimes hampered by the training enrollment
deadline and that workers find the deadline confusing. Few TAA
participants take advantage of the wage insurance and health coverage
benefits, and several factors limit participation. For example, several
states reported that the requirement that workers must find a job
within 26 weeks to receive the wage insurance benefit was the major
factor preventing more workers from taking advantage of the benefit.
Regarding the health coverage benefit, several states told us that high
out-of-pocket costs may discourage workers from using the benefit.
Finally, an industry certification approach based on three petitions
certified within any 180-day period would likely increase the number of
workers eligible for TAA--potentially doubling those eligible--but also
presents some design and implementation challenges. For example, using
an industrywide approach raises the possibility that workers who have
not been affected by trade will be certified. We made a number of
recommendations to Labor to address the issues we identified, as well
as suggested that Congress make changes during reauthorization to
improve the program.
Background:
The TAA program was designed to assist workers who have lost their jobs
as a result of international trade. The program provides two primary
benefits to these workers--training and extended income support. In
addition, as a result of the TAA Reform Act of 2002, workers also have
access to wage insurance and health coverage benefits. In order to be
eligible for any of these benefits, Labor must certify that a layoff
was trade affected.
TAA Benefits and Services:
Under TAA, workers enrolled in the program have access to a variety of
benefits and services, including the following:
Training. Participants may receive up to 130 weeks of training,
including 104 weeks of vocational training and 26 weeks of remedial
training, such as English as a second language.
Extended income support. Participants may receive a total of 104 weeks
of extended income support beyond the 26 weeks of unemployment
insurance (UI) benefits available in most states.
Job search and relocation benefits. Payments are available to help
participants search for a job in a different geographical area and to
relocate to a different area to take a job.
Wage insurance benefit. The wage insurance benefit, known as the
Alternative Trade Adjustment Assistance (ATAA) program, was created by
the TAA Reform Act of 2002 as a demonstration project for workers age
50 or older and those who find reemployment within 26 weeks of being
laid off that pays less than $50,000 and less than what they previously
earned. Workers who meet these criteria are eligible to receive 50
percent of the difference between their new and old wages, up to a
maximum of $10,000 over 2 years. For the fiscal year 2008 budget
request, Labor estimated wage insurance benefits at $23 million.
Health coverage benefit. The health coverage benefit, known as the
Health Coverage Tax Credit (HCTC) and also created by the TAA Reform
Act, helps workers pay for health care insurance through a tax
credit.[Footnote 3] Workers can choose to receive the benefit in one of
two ways--as an advance option that covers 65 percent of their monthly
premiums, allowing them to lower the amount they have to pay out of
pocket for health coverage, or as an end-of-year tax credit that is
claimed on their income taxes. To be eligible for the health coverage
benefit, workers must either be (1) receiving extended income support
payments or eligible for extended income support but still receiving UI
payments, or (2) receiving the wage insurance benefit. IRS administers
the health coverage tax credit program. There are three health plan
options that are automatically eligible: COBRA continuation
plans,[Footnote 4] coverage through the worker's spouse, and individual
market plans purchased by the worker. In addition, the TAA Reform Act
also allows states to designate other coverage alternatives--called
state-qualified options.
TAA Certification Process and Eligibility Requirements:
Currently, Labor certifies workers for TAA on a layoff-by-layoff basis.
Petitions may be filed by the employer experiencing the layoff, a group
of at least three affected workers, a union, or the state or local
workforce agency. Labor investigates whether a petition meets the
requirements for TAA certification and is required to either certify or
deny the petition within 40 days of receiving it.
The TAA statute lays out certain basic requirements for petitions to be
certified, including that a significant proportion of workers employed
by a company be laid off or threatened with layoff and that affected
workers must have been employed by a company that produces articles. In
addition, a petition must demonstrate that the layoff is related to
international trade in one of several ways, including the following:
* Increased imports--imports of articles that are similar to or
directly compete with articles produced by the firm have increased, the
sales or production of the firm has decreased, and the increase in
imports has contributed importantly to the decline in sales or
production and the layoff or threatened layoff of workers.
* Shift of production--the firm has shifted production of an article to
another country, and either:
* the country is party to a free trade agreement with the United States
or:
* the country is a beneficiary under the Andean Trade Preference Act,
the African Growth and Opportunity Act, or the Caribbean Basin Economic
Recovery Act or:
* there has been or is likely to be an increase in imports of articles
that are similar to or directly compete with articles produced by the
firm.
Labor investigates whether each petition meets the requirements for TAA
certification by taking steps such as surveying officials at the
petitioning firm, surveying its customers, and examining aggregate
industry data. When Labor has certified a petition, it notifies the
relevant state, which has responsibility for contacting the workers
covered by the petition, informing them of the benefits available to
them, and telling them when and where to apply for benefits.
Training Funds:
Approximately $220 million is available annually for training, and
states have 3 years to spend these funds. Thus fiscal year 2006 funds
must be used by the end of fiscal year 2008. Each year Labor allocates
75 percent of the training funds to states according to a formula that
takes into consideration several factors, including the average amount
of training funds allocated to states, reported accrued training
expenditures, and the average number of training participants over the
previous 2½ years. In addition, 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. In fiscal year 2006, Labor
initially allocated $165 million of training funds to 46 states. To
cover administrative costs, Labor allocates to each state an additional
15 percent of its training allocation. Labor holds the remaining 25
percent in reserve to distribute to states throughout the year
according to need as they experience unexpected large layoffs.
TAA Performance Reporting System:
Labor is responsible for monitoring the performance of the TAA program.
States are required to submit information on exiting participants
through the Trade Act Participant Report (TAPR) each quarter. The TAPR
data submitted by states are used to calculate national and state
outcomes on the TAA performance measures for each fiscal year, which
include reemployment rate, retention rate, and wage replacement rate.
Unlike other training programs, like WIA, TAA has no individual state
performance goals, and states do not receive incentives or sanctions
based on their performance levels, nor are they otherwise held
accountable for their performance. In addition to submitting TAPR data,
states also submit data to Labor on TAA services and expenditures each
quarter.
Labor Could Improve Its TAA Program Administration:
Labor could improve the way it administers the program in two key
areas--the process it uses to allocate training funds and its tracking
of program outcomes. Labor's process for allocating training funds
presents two significant challenges to states. First, the amount states
receive at the beginning of the fiscal year does not adequately reflect
states' spending the year before or the current demand for training
services in the state. Second, Labor distributes a significant amount
of funds to most states on the last day of the fiscal year, even to
states that have spent virtually none of their current year's
allocation. In addition the performance information that Labor makes
available on the TAA program does not provide a complete and credible
picture of the program's performance. For example, only half the states
are including all participants, as required, in the performance data
they submit to Labor.
Labor's Policies for Allocating Training Funds Present Challenges to
States in Managing Their Funds:
Labor's process for allocating training funds does not adequately
recognize the episodic nature of layoffs or the extent to which states
have used their previous year's allocations. Labor allocates 75 percent
of TAA training funds based upon a formula that takes into account
expenditures and participation over the previous 2½ years. The year-to-
year fluctuation in layoffs within a state may result in states
receiving more or less funds than they actually need. For example, the
estimated number of trade-affected workers being laid off declined
dramatically in Kansas from fiscal years 2004 to 2005 and increased
somewhat in 2006. Overall the estimated number of trade-affected
workers in Kansas laid off in fiscal year 2006 represented about an 80
percent decrease from 2004. On the other hand, Missouri experienced an
80 percent increase in the number of trade-affected workers being laid
off between fiscal years 2004 and 2006 (see fig. 1). Kansas used hardly
any of its fiscal year 2006 training fund allocation, while Missouri
used virtually all of its. Despite these trends, both states received
about 15 percent less in fiscal year 2007 than they received in 2006.
Figure 1: Fluctuation in Estimated Number of Trade-Affected Workers
Laid Off from Fiscal Years 2004 to 2006 in Kansas and Missouri:
[See PDF for image]
Source: GAO analysis of Department of Labor petitions data.
[End of figure]
While the 46 states responding to our survey reported using (spending
or obligating), on average, about 62 percent of their fiscal year 2006
training funds during the fiscal year, the percentage of funds states
expended and obligated varied widely. Thirteen of the states reported
using less than 1 percent of their fiscal year 2006 funds for training,
while 9 states reported using more than 95 percent of their fiscal year
2006 training funds(see fig. 2). The amount individual states reported
using ranged from 0 percent in several states to about 230 percent in 1
state.
Figure 2: States with High and Low Use of Fiscal Year 2006 Training
Funds:
[See PDF for image]
Source: Department of Labor, (Map) Map Resources.
[End of figure]
A particular problem with Labor's allocation process is the hold
harmless policy, which guarantees that each state receives no less than
85 percent of what it received in the previous year. While this policy
is intended to minimize significant fluctuations in state funding from
prior years, it awards states comparable training funds without
recognition of the previous year's expenditures or obligations. For
example, the 13 states that used less than 1 percent of the fiscal year
2006 funds received nearly $41 million in fiscal year 2007--an amount
slightly less than they received in fiscal year 2006. Moreover, 5 of
the 13 states received a larger allocation in fiscal year 2007 than
they received in 2006.
Labor distributes a significant amount of funds to most states on the
last day of the fiscal year, regardless of whether states need these
additional funds. Labor distributed end-of-year funds to 48 states,
including about $5 million to states that had spent or obligated less
than 1 percent of their initial fiscal year 2006 allocation.[Footnote
5] Labor distributes these funds to each state based upon a calculation
that takes into account the amount of training funds each state
received from its initial allocation plus any additional amount it
received during the year.[Footnote 6] According to Labor officials, all
states will receive an end-of-year allocation unless a state
specifically informs Labor it does not want any additional funds or if
it had not received any funds at all during the year. Waiting until the
last day of the fiscal year to distribute training funds to states does
not reflect good planning or management of program funds. Labor
officials agreed that the distribution of reserve training funds could
be improved so that more funds are disbursed throughout the year rather
than on the last day. Officials also acknowledged that states that have
not spent or obligated any of their initial allocation probably should
not receive additional training funds at the end of the year.
In our recent report, we recommended that the Secretary of Labor
develop procedures to better allocate training funds and ensure that
any reserve funds are given to only those states that have spent or
obligated a substantial portion of the current fiscal year allocation.
In its comments, Labor agreed with our findings and recommendations and
noted that it would examine the process for allocating training funds
to states.
TAA Data Do Not Provide a Complete and Credible Picture of the
Program's Performance:
TAA performance data are incomplete and may be inaccurate. States
report that they are not including all TAA participants in their
performance data, despite Labor's requirement that all participants be
included after they exit the program. We found that only 23 of the 46
states we surveyed reported that they are including all exiting
participants in their submissions to Labor. In general, states have
information on those in training, but may not systematically track
those who receive other assistance, but not training. Furthermore,
Labor does not have a process in place to ensure that states are
including all exiting TAA participants in their reporting submissions.
Despite the importance of accurately identifying exiters, the exit
dates themselves may not be accurate because some states do not
consistently obtain proper documentation to verify the dates. Accurate
exit dates are critical to TAA performance data for two reasons. First,
whether a participant exits determines if the individual should be
included in the state's report to Labor. Second, the actual exit date
determines when a participant's employment outcome will be assessed.
Some states are not using all available data sources to determine TAA
participants' employment outcomes. Labor requires states to use UI wage
records to determine the employment outcomes of participants reported
to Labor. However, each state's wage record database includes only wage
data on workers within the state and does not have data on participants
who found employment in another state.
In our 2006 report, we made several recommendations to Labor to help
ensure that TAA participant data reported by states are consistent,
complete, and accurate, including issuing clarifying guidance. Labor
has taken some steps to share information with states and to improve
data quality. In fiscal year 2006, Labor distributed $250,000 to each
state to help them improve their TAA performance data systems, but it
is too soon to know whether their efforts will improve the quality of
the data.
States Face Challenges in Providing Services to Workers:
States report being challenged by the lack of flexibility to use
training funds to provide trade-affected workers with case management
services, such as counseling to help them decide whether they need
training and what type of training would be most appropriate. In
addition, efforts to enroll workers in training are sometimes hampered
by the confusing TAA training enrollment deadline that requires workers
be enrolled in training within 8 weeks of certification or 16 weeks of
layoff to qualify for extended income support.
Limited Flexibility in Use of Training Funds Hinders Case Management
Services:
States also cited the lack of flexibility to use training funds to
provide trade-affected workers with case management services as a
challenge. Workers often need help making decisions about training--
what type of training to take or whether to enroll in training at all.
Difficulty funding case management services for trade-affected workers
was a concern among officials in the states we visited. For example,
state officials in one state said providing proper assessment, career
counseling, and other case management services was a real challenge and
noted that additional funds from other sources are limited. States do
not receive TAA program funds for case management and, by law, cannot
use training funds for this service. As a result, states must either
use their limited TAA administrative funds or use funds from other
programs to pay for case management, but there are limitations with
these funding sources.
According to Labor officials, states are encouraged to co-enroll
participants in the Workforce Investment Act (WIA) program, and in
Labor's view states have sufficient WIA funds to pay for case
management for TAA participants. About three-fourths of the states
reported in our survey that they were able to utilize WIA funds to help
pay for case management services. Yet nearly half of the states also
reported that coordination with WIA was a challenge. For example, WIA
funding may not always be available for TAA workers, especially during
a large layoff. Furthermore, local officials in a state we visited said
that while 85 percent of TAA participants do co-enroll in WIA, a large
layoff can strain funding and makes it difficult for WIA to completely
fund case management for trade-affected workers.
States also reported limitations to using administrative funds to
provide case management. More than half of the states responding to our
survey reported the shortage of administrative funds as a challenge.
One state noted that its administrative funds are usually exhausted by
the end of the first quarter because of the amount of case management
that is required for the program. A local official in one state we
visited said that it uses Wagner-Peyser funds to pay for case
management because not enough TAA administrative funds are received and
TAA training funds cannot be used. As a result, only one case manager
could be funded, and this one person had to cover three counties and
serve approximately 1,000 workers. Moreover, officials in some of the
states we visited cautioned that administrative funds should not be
used for case management because case management is a program activity-
-any increase in the administrative limit to pay for this service could
lead to the misconception that the program has too much overhead. These
state officials noted that having the flexibility to use TAA training
funds for case management would alleviate this concern.
In our recent report, we suggested that Congress may wish to consider
allowing a portion of TAA training funds to be used for case management
services to allow states greater flexibility in how they may use their
TAA funds to provide services to workers. Labor, however, contended
that the WIA, rather than TAA, should finance case management. We agree
with Labor that co-enrollment with WIA should be encouraged, but as our
report points out, WIA funds are not always available to provide this
service, especially during large layoffs. We believe that states would
benefit from having the option to use a portion of their training funds
to defray the costs of providing case management services to trade-
affected workers.
Training Deadline Can be Challenging and Confusing:
Efforts to enroll workers in training are sometimes hampered by the "8-
16" training enrollment deadline--that is, the requirement that workers
be enrolled in training within 8 weeks of certification or 16 weeks of
layoff, whichever is later, to qualify for extended income support.
Nearly three-quarters of the states responding to our survey reported
that enrolling workers in training by the 8-16 deadline was a
challenge. For example, one state noted that trying to enroll
participants in training by the 8-16 deadline is particularly
challenging when dealing with large layoffs because it is difficult to
handle all the logistics, such as notifying workers and setting up
appointments, for a large number of workers within the deadline.
Moreover, officials in the four states we visited also indicated that
the deadline is very confusing to workers. They told us that workers
become confused about which point in time the 8 weeks or 16 weeks apply
to and, as a result, are not sure when the clock starts and stops. We
previously reported that about three-fourths of states responded that
workers, at least occasionally, inadvertently miss the deadline and
consequently lose their eligibility for extended income
support.[Footnote 7] In that report, we recommended that Labor track
the ability of workers to meet the 8-16 deadline.[Footnote 8] As of
April 2007, Labor had not yet begun gathering information on the impact
of the deadline. In our recent report, we suggested that in order to
make it easier for workers to comply with the training enrollment
deadline, Congress may wish to consider simplifying the deadline by
specifying a single time period that commences when workers are laid
off or petitions are certified, whichever is later.
Several Factors Limit Participation in the Wage Insurance and Health
Coverage Benefits:
Several factors, including a short deadline for getting a job and the
cost of buying health coverage, may limit participation in two new
benefits resulting from the TAA Reform Act of 2002. In our site visits,
states reported that the requirement that workers must find a job
within 26 weeks to receive the wage insurance benefit was the major
factor preventing more workers from taking advantage of the benefit. An
additional factor that may limit participation in wage insurance by
some older workers is the requirement that for a group of workers to be
certified as eligible, the petitioning workers must have been laid off
from a firm where the affected workers lacked easily transferable
skills and a significant portion of those workers were aged 50 or over.
While cost is one of the most significant factors limiting
participation in the health coverage benefit, some states also reported
that the health coverage tax credit program can be complicated and
difficult to understand for both workers and local case managers.
Deadline to Find Employment and Other Requirements Limit Participation
in the Wage Insurance Benefit:
Few TAA participants take advantage of the wage insurance benefit.
According to Labor officials, in calendar year 2006, 6,316 workers
received the wage insurance benefit. The universe of workers eligible
for wage insurance cannot be estimated because data are not available
on the number of workers certified for TAA who are 50 years old or
older and meet the other eligibility requirements. However, two-thirds
of the states we surveyed reported that 5 percent or less of TAA
participants received wage insurance in fiscal year 2006.[Footnote 9]
We previously reported in a study of five layoffs that less than 20
percent of the workers potentially eligible for the wage insurance
benefit received it.[Footnote 10] In this study, we found that workers'
awareness of the wage insurance benefit varied greatly--many workers
who were 50 years old and older were simply unaware of the benefit.
While state or local officials told us they discussed the ATAA benefit
at rapid response meetings or TAA information meetings, workers were
often overwhelmed by the volume of information received after the
layoff, and didn't necessarily recall some of the specifics.
Although officials in the states we visited for our most recent study
believe the wage insurance benefit is beneficial to older workers close
to retirement, two key factors limit participation. Officials said that
one of the greatest obstacles to participation was the requirement for
workers to find a new job within 26 weeks after being laid off. For
example, according to officials in one state, 80 percent of
participants who were seeking wage insurance but were unable to obtain
it because they failed to find a job within the 26-week period. The
challenges of finding a job within this time frame may be compounded by
the fact that workers may actually have less than 26 weeks to secure a
job if they are laid off prior to becoming certified for TAA. For
example, a local case worker in one state we visited said that the 26
weeks had passed completely before a worker was certified for the
benefit.
Another factor that may limit participation by some older workers is
the requirement that, under the TAA Reform Act, for a group of workers
to be certified, they must have been laid off from a firm where the
affected workers lacked easily transferable skills and a significant
portion were aged 50 or over. Labor interprets a "significant portion"
as the lesser of 5 percent of the affected workforce or 50 workers at a
firm with 50 or more workers, or at least 3 workers in a firm with
fewer than 50 affected workers. Labor investigates each petition to see
if the firm meets the requirements, and in fiscal year 2006, nearly 90
percent of TAA-certified petitions were also certified for the wage
insurance benefit. Labor officials said that eliminating this step of
the TAA certification process--that is, allowing any TAA-certified
workers who meet the individual eligibility criteria for the wage
insurance benefit to participate--would decrease the agency's
investigation workload somewhat and may increase participation in the
wage insurance benefit.
Labor officials told us they are taking steps to overcome the lack of
awareness of wage insurance and promote the benefit by informally
encouraging states to ensure case workers talk about wage insurance
during one-on-one case management sessions. Furthermore, in our most
recent report, we suggested that in order to enable more workers to
take advantage of the wage insurance benefit, Congress may wish to
consider increasing the length of time workers have to become
reemployed and eliminating the requirement that to be certified as
eligible for wage insurance, the petitioning workers must have been
laid off from a firm where the affected workers lacked easily
transferable skills and a significant portion of those workers were
aged 50 or over.
Cost Is a Key Factor Limiting Participation in the Health Coverage
Benefit:
The high cost of the health coverage benefit to participants is the
greatest barrier to higher participation. State officials said that
many laid-off workers cannot afford to pay 35 percent of their health
care premiums while their primary income is unemployment insurance
benefits. IRS officials reported that the workers' 35 percent share is
among the primary barriers to participation in the benefit. For
example, in the four states we visited, the average monthly premium for
COBRA policies covering two or more individuals was about $800. The
workers' out-of-pocket cost for COBRA coverage in these states would be
nearly one-fourth of their monthly UI payment (see table 1).
Table 1: Comparison of Average Monthly Premiums:
State: California;
Average monthly UI payment: $1,176;
Average monthly COBRA premium for two or more: $777;
Workers' 35 percent share of monthly premium: $272;
Percentage of monthly UI payment: 23.
State: Massachusetts;
Average monthly UI payment: 1,465;
Average monthly COBRA premium for two or more: 895;
Workers' 35 percent share of monthly premium: 313;
Percentage of monthly UI payment: 21.
State: Michigan;
Average monthly UI payment: 1,161;
Average monthly COBRA premium for two or more: 737;
Workers' 35 percent share of monthly premium: 258;
Percentage of monthly UI payment: 22.
State: North Carolina;
Average monthly UI payment: 1,074;
Average monthly COBRA premium for two or more: 770;
Workers' 35 percent share of monthly premium: 270;
Percentage of monthly UI payment: 25.
State: Average;
Average monthly UI payment: 1,219;
Average monthly COBRA premium for two or more: 795;
Workers' 35 percent share of monthly premium: 278;
Percentage of monthly UI payment: 23.
Source: Source: GAO analysis of UI data from states and average COBRA
premiums from IRS.
[End of table]
State-qualified plans are similarly expensive and are often more
expensive than COBRA coverage. Currently, 43 states have such plans,
which, among other requirements, must provide for preexisting
conditions. For example, in one state we visited, the premium for the
state-qualified plan for a family was about $940 per month, while the
average COBRA premium was about $740 per month. The worker's share of
the state-qualified premium was about $330---or about 30 percent of the
UI benefit--compared to about $260 for COBRA coverage.
In addition, there is currently a period of up to about 3 months where
workers must cover the full cost of their health premiums before
beginning to receive the advance credit, and these costs are not
reimbursable. IRS officials reported that inability to pay the out-of-
pocket costs between layoff and application for the advance credit is
one of the reasons workers lose eligibility and may be denied the
benefit.
While cost is one of the most significant factors limiting
participation in the health coverage benefit, some states also reported
that the health coverage tax credit program can be complicated and
difficult to understand for both workers and local case managers. In
our survey, nearly two-thirds of the states reported that limited IRS
guidance on the benefit was still a challenge. Furthermore, during our
site visits, some state and local officials said that they are not
experts on the health coverage benefit and do not know enough details
of the benefit to get information out to workers and to assist them
with the enrollment process. In some local areas, case managers we
interviewed said that they provide minimal information about the
benefit and primarily refer workers to pamphlets or the IRS call center
for details. We previously reported on the complexity of the health
coverage benefit, noting that the process for workers to become
eligible and enroll for the benefit was fragmented and difficult to
navigate.[Footnote 11] In that report, we recommended to several
agencies, including Labor and IRS, that a centralized resource be made
available at the time individuals must make decisions about purchasing
qualifying health coverage and meeting other eligibility requirements.
In February 2007, IRS began distributing to all workers covered by a
petition a more simplified program kit for the health coverage benefit.
Certification Applied Industrywide May Increase Number Eligible, but
Implementation Challenges Exist:
Two alternatives are being considered that would expand the current
firm by firm petition certification approach. One approach being
considered would make an industry eligible to be investigated for
possible certification when Labor certifies three petitions from that
industry within 180 days. Another approach would require certification
of an industry once a trade remedy had been applied.[Footnote 12] An
industry certification approach based on three petitions certified
within 180 days would likely increase the number of workers eligible
for TAA, but the extent of the increase depends upon the specific
criteria that are used. Using trade remedies for industrywide
certification could also result in expanded worker eligibility for TAA
in a number of industries, but the extent is uncertain. As we identify
in our forthcoming report, either approach presents some design and
implementation challenges.[Footnote 13]
Extent of Increase in Eligible Workers Depends on How Additional
Criteria Are Set:
From 2003 to 2005, 222 industries had three petitions certified within
180 days and therefore would have triggered an investigation to
determine whether an entire industry should be certified, if such an
approach had been in place at that time. These industries represented
over 40 percent of the 515 industries with at least one TAA
certification in those 3 years and included 71 percent of the workers
estimated to be certified for TAA from 2003 to 2005.[Footnote 14] The
222 are a diverse set of industries, including textiles, apparel,
wooden household furniture, motor vehicle parts and accessories,
certain plastic products, and printed circuit boards.
The proposals for this approach would require that, once an industry
meets the three-petition criterion, Labor investigate to determine
whether there is evidence of industrywide trade effects. Not all 222
industries would likely be certified industrywide. In its
investigation, Labor would use additional criteria and likely consider
such factors as the extent to which an industry has been affected by
imports, changes in production levels in the industry, or changes in
employment levels.
The number of workers that would become eligible for TAA through an
industry certification approach depends on what additional criteria are
established. We used information from the 69 industries for which we
had comprehensive data on petitions, unemployment, trade and production
to estimate the potential increases in eligible workers
programwide.[Footnote 15] We found that, if there were no additional
criteria beyond three petitions certified in 180 days, the overall
number of workers eligible for TAA might have nearly doubled, from
about 118,000 to about 233,000 in 2005. If the trade threshold were set
at a 10 percent increase in the import share of the domestic market,
the number of eligible workers might have increased by approximately 49
percent from 118,000 to about 175,000. If certification were limited to
industries with a 15 percent increase in any 1 year, the number of
workers eligible for TAA might have increased by approximately 27
percent to about 150,000. Finally, if the criterion was a 20 percent
increase in the import share in any 1 year, the number of workers might
have increased by about 22 percent, to 144,000. More stringent criteria
would result in a smaller increase in the number of workers eligible
for TAA.[Footnote 16]
Certifying Industries Subject to Trade Remedies Could Increase Eligible
Population, but the Extent Is Uncertain:
Using trade remedies for industrywide certification could result in
expanded worker eligibility for TAA in a number of industries. The
number of workers eligible for TAA might increase under this approach
in areas in which there have been few or no TAA petitions. For example,
even though ITC found that domestic producers of certain kinds of
orange juice had been injured by imports, there appear to be no TAA
petitions for workers producing orange juice.[Footnote 17]
However, the number of workers eligible for TAA may not increase
substantially in some areas, in part because of overlap between trade
remedies and TAA petitions. For example, over half of outstanding
antidumping and countervailing duty orders are for iron and steel
products, for which hundreds of TAA petitions have been certified. In
addition, industries with trade remedies may not necessarily have
experienced many trade-related job losses because the International
Trade Commission (ITC) does not focus on employment when determining
whether an industry has been injured, according to an ITC official.
Furthermore, trade remedies are intended to mitigate the trade-related
factors that caused the injury to the industry, so employment
conditions in an industry could improve after the trade remedy is in
place.
It is difficult to estimate the extent that industry certification
based on trade remedies would increase the number of workers eligible
for TAA because trade remedies are imposed on specific products coming
from specific U.S. trade partners, and data are not available on job
losses at such a detailed level. The product classifications for a
given trade remedy can be very narrow, such as a dye known as
"carbazole violet pigment 23" or "welded ASTM A-312 stainless steel
pipe."
Potential Design and Implementation Challenges Exist:
Although industry certification based on three petitions certified in
180 days is likely to increase the number of workers eligible for TAA,
it also presents several potential challenges.
* Designing additional criteria for certification. Any industrywide
approach raises the possibility of certifying workers who were not
adversely affected by trade. Even in industries that are heavily
affected by trade, workers could lose their jobs for other reasons,
such as the work being relocated domestically. In addition, using the
same thresholds for all industries would not take into account industry-
specific patterns in trade and other economic factors.
* Determining appropriate duration of certification. Determining the
length of time that an industry would be certified may also present
challenges. If the length of time is too short, Labor may bear the
administrative burden of frequently re-investigating industries that
continue to experience trade-related layoffs after the initial
certification expires. However, if the time period is too long, workers
may continue to be eligible for TAA even if conditions change and an
industry is no longer adversely affected by trade.
* Defining the industries. How the industries are defined would
significantly affect the number of workers who would become eligible
for TAA through an industry certification approach. Our analysis
defined industries according to industry classification systems used by
government statistical agencies. However, some of these industry
categories are broad and may encompass products that are not adversely
affected by trade.
* Notifying workers and initiating the delivery of services. Notifying
workers of their eligibility for TAA has been a challenge and would
continue to be under industry certification. Under the current
certification process, workers are linked to services through the
petition process. The specific firm is identified on the petition
application, and state and local workforce agencies work through the
firm to reach workers in layoffs of all sizes. For industry
certification, however, there are no such procedures in place to notify
all potentially eligible workers in certified industries. For large
layoffs in a certified industry, agencies could make use of the
existing Worker Adjustment and Retraining Notification (WARN) notices
to connect with workers.[Footnote 18] However, in smaller layoffs in
certified industries, or when firms do not provide advance notice,
workforce agencies may not know that the layoff has occurred.[Footnote
19]
* Verifying worker eligibility. Verifying that a worker was laid off
from a job in a certified industry to ensure that only workers eligible
for TAA receive TAA benefits may be more of a challenge under industry
certification than under the current system. For example, it may be
difficult to identify the specific workers who made a product in the
certified industry if their employer also makes products that are not
covered under industrywide certification. In addition, determining who
should conduct this verification may also present challenges. A
centralized process conducted by Labor would likely be unwieldy, while
verification by state or local workforce agencies could take less time,
but ensuring consistency across states might prove challenging.
An approach using trade remedies presents some of the same challenges
as an industry certification approach based on three petitions
certified in 180 days.
Concluding Observations:
Through our work on the Trade Adjustment Assistance Program since
passage of the Reform Act in 2002 we have identified a number of areas
where Labor and the Congress should take action. Taking steps to limit
confusion, ease restrictions, and provide support for case management
would facilitate workers' access to services and benefits. States'
ability to assist these workers would be enhanced by an improved
process for allocating training funds.
Mr. Chairman, this concludes my prepared statement. I will be happy to
respond to any questions you or other members of the committee may have
at this time.
GAO Contacts and Staff Acknowledgments:
For information regarding this testimony, please contact Sigurd R.
Nilsen, Director, Education, Workforce, and Income Security Issues, at
(202) 512-7215. Individuals who made key contributions to this
testimony include Dianne Blank, Wayne Sylvia, Yunsian Tai, Michael
Hoffman, and Rhiannon Patterson.
[End of section]
Related GAO Products:
Trade Adjustment Assistance: Changes to Funding Allocation and
Eligibility Requirements Could Enhance States' Ability to Provide
Benefits and Services. GAO-07-701, GAO-07-702. (Washington, D.C.: May
31, 2007).
Trade Adjustment Assistance: New Program for Farmers Provides Some
Assistance, but Has Had Limited Participation and Low Program
Expenditures. GAO-07-201. (Washington, D.C.: December 18, 2006).
National Emergency Grants: Labor Has Improved Its Grant Award
Timeliness and Data Collection, but Further Steps Can Improve Process.
GAO-06-870. (Washington, D.C.: September 5, 2006).
Trade Adjustment Assistance: Labor Should Take Action to Ensure
Performance Data Are Complete, Accurate, and Accessible. GAO-06-496.
(Washington, D.C.: April, 25, 2006).
Trade Adjustment Assistance: Most Workers in Five Layoffs Received
Services, but Better Outreach Needed on New Benefits. GAO-06-43.
Washington, D.C.: January 31, 2006.
Workforce Investment Act: Substantial Funds Are Used for Training, but
Little Is Known Nationally about Training Outcomes. GAO-05-650.
Washington, D.C.: June 29, 2005.
Trade Adjustment Assistance: Reforms Have Accelerated Training
Enrollment, but Implementation Challenges Remain. GAO-04-1012.
Washington, D.C.: September 22, 2004.
Workforce Investment Act: Better Guidance and Revised Funding Formula
Would Enhance Dislocated Worker Program. GAO-02-274. Washington, D.C.:
February 11, 2002.
FOOTNOTES
[1] For further information on TAA, please see the following reports:
GAO, Trade Adjustment Assistance: Changes to Funding Allocation and
Eligibility Requirements Could Enhance States' Ability to Provide
Benefits and Services, GAO-07-701, GAO-07-702 (Washington, D.C.: May
31, 2007); Trade Adjustment Assistance: Labor Should Take Action to
Ensure Performance Data Are Complete, Accurate, and Accessible, GAO-06-
496 (Washington, D.C.: Apr. 25, 2006); Trade Adjustment Assistance:
Most Workers in Five Layoffs Received Services, but Better Outreach
Needed on New Benefits, GAO-06-43 (Washington, D.C.: Jan. 31, 2006);
and Trade Adjustment Assistance: Reforms Have Accelerated Training
Enrollment, but Implementation Challenges Remain, GAO-04-1012
(Washington, D.C.: Sept. 22, 2004).
[2] GAO-07-701, GAO-07-702, GAO-06-496.
[3] The Trade Adjustment Assistance Reform Act of 2002 created a health
coverage tax credit for certain workers who are eligible to receive
income support benefits under the TAA program because their jobs were
lost due to foreign competition and for certain retirees whose pensions
from a former employer were terminated and are now paid by the Pension
Benefit Guaranty Corporation (PBGC).
[4] Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of
1985, certain employers with 20 or more employees are required to make
available 18 to 36 months of continued health care coverage for former
employees and their dependents who lose health coverage due to certain
circumstances, such as when a worker is laid off.
[5] Hawaii and North Dakota did not receive end-of-the year funding
because these states received no training funds at all during the year.
[6] For example, if Labor had distributed a total of $200 million in
training funds during the year and a state had received a total of $10
million (received $7 million from its initial training allocation and
had requested an additional $3 million during the year), then that
state would receive 5 percent of any reserve funds distributed at the
end of the year.
[7] GAO-04-1012.
[8] GAO-06-43.
[9] This percentage is based on the total number of TAA participants
because the number of workers potentially eligible for the wage
insurance benefit is not readily available.
[10] GAO-06-43.
[11] GAO, Health Coverage Tax Credit: Simplified and More Timely
Enrollment Process Could Increase Participation. GAO-04-1029.
(Washington, D.C.: September 30, 2004).
[12] Trade remedies include, for example, a duty imposed on an imported
product because the industry had been injured by unfair trade
practices.
[13] For more detailed information on our analysis, see our forthcoming
report, Trade Adjustment Assistance: Industry Certification Would
Likely Make More Workers Eligible, but Design and Implementation
Challenges Exist. GAO-07-919. (Washington, D.C.: forthcoming).
[14] These industries are classified according to the four-digit
Standard Industrial Classification (SIC) System codes.
[15] Of the 222 industries, we analyzed 69 for which we had complete
data. The data available used different classification systems that we
matched to each other, but we only included data for which we had
complete and well-defined matches. Since the 69 industries were not
drawn from a random sample, the results of this analysis are not
necessarily representative of the entire 222 industries.
[16] Our analysis applied the same threshold to all industries. In
practice, the criteria would likely vary by industry in order to take
into account industry-specific patterns in trade and other economic
factors.
[17] We cannot be certain about the degree of overlap between TAA
petitions and trade remedy products because product information is not
recorded in a standardized way in Labor's petitions data.
[1] The WARN Act requires employers to give their employees or their
representatives, the state's dislocated worker unit, and local
government officials 60 days advance notice of a mass layoff or plant
closure. Generally speaking, the WARN Act applies to employers with 100
or more full-time workers involved in layoffs or plant closures that
affect 50 or more workers.
[19] In a 2003 report on the WARN Act, GAO found that employers
provided notice for an estimated 36 percent of mass layoffs or plant
closures that appeared subject to WARN's advance notice requirements.
GAO, The Worker Adjustment and Retraining Notification Act: Revising
the Act and Educational Materials Could Clarify Employer
Responsibilities and Employee Rights, GAO-03-1003 (Washington, D.C.:
Sept. 19, 2003).
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