HBA-TYH, MPA H.B. 3657 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 3657 By: Oliveira Economic Development 7/26/1999 Enrolled BACKGROUND AND PURPOSE Prior to the 76th Legislature, the smart jobs fund provided grants to employers for customized training. In fiscal year 1998, smart jobs grants totaled nearly $55 million to train workers for almost 43,000 existing jobs. Key factors in establishing the grants were the companies' qualifications as established businesses and first-time grantees offering major employee benefits and technical skills training. Under the program, the business provided a 10 percent match to grants in participant's wages, benefits, and facilities during the training period. H.B. 3657 establishes a rainy day fund to address situations of severe economic dislocation within the state, directs new funding to the skills development fund, and provides a financial cushion to fund the smart jobs program. This bill calls for a biennial performance evaluation performed by the comptroller to assess the success of the smart jobs program and the skills development fund program. This bill prohibits an employer from applying both to both a grant under this Act and to a public community or technical college for customized training and assessment form the college through a grant issued to the college under the skills development fund program. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the governing board of the smart jobs fund program in SECTIONS 1.02 (Section 481.152, Government Code), 1.06 (Section 481.156, Government Code), 1.07 (Section 481.1565, Government 1.08 (Section 481.157, Government Code), and 1.09 (Section 481.159, Government Code) of this bill, and to the Texas Workforce Commission in SECTIONS 1.04 (Section 481.154, Government Code) and 1.07 (Section 481.1565, Government Code) of this bill. It is the opinion of the Office of House Bill Analysis that rulemaking authority previously delegated to the policy board is transferred to the governing board of the smart jobs fund program in SECTION 1.03 (Section 481.153, Government Code) and in SECTION 1.08 (Section 481.157, Government Code) of this bill. SECTION BY SECTION ANALYSIS ARTICLE 1. SMART JOBS FUND PROGRAM SECTION 1.01. Amends Section 481.151, Government Code, to add definitions for "county average weekly wage," "group health benefit plan," "large business," "medium business," and "qualified job." Redefines "existing employer," "micro-business," and "small business." Deletes the definitions of "business development," "demand occupation," "emerging occupation," "family wage job," "manufacturing occupation," "state average weekly wage," and "targeted industry." SECTION 1.02. Amends Section 481.152, Government Code, as follows: Sec. 481.152. New title: SMART JOBS FUND PROGRAM; PURPOSE; ADMINISTRATION. (a) Adds "purpose" to existing title. Provides that the smart jobs fund program (program) is created to enhance employment opportunities for residents of this state and to increase the job skills of the existing workforce by providing job training assistance to businesses operating in or relocating to, rather than meet the needs of existing and new industries in, this state. (b) Requires the program to award grants for the creation and retention of qualified jobs. Requires at least 20 percent of the money spent under the program to be used for employers that relocate operations to this state. Deletes provision for focus on employers in industries that promote high skill, high wage jobs in technology areas and on demand occupations that provide those jobs. Makes conforming and nonsubstantive changes. (c) Requires the governing board of the smart jobs fund program to develop and adopt by rule a scoring system that evaluates the economic impact of grant applications and reflects the criteria set forth in this subchapter (Business Development--Smart Jobs Fund Program). Requires the executive director to use the scoring system and a competitive process to award grants. Sets forth the legislative intent. (d) Requires the governing board and the Texas Department of Economic Development (department) to determine appropriate means to accomplish the goals of the program. Authorizes the governing board to work in conjunction with the Texas Workforce Commission and the comptroller, as necessary to implement those goals. (e) Redesignated from existing Subsection (c). (f) Redesignated from existing Subsection (d). (g) Requires the department to use the uniform service regions established by the comptroller under Section 120 (Uniform Service Regions), Article V, Chapter 19, Acts of the 72nd Legislature, 1st Called Session, 1991, to implement provisions regarding classification of the state into regions. SECTION 1.03. Amends Section 481.153, Government Code, to substitute "governing" for "policy" as the name of the board required to adopt rules to implement to program. SECTION 1.04. Amends Section 481.154, Government Code, as follows: Sec. 481.154. New title: FUNDING; RAINY DAY FUND. (a) Adds "; rainy day fund" to existing title. Provides that the smart jobs fund is established and is composed of any amounts appropriated by the legislature for the program from the general revenue fund, and other enumerated sources. (b) Makes no change. (c) Prohibits the administrative, marketing, and evaluation costs of the department from exceeding in any single year the lesser of five percent of the total amount appropriated for the program in that fiscal year or $1.5 million, rather than only prohibiting those costs from exceeding five percent of the total amount appropriated. (d) Provides that the smart jobs rainy day fund (RD-fund) is established as a special trust in the custody of the comptroller separate from all public money or funds of this state. Provides that the RD-fund is composed of money transferred to the RD-fund as provided by Section 204.123 (Transfer to Smart Jobs Fund and Compensation Fund), Labor Code, money returned by employers or recouped by the program under Section 481.159(d) (Contracts), and any other money received by the governing board for deposit in the RDfund. (e) Authorizes the governing board to authorize the executive director of the program (director) to use money in the RD-fund if it determines, after consulting with the comptroller, that the smart jobs fund is insufficient to cover the legislature's appropriation to operate the program, and the Texas Workforce Commission (commission) has determined that the unemployment rate in this state is 125 percent of the average rate during the previous three years, or a severe economic dislocation is occurring in a specific region of this state. (f) Requires the commission by rule to define "severe economic dislocation." Requires the commission to consider employment-related factors including the number of jobs lost in the region compared to the region's usual employment rate, and massive layoffs in a region of this state caused by the closure of military bases, the effect of the implementation of the North American Free Trade Agreement, employer relocation, or other analogous situations. (g) Authorizes the director to use the money allocated from the RD-fund solely for projects located in the affected region, if the governing board approves use of money from the RD-fund because of severe economic dislocation in a specific region. (h) Prohibits the total combined amount spent in any fiscal year from exceeding the amount appropriated by the legislature for the operation of the program. (i) Makes conforming and nonsubstantive changes. SECTION 1.05. Amends Section 481.155, Government Code, as follows: Sec. 481.155. GRANTS. (a) Authorizes the director to award the grants for projects that meet the requirements of this chapter (Texas Department of Economic Development). Deletes provision describing the legislative intent that the smart jobs fund be spent in all parts of the state, and conditions under which the director may award grants to a single employer in excess of $1,500,000 or at a rate greater than 10 percent of the annual wages of new or existing jobs created or retained. (b) Deletes requirement that the director attempt to ensure that at least 20 percent of the funds for grants are awarded to minority employers. Deletes statement that the program is job driven. Redesignated from existing Subsection (c). (c) Prohibits a grant, except as otherwise provided by this subsection, from being awarded unless each employer participating in the project certifies that each job is covered by a group health benefit plan for which the business pays at least 50 percent of the premiums or other charges assessed for employee-only coverage under the plan. Authorizes the executive director to waive the coverage requirement for a particular job if the affected employee voluntarily waives the coverage in the manner prescribed by rules adopted by the governing board. (d) Prohibits a grant from being awarded under this section unless a three percent wage increase is provided by micro-business and small business or a five percent increase for those businesses which are not in that classification, or each employer certifies that the starting wage will be equal to or greater than the county average weekly wage for the county in which the job or project is located, rather than the prevailing wage for that occupation in the local labor market area. Makes conforming and nonsubstantive changes. (e) Authorizes an employer to request a modification of the requirements provided by Subsection (d) and Section 481.159(c), if reasonable factors exist for the modification, as determined by the executive director. Deletes conditions having to do with employers reducing the workforce because of overall employment in the industry, and because technological changes require substantial change in the skills required. Makes conforming and nonsubstantive changes. (f) Makes no change. (g) Makes a conforming change. (h) Makes no change. (i) Provides that notwithstanding Subsection (d) of this section or any other provision of this subchapter, a grant awarded under this section for a job training project is exempt from the requirement that a job under the project pay at least 100 percent of the county average weekly wage for the county in which the job or project is located if the grant application was filed before September 1, 1999, and the application is for training for 1,000 or more technology-related jobs, the training is to begin not later than June 1, 2000, and all training is to be completed not later than August 31, 2001. Provides that this subsection expires September 1, 2001. Deletes existing Subsections (i) and (j), which require the executive director to ensure that 50 percent of total grants are awarded to small business, and that priority is given to projects in an enterprise zone. SECTION 1.06. Amends Section 481.156, Government Code, as follows: Sec. 481.156. New title: GRANT APPLICATION; AWARDING OF GRANTS. (a) Adds "; awarding of grants" to existing title. Deletes provisions that authorize employers to apply for grants to secure training for demand, emerging, or manufacturing occupations. (b) Provides Subsection (c) as an exception to this subsection regarding the filing of a business and training plan. (c) Authorizes the governing board, by rule, to exempt a micro-business from the requirement to submit a business and training plan that complies with Subsection (b). Requires the governing board, by rule, to establish a simplified application process for grant applications from micro-businesses. (d) Authorizes the department to provide assistance with the application process to all applicants and requires it to give priority to assisting small businesses and microbusinesses. Makes a nonsubstantive change. Redesignated from existing Subsection (c). (e) Requires the department to simplify as much as possible the review process for grant applications, and minimize the length of the form. (f) Requires the department to notify the applicant as to whether the application is complete no later than the fifth business day after the application is received by the department. Deletes existing Subsection (e) requiring the director to act on a completed application no later than 30 days after the application is filed. SECTION 1.07. Amends Subchapter J, Chapter 481, Government Code, by adding Section 481.1565, as follows: Sec. 481.1565. PARTICIPATION IN ADDITIONAL PROGRAMS; APPLICATION REQUIREMENTS. Prohibits a business from applying both for a grant under this subchapter and to a public community or technical college for customized training and assessment from the college through a grant issued to the college under the skills development fund program established under Chapter 303 (Skills Development Fund), Labor Code, unless the business and the college file an application for concurrent participation in both programs. Requires the commission and the governing board, by rule, to jointly establish the requirements for an application subject to this section. SECTION 1.08. Amends Section 481.157(b), Government Code, to authorize the governing, rather than policy, board to adopt rules modifying the matching requirements of this section for employers that are small businesses and micro-businesses, rather than employers with fewer than 50 employees. SECTION 1.09. Amends Section 481.159, Government Code, by amending Subsections (a) and (c) and adding Subsection (d), as follows: (a) Makes a nonsubstantive change. (c) Modifies the condition for the remittance of a withheld amount to an employer to provide that trainees who leave the employment voluntarily for better-paying jobs are not counted against the 85 percent who must be retained in employment for a 90-day period. Requires the governing board, by rule, to establish procedures as necessary to verify that a trainee has left the employment for a better-paying job. (d) Provides that each contract must state the term of the grant award. Requires a recipient who does not use all money awarded under the grant for the prescribed purpose within the allotted time to reimburse the program by submitting the appropriate amount to the executive director no later than the 30th day after the expiration of the term of the grant award. Requires the executive director to remit money received under this section to the comptroller for deposit in the RD-fund. SECTION 1.10. Amends Section 481.160, Government Code, by amending Subsection (b) and adding Subsection (c), as follows: (b) Provides that the annual report must include for that fiscal year: (1) the total number of applicants submitted, the total number of applications approved, and the total number of applications rejected, reported by region of the state and by size of business; (2) the number of employers receiving grants under the program reported by region and as a percentage of the total; (3) the total amount of money, rather than grants, awarded in each region of the state and as a percentage of the total; (4) a comparison of the percentage of total dollars awarded to each region versus each region's percentage of the state's population, civilian labor force, number of unemployed persons, and number of eligible grant applications for qualified jobs submitted to the department; (5) redesignated from existing Subdivision (3); (6) the number of businesses, classified by micro-businesses, small businesses, medium businesses, and large businesses, rather than small businesses as defined by Section 481.101(3) (Definitions), that receive grants under the program reported by region and business size and as a percentage of the total for each of those classifications statewide; (7) the total amount of money awarded classified by micro-businesses, small businesses, medium businesses, and large businesses, reported by region and business size and as a percentage of the total for each of those classifications statewide; (8) redesignated from existing Subdivision (5); deletes existing Subdivision(6) concerning the geographical distribution of employers receiving grants; (9) the total number of jobs created, enhanced, or retained under the program by region, by occupation (classified by the applicable two-digit standard industrial classification), by wage level, and whether attributable to relocation to this state by businesses including as a percentage of the total, or training and retraining of employees including as a percentage of the total; (10) average and median weekly wage levels of trainees entering or returning to the workforce; (11) redesignated from existing Subdivision (9); (12) the number and percentage of employees covered by the group health benefit plan offered by the employer; deletes the number and percentage of employers that offer health care insurance coverage; (13) the number and percentage of women, disabled persons, and minority group members receiving grants as employers, participating as trainees, or in the program as providers, broken out by group; (14) a list of modifications granted under Section 481.155(e) (regarding modification of wage requirements), the name of the project for which it was granted, and the reason it was granted; and (15) the number of trainees who have left employment with a grant recipient because the trainee has obtained a better-paying job, as verified under Section 481.159(c). Deletes existing Subdivisions (12) and (13) concerning the number and percentage of women, minority, group members and disabled individuals. (c) Requires the department to include in the annual report, in addition to the information required by Subsection (b), the percentage of all unemployment insurance contributions paid by employers in each region during the previous calendar year. SECTION 1.11. Amends Section 481.161, Government Code, to provide that this subchapter expires December 31, 2001, rather than 1999. ARTICLE 2. SKILLS DEVELOPMENT FUND SECTION 2.01. Amends Section 303.003(a), Labor Code, to provide that the skills development fund is composed of money transferred into the fund under Section 204.123, Labor Code, and any amount appropriated by the legislature for the purposes of this chapter from the general revenue fund. SECTION 2.02. Amends Chapter 303, Labor Code, by adding Sections 303.005 and 303.006, as follows: Sec. 303.005. PARTICIPATION IN ADDITIONAL PROGRAMS; APPLICATION REQUIREMENTS. Prohibits an employer from applying both to a public community or technical college for customized training and assessment from the college through a grant issued to the college under the skills development fund program established under this chapter and for a grant under the smart jobs fund program established under Subchapter J, Chapter 481, Government Code, unless the employer and the college file an application for concurrent participation in both programs that complies with Section 481.1565, Government Code. Sec. 303.006. REPORTING REQUIREMENTS. (a) Defines "employee," "employer," "existing employer," "in-kind contribution," "job," "large employer," "medium employer," "micro-employer," "program," "small employer," "trainee," and "wages." (b) Provides that in implementing provisions under this section regarding the classification of this state into regions, the executive director is required to use the uniform service regions established by the comptroller under Section 120, Article V, Chapter 19, Acts of the 72nd Legislature, 1st Called Session, 1991. (c) Requires the executive director to report to the governor and the legislature at the end of each fiscal year the status of the program established under this chapter. (d) Provides that the annual report must include the specified information for that fiscal year. ARTICLE 3. STUDY OF WORKFORCE PROGRAMS BY COMPTROLLER SECTION 3.01. Amends Chapter 403, Government Code, by adding Subchapter N, as follows: SUBCHAPTER N. STUDY OF CERTAIN WORKFORCE DEVELOPMENT PROGRAMS Sec. 403.351. PERFORMANCE EVALUATION. (a) Requires the comptroller to perform a biennial performance evaluation of the smart jobs fund program established under Subchapter J, Chapter 481; and the skills development fund program established under Chapter 303, Labor Code. (b) Provides that the evaluation must include: _an analysis of the wage levels of trainees one year and three years after the end of the trainees' participation in the programs; _ information relating to the number of trainees employed in the same field after one year and three years; _a survey and analysis of program satisfaction from former grant recipients; _a description of the overall impact of the programs on economic development in this state in general and on economically distressed areas of this state in particular; and _any additional information determined to be necessary by the comptroller to analyze the performance and impact of the programs. (c) Provides that in performing the evaluation required by this section, the comptroller is required to also analyze the efficiency of the programs subject to this section and the use of administrative funds by those programs. (d) Requires the department, the commission, and the State Occupational Information Coordinating Committee to cooperate with the comptroller in implementing this section. ARTICLE 4. CONFORMING AMENDMENTS SECTION 4.01. Amends Section 204.0065, Labor Code, to make a conforming change. SECTION 4.02. Amends Section 204.0625, Labor Code, to make a conforming change. SECTION 4.03. Amends Section 204.123, Labor Code, as follows: Sec. 204.123. New title: TRANSFER TO SMART JOBS FUNDS, SKILLS DEVELOPMENT FUND, AND COMPENSATION FUND. (a) Adds "funds, skills development" to existing title. Requires the commission to transfer from the holding fund 50 percent of the amount in the holding fund to the smart jobs fund, 30 percent of the amount in the holding fund to the skills development fund, and 20 percent of the amount in the holding fund to the RD-fund. (b) Makes conforming and nonsubstantive changes. (c) Requires the commission to transfer, from the amount in the holding fund created under Section 204.122 (Holding Fund), Labor Code, 14 percent to the smart jobs fund, 66 percent to the skills development fund, and 20 percent to the RD-fund, if the commission determines on September 1, 1999, that the compensation fund exceeds 100 percent of its floor as computed under Section 204.061 (Ceiling and Floor of Compensation Fund), Labor Code. (d) Provides that Subsection (c) expires October 2, 1999. SECTION 4.04. Amends Section 204.124, Labor Code, to make a conforming change. ARTICLE 5. TRANSITION; EFFECTIVE DATE; EMERGENCY SECTION 5.01. Makes application of Section 481.155, Government Code, as amended by this Act prospective, beginning January 1, 2000. SECTION 5.02. Provides that Section 481.159(d), Government Code, as added by this Act, applies to reimbursement by an employer of money awarded under a grant awarded before, on, or after September 1, 1999. SECTION 5.03. Effective date: September 1, 1999. SECTION 5.04. Emergency clause.