Reforming Federal Workforce Development Funding to Empower States

Introduction

The Workforce Innovation and Opportunity Act (WIOA) of 2014 is the Nation’s largest federal workforce development program. Congress appropriates more than $5 billion for the core programs within the law every year, the majority of which is sent directly to states to be used for workforce training programs and services (Collins, 2022).

Employers, particularly those that require skilled employees, have continually highlighted the need for better workforce training programs in recent years. Since the COVID-19 pandemic, workforce shortages have been further exacerbated as millions of employees have left the workforce. At 62.5 percent as of January 2024, the overall labor force participation rate is still below February 2020 levels, implying that 2.1 million workers are missing from the labor force (Ferguson & Lucy, 2024). The labor force participation rate for prime-age men, in particular, has been declining for decades (Federal Reserve Bank of St. Louis, 2024). In addition, many workers are rightly concerned that they may be displaced by automation, artificial intelligence, other technological innovations, a recession, or unfair trade practices. With so many workers on the sidelines and an uncertain future for many industries, America needs robust workforce development strategies at all levels of government.

While there is no silver bullet solution to all of these issues, workforce development and job training programs—at either the federal and state level—can play a part in easing workforce challenges. Unfortunately, WIOA provided training to only 222,791 workers in fiscal year 2021—not nearly enough to make a notable dent in the workforce shortage (U.S. Department of Labor, n.d.). Even more troubling, many workers did not experience better pay or outcomes after participating in WIOA-funded training.

State and local governments are best positioned to direct funding appropriately to achieve their workforce ends, so ideally, these activities would be managed outside of Washington, D.C. Any federal program, such as WIOA, will be most beneficial if Congress gives as much flexibility, authority, and decision-making power to the states as possible, rather than attempting to micromanage states’ decisions.

The original 2014 WIOA legislation authorized the program through fiscal year 2020, and Congress has extended it through the annual appropriations process ever since, so the program is overdue for long-term reauthorization. Policymakers should take the opportunity to enact critical reforms and empower states to use these funds to their fullest potential. This report includes a brief overview of WIOA’s programs and recommends steps that Congress and state leaders can take to use WIOA funds more effectively.

Overview of the Workforce Innovation and Opportunity Act of 2014

Congress enacted WIOA in 2014 to provide education and training services to prepare individuals for work and help improve their prospects in the labor market. WIOA replaced the Workforce Investment Act of 1998 (WIA) as the primary source of federal workforce development funding for states. Funds are used for career counseling, skills training in the classroom or on the job, job search assistance, and more.

WIOA contains five titles, but the largest programs are in Title I: three state formula grant programs for adult, youth, and dislocated workers, Job Corps, and other national programs. These programs are primarily run by the Employment and Training Administration at the U.S. Department of Labor (DOL).

During fiscal year 2022, Title I WIOA activities received $5.3 billion in total funding: $3.2 billion for adult, youth, and dislocated worker programs via state formula grants, $1.7 billion for Job Corps, and $360 million for national programs (Collins, 2022). Each state’s share of the $3.2 billion is determined by various factors, including the state’s unemployment rates for certain groups and the number of economically disadvantaged adults and youths.

Once the funds are disbursed to the states, the governor is permitted to set aside up to 15 percent of the state’s formula allocation for the governor’s reserve fund. The governor can reserve an additional 25 percent of the dislocated worker allocation for “rapid response” activities—i.e., a sudden plant closure or other emergency. The rest of the state’s funds must be allocated to local workforce development areas, with the exception of the 10 states with single-state area (SSA) designation, which manage all the funds at the state level. No more than 5 percent of the governor’s reserve fund may be used for administrative activities (Collins, 2022).

Once funds are distributed, WIOA career services are delivered through roughly 3,000 “one-stop…