The 2021-22 Budget: Creating a New Department of Better Jobs and Higher Wages

analysis full gutter The 2021-22 Budget: Creating a New Department of Better Jobs and Higher Wages FEBRUARY 2021 The Governor’s budget for 2021-22 proposes Legislature Rejected the Same Proposal Last to consolidate state workforce programs under Year. The Governor first proposed to create the a new Department of Better Jobs and Higher Department of Better Jobs and Higher Wages last Wages. Specifically, the Governor proposes year as part of the 2020-21 budget process. At that to consolidate employment, training, and data time, Legislative budget subcommittee hearings collection services currently conducted at various were consolidated due to the coronavirus disease entities—workforce services at the Employment 2019 (COVID-19) pandemic. Staff raised concerns Development Department (EDD), workforce that the Legislature would not have sufficient time training at the California Workforce Development to adequately review the Governor’s proposal Board, apprenticeship programs at the Division of for the new department. As a result of this and Apprenticeship Standards within the Department other concerns, the Legislature rejected the new of Industrial Relations, and employer-sponsored department during the 2020-21 budget process. training programs at the Employment Training Analysis Panel. Currently, these entities all reside within the state’s Labor and Workforce Development Framework for Evaluating Reorganization Agency, which integrates policy to align the state’s Proposals. When the Department of Better Jobs workforce programs. and Higher Wages was proposed along with several other departmental reorganizations last year, our Proposal office developed a broad framework for considering Governor Proposes to Create New proposals based on best practices identified from Department Using Statutory Process. According other governmental agencies. We developed the to the administration, the new department is following questions for the Legislature to consider needed in order to “integrate policy development when evaluating these proposals: and workforce innovation with existing employment, • Would the reorganization make programs training, and data collection services.” The more effective? Governor has proposed to establish the new • Would the reorganization improve efficiency? department using the state’s statutory process, rather than the executive branch reorganization • Would the new structure improve process outlined in the State Constitution. The accountability? executive branch process requires a review by the • Is the reorganization based upon a policy Little Hoover Commission—an independent state rationale? oversight agency tasked with reviewing proposed • Does the reorganization reflect legislative reorganization plans—and is subject to review priorities? by relevant policy committees of the Legislature • Do the potential benefits outweigh the and approval of the Legislature. Reorganizations potential costs? pursued through the statutory process, on the • Is the reorganization well planned? other hand, are exempt from the reviews required • How should the reorganization be under the executive reorganization process and implemented? instead most follow the current rules associated with passing budget trailer bill legislation. 2021-22 LAO Budget Series 1 analysis full gutter Labor Agency Serves Similar Functions as find it difficult to judge the proposal or establish Proposed New Department. According to the accountability and expectations for the new administration’s budget change proposal for the department. new department, released last year, consolidating Reorganizing EDD During Unemployment the entities will (1) improve equity for all workforce Insurance Challenges Poses Risks. To create participants, (2) provide efficiency by bringing the the new department, the administration proposes programs together, and (3) enhance customer to shift about 1,600 staff from EDD to the new service for workers and employers. However, department. These staff currently work within each of these entities resides currently within EDD’s workforce services branch and therefore are the Labor and Workforce Development Agency not responsible for the day-to-day administration (LWDA). The LWDA was created in 2002 to of the state’s unemployment insurance program. (1) improve accountability and access to services, Nevertheless, a reorganization presents logistical (2) eliminate program duplication, and (3) achieve and personnel challenges that call for considerable cost-effectiveness. Achieving the objectives focus from EDD and Labor Agency leadership identified for the new department appears well at a time when the state’s urgent goal is to within the original and ongoing responsibilities of eliminate the backlog of unemployment insurance the LWDA. claims and prevent further fraud. In our view, the Not Clear What Problem the Reorganization administration’s decision to move forward with a Is Intended to Solve. To the extent that problems complex reorganization during the pandemic poses exist within the current structure that prevent LWDA a potentially serious risk to the state’s ongoing entities from aligning resources, decision-making, efforts to eliminate the backlog of unemployment and policy, we are unsure how creating a new insurance claims. department addresses these problems. Without a clear problem definition, the Legislature may LAO Publications This report was prepared by Chas Alamo, and reviewed by Brian Uhler and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2021-22 LAO Budget Series 2