The American Recovery and Reinvestment Act: The Role of Workforce Programs

1 Background, Purpose, and Methodology

1 1 Background, Purpose, and Methodology Burt S. Barnow George Washington University BACKGROUND AND PURPOSE The American Recovery and Reinvestment Act of 2009 (Recovery Act, or ARRA) was a response to the Great Recession, which began in December 2007. The legislation, signed into law in early 2009, was an economic stimulus measure designed to “save and create jobs immediately ” (whitehouse.gov 2009).1 Other objectives were to provide aid to individuals affected by the recession and to invest in improving schools, updating infrastructure, modernizing health care, and promoting clean energy. State workforce agencies faced important and serious policy challenges in response to the severe economic recession, and while the provisions in the Recovery Act offered opportunities for relief, implementing some of the programmatic provisions presented challenges to states and local areas in expanding eligibility and services, adding staff to meet the increased demands, and making appropriate program modifications expeditiously and efficaciously. Additionally, before the Recovery Act was enacted, governors and state workforce agencies began taking actions to adjust their Unemployment Insurance (UI) systems to meet economic needs. This book is intended to provide useful information about the nature of the workforce development and UI policy decisions made nationwide in response to the recession, state and local administrators’perspectives on the policy developments and economic challenges, and implementation of key Recovery Act provisions.2 The majority of the book’s chapters , as well as Appendix A, focus on workforce development initiatives in the Recovery Act, and Chapter 8 focuses on the Recovery Act’s UI provisions. 2 Barnow At the time of its passage in February 2009, the cost of the Recovery Act was estimated by the Congressional Budget Office (CBO) to be $787 billion over the period 2009–2019, through a combination of tax and spending provisions. By February 2012, the CBO had revised the estimate to $831 billion. That month, it reported that “close to half of that impact occurred in fiscal year 2010, and more than 90 percent . . . was realized by the end of December 2011” (CBO 2012). Table 1.1 is a list of agencies receiving the majority of the Recovery Act funding . Only two agencies received more funding than the United States Department of Labor (USDOL). The Employment and TrainingAdministration (ETA) at the Department of Labor was the primary recipient of the USDOL funds. Table 1.2 summarizes the formula allocations for the major USDOL workforce development programs in Program Year 2009 (July 1, 2009, through June 30, 2010), and the additional funds provided for these programs through the Recovery Act.3 States had two years—through June 30, 2011—to spend the Recovery Act allocations. Among these programs, the Workforce Investment Act (WIA) Dislocated Worker Program received the largest increase in funding through the Recovery Act, both in relative and absolute terms, with over $1 billion in additional funding. The unrestricted Wagner-Peyser Act (W-P) funds were Table 1.1 Agencies with the Most Recovery Act Funds ($ billions) Agency Amount 1. Department of Health and Human Services 122.9 2. Department of Education 90.9 3. Department of Labor 66.0 4. Department of Agriculture 39.4 5. Department of Transportation 36.3 6. Department of Energy 26.8 7. Department of the Treasury 18.9 8. Social Security Administration 13.8 9. Department of Housing and Urban Development 12.7 10. Environmental Protection Agency 6.8 Total 434.7 NOTE: Categories do not sum correctly because of rounding. SOURCE: http://www.Recovery.gov, updated 07/27/2012. Background, Purpose, and Methodology 3 increased by the smallest amount, $148 million, but an additional $247 million in Recovery Act funds were included for Reemployment Services (RES), which had received no funding since 2005. By far, the UI provisions of the Recovery Act account for most of the Department of Labor’s Recovery Act stimulus expenditures. The Recovery Act included several major UI program tax and spending provisions , which at the time of passage were estimated to result in federal outlays totaling approximately $45 billion over 10 years, with most outlays occurring in fiscal years 2009 and 2010 (see Table 1.3). Note that the estimates in this table were made in the early months of 2009, well before the depth and duration of the Great Recession were widely Table 1.2 Summary of Baseline and Recovery Act Allocations for Adult Workforce Programs ($ millions) Program and time period Allocation WIAAdult PY 2009 859.4...