HBA-MPA H.B. 3657 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3657 By: Oliveira Economic Development 3/25/1999 Introduced BACKGROUND AND PURPOSE Currently, the smart jobs fund provides 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 are the companies' qualifications as established businesses and first-time grantees offering major employee benefits and technical skills training. Under the program, the business provides 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, and provide a financial cushion to fund the program. This bill also calls for a performance evaluation to assess the success of the program. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Workforce Commission in SECTION 4 (Section 481.154, Government Code)of this bill, and the rulemaking authority previously delegated to the policy board is transferred to the governing board of the smart jobs fund program also in SECTION 3 (Section 481.153, Government Code) of this bill SECTION BY SECTION ANALYSIS SECTION 1 Amends Section 481.151, Government Code, to add definitions for "county average weekly wage," "large business," and "medium business." Redefines "existing employer," "microbusiness," and "small business," and deletes definitions for "demand occupation," "emerging occupation," "family-wage job," "manufacturing occupation," and "state average weekly wage." SECTION 2. Amends Section 481.152, Government Code, to provide that the smart jobs program (program) is created to enhance employment opportunities for residents of this state and to increase the competitiveness of the existing workforce, rather than meet the needs of existing and new industries, in this state. Requires the program to give priority to the creation and retention of jobs in targeted industries that pay more than the county average weekly wage and provide health care benefits, rather than focus on employers in industries that promote high skill, high wage jobs in technology areas and on demand occupations that provide those jobs. Makes a conforming change. SECTION 3. Amends Section 481.153, Government Code, to substitutes "governing" for "policy" as the name of the board required to adopt rules to implement to program. SECTION 4. Amends Section 481.154, Government Code, by amending the heading and adding Subsections (d), (e), (f), (g), and (h), as follows: Sec. 481.154. New title: FUNDING; RAINY DAY FUND. (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 5. Amends Section 481.155(a), (d), and (g), Government Code, to require the director to award the grants through a competitive process and develop and use a scoring system that evaluates grant applications. Deletes conditions under which the director may award grants to a single employer in excess of $1,500,000 or at greater than 10 percent of the annual wages of new or existing jobs created or retained. Prohibits a grant from being awarded under this section unless each employer certifies that the starting wage will be equal 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. SECTION 6. Amends Section 481.156(c) and (e), Government Code, to authorize the Texas Department of Economic Development (department) to provide technical assistance to applicants in formulating the required business and training programs. 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. Makes conforming changes. SECTION 7. Amends Section 481.159, Government Code, by adding Subsection (d), to provide 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 term of the grant award. Requires the executive director to remit money received under this section to the comptroller for deposit in the smart jobs rainy day fund. SECTION 8. Amends Section 481.160(b), Government Code, to make conforming and nonsubstantive changes. SECTION 9. Amends Subchapter J, Chapter 481, Government Code, by adding Section 481.1605, as follows: Sec. 481.1605. PERFORMANCE EVALUATION. (a) Requires the governing board to provide for the implementation of a biennial performance evaluation of the program, which must include: (1) an analysis of the wage levels of trainees one and three years after completion of the program; (2) information related to the number of trainees employed in the same occupation after one and three years; (3) a survey and analysis of program satisfaction from former grant recipients; (4) a description of the impact of the program on the state generally and on economically distressed areas in particular; and (5) any additional information determined by the governing board to be necessary to analyze the impact and performance of the program. (b) Authorizes the governing board to contract with the comptroller or another agency to perform the evaluation and submit requests for proposals to contract with private vendors to perform the evaluation. Authorizes the governing board to enter into contracts, memoranda of understanding, or interagency agreements to implement this section. (c) Requires the person performing the evaluation to analyze the efficiency of the program and the use of administrative funds by the program in performing the evaluation, (d) Requires the department, the commission, and the State Occupational Information Coordinating Committee to cooperate with the person performing the evaluation. (e) Requires the governing board to pay the costs of the evaluation from money authorized under Section 481.154(c) (permitting smart job fund money to be used for administrative purposes). Authorizes no additional funds to be spent on the performance evaluation. SECTION 10. Amends Section 481.161, Government Code, to provide that this subchapter (Business Development - Smart Jobs Fund Program) expires December 31, 2001, rather than 1999. SECTION 11. Amends Section 204.0065, Labor Code, to make a conforming change. SECTION 12. Amends Section 204.0625, Labor Code, to make a conforming change. SECTION 13. Amends Section 204.123, Labor Code, to require the commission to transfer from the holding fund 80 percent of the amount in the holding fund to the smart jobs fund, and 20 percent of the amount in the holding fund to the RD-fund. Makes conforming and nonsubstantive changes. SECTION 14. Amends Section 204.124, Labor Code, to make a conforming change. SECTION 15. Makes application of Section 481.155, Government Code, as amended by this Act prospective, beginning January 1, 2000. SECTION 16. Effective date: September 1, 1999. SECTION 17. Emergency clause.