Consultation Paper on Awarding Incentive Grants and Applying Sanctions for Title I Programs Under Sections 503 and 136 of the Workforce Investment Act (WIA)

SUMMARY: The purpose of this notice is to disseminate a consultation

paper for interested parties on the awarding of Incentive Grants and

application of Sanctions pertaining to the Performance Accountability

Measurement System for Title I of WIA. This is the third of a series of

consultation papers on the implementation of the Performance

Accountability System under Title I of WIA. On March 24, 1999 two

consultation papers were published in the Federal Register, the

framework for Core Performance and Customer Satisfaction Measures and

the framework for Negotiating State Adjusted Levels of Performance.

Interested parties have 30 days to provide comments on this paper.

DATES: Comments must be received by May 27, 1999.

ADDRESSES: Send comments to Mr. Eric Johnson, Workforce Investment

Implementation Taskforce Office, U.S. Department of Labor, 200

Constitution Avenue, NW, Room S-5513, Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Mr. Eric Johnson, Workforce Investment

Implementation Taskforce Office, U.S. Department of Labor, 200

Constitution Avenue, NW, Room S5513, Washington, DC, Telephone: (202)

219-0316.(voice) (This is not a toll-free number), or 1-800 326-2577

(TDD). Information may also be found or comments provided, at the

website--http://usworkforce.org.

SUPPLEMENTARY INFORMATION: The Workforce Investment Act , Pub. L. 105-

220 (August 7, 1998) provides the framework for a reformed National

workforce and employment system designed to meet the needs of the

Nation's employers, job seekers and those who want to further their

careers.

The Workforce Investment Act requires that a performance and

accountability system be developed and implemented. The system must

include certain core measures regarding performance and customer

satisfaction. Adjusted levels of performance must be negotiated between

the Governor and the Secretary of Labor for each core and customer

satisfaction measure, and applicable incentives or sanctions applied.

The U.S. Department of Labor in establishing this performance

accountability system and is interested in comments and suggestions

concerning the process for awarding Incentive Grants and applying

Sanctions. Some of the questions on which the Department of Labor is

seeking input are the following:

Whether a ``range'' vs. a single value should be used to

differentiate between being eligible for an incentive award and

application of sanctions;

How the bottom of such a ``range'' should be determined

(ie. a nationally determined percentage from the negotiated State

Adjusted Level of Performance, different percentages based on specific

factors, etc.);

The proposed methodology for determining when a State

should be considered eligible for an incentive grant;

The factors to be used in determining the level of

monetary sanctions; and

The proposed methodology for calculating failure to meet

the adjusted levels.

Please consider these issues as you review this consultation paper,

and provide comments.

Signed at Washington, D.C., this 21st day of April 1999.

Raymond L. Bramucci,

Assistant Secretary of Labor, Employment and Training Administration.

Attachment

I. Incentives and Sanctions Under WIA

WIA contains performance accountability provisions intended to

hold States accountable for the results obtained by their workforce

programs and system. Performance accountability revolves around the

planning, assisting, rewarding and sanctioning performance measured

by agreed-upon levels for a set of core and customer satisfaction

indicators.

WIA requires that the Secretary reach agreement with each State

on the expected levels of performance for core indicators of

performance. Section 136(b)(3)(A)(iv)(III) of WIA requires that the

agreement between the Secretary and the State take into account the

extent to which the levels for years 1, 2 and 3 of the 5 year

strategic State plans (and subsequently years 4 and 5) promote

continuous improvement and ensure optimal return on investment.

WIA section 503 provides that the Secretary shall award an

incentive grant to each State that exceeds the State adjusted levels

of performance for WIA Titles I and II and the Vocational and

Applied Technology Education Act (Perkins Act). States that exceed

the performance levels for WIA Titles I and II and the Perkins Act

may apply for an incentive award for the purpose of carrying out an

innovative program consistent with the requirements of any one or

more of the programs within WIA Title I, WIA Title II, or the

Perkins Act. The application must assure that the State legislature

was consulted and that the Governor and the cognizant adult

education and post-secondary vocational education agencies approved

the application.

WIA section 136(g)(1)(B) provides that the Secretary may reduce

the Title I grant by not more than 5 percent for a State's failure

to meet adjusted performance levels under Title I for a second

consecutive year or for failure to submit the annual performance

progress report required under section 136(d).

State responsibilities for providing incentive grants to local

areas are described under WIA section 134(a)(2)(B). Sanctions for

local areas failing to meet local performance measures are discussed

under section 136(h).

Some of the key issues for developing incentives and sanctions

policy include:

(a) The nature of the WIA Title I state adjusted levels of

performance;

(b) The definition or standard for exceeding the WIA Title I

adjusted levels;

(c) The measures to be included for determining incentive

awards;

(d) The criteria for qualifying for incentive grants;

(e) the amount of the incentive award;

(f) The definition or standard for failing to meet the adjusted

levels;

(g) the criteria for receiving monetary sanctions;

(h) The amount of the monetary sanction; and

(i) sanctions for failing to submit annual performance progress

reports.

A. The Nature of the WIA Title I State Adjusted Levels of Performance

WIA provides for establishment of state adjusted levels of

performance which become the baseline performance levels for

subsequent decisions related to incentives and sanctions. States

that exceed the agreed-upon performance levels may receive incentive

awards; and States that fail to meet the agreed upon levels may be

sanctioned. A strict reading of the law might lead to the conclusion

that the planned performance level is a single number or point,

which is either exceeded or failed. If planned levels are driven

high through negotiation, then fewer States will exceed the level

and more states will fail it. If the planned levels are allowed to

be low through negotiation, then just the opposite will occur and

many States will be rewarded, some for quite low performance.

Stakeholders have suggested that incentives be awarded for high

performance and that sanctions be reserved for truly low

performance. These ideas suggest that a range of performance should

be established so that only performance that exceeds the top of the

range will receive incentive grants and only performance that falls

below the bottom of the range will be subject to sanctions. States

with performance within the range will neither qualify for

incentives nor be subject to sanctions.

The state adjusted levels of performance constitute the top of

the range and will be

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arrived at through negotiation between the State and Department of

Labor. As part of negotiation process, and in consideration of the

factors described in WIA section 136(b)(3)(A)(iv), it is expected

that the levels will assist the State to attain high levels of

customer satisfaction, promote continuous improvement, and ensure

optimal return on investment. The bottom of the range will be set

initially by multiplying the State adjusted levels of performance by

some appropriate percentage (e.g. 80 percent). This will be

necessary in the initial years of WIA operation due to the lack of

comparable performance data under WIA. However, establishment of the

bottom of the range will be periodically reviewed as more comparable

performance data under WIA becomes available and in the future the

bottom of the range will be based on experience.

The use of a range acknowledges that performance can vary over

time due to random events that cannot always be anticipated or

necessarily prevented. The range could be expressed as a percentage

or value; and it generally would not be the same for each measure,

depending on the degree of variation of performance under each

measure nationally. There are many possibilities for creating an

appropriate ``range.'' Once national WIA performance data becomes

available, the breadth of the range can be refined and calibrated to

assure that the lower limit is set at a level that reasonably

represents unacceptable performance.

B. The Definition or Standard for Exceeding the Title I Adjusted Levels

of Performance

WIA section 503 provides that the Secretary must award a grant

to each State that exceeds the State adjusted levels of performance

for WIA Titles I and II and the Perkins Act. WIA Title I will

operate with 15 core and 2 customer satisfaction performance

indicators. The determination for whether the adjusted levels of

performance were exceeded will be based on the State's cumulative

achievement across all measures. This will be done by calculating

the percent of the State adjusted level achieved for each measure;

and then averaging the percentages achieved across all measures.

When the cumulative average across all measures exceeds 100 percent,

the State will be determined to have exceeded the adjusted

indicators overall. There is no minimum number of measures that must

be exceeded; however, both customer satisfaction measures must be

exceeded and a State may not fall below the bottom of the ``range''

for any measure. See Table A for an example as to how the cumulative

averaging would work.

C. The Measures to be Included for Considering Incentive Awards

In addition to the core indicators of performance, WIA Titles I

and II and the Perkins Act each allows States to identify additional

indicators of performance which are subsequently defined to be part

of the State adjusted levels of performance. Section 503 directs the

Secretary to award incentives to states exceeding the state adjusted

levels of performance. In order to promote equity and uniformity for

award of incentive funds, only the Federally required core and

customer satisfaction indicators will be considered in the

methodology for determining eligibility for incentive awards.

D. The criteria for qualifying for incentive grants

WIA section 503 provides that the Secretary must award a grant

to each State that exceeds the State adjusted levels of performance

for WIA Title I, the expected levels of performance for WIA Title

II, and the levels of performance under the Perkins Act. Qualifying

for award of an incentive grant is dependent upon exceeding levels

of performance for all three programs. To arrive at the decision to

award incentive funds, DOL and DoED will determine if performance

was exceeded for its respective programs; however, DOL and DoED will

cooperate towards the development and use of a similar methodology

to define what it means to exceed planned performance levels. In

order to receive an incentive grant, performance must exceed planned

performance in each of the three program areas.

E. The Amount of the Incentive Award

WIA section 503 indicates that incentive grants will be awarded

in an amount that is not less than $750,000 and not more than

$3,000,000. The primary issues related to determining the amount of

award concern the equity of the size of the award among the states

and the incentive power of the award. WIA section 503(c)(2) requires

a proportionate reduction in the minimum and maximum amounts when

total available funds are insufficient. Based upon achieved

performance levels for Titles I and II of WIA and the Perkins Act,

the DOL and DoED will publish a list of States qualifying for

incentive grants along with the maximum amount of the grant based

upon available funds. The methodology for determining award amounts

will be developed at a later time. Section 666.230 of the interim

final regulations for WIA Title I provides factors that may be

considered in the determination.

F. The Definition or Standard for Failing to Meet the Adjusted Levels

Section 136(g) addresses sanctions for State failure to meet

State performance measures for the core indicators or the customer

satisfaction indicators under Title I of WIA. The Act indicates that

failure should be defined as failing to meet levels established for

each separate program or for the customer satisfaction indicators.

Failure will be defined using a calculation methodology similar

to that used for defining exceeding; that is, calculating across

relevant indicators the cumulative average achieved of the lower

limit of the range. This will be done by calculating the percentage

achieved of the lower limit of the range established for each

measure; and then calculating the average achieved across all

measures. When the cumulative average across relevant program

measures falls below 100 percent of the lower limit, the State will

be determined to have failed to meet the adjusted levels of

performance. See Table B for an example of how the calculation of

failure would work.

Determinations of failure will be established separately for

each program (adult, dislocated workers, and youth) and for the

program overall considering customer satisfaction measures. States

that fail for any program year to achieve an average of at least 100

percent of the lower limit of the range for the relevant indicators

for any single program, or the overall program measured by customer

satisfaction, may request and receive technical assistance for the

Secretary.

G. The Criteria for Receiving Monetary Sanctions

Section 136(g)(1)(B) provides that the Secretary may reduce the

grant by not more than 5 percent of the amount payable under a

program should the State fail to meet adjusted performance levels

for a program for a second consecutive year. The failure must occur

for the same program area for two consecutive years; in other words,

the State must achieve an average below 100 percent of the lower

limit of the range for two consecutive years for either the adult

measures, the dislocated worker measures, the youth measures, or the

customer satisfaction measures. The sanction system will be totally

objective and will automatically invoke monetary sanctions when a

State fails to achieve the minimum average performance for the same

program for a second consecutive year. The grant may also be reduced

by up to 5 percent for failure to submit the annual performance

progress report required under section 136(d).

Since data will not be available in sufficient time to actually

determine that there was a failure for a second consecutive year,

the monetary sanction will be invoked with respect to the funding

allocation for the next full program year following the year in

which data about ``the second consecutive year'' became available.

This approach assures that funding is not affected after-the-fact.

H. The Amount of the Monetary Sanction

Section 136(g)(1)(B) provides that the Secretary may reduce the

grant by not more than 5 percent of the amount that would be payable

under the program; and the penalty shall be based on the degree of

failure to meet State adjusted levels of performance. Using the

average percent achieved across relevant indicators for each

program, and for the overall program based on customer satisfaction,

there will be a one percent monetary sanction for every three

percent below 100 percent cumulative attainment of the lower limit

of the ranges established. As an example, achievement between 97.0

and 99.99 percent of the lower limit would result in a one percent

reduction; achievement between 94.0 and 96.99 percent would result

in a two percent deduction, etc.

I. Sanctions for Failure To Submit Annual Performance Progress Reports

Section 136(g)(1)(B) provides that the Secretary may reduce the

grant amount by up to five percent for failure by a State to submit

the annual performance progress report to the Secretary. States that

are more than 45 days late in submitting complete and sufficiently

accurate reports will be sanctioned by one percent, plus an

additional one percent for each addition 45-day period of lateness.

Any state sanctioned for not submitting its

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performance progress report within the specified time will not be

eligible to apply for incentive funds.

Incentives Example State A

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Percent

Measures Adjusted level Actual achieved Lower limit*

----------------------------------------------------------------------------------------------------------------

Adult

Entered Employment.............................. 74% 82% 110.8 59.2%

6-Month Retention............................... 86% 89% 103.5 68.8%

6-Month Earnings Change......................... $4,000 $3,579 89.5 $3,200

Credential Attainment Rate...................... 20% 19% 95.0 16.0%

Dislocated Workers

Entered Employment.............................. 82% 89% 108.5 65.6%

6-Month Retention............................... 88% 92% 104.5 70.4%

6-Month Earnings Change......................... $1,000 $910 91.0 $800

Credential Attainment Rate...................... 20% 25% 125.0 16.0%

Youth 19-21

Entered Employment.............................. 55% 67% 121.8 44.0%

6-Month Retention............................... 60% 70% 116.7 48.0%

6-Month Earnings Change......................... $3,000 $3,557 118.6 $2,400

Credential Attainment Rate...................... 35% 47% 134.3 28.0%

Youth 14-18

Skill Attainment................................ 67% 72% 107.5 53.6%

Diplomas or Equivalent Attainment............... 25% 27% 108.0 20.0%

Placement and Retention......................... 65% 62% 95.4 52.0%

Customer Satisfaction

Employer........................................ 87% 94% 108.0 69.6%

Participant..................................... 87% 92% 105.7 69.6%

---------------------------------------------------------------

Average Achieved Over All................... .............. .............. 108.5 ..............

----------------------------------------------------------------------------------------------------------------

State A has exceeded the adjusted levels for WIA Title I: the overall average percent achieved is over 100%;

actual performance didn't fall below the lower limit for any measure; and both customer satisfaction adjusted

levels were met.

*In this example, the lower limit was calculated at 80% of Adjusted Level for all measures.

Sanctions Example State B

----------------------------------------------------------------------------------------------------------------

Percent

Measures Lower limit Actual achieved

----------------------------------------------------------------------------------------------------------------

Adult

Entered Employment.............................................. 56% 75% 133.9

6-Month Retention............................................... 65% 80% 123.1

6-Month Earnings Change......................................... $3,000 $2,579 86.0

Credential Attainment Rate...................................... 15% 14% 93.3

-----------------------------------------------

Adult Program Average....................................... .............. .............. 109.1

Dislocated Workers

Entered Employment.............................................. 62% 80% 129.0

6-Month Retention............................................... 66% 76% 115.2

6-Month Earnings Change......................................... $750 $605 80.7

Credential Attainment Rate...................................... 15% 20% 133.3

-----------------------------------------------

DW Program Average.......................................... .............. .............. 114.5

Youth 19-21

Entered Employment.............................................. 41% 39% 95.1

6-Month Retention............................................... 45% 46% 102.2

6-Month Earnings Change......................................... $2,250 $1,998 88.8

Credential Attainment Rate...................................... 26% 24% 92.3

Youth 14-18

Skill Attainment................................................ 50% 54% 108.0

Diplomas or Equivalent Attainment............................... 19% 20% 105.3

Placement & Retention........................................... 49% 47% 95.9

-----------------------------------------------

Youth Program Average....................................... .............. .............. 98.2

Customer Satisfaction

Employer........................................................ 65% 77% 118.5

Participant..................................................... 65% 81% 124.6

-----------------------------------------------

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Customer Satisfaction Average............................... .............. .............. 121.5

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State B failed the Youth Program measures: 98.2% of lower limit achieved on average. If these youth measures

depict failure in the second consecutive year, a monetary sanction equal to one percent would be applied to

the youth allocation.

[FR Doc. 99-10473 Filed 4-26-99; 8:45 am]

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