If perfect storms have three fronts, then NOVA is operating in a super-perfect storm caused by the intersection of four fronts: increased worker dislocation, reduction of appropriated resources, elimination of supplemental funding opportunities, and the rescission of funds already committed.

Increased Worker Dislocation

For the past three years Silicon Valley has been experiencing an ever-increasing amount of worker dislocation. Due primarily to globalization, advanced technology deployment, and a weakening economy, the number of both layoff events and individuals affected by mass layoffs has increased exponentially. One objective indicator of this trend is Worker Adjustment and Retraining Notification (WARN) activity.

WARN notifications are required in the event of mass worker layoff, and while not a comprehensive record of layoff activity, they provide an excellent sampling of the larger and more damaging events. Within the NOVA Workforce Investment Area (northern Santa Clara County), the number of affected individuals reported through the formal WARN process has increased from 1,686 in CY05 (3.2% of all “WARNed” individuals within California) to 3,335 in CY06 (4.8% of the state) to 3,969 in CY07 (6.4% of the state). CY08 continues to reflect this exponential growth with 833 individuals (one-fifth of all of CY07) reported in the first month alone. And as you would expect, we have seen a corresponding increase in dislocated workers contacting us for training and other job-search assistance: 6,676 in FY 05, 7,239 in FY 06 and 7,639 in FY07 (an average increase of roughly 7% year over year).

The bottom line is that there is an increasing number of people looking for reemployment assistance and services and this increasing need is less often reflected in such historic measures as unemployment rates.

Decreased Allocated WIA Funds

While the need has dramatically increased over the past several years, conversely the amount of federal funding available to the State of California for workforce development has been in steep decline. Since WIA was implemented in 2000, both California’s share of and actual amount of funding to assist dislocated workers have been continuously evaporating. This is primarily due to inequities in the federal Workforce Investment Act (WIA) allocation formulas—well documented by the GAO. In the past three years alone, this has been a 15% reduction (even greater when adjusted for inflation), a loss to the State of $43 million. By formula, this loss has been passed on to the local areas.

NOVA’s WIA funding from the State has experienced a more significant decline than any other local workforce investment area. In the resources dedicated to dislocated workers, our WIA funding has decreased in the past three years by 45%—again not adjusted for inflation.

Decreased Supplemental Funding

Other federal funds that had been available to local areas for employment and training services have also evaporated. The most notable example of this for NOVA is the training accounts set up as part of the application process for H-1B workers. Whereas several years ago NOVA successfully applied for millions of dollars of these competitive funds, the Administration has now diverted these funds to be used at the discretion of the Secretary of Labor for initiatives that support the Administration’s agenda. NOVA has applied for several of these grants, but to date has not been successful, being told that Silicon Valley does not fit the desired profile.

As with the federal funding, State funds are being diverted due to California’s $14 billion structural budget deficit. NOVA is not only being asked to assume additional financial burdens because of vacancies created by the State’s hiring freezes, but uncommitted dollars that traditionally have been available for local programming are less often being put out to bid.

Rescission of Current Funding

If rapidly increasing demand with rapidly decreasing resources were not enough, we now have to “pay back” money already obligated by DOL and, for the most part, already spent by NOVA.

When Congress passed and the President signed into law PL 110-161 on December 26, 2007, $300 million (or 9% of total national appropriations) were rescinded from WIA funding for this year and last year. These funds had already been granted to the states, and most states had already obligated them to local areas. While the rationale that justified this action was that there were “idle” carry-forward funds available and that Workforce Investment Boards would not miss the money, this is just not true. In NOVA’s case, given the accelerating demand for services,
we had committed literally every dollar we had and had budgeted 99% of the expenditures by June 30.

To complicate this unanticipated rescission, we do not yet know either the amount of funding that NOVA will be required to pay back or a firm date as to when it will be due. DOL has stated that they will not be able to inform the states of their respective apportionments until late February, after which the states must then divide the rescission among their local areas. Our estimate is that California’s share will be $18–23 million and we can only guess at what NOVA’s share of that sizeable bill will be without the formula, which has yet to be adopted by the State.

This situation is exacerbated by how late in the budget cycle this action is occurring. Assuming that NOVA’s bill will be in the neighborhood of $300,000, with only three months left in the fiscal year the impact of this hit is equivalent to a 20% cut for the remainder of the fiscal year.

Managing the Fiscal Crisis

This 20% reduction is a difficult cut to absorb and if we wait until March or April to take action, it will be impossible to absorb. In light of this, the consortium cities and the NOVA Workforce Board have authorized the following actions to manage the rescissions:

1. NOVA will continue its aggressive practice to search out new funding opportunities that align with and further our efforts to enhance the talent and economic prosperity for our workforce and our businesses.
2. Starting this week, all of NOVA’s services, programs and operations will be shut down every Friday. This closure is scheduled to continue through the end of June and will mandate a 20% reduction in every staff member’s work hours.
3. If this action is not enough to close the gap and/or depending on the funding available for FY 08/09, further permanent reductions in services and staff will be implemented. (Please note that NOVA has already experienced a reduction in staffing over the course of the past four years from 115 positions to 65.)

I recognize that much of the above is very technical and that the short synopses provide only a high-level overview. If you would like to speak with me directly about the closure or its various causes, please contact me by e-mail at fridayclosure@novaworks.org or by phone at 408-730-7232.

As to future actions, it is our hope that the House’s Committee on Education and Labor under the leadership of Congressman Miller will be instrumental in the reauthorization of the Workforce Investment Act (given that we are in our eighth year of a five-year program). We also hope that the legislation will be responsive to the phenomenon of a regional economy such as Silicon Valley’s, that churns a significant share of its workforce through the process of creating new opportunities while simultaneously shedding old jobs.

To this end, when the National Association of Workforce Boards has its annual conference in D.C. later this month, Congressman Miller has graciously agreed to meet with the 75 or so representatives from California (WIB directors like myself as well as business leaders) for a 7 a.m. breakfast meeting. It is my hope that from this meeting the Congressman will not only have a better understanding of the power and the opportunity of the local boards, but also be willing to visit NOVA’s one-stop employment/re-employment center (hopefully not on one of those closed Fridays!) and witness first-hand our value, our challenges and our opportunities. If you or your staff think you might be able to attend the breakfast meeting, just let me know and I will make all the arrangements and get you the necessary information ASAP.

I recognize that a significant part of the budget challenges we are facing is the result of actions of the current Administration and past Congresses. With a new Congress in place and the change in the Presidency, it is our goal now to “survive today so that we can thrive tomorrow.” I am optimistic that we are moving on a path of improved public policy and public workforce investment. However, I hope that the ultimate toll in the near term is not too high for those currently in need of employment or reemployment assistance, and that the talent infrastructure’s critical support systems, like NOVA, are able to weather this turbulent transition.

Again, I am saddened that, at a time when an increasing number of individuals are in need of NOVA’s services, the response has proven to be a reduction in our hours of operation. I hope that this partial closure will be enough to solve the budget shortfall and that future funding is more in line with the needed investment in our region’s workers.

Regretfully,

Michael J. Curran
NOVA Director