May 30, 2006

REPORT IN BRIEF

Current STAR (Skills Testing, Assessment & Re-employment) funding for the Silicon Valley region totals $5,625,000 for the year ending June 30, 2006.  Existing dislocated worker allocated funds are not sufficient to meet the demand for services for the coming year. Staff recommends that the Sunnyvale City Council, on behalf of the seven NOVA consortium cities, concur with the decision of the NOVA Workforce Board and authorize the submission of a proposal to the State of California Employment Development Department (EDD) for Workforce Investment Act Dislocated 25 Percent Additional Assistance Funding of up to $10 million for a two-county area to provide for the continuation of dislocated worker services from July 1, 2006 through December 31, 2007.

BACKGROUND

The State of California initially funded NOVA’s STAR services in the fall of 1989.  NOVA has since received continuous funding through 15 major grants over a 17-year period. EDD has invested over $67 million in STAR to serve over 20,000 dislocated workers, and the grant has consistently met or exceeded its performance goals.  In recent years, State discretionary funding has become more limited, and the State has not been able to continue its investment in STAR to the extent it has in the past.

In 2005, realizing the state of urgency that exists in the region relative to the re-employment efforts of dislocated workers, NOVA partnered with its neighboring workforce boards to submit a proposal for STAR funding for $5,625,000 to serve dislocated workers.  NOVA’s portion of this current STAR XV grant is $4,845,000 and plans to enroll a total of 948 clients in a myriad of services including extensive testing and assessment, occupational classroom training, re-employment workshops, ProMatch services, a computerized learning lab, and funding for appropriate one-stop services. STAR’s program model provides the basis for NOVA's service delivery system for dislocated workers.  This funding runs through June 30, 2006.  At this time, 282 participants have exited the grant with an entered employment rate of 81% and an average wage of $31.74 per hour, both measures of which exceed the plan.  A total of 578 participants are expected to be carried in to the new STAR grant, creating an immediate funding need.

EXISTING POLICY

The proposed activities are consistent with the City of Sunnyvale's Socio-Economic Goal 5.1F: Provide job training and employment services within constraints of operative, federal regulations and available federal funding, to address the locally-determined employment and training needs of economically disadvantaged residents and others with special needs.

DISCUSSION

The demand for dislocated worker services in the core of Silicon Valley continues to be high.  Although the unemployment rate has fallen from its peak in 2003, the reality is that the San Jose area lost 231,000 jobs (21 percent of total jobs) from December 2000 through January 2004 and has only recovered seven percent of those lost jobs in the last two years.  Now, more than ever, the Silicon Valley economy reflects a “tale of two cities” with new, higher-wage jobs being created and often filled by talent attracted from across the nation and around the world, and less productive jobs being eliminated and often vacated by workers needing new skills and new networks to become re-employed.  This churning—the continuous cycle of job creation and job destruction—results in a net job flow that does not necessarily reflect labor force statistics.

Although dislocated worker allocations have not yet been announced for 2006-07, NOVA expects a similar or reduced amount compared to its 2005-06 amount of $976,291. The reality of the Workforce Investment Act funding formula is that it allocates funds based on the rate of unemployment among residents of the local area.  A full 54 percent of NOVA clients do not even reside in our area but choose to come to NOVA primarily because their companies are located here.

The funding formula is also inequitable relative to the share of worker dislocation in the region.  To date in 2005-06, the NOVA and San Mateo workforce areas experienced 102 layoff events.  This represents 9.1 percent of all dislocation events statewide, yet the two areas combined received only 2.9 percent of the dislocated worker allocated funds.  If the formula took this into account, these areas would have received an additional $6.8 million for this year and the need for supplemental funds would have been greatly reduced.

NOVA projects a need for an additional $10 million to serve approximately 1,920 participants through NOVA and the San Jose and San Mateo workforce boards from July 1, 2006 through December 31, 2007.

The NOVA Workforce Board, at its May 24 meeting, authorized the submission of a proposal to the State of California Employment Development Department.

FISCAL IMPACT

There will be no fiscal impact to the City because funds received will offset program expenditures.

CONCLUSION

NOVA’s current STAR (Skills Testing, Assessment & Re-employment) funding to serve dislocated workers ends June 30, 2006.  Its allocated dislocated worker funds will not be sufficient to meet the needs of the region.  NOVA seeks authority to apply for State of California Workforce Investment Act Dislocated 25 Percent Additional Assistance funding of up to $10 million for NOVA and its neighboring workforce areas in Santa Clara and San Mateo Counties.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City's official notice bulletin board, posting of the agenda and report on the City's web page and the availability of the report in the Library and City Clerk's Office.

ALTERNATIVES

1.      Council authorizes the submission of a proposal to the State of California Employment Development Department for Workforce Investment Act Dislocated 25 Percent Additional Assistance Funding of up to $10 million for a two-county area to provide for the continuation of dislocated worker services from July 1, 2006 through December 31, 2007.

2.      Council does not authorize submission of a proposal.

3.      Other action as determined by Council.

RECOMMENDATION

It is recommended by staff that the Sunnyvale City Council, on behalf of the NOVA seven-city consortium and in concurrence with the NOVA Workforce Board, adopt Alternative 1: Council authorizes the submission of a proposal to the State of California Employment Development Department for Workforce Investment Act Dislocated 25 Percent Additional Assistance Funding of up to $10 million for a two-county area to provide for the continuation of dislocated worker services from July 1, 2006 through December 31, 2007.

Reviewed by:

Michael J. Curran, Director

Department of Employment Development

Prepared by: 

Jeanette Langdell

Employment Training Manager

Approved by:

Amy Chan

City Manager