	Introduction

The Workforce Investment Act (WIA) was enacted in 1998 and replaced the Job Training Partnership Act (JTPA) as the federal government's primary employment and job training legislation. Title I of WIA—Workforce Investment Systems—authorizes job training and related services to unemployed or underemployed individuals. Funds authorized under Title I, Subtitle B of WIA ("Statewide and Local Workforce Investment Systems") are allocated to states by formula and are used for workforce development activities. The dislocated worker program is the largest of the three Title I grant programs and is intended to provide funding for employment and training activities for a specific group of unemployed individuals—dislocated workers. Third, in addition to concerns about the dislocated worker program formula leading to significant volatility and concerns about a mismatch between changes in unemployment and changes in funding, a fundamental misalignment between the formula factors and the intended population of the formula has also come under some scrutiny. This report addresses issues related to the dislocated worker program allocation formula by
examining the extent to which problems may exist in the current formula regarding alignment of the formula factors with the program aims and volatility in year-to-year allocations; examining how aspects of the current formula's design may contribute to misalignment and volatility; and analyzing the strengths and weaknesses of alternative design options that may have the potential of improving alignment and reducing year-to-year volatility in state grant levels. There are three state formula grant programs in Title I: adult, dislocated worker, and youth. Thus the measures used for allocating funds in the current dislocated worker formula are likely to include but do not focus on the population of dislocated workers targeted by WIA. How Volatile Are Annual State Funding Allocations? Indexation in the Dislocated Worker Formula

Although the current WIA dislocated worker formula, which uses a formula feature of fixed indexation of 4.5% to define excess unemployment, is intended to target funding on states with high or increasing unemployment (which, as discussed previously, is not strictly aligned with the dislocated worker population as defined by WIA), the use of a fixed point of reference yields results that do not always achieve this goal or results in funding decreases in times of unemployment increases. Conclusion

The analysis in this report supports four conclusions. First, the current factors used in the WIA state grant formula for dislocated workers are not fully aligned with the target population. Fourth, there are several alternative factors available to measure the dislocated worker population.
The Workforce Investment Act (WIA), enacted in 1998, is the federal government's primary employment and job training legislation. Title I of WIA—Workforce Investment Systems—authorizes job training and related services to unemployed or underemployed individuals. Funds authorized under Title I, Subtitle B of WIA are allocated to states by formula and are used for workforce development activities.
This report analyzes the current allocation formula for one of the three Title I formula grant programs—the dislocated worker program, which is the largest of the three Title I grant programs with annual funding of about $1.2 billion. The dislocated worker program is intended to fund employment and training activities for a specific group of unemployed individuals—dislocated workers. Dislocated workers are distinguished from the general category of adult unemployed individuals for purposes of funding allocations and are defined in WIA by specific criteria such as being part of a mass layoff.
Interest in the dislocated worker program's allocation formula has increased recently because some high unemployment states have lost substantial funds under this program in recent years and there has been significant volatility in year-to-year state funding allocations under this particular funding stream. This report examines the funding formula and explores the pros and cons of alternative allocation procedures. The analysis in this report leads to three conclusions:
First, the current dislocated worker formula does not align fully with the WIA-defined population of dislocated workers. The factors used for allocating funds in the formula may include but do not focus on the targeted population of dislocated workers. Second, as currently configured, the dislocated worker formula results in volatile changes in state allocations from one year to the next. While some volatility in allocations may be desirable so that funds go to the areas of greatest temporal need, the mechanics of the current formula tend to exaggerate the underlying volatility of the factors and lead to large annual changes in the intensity of funding (i.e., funding dollars per funding factor). Third, there are several alternatives to the current factors in the dislocated worker formula and several alternative formula features that may potentially offer better alignment with the target population and reduced volatility. In addition, there are options available to mitigate the large swings in specific state annual allocations under the dislocated worker formula.