Background: A number of States have inquired about whether or not it is permissible to "support or supplement" "training" funds which have been carried forward with "administration" funds allocated for another program year. More broadly, the question is how to treat any unspent funds, whether "administration" or "training" funds, which are carried forward to a subsequent program year. Many States, service delivery areas (SDAs), substate grantees (SSGs), and other subrecipients, upon receipt of their program year allocation, divide the allocation into fund accounts corresponding to the JTPA cost categories. The administration fund budget is usually set at the 15% or 20% maximum limit, and retraining services/direct training services is set at the 50% minimum limit. As costs are incurred in the delivery of program services, each fund account (cost category) is charged for its share of costs. Although SDAs/SSAs are likely to have most of a current year's allocation expended at the end of the program year, any unexpended fund balances are carried forward into the second year (or even the third year) and costs continue to be charged to each category, usually on a first-in, first-out (FIFO) basis. Section 161(b)(1) of the Act provides that JTPA funds appropriated for any program year are available for expenditure during that program year and the subsequent two program years. During the period of availability, the appropriated funds may be expended for any allowable JTPA cost, subject to the cost category limitations. Sections 108(b)(4) and 315(c) of the Act provide that of the funds allocated to a subgrantee for any program year, not more than 20% or 15% (depending on the Title) may be expended to cover the costs of administration. The JTPA regulations at 20 CFR 627.445(c)(2) and 20 CFR 631.14(g) indicate that States, SDAs and SSGs have the full three year period of fund availability to comply with the cost limitations. The relevant regulatory provisions require that expenditures be reported by program year of appropriation [20 CFR 627.455(d)(1)] and that administrative and other costs be charged to a JTPA program based on benefits received by that program [20 CFR 627.440(a)]. Interpretations: The first interpretation argues that each program year allotment is a separate grant and therefore a discrete program. In other words, if a grantee expends all of its allotted "administration" funds (20% of its PY 1 allocation) in year 1, but spends less than 100% of its allotted PY 1 "training" funds, then PY 2 "administration" funds cannot be used to support the expenditure of these carry-over "training" funds. This interpretation is based on the position that benefits derived from the expenditure of PY 1 funds on administration can accrue only to PY 1 program expenditures. Expenditure of PY 2 or PY 3 funds in support of the expenditure of PY 1 carry-over funds constitutes an impermissible "shifting of funds" in violation of 20 CFR 627.435(c). A second, alternative interpretation of the statutory and regulatory provisions gives greater weight to the three-year expenditure provisions of section 161(b)(1) of JTPA. This interpretation holds that the strict application of the "benefits received" test to individual grants has the effect of nullifying the three-year expenditure flexibility built into the statute. Under this alternative interpretation, funds from different PY appropriations may be expended along side each other for the operation of the "program" (e.g., Title II-A), as long as all other conditions governing allowability of costs are met. This means that funds appropriated for one PY are available for expenditures on "administrative costs" along side and in support of "program costs" charged to another PY allocation. Action Required: ETA will apply the second, more flexible interpretation in evaluating a State's expenditure of funds unless the State explicitly adopts the first, more restrictive interpretation. However, a State may adopt either of these two interpretations to govern the expenditure of JTPA funds in their individual States, and ETA will defer to the State's decision in this regard under 20 CFR 627.200(a)(1) of the regulations.

References: The Wagner-Peyser Act, as amended (P.L. 97-300); 20 CFR 652; TEGL No. 4-94. Background: The Secretary of Labor is issuing final planning allotments for each State's share of PY 1995 funds for basic labor exchange activities. These allotments (Attachment I) are based on the FY 1995 appropriation of $845,912,000 and are distributed by the statutory formula described in Section 6 of the Act. The allotments are also being published in the Federal Register. The data used are Calendar Year 1994 averages of civilian labor force (CLF) and number of unemployed individuals. Section 6(b)(4) of the Act authorizes the Secretary of Labor to reserve up to 3 percent of the total fund availability to assure that each State will have sufficient resources to maintain statewide employment service (ES) activities. The set-aside for distribution through an administrative formula for PY 1995 is $24,791,040. The 3 percent distribution is included in the total final allotment. The set-aside was distributed in two steps to States whose relative share of resources declined from the previous year. In Step 1, those States with a CLF below one million and that are also below the median CLF density were held harmless at 100 percent of their prior year relative share of resources. The remainder was distributed in Step 2 in pro rata shares to all other States that lost in relative share from the prior year but did not meet the size and density criteria for Step 1. Differences between preliminary and final planning estimates are caused by the use of Calendar Year data as opposed to the earlier data used for preliminary planning estimates and postage savings related to U.S. Postal Service changes in methodology of calculating charges and improved mail management practices. Postage costs incurred by States during the conduct of ES activities are billed directly to the Department of Labor by the U.S. Postal Service. The States' final allotments do not include $19,544,000 of the total amount available, which is withheld for the payment of the States' ES penalty mail costs. Action: State planning activities are to be guided by the process described in the Wagner-Peyser Act, Federal Regulations at 20 CFR Part 652, and planning guidance provided by ETA Regional Offices.

References: JTPA Sections 161 and 162, as amended by the Job Training Reform Amendments Act of 1992; Department of Labor Appropriations Act, P.L. 103-333 (for PY 1995); Training and Employment Guidance Letter No. 4-94; Public Law 104-6 (Defense Department supplemental). Background: On April 10, 1995, President Clinton signed Public Law 104-6, a Defense Department supplemental appropriation, which also contained a $200 million rescission to the PY 1995 Title II-C Youth Training Program grants. This represents a 33.4 percent reduction from the previously appropriated level of $598,682,000. A second rescission package is currently pending in Congress. The House bill contains a $310 million reduction to the program, while the Senate rescission would be $272 million. The effect of the Public Law 104-6 $200 million rescission is not in the House bill, but is reflected in the Senate bill reduction; thus the possibility remains for a further reduction that could be in the range from $110 million to $272 million. The House/Senate conference to finalize the rescissions package is expected to occur during the week of May 8 and it is expected that the final bill will go to the President by May 29. Implementation: The attached table shows the $200 million reduction by State, and is being provided for planning purposes. The final revised Title II-C allocations will not be issued until final action is taken on the second bill. Notices of Obligation (NOOs) will be issued on or about July 1, 1995. One option for dealing with the Title II-C reductions is the flexibility provided by the Act to shift up to 10 percent of Title II-A funds, and/or 20 percent of Title II-B funds to Title II-C, provided such transfers are described in the Job Training Plan and approved by the Governor (20 CFR Part 628.550). Also, the Senate rescission bill includes language that would authorize transfers of up to 50 percent from II-B to II-C. Final Conference action will determine whether that provision stays. States and SDAs should ensure that all subgrants and subcontracts contain a clause which limits these agreements to the availability of Federal funds. Action: States are requested to begin adjusting their PY 1995 planning efforts in light of the information contained in this issuance and to advise their SDAs to do the same.

Background: Section 106 of JTPA directs the Secretary to establish performance standards for adult, youth, and dislocated worker programs. These standards are normally updated every two years based on the most recent JTPA program experience and on program emphases and goals established by the Department. The Secretary also issues instructions for implementing standards and parameter criteria for States to follow in making adjustments to the Title II-A performance standards. Program policies and relevant standards have remained unchanged since Program Year 1990. The Department did not update its performance standards levels in Program Year 1992 in order to maintain program management continuity amidst uncertainty about the passage of the ma Amendments and economic conditions. Program Year 1991 data indicate that outcomes have continued to decline since 1988 -- the reference year for the current standards. In addition, the Department's adjustment model cannot adequately account for decreased opportunities caused by slow economic growth. JTPA Program Performance in 1991: A review of 1991 data shows a trend of declining SDA performance on the employment-related standards (i.e., the adult and welfare follow-up employment rates and the youth entered employment rate). Thus, despite the Department's intent in setting the standards at levels that 75% of SDAs can be expected to meet or exceed, only about 65% of SDAs met or exceeded their employment-related standards in 1991. There is little reason to believe that outcomes have declined because the quality of SDA services decreased. Rather, because of the program's sensitivity to the economic environment, the most likely explanation for the employment rates is the decline in job opportunities associated with slow economic growth. Although economic conditions are improving, they have not yet been accompanied by increased employment -- and continued slow employment growth is forecast for the near future. It is likely to be some time before job opportunities improve for JTPA participants, and lower program outcomes for the employment-related standards can therefore be expected to continue in Program Years 1992-1993. Effects of Current Standards on State Incentives and Sanction Determinations: Maintaining employment standards at current levels would unfairly penalize SDAs for the effects of economic conditions and discourage enrollment of more difficult-to-serve populations. This would be unproductive and contrary to DOL's intent in setting performance standards; that is, holding SDAs harmless for factors outside their control. Secretary's Revised National Numerical Standards for Program Years 1992-1993: To ease the implementation of the Amendments and to further the Department's goal of increased service to hard-to-serve populations, the Department has decided to update the national standards to levels that 75% of SDAs can be expected to exceed -- the Department's traditional benchmark. This will result in slightly lower employment-related standards and a slightly higher standard for the youth employability enhancement rate -- reflecting performance improvements that have come with an increased program focus on skill-enhancing efforts for youth. The Title II-A earnings measures will remain at current levels. The revised Title II-A standards are: -- Adult Follow-Up Employment Rate 60% -- Welfare Follow-Up Employment Rate 46% -- Youth Entered Employment Rate 41% -- Youth Employability Enhancement Rate 36% The following standards remain unchanged: Title II-A: -- Adult Weekly Earnings at Follow-Up $228 -- Welfare Weekly Earning at Follow-Up $207 Title III: -- Title III Entered Employments Rate 64% Implementing Provisions: Implementation provisions remain unchanged. Please refer to section 6, TEGL No. 9-89, dated June 29, 1990 for these provisions. Performance Standards Provisions for Title III: Provisions for Title III remain unchanged as no drop in program performance has been noted. Please refer to section 7, TEGL No. 9-89, dated June 29, 1990 for these provisions. State Action: States are to distribute this Guidance Letter to all relevant officials within the State responsible for implementing performance management policies and requirements for Program Years 1992-1993. A copy of this Guidance Letter is also being sent to State JTPA Liaisons, the State Wagner-Peyser Administering Agencies and the State Worker Adjustment Liaisons.

References: (a) Sections 314(c), 315(a) and 315(b) of the Job Training Partnership Act, as amended; (b) Sections 631.14(a), 631.14(b) and 631.20(b)(1) of the JTPA Regulations (Federal Register, September 4, 1994); (c) National Reserve Account Application Guidelines; (d) TEGL No. 10-94, "Needs-Related Payments in National Reserve Account (NRA) Projects under Title III of the Job Training Partnership Act (JTPA)", April 24, 1995. Effective Dates: The statutory and regulatory provision changes described herein are effective for funds appropriated for Program Year 1995 (during the period of availability, or until expended whichever occurs first). Statutory Provisions: The Conference Report from the Committee on Appropriations states that in order to enable States and local communities to deliver efficient and effective Title III readjustment programs, P.L. 103-333 (excerpt attached) adds greater flexibility in three areas. The 1995 Appropriations Act provides-- "that funds used from this Act to carry out title III of the Job Training Partnership Act shall not be subject to the limitation contained in subsection (b) of section 315 of such Act; "that the waiver allowing a reduction in the cost limitation relating to retraining services described in subsection (a)(2) of such section 315 may be granted with respect to funds used from this Act if a substate grantee demonstrates to the Governor that such waiver is appropriate due to the availability of low-cost retraining services, is necessary to facilitate the provision of needs-related payments to accompany long-term training, or is necessary to facilitate the provision of appropriate basic readjustment services; and "that funds used from this Act to carry out the Secretary's discretionary grants under part B of such title III may be used to provide needs-related payments to participants who, in lieu of meeting the requirements relating to enrollment in training under section 314(e) of such Act, are enrolled in training by the end of the sixth week after grant funds have been awarded." Policy: As a result of the P.L. 103-333 and the direction provided in the Conference Report from the Committee on Appropriations, this TEGL provides for the following Title III policy guidance for the administration of PY 1995 funds: a. Supportive Services and Needs-related Payments Cost Limitation: The twenty-five (25) percent spending limit contained in Sec. 315(b) of the Act and 20 CFR 631.14(b) for supportive services and needs-related payments under Title III is removed for programs operated with PY 1995 funds. Programs operated by the States and Substates with Part A formula block grants may be adjusted for PY 1995 according to State and Substate procedures. Cost limitations for projects being operated under Part B, Sec. 322 (Secretary's National Reserve Account) may be funded based upon the grant application and the award signed by the Grant Officer. b. Retraining Expenditure Minimum: The Conference Report states that this language modifies the State waiver authority under Sec. 315(a) permitting the Governor to reduce to 30 percent the requirement that not less than 50 percent of the funds be used for retraining services. The Report concludes that this language will enable local areas to determine the appropriate share of resources for up- front, cost-effective readjustment services that can facilitate rapid reemployment. Therefore, P.L. 103-333 modifies Sec. 315(a)(2) of the Act authorizing a Governor to waive the 50% retraining require- ment if a Substate Grantee demonstrates to a Governor that such waiver: (1) is appropriate due to the availability of low-cost retraining services; (2) is necessary to facilitate the provision of needs- related payments to accompany long-term training; or (3) is necessary to facilitate the provision of appropriate basic readjustment services. States are responsible for implementing systems which provide for Substate Grantees to request waivers pursuant to this provision. c. Enrollment in Training or Education Requirement for Needs-Related Payment Eligibility: The Conference Report states that this change allows for funds "awarded under the National Discretionary Grant Program to be used to provide needs-related payments to participants who, in lieu of meeting the general EDWAA requirement that they be enrolled in training by the 13th week after layoff, have enrolled in training or education by the end of the 6th week after the grant is awarded." The Report continues that this provision adds appropriate flexibility while "preserving the principle that retraining is most effective if individuals are enroll- ed in training early in the adjustment process." Therefore, grants awarded by the Department with National Reserve Account (Part B) PY 1995 funds shall include provisions allowing for participants to meet the "enrolled in training prerequisite" if they are enrolled in training or education programs by the end of the sixth week after funds have been awarded. This provision will be included in all National Reserve Account grants (except Additional Financial Assistance) which authorize expenditures for-4- needs-related payments, including projects under Sections 322 and projects like those authorized under Sections 325 (Defense Conversion Adjustment Program), 325A (Defense Diversification Program), and 326 (Clean Air Employment Transition Assistance). Action: For Part A, formula funds: States should take actions necessary and appropriate to advise Title III staff, Substate Grantees and other entities of the information provided in this TEGL in order to ensure the efficient and effective delivery of Title III readjustment programs consistent with these provisions. For Part B, NRA grant applicants: States should take actions necessary and appropriate to advise Title III staff, Substate Grantees and other entities of the provisions relating to needs- related payments in projects operated with the Secretary's Discretionary PY 1995 funds. These provisions are effective only for programs operated with funds appropriated for Program Year 1995.

Reference: Sections 325A and 326, Job Training Partnership Act (JTPA), as amended. Discussion: Some JTPA programs use 70 percent of the Lower Living Standard Income Level (LLSIL) in determining economically disadvantaged status. In determining eligibility for needs-related payments for Clean Air Employment Transition Assistance (CAETA) and Defense Diversification Programs (DDP) grants under Title III, Section 326(f) (and by reference Section 325A(i)) provides for the use of the LLSIL (100 percent). Attached is an information package which includes: 1) the tables for the 1995 LLSIL adjusted to reflect 100 percent of the LLSIL; 2) the Federal Register notice (April 25, 1995 and May 8, 1995) which explains how to use these tables; and 3) the poverty guidelines for 1995 (Federal Register, February 8, 1995) issued by the U. S. Department of Health and Human Services which are used in determining the level of the needs-related payments. These are to be used by grantees operating dislocated worker projects under the CAETA or DDP guidelines. Action: States should make this information available to all appropriate officials and staff who deal with Title III.

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References. TEGL 1-94, dated August 31, 1994; 20 CFR Part 627.470; also the "Guide to JTPA Performance Standards for Program Years 1994 and 1995" transmitted by Training and Employment Information Notice 16-94, dated December 13, 1994. Background. Within 90 days after the end of the Program Year [JTPA 106(j)], each State is required to report to the Secretary the final performance standards and actual performance of each Service Delivery Area (SDA) within the State. Within the same timeframe, the State shall also provide to the Secretary technical assistance plans for each SDA that has failed the established performance standards for one program year, and a reorganization plan for each SDA that has failed performance standards for two consecutive program years. Policy. Effective Program Year (PY) 1994, the Governor's determination of an SDA's failure to meet performance standards, and the consequent imposition of technical assistance and reorganization plans, must incorporate the Secretary's parameters, including the new definition of failure to meet performance standards (see TEGL 1-94). The Secretary's definition of failure to meet performance standards is not retroactive to PY 1993, unless similar provisions were included in the Governor's performance standards policy for PY 1993. For Program Years 1993 and 1994 only, the Governor's policy shall be used to determine SDAs that are subject to sanctions due to failure to meet performance standards for 2 consecutive years. Further, Governors are encouraged to take into consideration program funding uncertainties and other budgetary constraints in their review of SDA performance results and development of performance standards. In particular, we encourage Governors to review performance standards for youth programs, given rescissions and continuing uncertainty of youth program funding. Governors are reminded that adjustments to performance levels are allowable should changes occur in the levels of funding, the local economy, or needs in service to special populations.

Background: Sec. 106 of JTPA, as amended, directs the Secretary to establish performance standards for adult, youth, and dislocated worker programs. These standards may be updated every two years based on the most recent JTPA program experience, as well as program emphases and goals established by the Department of Labor. The Secretary also issues instructions for implementing standards and parameter criteria for States to follow in adjusting the Secretary's standards for service delivery areas (SDAs) and substate areas (SSAs). The Job Training Reform Amendments (JTRA) of 1992 mandated significant changes in the design and operation of local job training programs, as well as the criteria used to assess their performance. Revised section 106 requires that performance standards for Title II-A, Title II-C, Section 204(d), and Title III programs measure the number of job placements that provide a minimum of 20 hours of work per week, and that programs be rewarded based on high performance, increased service to the "hard-to-serve," and quality job placements that are both high-paying and offer employer-assisted benefits. Incentive and sanction policies are to be structured around more explicit criteria, and performance standards failure is now federally defined to ensure greater uniformity in assessing underperformance nationwide. As a result of the JTPA amendments, section 204(d) now mandates performance measures for the older worker program. To assist the Department in responding to the substantive changes required in the section 106 amendments, a Technical Workgroup was convened in Washington, DC, in mid-July 1993. The workgroup had representatives from State and local JTPA programs; public interest groups, including the Partnership for Training and Employment Careers; the U.S. Conference of Mayors; the National Association of Counties; the National Governors' Association; the National Council on the Aging; and staff from the Department of Labor (DOL) Office of the Inspector General. This Guidance Letter incorporates, to a large extent, the workgroup's findings. Performance Management Goals for PY's 1994-1995: Departmental goals, initially established for PY 1990 in anticipation of the amendments, remain unchanged and are as follows: Targeting services to a more at-risk population; Improving the quality and intensity of services that lead to skills acquisition, long-term employability and increased earnings; Placing greater emphasis on basic skills acquisition to qualify for employment or advanced education or training; and Promoting comprehensive, coordinated human resource programs to address the multiple needs of at-risk populations. In addition, with the passage of the 1992 JTPA Amendments, the performance management system has been tasked, through its performance incentive policies, to improve service to out-of-school youth and also to foster employment in better quality jobs which offer high wages and employer-assisted benefits. These goals are reflected in the Secretary's six Title II-A and Title II-C (core) measures, national numerical standards for these measures, new incentive award criteria, and associated reporting requirements. Governors still retain authority to establish additional standards which reflect State policy and to develop the specific approach to determining incentive awards. This issuance specifies the national standards for PY's 1994-1995 and introduces the new criteria which must be a part of State incentive grant policies. Data to support additional non-cost measures will continue to be reported and Governors may use these measures, or others in making State incentive award determinations. Data on costs together with program performance will provide critical information for State monitoring, fiscal oversight, and assist States in measuring returns on their human resource investments. The Department has identified two additional goals for PY 1994-1995. These are: -- Establishing a strong customer focus and orientation toward improving the program's responsiveness in meeting the individual needs of participants; and -- Seeking and using customer feedback to monitor the appropriateness of JTPA services and to promote continuous program improvements. States and SDAs are encouraged to survey customers on a regular basis as an integral part of their program oversight to identify program weaknesses and to improve program services. Technical assistance will be made available on cost-effective ways to gather and utilize such information. Secretary's National Standards for PY's 1994-1995. The Secretary's performance measures and national standards for Title II-A, Title II-C, section 204(d), and Title III (all of section 302(c)(1) State activities, and sections 302(c)(2) and 302(d) substate area activities) are as follows: PY 1994-1995 Performance Standards Title II-A Adult Follow-up Employment Rate: 59% Adult Weekly Earnings at Follow-up : $245 Welfare Follow-up Employment Rate: 47% Welfare Weekly Earnings at Follow-up : $223 Title II-C Youth Entered Employment Rate: 41% Youth Employability Enhancement Rate: 40% Section 204(d) Older Worker Programs Entered Employment Rate: 52% Average Hourly Wage at Placement: $5.45 Title III Entered Employment Rate: 67% Average Wage at Placement State Determined The Title II-A adult and welfare follow-up measures will continue to be based on individuals who terminate during the first three quarters of the program year and the last quarter of the previous program year. Explanation of Performance Standards Levels. The Title II-A and II-C numerical standards were derived from PY 1992 aggregate performance data reported on the JTPA Annual Status Report (JASR) and are generally set at a minimally-acceptable level that approximately 75% of the SDA's can be expected to exceed. Revising the numerical standard for the Youth Entered Employment Rate (YEER) in the same way would lead to reduced standards for SDAs. However, recent National JTPA Study results suggest that employment and earnings experienced by out-of-school youth in JTPA fall short of acceptable levels. Therefore, to encourage improved services to out-of-school youth, the numerical standard for the YEER will remain at its current level of 41 percent. Earnings standards have been adjusted to account for expected future inflation. Finally, an additional special adjustment has been made to employment-related standards to account for the requirement in section 106(k) that permits credit, for performance standards purposes, only for employment that is scheduled for 20 or more hours per week. Similar to the Title II-A and Title II-C standards, the Title III standard was derived from PY 1992 performance data reported on the Worker Adjustment Program Annual Program Report (WAPR). This standard is set at a level that, approximately, 75 percent of the substate areas can be expected to exceed. As with the employment measures for Titles II-A and II-C, an adjustment has been made to take into account the 20-hour per week employment requirement. Since discrete aggregate data were not available for PY 1992 Section 204(d) Older Worker program performance, available SPIR data were used to assist in setting performance standards levels for that program. As with the employment measures for Titles II-A, II-C and III, an adjustment has been made to take into account the 20-hour per week employment requirement. NOTE: Programs operated under section 204(d) are State programs even though they may be managed by various local entities. Therefore, performance standards will be applied to the total older worker programs State-wide. Unlike the adult and youth programs under Title II-A/C, however, no incentive awards or sanctions are associated with these standards. Implementing Provisions: The following implementing requirements must be followed: A. Required Standards. For Titles II-A and II-C, Governors are required to set, for each SDA, a numerical performance standard for each of the six Secretary's measures; for the Older Worker program, Governors are required to set numerical Entered Employment Rate and Average Wage at Placement standards for programs operated under section 204(d); for Title III, Governors are required to set for each substate area a numerical performance standard for the Entered Employment Rate and are encouraged to establish an Average Wage at Placement goal B. Setting the Standards. Consistent with new legislative provisions, Governors are now required to adjust the Secretary's performance standards to reflect local area circumstances (section 106(d)). Such adjustments apply to Title II-A, Title II-C, section 204(d) and Title III programs, and must conform to the Secretary's parameters described below: 1. Procedures must be: Responsive to the intent of the Act, Consistently applied among the SDA's/SSA's, Objective and equitable throughout the State, In conformance with widely accepted statistical criteria; 2. Source data must be: Of public use quality, Available upon request; 3. Results must be: Documented, Reproducible; and 4. Adjustment factors must be limited to: Economic factors, Labor market conditions, Geographic factors, Characteristics of the population to be served, Demonstrated difficulties in serving the population (this adjustment factor is new), and Type of services to be provided. The Department offers Governors an adjustment methodology that conforms both to these parameters and to the requirement in section 106(d). This methodology covers Title II-A, Title II-C, Section 204(d), and Title III programs and will be provided to States in a soon-to-be issued Training and Employment Information Notice. Should the Governor choose to use an alternate methodology, or make adjustments not addressed by the Departmental model, it must conform to the parameter criteria and be documented in the Governor's Coordination and Special Services Plan (GCSSP) prior to the program year to which it applies. The State Job Training Coordinating Council and, where appropriate, the State Human Resources Investment Council must have an opportunity to consider adjustments to the Secretary's standards and to recommend variations. To determine whether an SDA has met or exceeded a performance standard, Governors must use actual end-of-year program data to recalculate the performance standards. C. Performance Standards Definitions. Governors must calculate the performance of their SDA's, SSA's, and section 204(d) programs according to the definitions included in the Attachments. D. Titles II-A and II-C Incentive and Sanction Policies. Performance standards are to be established for programs funded under Titles II and III of the Act. In applying the Secretary's standards for Titles II-A and II-C, Governors must use the six core measures and also consider criteria relating to programs successfully serving out-of-school youth and placement in jobs providing employer-assisted benefits. Governors are encouraged to begin using these criteria in PY 1994 incentive policies; these criteria are required (i.e., they cannot be zero-weighted) to be incorporated into State incentive policies beginning in PY 1995. Governors may select additional non-cost measures, such as increased service to hard-to-serve participants, to form the basis of incentive policies as long as the following criteria are met: 1. As the basis for making incentive awards, the Governors must use all (i.e., cannot "zero weight" any) of the six Secretary's core measures. Beginning in PY 1995, Governors will also be required to reward innovative out-of-school youth program models either identified by the Department of Labor or recognized by the State as having a demonstrated record of success, and placements in jobs providing employer- assisted benefits. Although successful programs for out-of- school youth remain the cornerstone of out-of-school incentives, SDA's will still be expected to exceed the 50 percent minimum service level to be rewarded under that criterion. Governors have considerable flexibility in implementing the new incentive criteria. Suggested approaches to addressing these criteria are included as Attachments 3 and 4 to this TEGL. Decisions regarding the relative weight or emphasis of each core measure (e.g., the Youth Entered Employment Rate) and incentive criterion (e.g., placement in jobs with employer-assisted benefits) in a State's incentive award formula rest with the Governor. The core measures will be the basis for identifying SDA's that are candidates for technical assistance and for imposing sanctions. At least 75 percent of the funds set aside for performance incentives must be related to these measures and the out-of-school youth and assisted employer-benefits criteria, in accordance with section 106(b)(7)(E). 2. Cost standards cannot be used for incentive award purposes. However, States are reminded of the integral role of financial reviews in program management. States are encouraged to explore ways of relating overall costs of job training to more direct measures of long-term employment, earnings and reductions in welfare. Incentive policies may include adjustments to incentive award amounts based upon factors such as grant size, additional services to the hard-to-serve, intensity of service, and expenditure level. 3. A Secretary's standard for service to the hard-to-serve, as required by section 106(b)(7)(B) of JTPA, has been established in the form of a stand-alone eligibility criterion ("gate") for incentive awards. In order for an SDA to be eligible to receive any incentive award, at least 65 percent of both the SDA's (a) Title II-A AND (b) Title II-C (in-school and out-of-school youth combined) participants receiving training and/or other services beyond objective assessment must be hard-to-serve. The definitions of hard-to-serve are to be consistent with the definitions in sections 203(b), 263(b), and 263(d) of the Act. For the purpose of determining compliance with this requirement, Governors are to include any SDA-defined barriers that have been approved by the Governor, as well as the characteristics of participants in school-wide projects under section 263(g) and participants in five percent-funded projects. 4. For those SDA's that successfully "pass through" the gate, three criteria (in addition to any funds set aside for Governors' standards) will determine the amount of the incentive award: 1) exceeding the Secretary's performance standards, 2) providing quality service to out-of-school youth, and 3) placing participants in employment that provides employer-assisted benefits. - The definition of "employer-assisted benefits" is to be consistent with the SPIR definition (see Attachment). For the purposes of reporting and performance standards, fringe benefits count so long as they are an acknowledged component of employment conditions, whether actually received at the time of placement or not. Thus, State incentive policies will be structured to include benefit information for those participants who entered employment at termination, and Governors will have considerable latitude in implementing this incentive policy requirement. 5. Consistent with present DOL policy, SDA's that pass through the "gate" and exceed all six of the Secretary's Titles II-A and II-C standards must receive an incentive award. 6. Determination of an SDA's failure to meet these standards and the consequent imposition of technical assistance and reorganization requirements under section 106(j) will be based only on the Secretary's Title II-A and Title II-C core measures. - "Meeting Performance Standards" overall is defined as meeting at least four of the six core standards, one of which must be a youth standard. Conversely, overall "Failure" is defined as failing any three (3) or more of the core standards or failing both youth standards. Definitions for meeting and failing individual standards will be established by Governors. - Failure for the first year precludes an SDA from receiving any incentive awards and requires Governors to provide technical assistance to the underperforming SDA. - Failure in the second consecutive year precludes an SDA from receiving any incentive award and requires Governors to impose a reorganization plan. 7. Section 106(j)(3) requires each State to report to the Secretary, not later than 90 days after the end of each program year, the actual performance and performance standards for each SDA within that State. Within the same timeframe, technical assistance plans developed by the State are required for each SDA "failing" for the first year. A 90-day timeframe also applies to the imposition of a reorganization plan, which is mandatory when an SDA "fails" for a second consecutive year. Specific procedures for the formal performance standards report and required State action will be provided under separate cover. However, in addition to the formal annual process, there should be ongoing oversight of SDA performance and continuous technical assistance and capacity-building aimed at addressing areas where program performance can be improved. In addition, the Employment and Training Administration will initiate a national JTPA Report Card that will highlight programs showing the greatest returns on their human resource investments in terms of high-quality employment (type of job, wages and fringe benefits) for those participants most at-risk of failure. Further information on the content and procedures for preparing the "report card" will be provided separately. 8. Governors must specify in the GCSSP their incentive award policy under sections 202(c)(1)(B) and 202(c)(3)(A) and imposition of sanctions policy under section 106(j). It is recognized that the timing of this issuance may have precluded some States from submitting complete incentive policies with their PY 1994-95 GCSSPs. States are to provide as much information as possible in compliance with required due dates and submit a GCSSP amendment containing complete information no later than August 31, 1994. 9. In PYs 1994 and 1995, Governors will continue to have the authority to exclude pilot projects serving "hard-to-serve" individuals funded from the 5 percent incentive fund set-aside in computing their standards and actual performance. States and SDA's are encouraged to use such funds to develop or replicate model programs serving out-of- school youth, particularly those based on contextual learning models. NOTE: For those SDA's in which "incentive projects" are indistinguishable from those that provide general training, these programs would not be considered exempt from performance standards. State Action: States are to distribute this Guidance Letter to all officials within the State who need such information to implement the new performance standards policies and requirements for PYs 1994-1995. It is especially critical that States, State Councils, Private Industry Councils and SDA operational staff become thoroughly familiar with the new provisions concerning incentive and sanctions policies.

Authorities and References: Training and Employment Guidance Letter (TEGL) No. 3- 98, WtW Planning Guidance and Instructions for Annual State Plans and Planning Allocations for FY 99, dated July 30, 1998. Background: TEGL 3-98 provided States with Planning Guidance and Instructions for Annual State Plans. It specified that the deadline date for states to submit State Plans is March 31, 1999. This TEGL change extends that deadline. New Deadline for Plan Submission: States must submit their FY 99 Annual Plans no later than June 30, 1999. All other guidelines set out in TEGL 3-98 still apply. Action: States should provide this guidance to appropriate staff for the preparation and submission of the FY 99 WtW Annual State Plans.