Budget Analyst Workforce Development Audit:
Human Services Agency Response
Submitted August 1, 2007

The Human Services Agency (HSA) welcomes the opportunity to comment on the Budget Analyst's audit of San Francisco's workforce development system. This response is divided into three sections:

• Section I places the Budget Analyst's report in context by providing an overview of the evolution and current day role of HSA in the City's workforce development system.

• Section II comments generally on broad issues raised in the Budget Analyst's report.

• Section III responds specifically to the Budget Analyst's recommendations.

I. Context for the Budget Analyst's Report

Human Services Agency's Role in the Workforce Development System

In 1996, Congress passed the most significant piece of welfare reform legislation in decades, which eliminated the entitlement to cash assistance and replaced it with a time-limited benefit contingent upon participation in work activities. This shift in philosophy had a dramatic impact not only on participating low-income families but also on HSA. Under welfare reform, HSA was transformed from an agency that merely determined eligibility and dispensed cash grants, thus perpetuating a lifestyle of dependency for welfare recipients, to one that focuses on developing strategies to help low-income people find employment and transition to self-sufficiency.

HSA's role in the City's workforce development system has been shaped principally by the requirements of federal welfare reform, the needs of low-income clients, and the locally supported premise that scarce resources for employment services should be targeted to those with the most barriers to employment.

Welfare reform and the passage of the Workforce Investment Act shortly thereafter led states and localities to rethink the relationship between their welfare and workforce systems, and many moved toward closer integration of the two. HSA's integrated model reinforces the philosophy that welfare services should provide a helping hand rather than an handout by marrying benefit eligibility and case management functions with the development of employment plans and the provision of supportive services that enable work. Over the past decade, HSA has made considerable progress toward designing and operationalizing a system that integrates the welfare and workforce development systems and achieves the goals of both.

HSA is uniquely positioned among City departments to most effectively deliver employment services in conjunction with income support and supportive services to low-income San Franciscans with multiple barriers to employment. Low-income clients benefit from the co-location of the City's welfare and workforce development agencies, which affords easy access to a broad range of services under one roof, facilitates service coordination, and enables targeting of work supports to those who need them most. Over time, HSA has tried to created synergies between its employment and other programs, tailoring them to ensure that clients have the full range of services needed to secure and retain a job (child care, transportation, mental health services, substance abuse treatment, stable housing, etc.).

The Agency reorganized itself several years ago to create a Workforce Development Division (WDD) that oversees the provision of services such as vocational assessment, work readiness, vocational training, job search and job retention to low income and special needs clients. Those clients include nearly 2,000 CalWORKs recipients, nearly 2,000 single indigent adults in the Personal Assisted Employment Services (PAES) program, over 20,000 Food Stamps beneficiaries, refugees, homeless individuals and foster youth. Additionally, employment and training specialists within the CalWORKs and PAES program develop and monitor welfare recipients' employment plans, which are required in order to continue to receive cash assistance. WDD staff work in close partnership with the welfare case workers to monitor clients' engagement in mandated work activities and to identify and quickly address problems that could interfere with continued participation. This coordination is paramount to client success.

HSA's concerted effort to shift the emphasis of its welfare programs to work and self-sufficiency has demonstrated positive results. San Francisco's welfare rolls were cut roughly in half in the first six years of implementation. Employment outcomes for HSA-administered programs are also positive; two of our largest employment initiatives have a combined job placement rate of over 70%. These successes are due to both the programmatic alignment of welfare and employment services discussed above, and to the fact that HSA is able to reach and effectively assist individuals with multiple barriers to employment. Receipt of cash assistance may be the hook that initially draws these individuals to connect with the system, but participation in a work plan and access to pre-and post-employment services help them to stay connected and succeed in the transition to self-sufficiency. Childcare, transportation, food assistance, housing, behavioral health services, and health coverage - all of which are provided through HSA and can be accessed through the One Stop System - are inextricably linked to positive employment outcomes.

Disconnecting the delivery of workforce and supportive services would represent a step back toward the old welfare model that the Agency has worked so hard to move beyond. HSA would return to being a 93welfare department94 rather than a 93work support agency94 for its low-income clients. This would be particularly problematic given that the federal government recently imposed stricter requirements on states and counties to increase the work participation rate of CalWORKs recipients. As a result, San Francisco must move 1,049 additional families into work activities. Severing the programmatic linkages between welfare case managers and WDD services would jeopardize San Francisco's ability to meet the new mandate, expose the City to risk of financial sanction, and result in poorer outcomes for low-income clients.

II. General Comments on the Budget Analyst's Report

One Stop System

The Budget Analyst fails to properly distinguish between the One Stop Centers and the One Stop System. While HSA is the lead agency responsible for operating the One Stop Career Centers, it is important to understand that the One Stop System is just that: a system comprised of numerous mandated partners, including the community college district, the State Employment Development Department, the State Department of Rehabilitation, community-based organizations and local businesses. HSA and the One Stop Career Centers have never been solely charged with providing the full continuum of One Stop services (core, intensive, training); the Office of Economic and Workforce Development, state agencies and various subcontractors all share these responsibilities. Additionally, the Budget Analyst's report at no point discusses the central role of employers in meeting the objectives of the City's workforce system, unfairly placing full responsibility for achieving job placements on City departments. While HSA believes that it should retain responsibility for operating the One Stop Centers, the Agency concurs with the Budget Analyst's position that responsibility for overseeing and directing the system as a whole should reside with the Office of Economic and Workforce Development and Workforce Investment San Francisco.

The Budget Analyst also fails to note the extent to which nondiscretionary social service funding streams have been leveraged to bolster the City's workforce development system. The Workforce Investment Act's (WIA) One Stop System mandate is a broad one, but the allocation of federal resources has not matched its expansive vision. HSA's budgeted WIA allocation for One Stop operations in FY 07-08 is $889K, a mere fraction of the Agency's total $13.6M budget to support the One Stop System. The ability to spend at this level without significantly draining the City's General Fund is possible only because HSA brings substantial amounts of social services funding to the table. Specifically, HSA draws down state and federal reimbursement to offset over two-thirds of the administrative expenses of its Workforce Development Division, and leverages state and federal social service subventions to support workforce development objectives. While HSA is supportive of efforts to better coordinate the disparate funding sources that flow into the workforce development system, many of these sources can only be used legally to serve HSA's low-income clients.

Outcome Data

In most instances, HSA does not disagree with the outcome data in Section 4 of the Budget Analyst's report, but does feel that the data should be presented with a caveat. Program completion and job placement rates are very difficult to calculate because program years do not coincide with fiscal years. Completion rates are understated because the calculation does not exclude clients that are still in the process of completing a program, and contracted programs are given at least three months to place clients in jobs after they complete a program. As a result, annually calculated rates such as those used by the Budget Analyst are skewed: they will include some job placements resulting from program enrollments in a prior year and some enrollments that cannot be expected to result in placement until a subsequent year.

In one instance however, HSA believes that the Budget Analyst's calculations give a faulty depiction of the department's outcomes. The Budget Analyst erroneously equates the total number of One Stop enrollments (13,157 clients) with the number of clients directly served by HSA's Workforce Development programs. The One Stop 93enrollment94 number is the unduplicated count of individuals who visit a One Stop Center. The vast majority of these individuals do not enroll in job training or job placement program. Some visitors may come only once to look at job postings, use the One Stop computers, or use the copiers and fax machine. Others may come to visit one of the agencies co-located at the center (e.g., Deaf Services, State Department of Rehabilitation, Family & Children's Services) for reasons entirely unrelated to employment services.

Because a much smaller subset of One Stop visitors receive 93intensive services94 from HSA, we believe that that number (instead of 13,157) should be used in the denominator when calculating the overall job placement rate. The year-end FY 06-07 One Stop Business Services Report shows that 4,273 universal job seekers were assisted by HSA Workforce Development Division staff through the One Stop, of whom 2,054 were placed, for a placement rate of 48%. While these are the best numbers currently available, it must be noted that they reflect only those job placements documented by the One Stop System. Many other One Stop visitors likely found jobs on their own without direct assistance from HSA staff. Moreover, only a portion of the clients who receive direct HSA employment services are captured in the One Stop tracking system, so these numbers do not present a complete picture.

On a related topic, the Budget Analyst calculates job placement rates in two different ways: by taking the number placements as a percent of total clients enrolled in an employment program (e.g., Table 4.8) and as a percent of the total clients who completed an employment program (e.g., Table 4.9). While HSA agrees that it is important to track both the program completion rate for all enrolled clients and the job placement rate for all clients who complete a program, we feel that the method used to calculate job placement rate in Table 4.8 and elsewhere results in a misleadingly low rate.

Additionally, HSA strives to achieve a number of client outcomes that must be attained prior to job placement, none of which are mentioned by the Budget Analyst despite the fact that they are inextricably linked to positive employment outcomes. These include housing stability, stable childcare, remediation of mental health, substance abuse, domestic violence and language barriers.

Costs Per Client

The Budget Analyst calculates a cost per client served by HSA in-house programs and a cost per job placement for HSA in-house programs, in both instances using the 13,157 One Stop visitors as the denominator. HSA does not believe this is an accurate calculation due to the fact that only a small portion of these clients received direct employment services (see discussion above) and due to the fact that actual program spending may differ significantly from budgeted expenditures. HSA would also advise against using this figure as a basis of comparison for costs incurred by community-based contractors.

Section 2 of the Budget Analyst's report suggests that workforce development services and funding are distributed inequitably across City neighborhoods and among City residents. The report also states that, 93planning for and providing services in specific City neighborhoods is not based upon a Citywide plan, or funding formula based on need, but rather each department's preferences or the availability of community-based organizations to provide services.94 HSA believes these conclusions are largely unfounded for the following reasons.

First, the analysis of the distribution of contract dollars in Table 2.1 is based on the location of contractors' administrative offices, not the neighborhoods served. Many contractors serve residents from multiple neighborhoods or citywide.

Second, the majority of HSA's workforce development funding comes from the CalWORKS and Food Stamps Education & Training programs and can only be used to serve clients who meet the eligibility criteria for those programs. These are federally restricted funding sources that all eligible San Francisco residents are entitled to be served by, regardless of what neighborhood they live in.

Third, HSA's One Stops were located in the Mission and the Bayview because they are two of the neighborhoods with the highest concentrations of poverty in San Francisco and presumably have the largest number of residents who could benefit from workforce development services.

Section 5 of the report refers to the First Source 93hiring requirement.94 The First Source Ordinance includes no requirement to hire by employers. The requirement is that employers post positions and give first right of referral by the "workforce system" for entry-level positions. This is an important distinction.

The Budget Analyst also suggests that many City contractors are not complying with the Ordinance. While this may be true in some instances, it should also be noted that the First Source requirement may be waived for employers that have a contract with the City above the Chapter 83 threshold. For example, there are many City contracts with out-of-state vendors who do not operate local offices. There are also many vendors who do not have open and available entry-level positions during the course of their contract.

III. Response to Specific Recommendations in the Budget Analyst's Report

HSA is in agreement with all of the Budget Analyst recommendations with the exception of those discussed below.

2.3 Workforce Investment San Francisco, with the support of the Director of the Department of Economic and Workforce Development, should as part of the development of an annual work plan and budget, develop standard
performance and outcome criteria for City workforce development programs.

4.1 The Director of the Human Services Agency should evaluate the breadth of workforce development programs and services available to Personal Assisted Employment Services participants, and if necessary, restructure the Personal Assisted Employment Services program to de-link Welfare-to-Work employment activities associated with the CalWORKs program in order to ensure that workforce development opportunities for Personal Assisted Employment Services clients are not being unnecessarily constrained by the CalWORKs regulatory framework.

4.4 Develop a more robust standard for what constitutes a successful client placement. At minimum, placement should have some established standards with respect to job quality, employment duration, and potential for upward mobility in order to properly evaluate and compare the effectiveness of various in-house and contracted workforce development programs in facilitating client self-sufficiency.

4.5 The Director of the Human Services Agency should re-evaluate the continued utility and cost-effectiveness of using community-based organizations to provide workforce development training to Human Services Agency clients. At minimum, the Human Services Agency should reassess each organization's capacity to meet specified performance goals and hold low-performing community-based organizations accountable for failing to meet contractual obligations.

5.2 The Board of Supervisors should assign First Source Hiring Program policy oversight to the Department of Economic and Workforce Development.