In the only DOL hearing expected before House Appropriators this year, Secretary Elaine Chao testified before the House Labor-HHS Appropriations Subcommittee yesterday on the President’s FY 2007 budget request, which proposes cutting funding for WIA and the Employment Services by $680 million. Chao received strong criticism about the proposed budget cuts from the Ranking Democrat David Obey (D-WI) and Patrick Kennedy (D-RI) in particular, questioning whether if Americans want to be able compete in the global economy cutting core funding for workforce was the right choice to make. Chao told Members that it is a matter of interpretation as to whether she was in fact really proposing budget cuts, as she claimed there is $1.2 billion in unexpended WIA formula funding available to states and localities. Chao consistently used this “carryover” funding argument as the justification for her proposed funding cuts.

Chao’s assertion that there is excess carryover is not a new one, as she has used this argument as a justification for the funding cuts in each of her five years as Secretary. While the GAO and the local system have been successful in both WIA reauthorization, and with appropriators in the past debunking the Secretary’s allegations that there is excess carryover, it is clear that Members of the Subcommittee will be reviewing this issue thoroughly as they make funding decisions for the upcoming fiscal year.

Chao also discussed her proposal for Career Advancement Accounts, describing them as modeled after Pell Grants. Chairman Regula (R-OH) asked a number of questions about the CAA proposal, inquiring about the potential for abuse and lack of accountability as well as the impact of her budget proposal on One Stops. Chao claimed that CAA’s would not replace One Stops, rather One Stops would be the points of access for participants to receive CAA’s. She described One Stops as a valuable component of the workforce system, but did not describe how they would be paid for in her budget proposal, which would limit all non-training formula funding to 22% of overall funding.

Appropriators tell NWA that they expect to mark up their bill based on current law, rather than DOL’s new WIA reauthorization proposal featuring CAA’s. Senior Members of the Subcommittee have significant questions about the CAA approach that were not changed by Chao’s testimony. However, it is clear that we will be in a yearlong fight over funding for our programs.

Members of Congress returned to their districts yesterday for a one-week recess. This period will be a critical one, as Members need to hear constituent opposition to deep funding cuts in key domestic programs, such as WIA, that are contained in the President’s budget request. This grassroots opposition could have a dramatic impact on the budget process this year as Republican moderates in particular are very wary of the President’s budget, feeling that it has overreached with severity in some of the cuts, particularly in education and health programs. A number of Members have expressed concern to NWA that this budget could doom the reelection prospects of a number of Members in close races. As a result, there is a better chance that the Budget Resolution can be defeated this year because a Member’s reelection hopes will likely trump Republican Party discipline.