GWB's 2004 budget

The following is President Bush's fiscal 2004Budget
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On Feb. 3, 2003, President Bush delivered a $2.2 trillion FY 2004 budget to Congress. In addition to $1.20 trillion proposed for mandatory programs such as Social Security and Medicare, the budget calls for $819 billion in discretionary outlays, with nearly half going to national defense. The remaining $429 billion in discretionary outlays is for the many other programs working families rely on, such as public safety, job training and worker protections, education, housing, transportation and environmental protections. The Department of Labor is slated to receive $11.5 billion in discretionary funding ($56.2 billion altogether) to enforce the nation’s worker protection laws. This is a drop of one-half percent from FY 2003 proposals and 6.5 percent less than the actual FY 2002 appropriation.

The Bush Administration's
FY 2004 Budget

•	Medicare Prescription Drugs
•	Individual Health Care Tax Credits
•	Individual Savings Account Proposals
•	Worker Safety and Health Programs
•	International Labor Affairs Bureau
•	Worker Training and Employment Programs
•	International Humanitarian and Development Aid
•	Social Security Administration
•	Employee Benefits Security Administration
•	Proposed Medicaid Block Grant
•	Programs to Audit, Investigate and Prosecute Unions
•	Wage and Hour and Equal Employment Opportunity Enforcement Funding
•	Education Proposals
•	Shortchanging the States
•	Treatment of Federal Employees

Missing from the president’s budget is any serious recognition of the economic downturn the nation has undergone or the severe budget crisis facing the states and the steps necessary to return to robust and sustained economic growth. The budget fails to invest in what matters most to American families: It does nothing to rebuild and modernize schools, improve transportation and transit systems and infrastructure, build and refurbish the nation’s drinking and wastewater systems and patch the holes in our internal homeland security framework. It does nothing to stem the relentless loss of jobs and capacity in our nation’s manufacturing sector or address the urgent need to restore our industrial base. It does nothing to create good jobs. And it provides no meaningful solutions for the nation’s crippling health care crisis, which for working families means higher costs, less coverage and inadequate quality of care.

Even where the president’s budget seeks new funds for critical neglected priorities, the approach to solving problems is deeply flawed and the conditions the president imposes on funds are unfair and counterproductive. The resources he seeks fall well short of need—a direct result of the president’s overriding goal to restructure the tax code and wring from it trillions in tax breaks for the very wealthy. The long-term consequences of the president’s tax plans and priorities are disastrous for the nation, making future deep cuts in family-supporting programs and benefits likely and saddling our children with crippling debt.

In short, the president’s FY 2004 budget fails America’s families in crucial ways:

	Medicare prescription drugs ($400 billion over 10 years). The president has proposed a plan for Medicare prescription drugs that is unfair, inadequate and uncertain. It is deeply unfair to require seniors to give up their doctors in order to get these life-saving benefits. It is misguided and counterproductive to bypass Medicare and entrust prescription drug coverage to the same private insurers that have failed miserably to maintain affordable health care coverage for the nation’s seniors. And it is wrong to skimp on monies needed to provide a solid, comprehensive and affordable drug benefit in order to free up billions in resources to pass along another huge tax cut to the very wealthy.
	Medicaid assistance for the states ($12.7 billion over seven years). Cash-starved states desperately need federal assistance to meet the health care needs of vulnerable low-income children, families, seniors and people with disabilities. But at a time when states face their worst budget crisis in 50 years and virtually every state is grappling with serious Medicaid shortfalls, the president is wrong to limit extra Medicaid funding to states that restructure their programs in ways that are likely to cut health care protections and increase costs for vulnerable Americans. It is unfair for him to skimp on the amount of relief available even to these states, proposing only $3.3 billion in FY 2004. It is duplicitous to suggest that the president’s proposal is real relief when the administration plans to reduce Medicaid assistance in the future. And it is unfair and unjust to move toward ending the federal entitlement to health care for the poor.
	Tax code restructuring ($31.1 billion in FY 2004; $614.5 billion over 10 years). During economic downturns, it makes sense to reduce tax burdens on low- and moderate-income families that will spend their extra income in ways that boost the economy. But the president is wrongly using the economic crisis as a smokescreen to rationalize further tax cuts for the very rich and to alter the tax code radically, shifting liabilities away from investors and the wealthy and onto average workers and their families. The president’s plans are deeply unfair: Under Bush's 2004 fiscal year budget tax proposals, households averaging $1 million would get 33 percent of the tax cut, according to an AFL-CIO analysis. But while the rich get richer, the bottom three-fifths of households would receive a mere 8.5 percent of the tax cut benefits. And it is fundamentally irresponsible for the president to gouge present and future budgets—and the programs working families rely on—in order to provide these whopping tax breaks for the very wealthy. The 2001 tax changes alone account for one-third of the startling transformation of the $5.6 trillion 10-year surplus projected in January 2001 to a $1.2 trillion deficit.
	Personal Re-employment Accounts ($3.6 billion over two years). The president’s proposed Personal Reemployment Accounts (PRAs) are the wrong answer to a serious problem—the significant rise in long-term joblessness. Additional funds to help meet the job training, job search and income support needs of unemployed workers are long overdue. But the president’s proposal completely ignores 1 million unemployed workers who already have run out of all unemployment benefits and still cannot find work in an economy that produces only one job for every 2.5 job seekers. Rather than pump billions into an entirely new and untested initiative, Congress should devote these new funds to improving existing job training and unemployment insurance programs. Far from being a real benefit for unemployed workers, the proposed PRAs are yet another example of the administration’s overarching goal to eliminate basic federal safety net programs, converting them to privatized systems in which individuals bear all the risks. It is cynical to tout the PRA proposal as one that provides “choice” and “flexibility” when it leaves out the long-term unemployed, requires workers to pay for services that have been free and caps the benefits they can receive.
	New retirement and education savings accounts. It is right to help individuals and families save for retirement and education, but the new savings accounts the president proposes offer no real assistance to most Americans, who can afford to save very little. Instead, the plan is one more way to give the wealthy additional options for stashing away tens of thousands of dollars in tax-sheltered savings accounts each year. It is misleading to rely on budget gimmicks to pretend these accounts raise revenues when their long-term costs overwhelm any short-term and temporary savings. And it is extraordinarily irresponsible and extremely damaging to blow yet another huge hole in future budgets, undermining our ability to invest in America and saddling our children with enormous debt.

Medicare Prescription Drugs

Bush Administration’s Proposed 2004 Budget

Medicare Prescription Drugs

Medicare—the federal health insurance program for seniors and people with disabilities—currently provides benefits to more than 41 million individuals. Medicare Part A covers inpatient care, skilled nursing facility care, some home health care and hospice care. Part B (traditional fee-for-service Medicare) covers outpatient care but has no prescription drug coverage. Part C (Medicare+Choice) gives beneficiaries the option of using managed care plans and often includes a drug benefit.

Nearly two-thirds of seniors currently lack any drug coverage for their staggering prescription drug bills. The administration proposes to address this crisis and to modernize Medicare by spending $400 billion over the next 10 years to create a prescription drug benefit within the Medicare+Choice program. In addition, the administration seeks to improve the floundering Medicare+Choice managed care program by increasing competition among participating health plans.

The administration’s Medicare approach is deeply flawed and falls short of meeting seniors’ pressing needs.

	The president’s plan requires seniors to leave the doctors they chose to get the drugs they need. The president’s plan forces seniors to leave the Medicare coverage they trust and turn instead to profit-motivated Health Maintenance Organizations (HMOs) for both their drug coverage and their basic health care. That means insurance executives rather than Medicare would decide how much to charge and what to offer.
	Despite the promises made to provide assistance to all Medicare beneficiaries, many millions will not get help with their drug costs under the president’s plan. Almost two-thirds of seniors nationwide have no prescription drug coverage, but the president’s plan will help only those who sacrifice their traditional Medicare coverage and switch to managed care plans.
	The president’s plan relies on a failed experiment with the private insurance market. The administration is not guaranteeing all seniors a real drug benefit. Rather, it is holding a drug benefit hostage to privatizing Medicare. Experiments in relying on the private insurance market to protect Medicare beneficiaries through the Medicare+Choice program have failed. More than 2 million seniors have been stranded as HMOs have withdrawn from the program since its inception in 1997. In addition, these plans are virtually nonexistent in rural areas and are notorious for avoiding seniors with health problems.
	Far more than $400 billion is needed to provide a meaningful drug benefit to seniors. According to the Congressional Budget Office’s newest projections, the cost of outpatient prescription drugs for Medicare beneficiaries over the next 10 years (2004-2013) will total $1.84 trillion.
	The president’s plan does not reduce cost pressures on employers that provide drug coverage for their retirees. A key design feature of any drug plan is whether and to what extent it provides cost relief to existing employer health plans that provide prescription drug coverage to retirees. Although very few specifics have been shared with the public on the administration's plan, if it tracks last year’s Republican congressional proposals, it will not provide any such relief because employer contributions do not count as payments that trigger Medicare coverage.
	Despite the deceptive claim that seniors will have choices like those of federal employees, no senior will get even close to the benefits that members of Congress get today. Under the president’s plan, seniors will pay more out of pocket before any coverage kicks in, and then they will pay a higher share of the costs until coverage ends entirely. Only those with the highest out-of-pocket costs—reportedly $5,500—will see their coverage be restored. For example, a senior with $400 a month in prescription drug bills would see her coverage end in August, leaving her with no assistance for five months of bills even while she is paying premiums. No member of Congress has such a “gap” in his or her coverage.

Individual Health Care Tax Credits

Bush Administration’s Proposed 2004 Budget

Individual Health Care Tax Credits

More than 41 million Americans are uninsured. The administration’s flagship FY 2004 budget proposal to address the lack of insurance is a refundable tax credit for the purchase of health insurance, costing $89 billion over 10 years. Maximum benefits under the Bush plan are available only to individuals who earn $15,000 or less per year (in modified adjusted gross income) and who have no dependents, and to all other filers with $25,000 or less in income. The maximum credit percentage is 90 percent of the policy premium up to $1,000 per adult and $500 per child for up to two children only.

Costs of Bush Health Insurance Tax Credit ($ in billions)

	FY 2004-2008 Cost	FY 2004-2013 Cost
Health Insurance Refundable Tax Credits	$34	$89.2

The administration’s health insurance tax credit proposal fails the uninsured. The proposed premium credit assistance ignores the high costs of individual polices and the difficult circumstances facing those most in need. According to a 2002 study by the Center for Studying Health System Change, premiums for individual policies ranged from $1,452 a year for a young adult (age 18 to 29) in excellent health to $3,276 per year for an early or near retiree (age 55 to 64) in poor health. Under the Bush plan, an individual who had $20,000 in annual income and no dependents would be eligible for a $556 premium credit, only slightly more than one-third the cost of the least expensive policy.

It is important to keep in mind that the premium rates cited above reflect premium levels in 1998-1999 and health insurance costs have grown substantially since then. Last year alone, premiums for single coverage under employer plans rose 27 percent and for family coverage they increased 16 percent. Furthermore, in many cases individuals in poor health or with particular health conditions cannot find an insurer to sell them policies or coverage exclusions for their conditions are built into the policies. Some are forced to turn to state-organized high-risk pools, which may offer a way to acquire coverage but at exorbitant rates.

The Bush tax credit proposals also threaten to undermine job-based coverage for low- and moderate-income workers. If young, healthy workers believe they can find adequate coverage with the tax credits, they may abandon employer-sponsored plans. As a result, employers’ risk pools would dry up and lead to higher per-worker insurance costs for those who remain. Some employers—especially those with predominantly low-wage workforces—may eliminate their health insurance plans altogether and urge their workers to rely on the Bush premium credits even though they may be inadequate.

Individual Savings Account Proposals

Bush Administration’s Proposed 2004 Budget
Individual Savings Account Proposals

The Bush administration is proposing to create Lifetime Savings Accounts (LSAs) that would hold savings for any purpose and Retirement Savings Accounts (RSA) for retirement savings. The administration also is proposing to create an Employee Retirement Savings Account (ERSA) to replace all existing 401(k)-type plans that accept employee pre-tax deferrals and after-tax contributions. In addition, the administration would eliminate and modify existing retirement benefit linkage rules that limit how much highly paid workers can contribute to job-based plans, depending on how much rank-and-file workers benefit from the plans.

	Individual Savings Accounts
	Current Law	Bush Proposal
Types of Accounts	Deductible, nondeductible and Roth IRAs	Lifetime Savings Accounts (LSAs) Retirement Savings Accounts (RSAs)
Contribution Limits	Up to $3,000 per individual for all IRAs combined in 2003 (increasing in steps to $5,000 in 2008), and $3,500 for individuals 50 and older (increasing in steps to $6,000 in 2008); limit depends on earned income, total income and/or job-based retirement plan coverage	Up to $15,000 combined: $7,500 per individual for all LSAs combined in 2003 and up to $7,500 per individual for all RSAs combined in 2003. No income or earnings limits on LSAs. A couple could contribute up to $30,000 in 2003. Like IRAs, RSA contributions would be limited to compensation includible in gross income if less than $7,500. Individuals would be permitted to convert some existing tax-deferred accounts into LSAs and RSAs if tax were paid on tax-deferred contributions to the existing accounts. (Also, Roth IRAs would automatically become RSAs.)
Tax Treatment	Deductible IRA contributions are deductible and distributions are taxed as ordinary income. Nondeductible IRA contributions are not deductible and account earnings are taxable as ordinary income at distribution. Roth IRA contributions are not deductible, but all distributions are completely tax free.	Contributions to LSAs and RSAs are not deductible but distributions are completely tax free.

	The administration’s proposal represents an enormous expansion of tax-favored savings accounts. An individual would be permitted to contribute up to five times more to these new accounts than can be put into a Roth IRA under current law—$15,000 combined into an LSA and an RSA—compared with $3,000 to a Roth IRA. That is more than a minimum-wage worker grosses in a year. Combined with the limit on what a worker can contribute to a 401(k) account—$12,000 in 2003 and rising to $15,000 by 2006—the total cap on tax-advantaged savings approaches what a typical year-round, full-time worker takes home in a year.
	The administration’s proposal sets up an enormous budget trap with costs that will explode outside of the budget window at the very same time the costs of Baby Boomer retirements begin to hit home. The LSA/RSA proposal raises revenue in the short-term because it allows individuals to convert existing tax-deferred accounts into the new plans by paying taxes on any tax-deferred contributions and effectively diverts future contributions away from tax-deferred accounts. However, virtually all of these savings are wiped out in the four-year period from 2009 to 2013, and the revenue costs explode thereafter.
	Increases in the contribution limits for tax-favored savings accounts are a give-away to individuals who already are saving, not a tool to get more people to save. Few people contribute to any IRA today. Busting the limits on contributions will not increase the numbers. Instead, it will lead people who already are saving to shift money into these new accounts so they can reap the tax benefits.
	The LSA and RSA proposals actually may reduce retirement plan coverage at small businesses. Some business owners will find the combined couple contribution limit of $30,000 for LSAs and RSAs more attractive than an employer-based plan in which contributions might have to be made for their employees.
	The administration’s so-called proposals to “simplify” employer defined-contribution retirement plans include a number of provisions that would gut existing taxpayer protections requiring benefits to accrue to rank-and-file workers, not just highly paid employees.

Worker Safety and Health

Bush Administration’s Proposed 2004 Budget
Worker Safety and Health Programs

President Bush’s FY 2004 budget contains mixed news for worker safety and health programs and protections. At the Department of Labor, the administration has proposed a budget for the Occupational Safety and Health Administration (OSHA) that seeks to implement cuts proposed in FY 2003, thus far rejected by Congress. The proposed funding for OSHA—$450.0 million—is less than the $462.3 million approved by the Senate in the Omnibus Appropriations Bill for FY 2003 and would cut 77 positions. Reductions are targeted at safety and health standard setting, enforcement and training and education for workers, while increases are proposed for compliance assistance.

For the Mine Safety and Health Administration (MSHA), a FY 2004 budget of $266.8 million is proposed. While this is an increase over what President Bush has sought in past years, it is less than the $271.8 million approved by the Senate in January. The FY 2004 budget proposes to increase MSHA staff by 70 positions over levels proposed in FY 2003, when reductions were proposed. The majority of these positions are earmarked for enforcement and compliance assistance activities in coal mining and metal/nonmetal mining. The 2,334 positions requested for MSHA in FY 2004 are 20 more than currently authorized (2,310 positions).

For the second year in a row, President Bush has proposed slashing the budget for the National Institute for Occupational Safety and Health (NIOSH). Under the proposal, NIOSH’s budget would be cut by $30.5 million from the current funding level of $276.5 million (under the continuing resolution) to $246.0 million. In January, the Senate voted to fund the FY 2003 NIOSH budget at $274.9 million.

In addition, the administration has failed to request any additional funds in the Centers for Disease Control (CDC) budget to fund programs and activities related to bioterrorism and homeland security. For FY 2004, the budget proposes $1,116 million for CDC bioterrorism activities, the same level proposed in FY 2003. No increase in funding is requested to implement the administration’s smallpox vaccination program that calls for the vaccination of 500,000 health care workers and 10 million first responders.

Occupational Safety and Health Administration (OSHA) ($ in millions)

Fiscal Year	Budget Request or Appropriation	Positions in FTEs
FY 2002 Enacted	$443,651	2,313
FY 2003 Request	437,000	2,233
FY 2003 Senate Omnibus	462,314	2,313
FY 2004 Request	450,000	2,236

	The FY 2004 budget proposal for OSHA, $450.0 million, seeks to implement cuts proposed by the Bush administration in FY 2003. Cuts have been targeted at safety and health standards development, federal enforcement, worker safety and health training grants and safety and health statistics. To date, Congress has rejected similar proposed cuts. In January, the Senate approved a $462.3 million budget for OSHA that included increases for most OSHA program areas.
	The budget proposes to cut OSHA’s staff by 77 positions over current authorized levels, reducing staff for federal enforcement (64), standard setting (10) and statistics (five) and increasing staff for compliance assistance (two).
	The budget proposes to increase funding for federal compliance assistance activities by $7.2 million over the FY 2003 proposal. This includes $5.2 million targeted to compliance assistance to employers and partnerships with a particular focus on non-English speaking and hard-to-reach workers and small businesses.
	The budget proposes to cut OSHA’s worker training and education program from $11.75 million to $4 million, as was proposed in FY 2003. Congress has rejected these cuts in the past, not only restoring the money but mandating that funds be spent to continue funding existing training programs. In January the Senate voted to fully fund the OSHA worker training and education program in FY 2003.
	The administration projects that only three final safety and health standards will be issued in FY 2004, even fewer than the four final standards slated for FY 2003. As the FY 2004 budget is issued, OSHA has failed to act to finalize important standards on tuberculosis and employer payment for personal protective equipment and has withdrawn more than a dozen important rules from the regulatory agenda.
	The proposed budget projects 37,700 federal OSHA inspections in FY 2004, the same level as FY 2003.
	No specific funds or activities are proposed to address ergonomic hazards or to implement the administration’s Comprehensive Approach to Ergonomics announced in April 2002. To date, the department has not issued any final ergonomics guidelines (a draft guideline for nursing homes was published for comment in August 2002), and has issued no general duty enforcement citations for ergonomic hazards.

Mine Safety and Health Administration (MSHA) ($ in millions )

Fiscal Year	Budget Request or Appropriation	Positions in FTEs
FY 2002	$254,768	2,310
FY 2003 Request	254,300	2,264
FY 2003 Senate Omnibus	271,841	2,310
FY 2004 Request	266,800	2,334

	The FY 2004 budget proposal for MSHA—$266.8 million—is an increase over current funding of $254.8 million, but less than the $271.8 million FY 2003 funding level approved by the Senate in the Omnibus Appropriations bill.
	For coal enforcement activities, an increase of $1.1 million over the president’s FY 2003 proposal is requested. However this request—$113.4 million—is less than the $117.8 million currently authorized and less than the $119.7 million approved by the Senate for FY 2003. The FY 2004 proposal requests 10 additional coal enforcement positions over the FY 2003 request. However, the proposed staffing levels for coal enforcement (1,086 positions) is still less than the number of positions currently authorized (1,141 positions).
	For metal/nonmetal enforcement activities, $66.4 million is requested, a $2.5 million increase over the president’s FY 2003 proposal of $63.9 million. Additional positions for metal/nonmetal enforcement and compliance assistance are also requested (622 positions requested, compared with 609 positions currently authorized).
	For MSHA’s standards development program, $2.3 million is requested, the same level requested in FY 2003 but less than the $2.4 million approved by the Senate in the FY 2003 Omnibus Appropriations bill.

National Institute for Occupational Safety and Health (NIOSH) ($ in millions)

Fiscal Year	Budget Request or Appropriation	Positions in FTEs
FY 2002	$276,460	1,428
FY 2003 Request	247,318
FY 2003 Senate Omnibus	274,899	1,428
FY 2004 Request	246,000

The FY 2004 budget proposes deep cuts in the NIOSH budget. Under the proposal, the NIOSH budget would be cut by $30 million, to $246.0 million from the current authorized level of $276.5 million. In FY 2003, the president proposed cutting the NIOSH budget by $28.5 million. The Senate rejected this cut when it included $274.9 million in the FY 2003 Omnibus Appropriations bill. Similarly, the House Appropriations Committee proposed funding NIOSH at a level of $275.2 million for FY 2003. The cuts in the NIOSH and worker safety and health research FY 2004 budget are proposed at the same time increases are being proposed for most other health research agencies.

Centers for Disease Control Bioterrorism Program

For FY 2004, the president has proposed $1,116 million for CDC bioterrorism activities, the same level proposed in FY 2003. No additional funds are requested to implement the administration’s smallpox vaccination program that began on Jan. 24, 2003, which calls for the vaccination of 500,000 health care workers and 10 million first responders. States have made clear that present funding levels are inadequate to administer the smallpox vaccination program, with resources being diverted from other public health programs. Moreover, no funds have been requested for the establishment of a compensation fund to compensate workers, family members or patients who suffer significant adverse reactions due to the smallpox vaccine, even though Health and Human Services Secretary Tommy Thompson has stated that the administration is working on establishing such a program.

International Labor Affairs Bureau

Bush Administration’s Proposed 2004 Budget
International Labor Affairs Bureau

The International Labor Affairs Bureau (ILAB) develops and promotes the Department of Labor’s key initiatives on issues such as protecting workers’ rights abroad, HIV/AIDS education and international child labor.

The administration proposes funding ILAB at only $12.3 million in FY 2004, a cut of a whopping $136.1 million from FY 2002. For FY 2003, the administration had proposed a budget for ILAB of $55 million, which in itself represented a cut of 63 percent. For FY 2004, the proposal is to chop the budget by a staggering 92 percent.

The administration’s proposal would effectively eliminate all programs currently being undertaken by ILAB. If this $12.3 million funding level holds, ILAB would be required to spend much of its FY 2003 budget developing and implementing close-out strategies on all existing programs and grants.

International Labor Affairs Bureau (ILAB) ($ in millions)

FY 2002 Actual	FY 2003 Requested	FY 2003 Omnibus Senate	FY 2004 Request
147.0	55.0	148.0	12.0

The administration proposes to eliminate all funding for ILAB’s bilateral and technical assistance programs.

	This would drastically weaken the International Labor Organization (ILO) program to promote its Declaration on the Fundamental Principles and Rights at Work, which reaffirms the universal right of all people to organize and bargain collectively, to refuse forced labor, to reject child labor and to work free from discrimination. The United States has been the largest contributor to this program.
	All Labor Department bilateral programs to strengthen the capacity of counterpart labor ministries around the world to enforce their own labor laws and meet international labor standards would be terminated.
	The ILO’s Child Education initiative and its International Program on the Elimination of Child Labor (IPEC) also would be decimated by these cuts. The U.S. contribution to these programs equals all other countries’ contributions combined.
	The administration proposes to eliminate virtually all support for international workplace-based education programs to combat HIV/AIDS.

These draconian cuts proposed in U.S. contributions to the ILO contradict President Bush’s own International Trade Agenda, released in May 2001. The administration’s agenda vows to “strengthen and raise the profile” of the ILO, “provide strong support” for the ILO and improve the ILO’s technical capabilities.

These cuts also undermine the administration’s ability to fulfill the objectives mandated by last year’s Trade Promotion Authority (TPA) legislation. TPA instructs the president to “promote universal ratification and full compliance” with the ILO Convention on eliminating the worst forms of child labor and also to “promote respect for” the core ILO standards. These objectives will be difficult or impossible to achieve without funding.

In sum, the administration’s budget proposals cripple recent efforts to promote the ILO’s core principles, combat AIDS, enhance the U.S. government’s capacity to monitor and report on labor issues around the world, combat the worst forms of child labor and provide education opportunities for child laborers.

Worker Training and Employment Programs

Bush Administration’s Proposed 2004 Budget
Worker Training and Employment Programs

Despite continuing economic hardship and record long-term joblessness, the administration’s FY 2004 budget fails those who most need help. The Congressional Budget Office estimates that in 2004, $7.557 billion dollars will be needed for training and employment programs to keep pace with inflation, but the administration’s budget calls for $717 million (10 percent) less, or only $6.840 billion. The administration’s Office of Management and Budget (OMB) tables (25-1) show that budget authority for training and employment has declined from $7.333 billion in 2002 to $6.840 billion as proposed on the FY 2004 budget, an overall decrease in training and employment funding of 7 percent since 2002.

In addition to constrained resources, the Bush budget proposes drastic changes to job training and reemployment programs that will promote devolution, reduce accountability and increase privatization and outsourcing of public employment service programs. The budget includes legislative proposals that call for radical changes in state and local governance structures as well as the allocation of employment and training resources that will further destabilize our nation’s workforce system.

The Labor Department budget contains no solutions for the long-term unemployed, including the million workers who have exhausted unemployment insurance. But it repeats last year’s proposal to cut employer taxes and transfer Unemployment Insurance administrative financing to the states, albeit with fewer resources, and also calls for creation of Personal Reemployment Accounts, which are likely to reduce rather than increase benefits for jobless workers.

The nation needs meaningful training, reemployment and unemployment insurance programs so jobless workers can support their families, find jobs or participate in training—not look for jobs that don’t exist or be forced into low-paying jobs that perpetuate cycles of unemployment and poverty.

Dislocated Worker Programs Under the Workforce Investment Act

Despite continuing hardship, increased unemployment and long-term joblessness, the administration proposes only level funding for Workforce Investment Act (WIA) dislocated worker programs in FY 2004 and, if legislation passes, the consolidation of dislocated worker programs into a single state block grant. Failing to boost funding for dislocated workers, especially during a period of downturn, results in declining services when workers need them most.

Fiscal Year Budget	Proposed Budget Amount	Actual Appropriations	Number of Unemployed Workers	Per Capita Budget Spending
FY 2001 (Clinton)	$1,770,510,000	$1,590,000,000	January 2001: 5.9 million unemployed	$300/worker
FY 2002 (Bush)	$1,383,000,000	$1,371,500,000 [1]	December 2001: 8.3 million unemployed	$166.63 /worker
FY 2003 (Bush)	$1,383,040,000	Not yet available	January 2002: 7.9 million unemployed	$175/worker
FY 2004 (Bush)	$1,383,040,000	NA	December 2002: 8.6 million unemployed	$160.81/worker

[1] Reflects a rescission of $177.5 million in FY 2001 Dislocated Workers Employment and Training

Block Grants for Worker Training and Employment Programs

The administration proposes consolidating adult dislocated worker funding under the WIA and Employment Service programs into a single block grant.

A historic function of federal job training funding is to target dollars to areas and individuals of greatest need. The adult WIA program allocates funding according to poverty levels to help communities with large numbers of economically disadvantaged workers. Dislocated worker funding is targeted to communities with high unemployment, and it also provides for state Rapid Response programs to intervene early with help for workers and companies in trouble. The result of the administration’s proposed block grants is to eliminate discrete programs that provide vital services to groups with special needs and could pit welfare recipients against unemployed workers in competition for limited funds.

In addition, far from bringing greater efficiency, as the administration claims, the actual costs to administer the employment and training programs may well rise under a block granted system if for-profit organizations contract for program administration.

A 1995 General Accounting Office (GAO) review of federal block grants found that:

	The focus and purpose of specific programs that block grants replace are lost;
	It is difficult to assure that block grants will target federal funds based on need;
	Block grants significantly reduce accountability for how federal funds are spent;
	Overall funding for block grants is greatly reduced from the level of funding the programs received before consolidation. Furthermore, the impact of federal funds is diffused when funds are provided in block grants.

The administration contends its goal is to give states more flexibility in using federal funds. States already have considerable discretion, however. Under the WIA waivers and work-flex program, states may apply to the Department of Labor for waivers of statutory and regulatory requirements. To date, 34 states have done so.

Eliminating the United States Employment Service

The administration also proposes to eliminate the 60-year-old United States Employment Service (ES), a federal-state partnership that provides assistance in matching job seekers with employers. ES also enforces the work test for Unemployment Insurance, ensuring that UI claimants are registered for and matched with suitable job openings. Additionally, the ES assists veterans, migrant and seasonal farm workers and other groups, performs alien labor certification and provides labor market information research.

Unlike private vendors, the ES places no restrictions on the employers or workers it serves. Any worker from a high school dropout to a Ph.D. and any firm from Microsoft to McDonald’s can request and receive free ES service. The ES is often the last resort for workers turned away from private placement agencies. The ES also occupies a unique position in the WIA One-Stop system, serving as the ideal entryway to One-Stop centers.

The administration proposes replacing the “honest broker” function of the ES with myriad organizations whose purpose will be driven by profit, not public service. The ES is supported by statutorily dedicated federal employer payroll tax funds that, under the administration’s plan, could be diverted to funding privatized or outsourced job placement services. This approach will undermine the principle of an unbiased, nonpartisan agency to administer job referrals and assist in the payment of UI benefits. It compromises adequate control over the uses of, and accountability for, federal funds from dedicated employer taxes. It undermines protections against breaches of confidential employer and claimant information and assurances that all services are provided in a nondiscriminatory manner.

Proposals to devolve and block grant the Employment Service threaten the very foundation of a national labor exchange that cannot be replaced with 50 state privatized operations nor be replaced by Internet job searches. The problems posed by such proposals are even greater now, when states face staggering budget gaps. As an example, in March 2002, states received a special distribution of federal unemployment insurance funds under the Reed Act to ease the pain of joblessness following the Sept. 11, 2001 terrorist attacks and provide an economic boost. The Reed Act funding came from the federal UI trust funds to pay for UI benefits or employment services. Employers lobbied the states heavily, however, to prevent spending from the funds on expanded UI benefits for workers or additional employment services. As a result, more states used the money to give employers tax breaks than to provide services for unemployed workers. States—and employers—are unlikely to respond any differently to ES block grants.

National Program Cuts

The administration seeks significant cuts in important national program activities, including:

	H-1B Training Programs: The administration will not seek to renew the
	H-1B training program, which created a $98 million training fund for U.S. workers, paid for through employers’ H-1B visa application fees. At the same time, the budget requests an increase of $49.5 million to expedite processing of permanent foreign labor certifications.
	Migrant and Seasonal Farm Worker Programs: The administration proposes to cut more than $76 million in funding for migrant and seasonal farm worker programs.
	National Skills Standards Board (NSSB): The NSSB is a collaboration of employers, labor, education and community groups that has helped develop voluntary partnerships in a range of industries, including manufacturing. As in FY 2003, the Labor Department budget proposes to eliminate all funding for the NSSB and its support of industry-labor partnerships in developing skills standards.

Transferring UI Administrative Financing to the States

Once again, the president’s budget calls for transferring UI administrative financing to the states. Employers would receive a 75 percent cut in the Federal Unemployment Tax, the federal premium assessed to help guarantee unemployment insurance coverage and finance administration of the UI system. Although states would get newly unfettered responsibility for administrative financing, they would have fewer resources and would be forced to raise employer taxes (an unlikely outcome) or cut services and benefits to make up the difference. Workers get virtually nothing from the proposal: no benefit increases or coverage expansions for part-time and low-wage workers. Although the administration proposes lowering the extended benefits trigger, this change will provide no assistance to workers currently unable to access the UI system and will only occasionally benefit those who are.

In the late 1990s, the Department of Labor convened a stakeholder process to examine the UI system and to reach consensus on changes in the system that would address the concerns of workers, employers and state workforce agencies. The stakeholders’ discussions were fruitful and the possibility of consensus was promising, but the Bush administration has abandoned the process. The AFL-CIO urges the department to resume these discussions, in the interest of reaching an agreement on UI reforms that will answer needs and address concerns of all who are involved in the system.

Creating Personal Re-employment Accounts

The budget proposes spending $3.6 billion in new money over two years to fund a system of Personal Re-employment Accounts (PRAs), to be administered by the states. Providing additional resources to jobless workers during periods of economic downturns benefits workers and families and the economy overall. However, the proposed PRAs are not the answer. In an economy with 2.5 unemployed workers for every job opening, no amount of financial incentive will enable unemployed workers to find nonexistent jobs.

As presently described, PRAs appear to restrict rather than expand services and benefits for unemployed workers. Workers who use PRAs would be denied access to WIA job training and intensive re-employment services for one year after exhausting their PRA accounts. Currently, there is no federal cap on the reemployment services jobless workers can access through the WIA system. Nor is there a federal cap on the job training services workers can access through the WIA system, and states provide vouchers for up to $10,000. PRAs, for the first time, would establish a $3,000 federal cap on the combined amount of reemployment services and job training (and, at state option, income support now provided by the UI system).

PRAs would be available for workers who are likely to exhaust, or already have exhausted, regular state unemployment benefits. If the same number of workers exhaust their state benefits over the next two years as in 2001 and 2002, a two-year appropriation of $3.6 billion for PRAs would provide only $500 per worker. Either many needy workers will be left out of this proposal or the accounts will be a great deal smaller than suggested.

The administration maintains that PRAs would not replace federal benefits, but the availability of PRAs to provide income support for workers who have exhausted state unemployment benefits suggests that they are intended to do so. The assistant secretary of Labor’s statement that PRAs are “a new approach to unemployment insurance” heightens concerns that the intention is to replace the existing extended benefits system.

Rather than create a new program with attendant delays and high start-up costs, Congress should use the funding that otherwise would go into PRAs to help the 1 million jobless workers who have exhausted federal unemployment benefits; expand job training access through WIA; or expand training, income support and health care for trade-impacted unemployed workers under the Trade Adjustment Assistance program.

Trade Adjustment Assistance (TAA)

The new (TAA) program significantly increased the number of workers who are eligible for training, income support and health care coverage. Estimates are that the TAA program enrollments will double.

While the administration proposes an increase in TAA training and income support, it does not propose any funding to provide states with the resources necessary to administer the new health care tax credit and provide interim coverage for TAA eligible individuals. Instead, the Department of Labor expects the already strapped National Emergency Grant (NEG) program under WIA to provide states with resources to administer a complicated health care tax credit program and to provide interim health coverage to the thousands of TAA eligible participants.

Congress authorized $160 million in funding for TAA administration and health care coverage in FY 2003 and $110 million in 2004. The Bush FY 2003 budget includes $60 million for health care administration, but no funds for health care coverage. The FY 2004 budget contains no separate funding for either TAA administration or health care coverage. As a result, up to 40 percent of the WIA National Emergency Grant program may be diverted to pay for TAA administration and health care coverage, forcing trade-affected workers to compete against other dislocated workers for help.

No Funding for Mass Layoff Statistics Reports

The administration’s budget does not seek to restore funding for the Labor Department’s Mass Layoff Statistics (MLS) report series, which the department recently canceled. The MLS reports provide important and timely information on plant closings and mass layoffs, helping states and localities respond to economic crises in their communities. Ironically, although the department has not sought funds to restore this important series about unemployed workers, it is seeking an increase in funds to institutionalize an annual survey on volunteerism. While the latter may be of interest, failing to revive the MLS reports while calling for new money to survey workers about their voluntary activities indicates seriously misplaced priorities for the nation’s preeminent workforce agency.

International Humanitarian and Development Aid

Bush Administration’s Proposed 2004 Budget
International Humanitarian and Development Aid

The administration’s FY 2004 budget calls for increased funding to respond to the world’s HIV/AIDS crisis, to boost international development assistance and to help ease the crushing debt burdens that maintain a stranglehold on poor nations and their citizens. The administration’s proposals are a salutary change but much more remains to be done.

Spending on International Development Assistance ($ in millions)

Area	FY 2002 Enacted	FY 2003 Request	FY 2003 Senate Committee Recommendation	FY 2004 Request
International Assistance	15,441	16,166	16,395	17,823
International Development Assistance	7,821	8,662		10,507
Global HIV/AIDS Programs	826	1086	1186-1286	2,000
Parts of USAID, etc.	626	886	886	1350
Global AIDS Initiative	0	0	0	450
Global Fund to Fight HIV/AIDS	200	200	300-400	200
Millennium Challenge Account	0	0	0	1,300
Debt Restructuring	251	2	40	395