“(a) Purpose.—The purpose of this section is to authorize any State to apply under this section on behalf of the entire State, or a local area or a consortium of local areas in the State, to receive the allotments or allocations of the State or the local areas, respectively, for youth workforce investment activities and adult and dislocated worker employment and training activities under this Act, and for activities under the Wagner-Peyser Act, as a consolidated grant for 5 years for the purpose of carrying out a demonstration project to pursue innovative reforms to achieve better outcomes for jobseekers, employers, and taxpayers.

“(b) General authority.—

“(1) WAIVERS AND DEMONSTRATION GRANT AMOUNTS.—Notwithstanding any other provision of law, during the demonstration period applicable to a demonstration project approved for a State pursuant to subsection (d)(3), the Secretary shall comply with each of the following:

“(A) WAIVERS.—Subject to paragraph (2), waive for the State as a whole, or for the local area or the consortium of local areas in such State selected by the State to carry out such demonstration project—

“(i) all the statutory and regulatory requirements of subtitle A, subtitle B, and this subtitle; and

“(ii) all the statutory or regulatory requirements of the Wagner-Peyser Act (29 U.S.C. 49g et seq.).

“(B) DEMONSTRATION GRANT AMOUNTS.—For each fiscal year applicable to such demonstration period:

“(i) STATE AS A WHOLE.—In a case of a State approved to carry out a demonstration project under this section on behalf of the State as a whole, distribute as a consolidated sum to the State, for purposes of carrying out the project, the State’s total allotment for such fiscal year under—

“(I) subsections (b)(1)(C) and subsection (c) of section 127;

“(II) paragraphs (1)(B) and (2)(B) of section 132(b), and section 132(c); and

“(III) section 6 of the Wagner-Peyser Act (29 U.S.C. 49e).

“(ii) LOCAL AREA.—In a case of a local area selected by a State to carry out a demonstration project under this section, require the State to—

“(I) distribute as a consolidated sum to the local board for such local area, for purposes of carrying out the project—

“(aa) the local area’s allocation for such fiscal year under—

“(AA) subsections (b) and (c) of section 128; and

“(BB) subsections (b) and (c) of section 133; and

“(bb) any funds under section 6 of the Wagner-Peyser Act (29 U.S.C. 49e) that the State would otherwise allocate for such fiscal year to the one-stop delivery system in the local area; or

“(II) if the local board of the local area enters into a written agreement with the State for the State to serve as the fiscal agent for the local board during the demonstration project, use the funds described in items (aa) and (bb) of subclause (I) for purposes of carrying out the project on behalf of the local board.

“(iii) CONSORTIUM OF LOCAL AREAS.—In a case of a consortium of local areas selected by a State to carry out a demonstration project under this section, require the State to—

“(I) distribute as a consolidated sum to the consortium, for purposes of carrying out the project—

“(aa) the total amount of the allocations for the local areas in such consortium for such fiscal year under—

“(AA) subsections (b) and (c) of section 128; and

“(BB) subsections (b) and (c) of section 133; and

“(bb) any funds under section 6 of the Wagner-Peyser Act (29 U.S.C. 49e) that the State would otherwise allocate for such fiscal year to the one-stop delivery systems in the local areas in such consortium; or

“(II) if the consortium enters into a written agreement with the State for the State to serve as the fiscal agent for the local board during the demonstration project, use the funds described in items (aa) and (bb) of subclause (I) for purposes of carrying out the project on behalf of such consortium.

“(2) EXCEPTIONS.—A State, local area, or consortium of local areas carrying out a demonstration project under this section—

“(A) shall comply with statutory or regulatory requirements of—

“(i) this Act relating to—

“(I) wage and labor standards;

“(II) nondisplacement protections;

“(III) participation and protection of workers and participants;

“(IV) nondiscrimination;

“(V) grievance procedures and judicial review; and

“(VI) performance accountability and reporting, except as otherwise provided in this section; and

“(ii) the Wagner-Peyser Act relating to provision of services to unemployed insurance claimants and veterans, and relating to universal access to basic labor exchange services without cost to jobseekers; and

“(B) may choose to comply with any other statutory or regulatory requirement of this Act or the Wagner-Peyser Act.

“(c) Demonstration period; Limitations.—

“(1) IN GENERAL.—A demonstration project approved under this section for a State, local area, or consortium—

“(A) shall be carried out for a 5-year demonstration period; and

“(B) may be renewed for additional 5-year demonstration periods, if the State, local area, or consortium meets its expected levels of performance established under subsection (f)(1) for each of the final 3 years of the preceding 5-year period.

“(2) LIMITATIONS.—

“(A) DEMONSTRATION PERIOD LIMITATIONS.—For each 5-year demonstration period (including renewals of such period)—

“(i) not more than 8 States may carry out demonstration projects approved for a State as a whole under this section; and

“(ii) not more than 8 local areas (or consortia of local areas) may carry out demonstration projects approved for a local area (or a consortium) under this section.

“(B) STATE LIMITATIONS.—No more than 1 demonstration project may be approved under this section per State. For purposes of this paragraph, a demonstration project approved for a local area or a consortium of local areas in a State shall be considered a demonstration project approved under this section for the State.

“(d) Application.—

“(1) IN GENERAL.—To be eligible to carry out a demonstration project under this section, a State shall submit to the Secretary an application at such time, and in such manner, as the Secretary may reasonably require, and containing the information described in paragraph (2).

“(2) CONTENT.—Each application submitted by a State under this subsection shall include the following:

“(A) A description of the demonstration project to be carried out under this section, including—

“(i) whether the project will be carried out—

“(I) by the State as a whole;

“(II) by a local area, and if so—

“(aa) an identification of—

“(AA) such local area; and

“(BB) whether the local board for such local area is the fiscal agent for the project, or whether the local board has entered into a written agreement with the State for the State to serve as the fiscal agent during the project; and

“(bb) written verification from the local board for such local area that such local board agrees—

“(AA) to carry out such project; and

“(BB) to the fiscal agent identified in item (aa)(BB); and

“(III) by a consortium of local areas in the State, and if so—

“(aa) an identification of—

“(AA) each local area that comprises the consortium; and

“(BB) the local area that will serve as the fiscal agent for the consortium during the project, or whether the consortium has entered into a written agreement with the State for the State to serve as the fiscal agent; and

“(bb) written verification from each local board of each local area identified in item (aa)(AA) that such local board agrees—

“(AA) to carry out such project as a consortium; and

“(BB) to the fiscal agent for the consortium identified in item (aa)(BB);

“(ii) a description of the activities to be carried out under the project; and

“(iii) the goals the State, local area, or consortium intends to achieve through such activities, which shall be aligned with purpose described in subsection (a).

“(B) A description of the performance outcomes the State, the local area, or consortium expects to achieve for such activities for each year of the demonstration period as described in subsection (f)(1).

“(C) A description of how the State, local area, or consortium consulted with employers, the State board, and the local boards in the State in determining the activities to carry out under the demonstration project.

“(D) A description of how the State will make such activities available to jobseekers and employers in each of the local areas in the State or, in a case of a project that will be carried out by a local area or a consortium, a description of how such services will be made available to jobseekers and employers in such local area or each of the local areas in the consortium.

“(E) A description, if appropriate, of how the State, local area, or consortium will integrate the funds received, and the activities carried out, under the demonstration project under this section with State workforce development programs and other Federal or State workforce, education, or social service programs (including the programs and activities listed in section 103(a)(2), the program of adult education and literacy activities authorized under title II, and the program authorized under title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et seq.)).

“(F) An assurance that the State, local area, or consortium will meet the requirements of this section.

“(3) SECRETARIAL APPROVAL.—

“(A) IN GENERAL.—Not later than 60 days after the date on which a State submits an application under this subsection, the Secretary shall—

“(i) in a case in which the application meets the requirements of this section and is not subject to the limitations described in subsection (c)(2), approve such application and the demonstration project described in such application; or

“(ii) provide to the State a written explanation of initial disapproval that meets the requirements of subparagraph (C).

“(B) DEFAULT APPROVAL.—With respect to an application submitted by a State under this subsection that is not subject to the limitations described in subsection (c)(2), if the Secretary fails to approve such application or provide an explanation of initial disapproval for such application as required under subparagraph (A), the application and the demonstration project described in such application shall be deemed approved by the Secretary.

“(C) INITIAL DISAPPROVAL.—An explanation of initial disapproval provided by the Secretary to a State under subparagraph (A)(ii) shall provide the State—

“(i) detailed reasons for why the application does not meet the requirements of this section; and

“(ii) if the State is not subject to the limitations described in subsection (c)(2), an opportunity to revise and resubmit the State’s application under this section.

“(e) State demonstration project requirements.—A State, local area, or consortium that has been approved to carry out a demonstration project under this section shall meet each of the following requirements:

“(1) USE OF FUNDS.—Use the funds received pursuant to subsection (b)(1)(B) solely to carry out the activities of the demonstration project to achieve the goals described in subsection (d)(2)(A).

“(2) ADMINISTRATIVE COSTS LIMITATION.—Use not more than 10 percent of the funds received pursuant to subsection (b)(1)(B) for a fiscal year for the administrative costs of carrying out the demonstration project.

“(3) PRIORITY FOR SERVICES.—Give priority for services under the project to veterans and their eligible spouses in accordance with the requirements of section 4215 of title 38, United States Code, recipients of public assistance, low-income individuals, and individuals who are basic skills deficient.

“(4) NUMBER OF PARTICIPANTS.—Serve a number of participants under the activities of the demonstration project for each year of the demonstration period that—

“(A) is greater than the number of participants served by such State, local area, or consortium under the programs described in subparagraphs (A) and (C) of section 3(13) for the most recent program year that ended prior to the beginning of the first year of the demonstration period; or

“(B) is not less than the number of participants to be served under the activities of the demonstration project that is agreed upon between the State, local area, or consortium, and the Secretary—

“(i) prior to the Secretary’s approval of the application submitted under subsection (d);

“(ii) after the Secretary takes into account—

“(I) the goals the State, local area, or consortium intends to achieve through the demonstration project; and

“(II) the participants the State, local area, or consortium intends to serve under such project; and

“(iii) prior to approval of the application submitted under subsection (d).

“(5) REPORTING OUTCOMES.—Submit, on an annual basis, to the Secretary a report, with respect to such State, local area, or consortium, on—

“(A) participant outcomes for each indicator of performance described in subsection (f)(1)(A) for the activities carried out under the project; and

“(B) the applicable requirements of section 116(d)(2), including subparagraphs (B) through (G) and subparagraph (J), as such subparagraphs are applicable to activities under the demonstration project.

“(6) COMPLIANCE WITH CERTAIN EXISTING REQUIREMENTS.—Comply with the statutory or regulatory requirements listed in subsection (b)(2).

“(7) EVALUATION.—Prior to the end of the demonstration period—

“(A) conduct a rigorous evaluation of the employment and earnings outcomes of participants in activities carried out under the demonstration project, compared to the outcomes of similarly situated individuals in such State, local area, or a local area in the consortium that do not participate in such activities; and

“(B) submit to Congress and the Secretary the results of such evaluation.

“(f) Performance accountability.—

“(1) ESTABLISHMENT OF EXPECTED PERFORMANCE INDICATORS.—

“(A) IN GENERAL.—Each State, local area, or consortium shall establish in the application submitted under subsection (d), for each year of the demonstration period—

“(i) with respect to participants who are at least 25 years old, the expected levels of performance for each of the indicators of performance under section 116(b)(2)(A)(i) for the activities carried out under the project under this section, which shall meet the requirements of subparagraph (B); and

“(ii) with respect to participants who are at least 16 years old and no older than 24 years old, the expected levels of performance for each of the indicators of performance under section 116(b)(2)(A)(ii) for the activities carried out under the project under this section, which shall meet the requirements of subparagraph (B).

“(B) 5TH YEAR.—Each of the expected levels of performance established for each of the indicators of performance under clauses (i) and (ii) of section 116(b)(2)(A) pursuant to subparagraph (A) for the 5th year of the demonstration period shall be higher than—

“(i) the highest level of performance for the corresponding indicator of performance for the programs described in subparagraphs (A) and (C) of section 3(13) for the most recent program year that ended prior to the beginning of the first year of the demonstration period; or

“(ii) an alternate baseline level of performance that is agreed upon between the State, local area, or consortium, and the Secretary—

“(I) prior to the Secretary’s approval of the application submitted under subsection (d); and

“(II) after the Secretary takes into account—

“(aa) the goals the State, local area, or consortium intends to achieve through the demonstration project; and

“(bb) the participants the State, local area, or consortium intends to serve under such project.

“(2) SANCTIONS.—

“(A) IN GENERAL.—The sanctions described in section 116(f)(1)(B) shall apply to a State, local area, or consortium beginning on the 3rd year of the demonstration period for such State, local area, or consortium, except that the levels of performance established under subsection (f)(1) of this section shall be—

“(i) deemed to be the State negotiated levels of performance for purposes of this paragraph; and

“(ii) adjusted at the end of each program year to reflect the actual characteristics of participants served and the actual economic conditions experienced using a statistical adjustment model similar to the model described in section 116(b)(3)(A)(viii).

“(B) INELIGIBILITY FOR RENEWAL.—A State, local area, or consortium that is subject to such sanctions shall be ineligible to renew its demonstration period under subsection (c).

“(3) IMPACT OF LOCAL OR CONSORTIUM DEMONSTRATIONS ON STATEWIDE ACCOUNTABILITY.—With respect to a State with an approved demonstration project for a local area or consortium of local areas in the State—

“(A) the performance of such local area or consortium for the programs described in subparagraphs (A) and (C) of section 3(13) shall not be included in the levels of performance for such State for any of such programs for purposes of section 116 for any program year that is applicable to any year of the demonstration period; and

“(B) with respect to any local areas of the State that are not part of the demonstration project, the State shall reach a new agreement with the Secretary, for purposes of section 116(b)(3)(A), on levels of performance for such programs for such program years.”.