No - you don't need to be furloughed. I was laid off when my airline went bust after 2+ years in Chap 11 BK. Any pilot whose company no longer requires his/her services for whatever reason (provided it's downsizing, of course) can apply.
Unfortunately, it is a somewhat subjective process - just like who gets an airline interview and who does not. The scheme - WIA - is a federal program but administered by individual states and then agencies within those states who have the so-called "approved" lists.
The key is to get in quick, get a good counselor who is sympathetic to your cause and one you can work with and then you have to convince them why you need it. A year ago, it was relatively simple. I got in quick after my layoff with others and started jumping thru hoops and filling out paperwork, attending mandatory orientations and tests. At that time the pot was full and it is done on a first come first served basis. I got 100% fundin but as the pot dried others only got 75-80% and then it finally dried up and there was no money left. I don't know the situation now.
Just like getting an airline interview and then getting hired, you have to be persistent. If you find the counselor you have can't tell the difference between a B737 and a C150, you need someone else. Apply in another state, if you are eligible. Collect job postings to back up your case - the more the merrier. Another idea is check your spam mail for those "free government grants available" like Mathew Lesko. These prob require an up-front fee and you do most of the research work.
I had a choice between B737, B747-400 and Gulfstream IV to choose from. While the latter two would have been nice, I chose the B737 for the reasons given earlier. Besides I don't think I could sell them on the idea that the G-IV would cost $28,000!!! I don't think anyone got approved for that unless you had real time on the aircraft plus a "I promise to hire John Doe" letter from a potential employer.
I agree, one of the concerns with the program is which training organization is on the "approved" list. Of course, it's great business for the training schools but they are NOT all equal. While my course and instructors were fine, there never was any kind of feedback or job placement assistance. The sum total of PremAir's "help" was giving student's a handout of all the B737NG/BBJ operators in the world. This turned out to be about two years out of date. Also, their sister company in SEA, Global Aircraft Delivery "were always looking for qualified and current BBJ/737 Captains and FOs" that PremAir students would get preferential hiring consideration and this (ferry/delivery)work would be ideal for "the furloughed, unemployed or retired airline pilot". After 6 months trying to get a foot in the door with them, I found out that this was all B.S. That's why I would not go back - even for a refresher, nor can I recommend them. The others, from what I have heard are FAR better.
Keep trying & good luck
b757driver