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Strategies for Financing Workforce Intermediaries: Options for LongTerm Sustainability


Financing strategies that could be implemented at state level-- need to reach scale quickly ... Bond Financing, cont. ... source of revenue- blended financing ... – PowerPoint PPT presentation

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Title: Strategies for Financing Workforce Intermediaries: Options for LongTerm Sustainability

Strategies for Financing Workforce
Intermediaries Options for Long-Term
Jobs for the Future and Kirkwood Community
College NAWB Conference February 24, 2008
Research Overview
  • Origins in 2003 American Assembly forum on
    alternative workforce development delivery
  • Workforce Intermediaries identified as
    dual-customer workforce development provider
  • Investing in Workforce Intermediaries launched as
    pilot for national initiative
  • National Fund for Workforce Solutions resulted
    from successful pilot
  • How to create long-term sustainability for the

Research Overview, cont.
  • Alternative financing strategies identified
  • Financing sources that could fund functions
  • Financing strategies that could be implemented at
    state level-- need to reach scale quickly
  • Bond financing
  • Unemployment Insurance diversion
  • Tuition-based Strategies
  • Food Stamp Employment and Training
  • Program-related Investments

Bond Financing
  • Sale of general obligation bonds to the public to
    fund training programs
  • Bonds are retired through a diversion of a
    portion of the state withholding tax associated
    with trained worker
  • Community colleges act as intermediaries, issuing
    bonds and managing training contracts with
  • Secured by either state bonding authority or
    community college tax levies

Bond Financing, cont.
  • Iowa community colleges have trained 140k
    workers since 1983 through bond-financing
  • Missouri will finance the training for 87k new
    jobs by 2010
  • Kansas used over 11m in bond proceeds in 2005 to
    train over 12k workers
  • Complex legislative process
  • Requires high-level of capacity on part of
    workforce partnerships to manage

UI Diversion
  • 23 states use some form of UI diversion or
    UI-based fees to finance training programs
  • Funds are typically available to employers
    through grants
  • Employers typically submit proposals in
    partnership with training providers or workforce
  • Tight focus on training and advancement
  • Strong dual-customer focus

UI Diversion, cont.
  • Politically sensitive strategy
  • Rarely accessible solely by workforce
  • Most states require matching funds to draw down
    UI funds
  • CA ETP, since 1983 over 1billion to train 600k
  • TX Employment Training Investment Assessment
    allocated 8.6 m to fund 23 Skills Development
    Fund projects in 2005
  • RI, in 2006 allocated 850k to fund 4 Industry

Tuition-Based Strategies
  • Approached from two angles
  • How might workforce partnerships assess tuition
    or leverage tuition-based funding sources?
  • How might community and technical colleges
    strengthen workforce partnership functions?

Workforce Partnerships Leveraging Tuition-Based
  • Charge tuition for training and access federal
    student financial aid, i.e, FocusHOPE
  • Partner with community or technical college,
    i.e., Project QUEST and adult student outreach
  • Create a boutique product that leverages
    private funding for education, i.e., LiLAs
  • Leverage IRS Section 127 employer tuition
    assistance programs

Community/Technical Colleges as Home for
Workforce Partnerships
  • Advantages
  • Have infrastructure
  • Many colleges are on both sides of the labor
    market - workers and employers
  • Many are key players in regional economy
  • Many serve our target populations - low-income,
    low-skilled, I.e., remedial education, short-term
    occupational programs
  • Many are responsive to employers skill needs
  • Nearly 1,200 throughout the country -- system

Community/Technical Colleges, cont.
  • Disadvantages
  • Bias toward education/training as the primary
    solution to workforce challenges
  • Struggle to balance multiple missions
  • Each side of the labor market may be in silos -
    low-skilled workers in developmental or adult
    education and workers in business and industry
  • Can they aggregate business/industry needs and
  • Are they responsive enough to low-skilled and
    economically disadvantaged populations?

Food Stamp Employment and Training (FSET)
  • USDA administered program provides employment and
    training services to clients receiving food stamp
    assistance, but not receiving other benefits
  • Key provision allows states to draw a 50 percent
    match in federal funding for use of non-federal
    funds in ET service provision to food stamp
  • Cost reimbursement structure

FSET, cont.
  • Advantages
  • State have some leeway in writing plans for use
    of funds
  • Can potentially increase to state to spend on
    education and training
  • Free up funds for supporting core intermediary
    functions, since reimbursement funds are flexible
  • Challenges
  • FSET reimbursement is restricted to eligible
    populations, limiting its use
  • Process of creating and operating an FSET
    program is resource intensive

Program Related Investments (PRIs)
  • Foundation based financing strategy
  • Take the form of low cost loans, recoverable
    grants, loan guarantees that must be repaid
  • Require recipients to have an assured or
  • reasonable expectation of revenue - to repay the
  • Not new but limited use (housing, capital
    projects)-- risky
  • Growing interest stretch
  • Limited use in workforce development

PRIs for Workforce Partnerships
  • Advantages for funders and partnerships
  • Foundation led - funder collaboratives can play
    special role
  • Stretch foundation dollars, leverage other
  • Flexible - can capitalize operations, support
    core functions, not tied to particular
  • Bridge Financing -- cover gaps or lags in
  • Drive accountability
  • Confer credibility to organization, leverage more
  • Disadvantages for funders and partnerships
  • Risky-for both -- Revenue may not materialize --
    financial liability
  • Require cultural shift
  • Requires good financial health and accountability
  • Management and tracking complex

PRIs for Workforce Partnerships
  • Can be paid through another source of revenue-
    blended financing
  • There are ways to structure PRIs to minimize
  • Recoverable grants
  • Can be paired with grants

Blended Financing
Strategies can be complementary Two sides of
financing coin. Front end financing Raise
revenue for training e.g., PRIs, Bonds. Back
end Cost reimbursement mechanisms e.g. FSET, UI
diversions, LiLas. Exploring Combinations e.g.
PRIs and FSET Bonds and UI offsets, PRIs and
LILAs Legal and regulatory questions in each
pairing Key Issue is whether and how
partnerships can access these sources
For More Information
  • Strategies for Financing Workforce
    Intermediaries Working Papers -
    http// (first item under
    Whats New at right)
  • Radha Roy Biswas -
  • Vickie Choitz -
  • Heath Prince -
  • Steve Ovel -