Our Approach to Workforce Development Fund Reforms

Minnesota is home to one of the country’s most talented workforces. That’s no accident – it comes from years of investments by public and private sector leaders in education and training that produce strong talent for a diverse economy.

One of the unique differentiators to training our workforce that many people may not be aware of is the state’s Workforce Development Fund – a payroll-tax-fueled training fund that puts serious money toward training workers for in-demand jobs across Minnesota.

We are the only state in the country that has such a fund. Yet it has been operating since its inception without any major updates. Meanwhile, a lot has changed in our economy, including best practices in workforce development, advances in performance management, and the overall composition and needs of Minnesota’s economy.

Stakeholders have been asking DEED to consider reforms for years, and this legislative session, DEED worked with hundreds of stakeholders to write legislation that did just that. The dynamics of this session did not yield the passage of those reforms; however, we wanted to highlight those we landed on here for reference in future discussions. We believe modernization remains an important imperative for job seekers and employers in our state in the years ahead.

What needs reforming?

DEED has consistently heard from legislators and stakeholders that our state's workforce development fund requires modernization in some basic areas:

• Equity – the fund would benefit from a perspective that focuses funding on those who face the biggest systematic barriers in our economy.

• Performance – a clear definition of what success looks like in Workforce Development would help grantees.

• Innovation – a pathway for innovative workforce development approaches to be tested, measured and grown based on success.

• Efficiency – a more efficient allocation of funds in a given year to ensure dollars are being spent when they’re needed, where they’re needed.

• Transparency – over the years, the fund has been used to make direct appropriations to workforce organizations chosen by the legislature. Those involved in these decisions consistently remark that they’d prefer to make those decisions in a more competitive environment where performance metrics guide decision-making.

Our process

With these principles in mind, our journey to workforce development modernization began over 2.5 years ago, in April of 2019, when DEED’s workforce development team kicked off a series of meetings with nonprofits to learn about their ideas, successes and challenges with workforce training for youth and adults in Minnesota.

Throughout the last year and a half, we met with a group of workforce development stakeholders in a Workforce Innovation Working Group to develop ideas for a legislative proposal to transform our state’s workforce system. Throughout the winter and spring of 2020, we hosted more than 20 discussions with hundreds of stakeholders.

The goal of this work is to get Minnesotans into good jobs in high-demand and in high-growth industries. The proposal we developed was designed to prioritize Black, Indigenous, and People of Color and other individuals who face multiple barriers to employment and who have faced the worst impacts of the pandemic. 

Reforms we proposed

After lengthy consultation and engagement, here’s a summary of the reforms we proposed on the core themes:

• Equity – We recommend equity benchmarks in competitive grant programs to ensure dollars go toward organizations that help train those with the biggest barriers to employment.

• Performance – We recommend focusing on four performance benchmarks to make decisions in competitive grant-making: job placement, wage rate, job retention and credential attainment.

• Innovation – We recommend a competitive grant program within the fund that is focused on new approaches to workforce. If they meet certain benchmarks for success, they’d receive additional future funding.

• Efficiency – We recommend right-sizing the amount of money spent on the state’s dislocated worker program to meet demand, but not over-subscribe – using the rest of that funding for competitive grant-making.

• Transparency – We recommend doing away with direct appropriations in the fund in favor of competitive grant programs that focus on three key needs in the market: equitable workforce development placements, innovative new approaches to workforce, and support services that help job seekers get on the path to employment. Driven by the equity focus and performance metrics mentioned above, these programs would make the fund a lot more transparent and effective.

What happened in the 2021 legislative session?

While the reforms we recommended did not pass this session, a few positive developments with the Workforce Development Fund did take place.

We negotiated for $34 million in direct appropriations to organizations that provide workforce training to BIPOC workers who are unemployed, underemployed or have been left on the sidelines. In addition, the bill funds a number of competitive workforce training programs such as the Pathways to Prosperity program, SE Asian Competitive Grant program and increased funding for capacity building through Propel Nonprofits. And – in a first – this year’s bill includes new programs focused on African Immigrants and Foreign-Trained workers.

You can look for more about these new programs, including RFPs, in the coming weeks.

While the reforms we’ve built with stakeholders of the Workforce Development Fund didn’t pass this session, there are lots of areas where we’re making change. We've revamped our grants management process and made the process more streamlined to reduce the paperwork burden on our nonprofit partners, built a community review process that ensures community participation in our grant-making decisions, and we’ve sped up the process for issuing funds by six months.

We began this work together over a year ago, with a working group and numerous stakeholder engagement meetings that brought hundreds of people together virtually during the pandemic. Our proposal and our workforce development system are stronger because so many people contributed their voices. Looking ahead, we will continue to work in partnership to modernize our system, make improvements and increase our ability to connect Minnesotans with good jobs. I look forward to what we’ll do next together.