MONEY TREE: Review Seeks Changes in Iowa Training Program
DES MOINES, Iowa (AP) — An internal review obtained by The Associated Press is calling for changes to Iowa’s system of training new workers after finding the program is the most expensive in the nation.
The review by the Department of Economic Development found that Iowa spent $62 million on the Industrial New Jobs Training Program in 2007. That’s $10 million more than was spent by second-ranked California.
“Iowa paid on average $13,000 for each new worker’s training costs, national average was $525 per worker,” the review said. “Iowa’s training costs far exceeded the costs of all other states.”
The review was prompted by an examination of all the state’s tax credits but also was due to an audit released in May by state Auditor David Vaudt that raised questions about job training done for new companies that later closed or failed to create the expected number of jobs.
Gov. Chet Culver’s staff is studying the review and its call for changing the program.
“We did make a recommendation that it needed to be looked at and changes should be made,” said Fred Hubbell, who oversaw an investigation of the program as interim director of the Department of Economic Development. “I think worker training is extremely valuable. It’s an old program that’s gone through many changes and it needs to be reviewed.”
The Economic Development Department is now headed by Bret Mills.
The program was created in 1983 in the depths of a deep farm-based recession in Iowa when unemployment soared and officials were desperate to create jobs. It allows community colleges to issue bonds to finance job training programs when they are approached by companies in need of workers with specific skills.
As the program has evolved, the report said its costs have grown tremendously. Only 17 percent of spending now goes toward actual training programs run by community colleges, while about one-third of the money is spent subsidizing the wages of workers receiving on-the-job training.
“The company controls the training content and the delivery method,” the review found. “No company match is required.”
In addition, the issuance of bonds “drives up the cost to taxpayers,” the review concluded. For every $1 million in bonds issued by a community college, roughly $700,000 goes to actual training programs. The cost of repaying the bonds, however, is roughly $1.3 million.
“In other words, the use of bonds to finance the program nearly doubles the cost of training,” the review said.
In addition, a goal of the program was to assist companies that offer wages above the regional average, and in targeted areas such as advanced manufacturing, renewable energy and biosciences. Over the last three years, only 16 percent of the companies participating in the program met that criteria, the review said.
The review found that the state’s liability over 10 years averaged about $45 million annually. It recommended phasing out the use of bonds and called for a $15 million limit on the fund.
It also said businesses should be required to put up a match at some level since they benefit from getting trained workers. The review also suggested tightening eligibility requirements and said community colleges should have a new ceiling on administrative costs for running the program.