News : Community colleges could see reduced funding under Iowa DOGE recommendation

By Robin Opsahl

Iowa community colleges could see reduced funds for high-demand job training programs if some recommendations from the Iowa DOGE task force report are implemented by the state Legislature.

The report, released Monday, included 45 recommendations from business leaders who met throughout the year to identify areas where state and local government could save costs and become more efficient. One of the three work groups convened through the task force focused on workforce issues in the state, such as how to address shortages in fields like health care and improve development opportunities.

The DOGE task force made multiple suggestions to change Iowa’s current workforce development programs, saying in the report the state’s current workforce programs are “fragmented, outdated and not employer driven.”

The report recommended sunsetting the Iowa Industrial New Jobs Training (260E) program, currently administered through Iowa’s community colleges, and establish a new, $30 million “employer-directed workforce training fund within Iowa Workforce Development.” This program, alongside others like the Iowa Jobs Training and Accelerated Career Education programs, were created decades ago and rely on 10-year bonds to finance training grants, delivered through community colleges — but DOGE task force members argued this structure does not reflect how training is typically delivered, and is not the most efficient way to fund training.

“Nearly three-quarters of 260E-funded training is now delivered by the businesses themselves or third-party providers and yet, according to IWD, community colleges still receive about 20% in administrative fees from bond proceeds, and about 10% of those funds go to debt service costs,” the report argues. “Bonding as a funding mechanism is antiquated, costly and inefficient. No other state uses a model like Iowa’s 260E program anymore. Furthermore, Iowa’s recent tax cuts have reduced the stream of diverted tax revenue used to repay these bonds, jeopardizing the 10-year repayment schedule. The working group recommends eliminating bonding as a funding method and estimates roughly $40 million per year will return to the state General Fund as existing 260E bonds are paid off.”

While the DOGE task force report criticized the practice of using bonds for this program, Emily Shields, executive director of Community Colleges for Iowa, said this funding model allows the state to better respond to workforce needs. The Iowa Industrial New Jobs Training program is funded through withholdings of newly created jobs, she said, with employers pledging to create a certain number of jobs in the state and community colleges taking out a bond “so that employers can receive the training dollars up front, and then it gets paid off over time with the withholding from those new jobs.”

“It’s really a brilliant funding mechanism that doesn’t have an initial cost to taxpayers, because it’s new income that the state just hasn’t seen yet, and the bonding allows for that the funding to go to the employers up front, so that they don’t have to wait until the withholding tax starts to show up for those new employees,” Shields said. “And they can do the training when they need to do the training.”

Shields also said though funding for the existing program changes each year based on demand, the proposed $30 million fund “certainly would represent less funding to businesses.”

Additionally, she called arguments about the program’s high administrative costs a “mischaracterization” of the services offered, saying these costs include community colleges’ support implementing workforce training efforts for rural and small businesses that do not necessarily have the training staff, a Human Resources department or other needed resources to implement the workforce development programs on their own.

The task force’s recommendation would make it more difficult for these businesses to receive workforce development funds, she said.

“I would fear that a program that is granted out of Des Moines and requires businesses to apply and administer the funds themselves, is going to significantly disadvantage smaller and more rural businesses,” Shields said.

The task force said in the report Iowa employers gave feedback saying they “need and want to have the flexibility to work directly with a variety of training providers – including private vendors and equipment manufacturers.” The report also recommended creating a new $15 million workforce infrastructure fund at IWD.

Additionally, the DOGE task force recommended combining certain tuition assistance programs into a a single $20 million scholarship fund for high-demand careers. While the report did not include a list of which programs would be consolidated, it stated the workforce group “identified $32 million in tuition assistance programs that could be consolidated into a new, streamlined program that would ensure state tuition dollars are focused on the fields most beneficial to Iowa’s employers.”

The proposed change would mean a reduction of $12 million in scholarship and tuition assistance for Iowa students, but the task force report stated this funding could be “redirected toward employer-driven workforce training.”

Shields said state community college leaders support making it “easier for students to navigate the funding available to them,” but was looking for more information on what specific programs would be consolidated through the change.

“Depending on what that includes, that could mean a significant cut in scholarship funding, and that certainly would be of great concern, especially right now with the workforce shortages that we have and the great economic need we have for folks to go back to college,” Shields said.

At a Tuesday news conference on the report, Gov. Kim Reynolds said she believes there were areas where Iowa’s workforce development systems could become more efficient, and could better address shortages in specific fields.

“When you’re spending $400 million annually into workforce programs and we still have an issue — something’s not right,” Reynolds said. “So we got to be better. We got to get better, and … there should be an expectation, that, ‘I’m going to put this money to this program, this is the metric, the outcome that we expect.’ And if that doesn’t happen, then it needs to go away.”