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Originally published in Governing, May 2019

In the midst of record low unemployment, many states are nonetheless struggling with ongoing skills gaps — shortages of workers with the right skills for in-demand jobs.

At the start of 2019, according to the Department of Labor, as many as 7.3 million jobs remained unfilled. These included a substantial number of “middle-skill” jobs requiring some schooling beyond high school but not a four-year degree. They were in fields such as health care, IT, welding and truck driving. The American Trucking Associations, for instance, reported a shortage of 50,000 drivers in 2017.

One reason these gaps exist is underinvestment in career and technical education. Of the more than $139 billion in annual federal student aid spending for higher education, just $19 billion goes to career and tech ed. Students generally can’t use federal Pell Grants to fund short-term, non-college-credit training programs, such as for welding certifications and commercial drivers’ licenses. Federal dollars under programs such as the Workforce Innovation and Opportunity Act are typically limited to the lowest-income workers.

Two states, however, have programs that show how valuable occupational credentials can be. Already, these initiatives are generating big returns by raising workers’ wages, closing skills gaps and driving economic development — and at a price much cheaper than “free college,” another higher-ed funding idea that’s gained popularity in recent years.

In Virginia, the state’s New Economy Workforce Credential Grant Program covers two-thirds of the cost of a credentialing program, up to $3,000 per student. It’s a pay-for-performance model, so community colleges and other training providers don’t get paid until a student completes a class and obtains an approved credential aligned with the state’s annual “hot jobs” list. So far, about 8,000 Virginians have earned credentials through the program since its launch in 2017.

In Iowa, the Gap Tuition Assistance Program pays tuition, books and fees for lower-income students pursuing credentials from approved programs. In 2018, about 2,400 students applied, and 1,000 were accepted. The program boasts an 89 percent completion rate.

Both programs aim to reach workers who don’t qualify for federal aid. “Back in the days when a welding class was going to cost an individual $4,000, someone who was struggling to make ends meet would not come to us,” says Elizabeth Creamer, vice president of the Community College Workforce Alliance in central Virginia. “Now they can.”

Funding credential attainment has been a smart investment in these states — for workers, for businesses and for the public purse. “These are great programs for moving somebody who could be a public burden or isn’t really on track for a good career into getting the skills they need in a high-demand area,” says Jeremy Varner, administrator of the Division of Community Colleges and Workforce Preparation for the Iowa Board of Education. “It’s giving folks economic opportunity they otherwise wouldn’t have and at the same time meeting the very profound industry labor market needs that exist.”

In Iowa, which allocates about $2 million to the program annually, workers who earned a credential and found a job in a new industry increased their wages an average of 37 percent, according to the state’s analysis. Workers who moved from agriculture to manufacturing raised their wages by as much as 138 percent.

In Virginia, Creamer says her graduates see average wage increases of between 20 and 45 percent as they go on to good-paying jobs at regional powerhouses such as Amazon, Altria and DuPont. Results like these are one reason Virginia is growing its investment from $4.5 million in 2017 to a projected $13.5 million by 2020. The program has also encouraged the state’s community colleges to build better partnerships with local businesses so they can produce the talent companies need. “We’re not just training and hoping someone gets a job,” says Creamer. “We know they will.”

Originally published in Governing, March 2019

An ambitious group of seniors from Oregon’s Portland State University devised a creative plan in 2012, dubbed “Pay Forward, Pay Back,” to deal with spiraling college costs and student debt. In exchange for deferred tuition, students would contribute a chunk of their post-graduation earnings to a fund for future students, ultimately creating a self-perpetuating pool of aid passed from one generation to the next.

Unfortunately, Pay Forward, Pay Back quickly hit the wall of fiscal reality. Despite the embrace of legislators, the state’s Higher Education Coordinating Commission concluded that the deferred tuition plan was unaffordable, costing as much as $20 million a year for 20 years to benefit just 1,000 students annually.

Yet interest in new ways to finance college remains very strong, especially as average in-state tuitions at four-year public universities have roughly tripled since 1998, total student debt topped $1.5 trillion in mid-2018 and state grant aid has stayed flat.

Rather than look to public money, however, some states are exploring novel alternatives to traditional student debt, ideas that would rely on private and philanthropic financing. Of particular interest are so-called income share agreements (ISAs), which proponents argue has the sex appeal of Pay Forward, Pay Back, but poses less risk to the public purse. Six states considered ISA-related legislation in 2018, according to the Education Commission of the States. In 2019, California could launch the nation’s first statewide ISA pilot.

Perhaps the nation’s best-known ISA program so far is a private one. Purdue University’s Back a Boiler program, begun in 2016, allows students to get a grant toward tuition. The grant is to be repaid as a fixed share of post-graduation income for a certain number of years, depending on major and projected earnings. For example, a computer science major with a $26,000 ISA grant would pay 7.3 percent of his or her income for seven years. If this student makes the expected median salary, total payments should be slightly cheaper than a traditional student loan.

The biggest benefit, though, is if the student’s career plans don’t pan out or the economy craters. Under a traditional loan, interest and principal would accrue regardless of borrower hardship. But ISA holders are unburdened by that risk. “This idea of shifting risk from student to school is one of the beautiful ideas behind ISA,” says Mary Claire Cartwright, vice president of information technology at the Purdue Research Foundation, which administers Back a Boiler. “We’re telling students, ‘You’re going to get a great job when you graduate, and if you don’t, we’re here to catch you.’”

So far, Purdue has issued $6.5 million in ISA contracts to more than 750 students, many of whom, Cartwright says, are first-generation students. And according to tech startup Vemo, which administers ISAs, more than 30 universities now have them, as do coding boot camps and trade schools.

While ISAs and other innovations are no silver bullet, states could benefit from experimenting with loan alternatives. First, they could expand their arsenal for making college more affordable, especially if lean budgets disallow expanding grant aid. Second, states could benefit from graduates’ economic success if schools have an incentive to ensure students get jobs to pay back their commitments.

In California, a bill by Republican Assemblyman Randy Voepel to establish an ISA pilot at the University of California system failed to make it past the state Senate last session, but unanimously passed the Assembly. Supporters are optimistic, and its success could pave the way for other state experiments. Federal legislation to recognize and regulate ISAs also enjoyed bipartisan support last Congress and is set for reintroduction this year as well. All this could mean good news for future students.

Originally published in Governing, January 2019

Azavea is a 65-person software development company based in Philadelphia. Its business is helping governments and nonprofits use geospatial data to achieve various public goals, such as improving traffic flow or reducing pollution. Many would call Azavea a dream employer. It shares its profits with its workers, buys locally, pays generously for training and allows employees to spend 10 percent of their time on personal projects. “We’re very much a people-first, employees-first company,” says CEO Robert Cheetham.

A growing number of firms are, like Azavea, on the leading edge of corporate reforms to make American businesses better stewards of the environment and worker well-being. They are so-called benefit corporations, whose charter explicitly allows them to pursue purposes other than sheer profit. Many are also certified, meaning they’ve met strict standards set by the nonprofit B Lab. More than 2,600 certified “B Corps” operate globally, according to the group, including such well-known brands as ice cream maker Ben and Jerry’s, women’s clothier Eileen Fisher and crowdfunding platform Kickstarter.

Now, an increasing  number of governments are facilitating the growth of benefit companies. At least 34 states and the District of Columbia have passed laws — most of them within the past six years — that allow companies to organize as legally recognized benefit corporations. Legal status confers a potentially significant advantage for a company: protection from shareholder liability if executives fail to maximize profit in pursuit of other goals.

Legalizing B Corps

Thirty-four states, including the District of Columbia, have passed laws recognizing benefit corporations. Another six are currently considering such legislation.

(Source: B LAB)

One state that affords such protection is Pennsylvania, but the city of Philadelphia goes even further. It offers a tax credit of up to $8,000 for sustainable businesses — either those certified or those that can show they meet similar standards of social and environmental responsibility. Christine Knapp, director of Philadelphia’s Office of Sustainability, said the city launched the sustainable business tax credit in 2012 on a pilot basis, limiting it to 25 companies and capping the credit at $4,000. Growing demand led to the credit’s expansion in 2015, and while the current credit is capped at 75 businesses on a first-come, first-served basis, further expansions could come when the credit is reauthorized in 2022. “We want to recognize the businesses leading by example,” she says, “but also encourage other businesses to take some action.”

Andrew and Jenn Nicholas, husband-and-wife co-founders of the graphic design firm Pixel Parlor, say the credit has been a big help to their 10-person company. “It’s a challenge to be profitable and provide benefits to our employees,” says Jenn Nicholas. “Every tiny bit helps, and it feels like somebody is looking out for us when the general climate [for small businesses] is the opposite.”

At the much bigger Azavea, the credit has had a smaller bottom-line impact. Still, says Cheetham, “symbols matter. It’s a powerful symbol when you’re going to other businesses and trying to attract them into the city.”

For state and local governments, this business-led reform is well worth encouraging. Research has shown that benefit companies are a boon for workers and their communities and could encourage a much-needed shift in national corporate culture — away from the single-minded focus on shareholder profit. In short, benefit corporations are a refreshing countertrend that could ultimately prove more effective than prescriptive efforts to regulate corporate behavior. They prove, says Anna Shipp, executive director of Philadelphia’s Sustainable Business Network, that “an equitable society and a thriving economy are not mutually exclusive but interdependent.”

But some businesses, according to Shipp, may need a little encouragement to refocus their mission on doing good. Laws to recognize benefit corporations’ legal status is the first step, she says; following Philadelphia’s lead with a tax credit could be the next catalyst.

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Via the Los Angeles Times

 

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