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State Investment in Workforce Development on the Rise

Written by Jacob Stenstrom

When analyzing spending on workforce development activities as part of states’ overall economic development expenditures, there has been a substantial increase over the last decade. For the budget year covering 2020, states have committed to spending a total of $1.76 billion on workforce preparation and development. This is more than double the amount from 2011. This amount is separate from Federal funding that is provided through a variety of U.S. Department of Labor and Department of Education programs.  While the increase corresponds with an overall increase in economic development spending by states, the percentage allocated to workforce development rose from 11 percent to 13 percent. In calculating the amount of state investment, the Council for Community and Economic Research (C2ER) focuses on the amount states spent on education, training and recruitment of workers with programs concentrating on improving the skills base and job placement of a state and/or community’s labor base. For economic development, these programs are almost always employer or firm focused.

Figure 1

When looking at the increase in workforce spending on a per capita basis, workforce development programs increased from $2.30 to $5.30 per person between 2011 and 2020.  This at a time when Federal spending to support employment and training declined. The data is reflected in the Workforce Development Spending trendline and in the Comparison of Workforce and Economic Development State Spending, presented in Figure 1 and Figure 2. Growing state spending is a recognition by states that companies are in desperate need of skilled workers, at a time when the unemployment rate has been at historic lows.  This has prompted states to focus on workforce preparation and development efforts like customized training tailored to the specific needs of a business, apprenticeships, or relying on community colleges, universities, or private training providers to help build a talent pipeline for companies in particular industries like manufacturing.

Figure 2

The five states that spend the most  on workforce development are Minnesota, New York, New Jersey, California, and Alabama. Each state listed, except for Minnesota and New Jersey, saw significant increases in spending year-over-year. Workforce development spending is, therefore, a heavy investment in more than just coastal-urban states. Rural states such as Minnesota and Alabama are leaders in workforce development spending. Several of these top five states have engaged in creating, supporting, and expanding programs.

Minnesota’s FY2020-21 biennial budget proposed more funding for Youth and Young Adult workforce development programs. Minnesota provided state funding for the Youthbuild program, Youth at Work Competitive Grants, and a Youth Program offer a construction career pathway for at-risk youth and young adults who have dropped out of school, youth with industry-recognized credentials and pre-apprenticeship training in residential construction; and provide summer and year-round employment and training services to low-income and at-risk youth, ages 14 to 24, through a partnership with the Local Workforce Development Boards and Youth Committees. However, the Department of Employment and Economic Development proposed a 6 percent decrease in workforce development for FY2020-21.

New Jersey has enhanced and refocused its investment in workforce development and apprenticeship programs over the past two years. There was a 32% increase in funding for workforce development programs in FY2019. The vast increase in funding is the result of additional support being put into the state’s Manpower and Employment Services and the Work First New Jersey program. The focus of these funding increases being employment and training services, strengthening of workforce development programs in the state. FY2020 budget proposal continues that commitment to workforce initiatives.

California has proposed an 11% increase in funding for workforce development programs in FY2020. The Governor’s proposed budget has included increased investment for pre-apprenticeship and apprenticeship programs and the state’s High Road Training Partnership program, a sector partnership initiative of the California Workforce Development Board.

For more information and updates, visit the C2ER State Economic Development Program Expenditures Database.