Regulatory burden: Are DEED’s accountability measures for job-training programs doing more harm than good?

At a December stop in north Minneapolis before his inauguration as governor, Tim Walz got an earful from Alfred Babington-Johnson.

Babington-Johnson, president and CEO of the nonprofit Stairstep Foundation, told Walz that state officials were putting unnecessary stress on organizations that provide job training and education to help cut Minnesota’s persistent racial disparities. Groups like his, he said, “got sidetracked, hoodwinked, hornswoggled” by state bureaucracy.

Stairstep Foundation is not alone in this concern. Since 2016, the Legislature has spent millions of dollars each year on what are often referred to as “equity grants.” Yet many of the organizations getting money have complained of slow payments, inconsistent expectations and burdensome state oversight that has hindered their work.

The relationship with the state has frayed enough for the Department of Employment and Economic Development (DEED) to acknowledge many concerns and pledge reform.

Tackling racial disparities

Until recently, DEED did most of its workforce development at nearly 50 state-run hubs throughout Minnesota. These centers offer job-seekers help with everything from writing a résumé to career advice.

The model is still in use, but has been supplemented in recent years through expanded partnerships with nonprofits that help the unemployed, particularly in communities of color.

Faced with Minnesota’s dismal economic racial disparities and protests after police shot Jamar Clark to death in north Minneapolis, then Gov. Mark Dayton asked lawmakers for $100 million to spend on workforce programs to boost the prospects of people of color.

The Legislature eventually approved $35 million in 2016 and another $24.3 million in 2017. Of that $59.3 million, about $24 million was awarded directly by the Legislature to a dozen nonprofits and government programs, including EMERGE Community Development in north Minneapolis and the Minneapolis Foundation.

The rest was distributed by DEED through a series of competitive grant programs. For example, the Hmong American Partnership received $450,000 for its job training work in sectors like manufacturing. Project for Pride in Living was awarded $412,500 for its career training programs, along with two other grants for youth programs and supportive services for at-risk, low-income people, says a state report.

These organizations generally do more than provide basic services such as résumé-writing help. EMERGE, for example, helps enrollees complete programs to earn job credentials, such as commercial driver’s licenses, and offers vocational training in areas like manufacturing.

The nonprofit has specialized help for people who are formerly incarcerated and helps run the Cedar Riverside Opportunity Center, which has partnered with companies like Medtronic and Fairview Hospital to hire people in a neighborhood with some of Minnesota’s highest unemployment rates.

DEED contracts with organizations that get direct awards from the Legislature and those funded through the competitive grant process. The agency also monitors their work.

Collecting data

When DEED was asked this year to explain if the new spending on equity had been successful, the answer was complicated. Agency leaders told a Republican-led Senate panel there was no easy way to evaluate the program overall, that it had its successes and failures, and that each organization was serving different types of people and had different objectives.

That answer baffled some lawmakers in an age of meticulous data keeping and evaluation by metrics. To add to the confusion, DEED does keep data. Lots of it.

Each nonprofit getting state money — through either a competitive grant or a direct award by the Legislature — has to report a slew of information on whom they serve and how they’re doing. Much of it is posted to an online “Report Card” for the public. For any given nonprofit receiving money, the dashboard shows stats including who participates, how many people get jobs and stay employed and increases in wages after the program.

But there does not appear to be broad consensus on what pieces of information are important and useful. The state’s data has been a key source of contention for many nonprofits who spend time and resources collecting it. For one, it does not always match primary goals and requirements set out in grant contracts. And organizations have said at least some of the data may not be critical to their work or state evaluation.

Other nonprofits told DEED they weren’t expecting the level of reporting requirements tied to the agency’s grants.

Those requirements are likely a much bigger hurdle for smaller nonprofits than bigger ones, said Louis King, the CEO of Summit Academy, a large accredited vocational school in north Minneapolis that provides job certificates in high-need industries.

Summit has an entire department devoted to recordkeeping — something smaller nonprofits might not have — and DEED is just one of many funding sources the nonprofit is accountable to. “We have audits all the time, so it’s not a big issue for us,” King said. Tom Streitz, president and CEO of the north Minneapolis workforce nonprofit Twin Cities Rise, said his organization has a full-time staffer dedicated to providing DEED with data.

Even lawmakers told MinnPost that data is not always the most important factor in picking which organizations get money directly from the Legislature, and they don’t rely on the state’s “report card” dashboard to draw conclusions.

State Sen. Bobby Joe Champion, a Minneapolis DFLer who helped write the first equity package, said the data collected doesn’t necessarily reflect the Legislature’s view of success, and said lawmakers can help grow promising nonprofits that don’t have effective grant writers or a wealth of donors.

Champion, who is the top Democrat on the Senate’s Jobs and Economic Growth Finance and Policy Committee, said they intentionally chose to sidestep DEED for some of the money because he said the agency has not made enough impact and does not understand communities the way lawmakers do.

Republican Sen. Eric Pratt, chairman of the Senate jobs committee, said the DEED report card is “interesting data” but not a good decision-making tool that factored into their search for which nonprofits to support.

Strained relationship with DEED

Tensions with DEED have led to irritation when the agency has tried to enforce its expectations. Summit Academy’s King said they dealt with different grant monitors at the same time who had contrasting beliefs on how they should operate. “It’s simply make up (your) minds about what it is that you really want, and does it depend on who’s showing up?” King told MinnPost.

The discord reached new heights in late 2017, when the agency froze payments to EMERGE and a group of partners, including Stairstep Foundation. DEED said the organization had not met its goals and had issues in reporting progress and financial management.

One of the state’s concerns was that EMERGE had spent money without authorization to contract with another organization to help with services like accounting. EMERGE’s president was also on the board of that separate group.

But in response, EMERGE sued the state, arguing it had actually met its workforce goals, and was a victim of government overreach, punitive oversight and inconsistent expectations. The clash became acrimonious and brought frustrations from many nonprofits into public sight.

In legal documents, EMERGE accused DEED of causing “immediate and ongoing irreparable harm to current and future program participants — who desperately need the support of these programs to stabilize their lives and be prepared to enter the workforce.”

Eventually, in January of 2019, the two sides settled and neither admitted fault.

Later that year, state lawmakers considered overhauling the equity spending package to eliminate nearly all the direct funding from the Legislature and award it instead through competitive grants overseen by DEED, arguing in part that it would help the state use data to direct taxpayer money and provide stricter oversight.

But nonprofits opposed that plan, bringing up many concerns they had with oversight DEED already conducts. They said DEED was no authority on evaluating success and argued the push for more supervision by the agency was born not out of a current lack of accountability, but out of a misplaced distrust of organizations primarily aimed at helping people of color.

Experts told MinnPost that friction over accountability isn’t uncommon in workforce development, for one reason in particular: it’s complicated. Data on outcomes can be difficult to interpret, even when it is readily available, which isn’t always the case.

“It’s sometimes a capacity issue, where the local service providers or boards don’t know how to do all this stuff; it’s too complicated,” said Annelies Goger, a fellow at the Brookings Institution. And in some cases, the policies themselves might be unreasonable, she added.

DEED plans to start over

Facing pressure from workforce organizations and top DFLers in the state House, Rep. Tim Mahoney, chairman of the House Jobs and Economic Development Finance committee, reversed his plans for more DEED grants and the Legislature eventually approved an equity package for the 2019 budget similar to previous ones.

But even with a similar funding structure, Steve Grove, a former Google executive who took the reins as DEED commissioner this year, says the process of awarding and administering state money will change. “I know that some of our requirements for monitoring are perceived to be somewhat onerous,” he said.

In an April blog post, he outlined a three-part process for reforming DEED’s competitive workforce grantmaking process.

The first part centers on transparency: making word about grants widely available, incorporating community feedback and making scoring more clear.

Second, DEED plans to speed up its process by making expectations understandable, making one person at DEED the point of contact for nonprofits and streamlining the agency’s decisions about whom to award competitive grants to.

Third, Grove outlined more training and support of nonprofits in DEED’s management of grants.

Grove said the agency does study the information it collects to analyze workforce programs, and noted some of that oversight is mandated in state law. But he said DEED will nevertheless overhaul how it measures and evaluates success.

Hamse Warfa, a new assistant commissioner at DEED says changes are already in the works: This year, it took DEED significantly less time to announce grant awards. He said communication with nonprofits about the requirements tied to DEED grants during the listening tour led some to understand they weren’t quite ready to apply.

Warfa recently joined the agency to focus on improving racial equity in Minnesota after a long career in philanthropy aimed at boosting workforce development.

“I can relate to a lot of the frustration and points of pain on both sides,” he said.

The agency is holding a roundtable discussion in November to discuss its reporting requirements — in particular, whether the data it gathers is useful and whether it’s gathering too much.

Grove said he wants to fairly balance the different work that nonprofits do while also finding a consistent way to measure them that can help show what programs are working well. Without meaningful data to make conclusions, “it just becomes a conversation between stakeholders about which favorite nonprofit should get the money,” Grove said. “And nobody wants that to be the conversation.”

Some workforce organizations have made suggestions for change. Twin Cities Rise has argued the state should consider wider implementation of its “pay for performance” model — the nonprofit only gets state dollars when a low-income person who graduates from its program is hired for a job with benefits and stays for at least a year.

Grove said he was “intrigued” by the system and is interested in highlighting goals that focus not on an activity, like the number of hours spent training people, but rather benchmarks like how many people get a job after graduating from a program, how long they keep that job, how much their wages increase and if they’re employed in a high-need occupation.

King, the CEO of Summit Academy, said wage increases should be the gold standard.

“As long as we keep the ultimate outcome of increasing wages and a strong, well-skilled workforce at the forefront, then we do the things that work and let go of the things that don’t,” he said.