A funding vehicle used by Iowa’s community colleges for the Iowa New Jobs Training Program appears to be a good investment in two ways — both for employers investing in their workers, and for the investors who buy the bonds.

Later this month, Des Moines Area Community College will issue investment certificates representing 10 Central Iowa companies that are adding new employees who need training. The certificates will be sold on the open market to investors who want a safe return on investment comparable to most federally tax-exempt bonds.

The companies receiving training are reimbursed for those costs by the program and the certificates are then paid off within a 10-year period from a percentage of the state taxes withheld for those employees. It’s a process each of the state’s 15 community colleges go through once or twice a year on average.

“It’s a way for companies to use future withholding on tax dollars to train their new workers today,” said Larry Grubisich, executive director of DMACC Business Resources. Last fiscal year DMACC raised more than $4.8 million from issues of the industrial revenue bonds to train 1,184 new employees in 13 companies.

Of the nearly 500 Iowa companies that received New Jobs Training dollars in the past five years, about one-fourth of the funds were to train workers in new companies; the remainder went to train workers added as part of existing companies’ expansions.

Statewide, the amount of training dollars awarded fell off the table after Sept. 11, 2001, as companies scaled back on expansion and training. Approximately $10 million was awarded for 30 projects in fiscal year 2003, a 75 percent drop from the amount awarded in 2001. Additionally, state funding to community colleges has declined even though the cost of training has generally increased.

Now, “the indications are that there’s a lot more activity out there this year, and that companies are looking at their employment needs,” said Mike Fastenau, business services manager for the Iowa Department of Economic Development. “The expectation is that there will be a lot more training needs this year.”

Iowa’s job training programs are relatively unique among the states, and some state have adopted similar programs based on the state’s model, Fastenau said. New Mexico is the most recent state to examine Iowa’s programs, he said.

“The biggest thing with the training programs is they’re flexible, adaptive and they’re driven by the industries to train the workers to do those jobs and be more competitive in the national and global marketplace,” he said.

Companies participating in the New Jobs Training Program have three years to conduct the training and be reimbursed by the state, and then for either five or 10 years continue to have a portion of its employees’ withholding taxes diverted to the program. If a company does not hire as many workers as they promised or leaves Iowa before the bonds are retired, it would owe a balloon payment to retire the bonds.

Each community college annually verifies that the companies have created the new jobs that were pledged and that the training was completed.

“We verify they have actually done the training before we issue the check,” Grubisich said.

The jobs training programs, which are limited to non-retail businesses that manufacture, assemble, warehouse or wholesale products, or companies conducting research and development, range from soft-skills management training to welding.

Among the areas in highest demand currently are technical training, management-supervisory training, lean manufacturing and safety-OSHA standards, Grubisich said.

“It’s really up to the company how much they’re going to use DMACC or other institutions,” he said. “We have 70 vocational technical programs. They have a choice of what institution they use, public or private, or sometimes they use corporate training programs from the private sector.

“As we enter into a final agreement with a company, we will go down and assess their needs and provide a training plan of how the funds will be expended,” he said.

The assessment is one of the checks and balances made to minimize the risk of the program, which historically has had a default rate of less than 2 percent. The companies’ financial records for the past three years are also scrutinized.

“We are very careful in who we do business with, and the companies’ liabilities and strength,” Grubisich said.

CLASSES IN ‘LEAN’

Since 2001, EMCO Enterprises in Des Moines has been educating its production and distribution employees in “lean management” techniques for finding low- or no-cost process improvements to enhance their productivity.

By the end of 2003, 420 of the manufacturer’s employees had attended an eight-hour “Lean 101” course, funded through the Iowa Jobs Training Program, and many have attended more advanced courses.

The education was “instantly beneficial to the bottom line,” said Jim Gelina, EMCO’s director of engineering. Immediately following the classes, employees helped to implement a new plant layout, reorganize their workstations and revise redundant processes, he said.

Employees recognized that change was good, said Randy Ross, the company’s human resources director.

“The metrics of lean and goal setting by the lean teams will play a significant role during the next year as EMCO maintains their employment level and implements continuous improvement plans,” he said.

Company officials have said EMCO plans to add about 60 additional workers this year, about half of those at its Des Moines plant.