Driving Results: Making the most of relief funding

Shelby Kohn, Director

The Community Outcomes Fund at Maycomb Capital



The breadth of the distress that COVID-19 has inflicted on labor markets across the United States, and especially in historically oppressed communities, leads to three key takeaways:

• The nature of work was already changing, leaving many un- or under-employed. In the context of COVID-19, those changes are now rapidly accelerating.
• Workforce development programs are facing the need to change both what jobs they train for and how they train as employer demand shifts and social distancing and remote work continue to gain traction.
• The federal government has passed an unprecedented amount of stimulus funding to state and local governments.

Workforce Boards understand better than anyone the impact of this pandemic on workers and businesses in their own communities. Workforce Boards also have the expertise to inform the path towards an equitable and sustainable economic recovery.

Excitingly, one of the largest sources of federal relief—the American Rescue Plan’s (ARP) State and Local Fiscal Recovery Funds—puts local governments in the driver’s seat. This means many Workforce Boards are informing how to deploy these funds. For example, in Connecticut, the Governor has convened a Workforce Council of all Workforce Boards across the state. The Council’s feedback is shaping the Governor’s approach to workforce-related ARP spending.

At this pivotal time, many of us in the workforce development community are asking ourselves the same questions: How do we make the most of this once-in-a-generation funding? How do we ensure it is allocated in a way that generates quality employment opportunities and readies our communities for careers of the future? How do we use this unprecedented funding to generate a truly equitable economic recovery?

Perhaps the most important way to drive results is to use smart contract structures that condition funding on measurable outcomes. Outcomes-based contracting and outcomes financing provide a way forward by aligning the efforts and incentives of public, nonprofit, and private stakeholders. It is an effective, tested tool that Workforce Boards and local governments can use to drive impact.

How do outcomes-based contracts work? These contracts disperse payments to service providers as participants reach targeted outcomes, such as training completion, job placement, or retention—and ideally measures of ultimate success, like wage growth. Depending on the nature of the program, the values of the community, and the availability of data, the measured outcomes vary—what matters most is that dollars are tied to those results.

In some cases, these projects may be structured as public-private partnerships where impact investors provide up-front dollars to cover initial program delivery costs. These investments give service providers, typically nonprofit community-based organizations, the funds they need to operate. The impact investors take on the financial risk if the program falls short of expected outcomes. In this way, public dollars only pay for what works.

The good news is that the ARP State and Local Fiscal Recovery Funds allow for an outcomes-based approach. What’s more, in many cases the outcomes that drive payment are likely to align with the performance indicators established by Treasury. And finally, the outcomes data collected for contract payment also enable communities to continuously refine services in real time.

At this moment, we have a rare opportunity to tackle some of our deepest workforce and economic mobility challenges. Ineffectual programs and services are a disservice to job seekers and businesses—they breach trust between government and communities. The key to our success will be driving dollars towards programs that achieve measurable results, that help individuals and families enjoy higher earnings and economic mobility that has always been America’s promise.