New analysis of major workforce investments in five states, with policy lessons and opportunities for what comes next. Also, an update on Indiana’s bid to serve 50K youth apprentices, and a framework for scaling job training to meet the AI moment from a veteran of philanthropy and workforce development. (Subscribe here.)

States Recalculate as Federal Money Fades

Governors across many states used federal pandemic relief funding as seed money for ambitious workforce projects. But that onetime infusion of cash from Washington is running dry. And with 39 gubernatorial elections slated for 2026, big-ticket workforce initiatives across dozens of states face an uncertain future. 

A new report from the Project on Workforce at Harvard University and the National Governors Association looks at signature workforce investments from governors of five states: Idaho, Massachusetts, Minnesota, North Dakota, and Wyoming.

The research sought a better understanding of how state money is being used for workforce development, which is particularly understudied in states with smaller populations and budgets, says Brandon Tatum, NGA’s CEO.

Selected programs feature a wide range of approaches, from Idaho’s LAUNCH, a $75M annual scholarship for high school seniors pursuing postsecondary education and training, to MassReconnect, Massachusetts’ $54M free community college program, and Minnesota’s Drive for 5, a $32M competitive grant initiative aimed at developing training-to-employment pipelines in five high-growth industries. 

The researchers examined how those projects were designed, funded, and implemented, with an eye toward the gaps they sought to fill in the primary federal workforce system.

Each of the five selected programs represents significant gubernatorial priorities, says Kerry McKittrick, director of the Project on Workforce and one of the report’s six co-authors. They also were backed by substantial state funding and reached a level of maturity where measurable results were emerging.

“These investments weren’t simply funding new services,” McKittrick says. “They were often attempting to reshape how workforce systems operate by creating new forms of collaboration, strengthening employer engagement, and reaching populations that aren’t typically served by federal programs.”

The report identifies common challenges across the five diverse projects, as well as policy opportunities to help shape future state workforce investments. Tatum says the goal is to help a large incoming class of governors navigate trade-offs in program design, governance, funding, and sustainability.

For example, the researchers describe the balancing act policymakers face when mulling whether to feature broad eligibility requirements for these projects or to drill down with strategic targeting across industries, geographies, and participant populations. 

Idaho’s approach with LAUNCH tried to thread the needle by tying funding to in-demand careers while being expansive with 81 eligible training providers, ranging from public universities and community colleges to technical programs and private training organizations offering noncredit programs. The program also has sought to be open-access for students, avoiding barriers like filling out a FAFSA or meeting a minimum GPA.

The money is tightly targeted on the industry side, with a weighted funding formula focused on labor market alignment. But it also features a broad and annually updated list of roughly 250 eligible in-demand occupations, spanning electricians, carpenters, physical therapists, and dental hygienists. “This approach is intended to capture not only direct job demand but also related and supporting occupations across industries,” the report says.

Early evidence suggests Idaho has been able to strengthen connections between education, training, and the labor market. And the researchers call it a useful model for other states.

Storm Clouds on Funding: LAUNCH has been durable and politically popular, and its current version doesn’t rely on federal pandemic relief money. But the state’s Legislature determines how the money is spent each year and can slash funding or redirect it to other workforce priorities. Lawmakers cut the in-demand careers fund by $10M this fiscal year, and by the same amount going forward.

The five programs featured in the report, and many other state workforce initiatives, face serious questions about sustainability in coming years. Spending $75M annually on workforce education is a lot of money for Idaho, which has 2M residents. The forecast for most states is a constrained fiscal environment, with slow revenue growth, federal money drying up, a growing number of budget deficits, and competing spending pressures.

“Governors will need to be increasingly selective about where they invest workforce dollars and how they structure investments,” says McKittrick.

Tatum says governors are innovating to make success less dependent on federal dollars and frameworks, while also reshaping workforce systems for long-term gains.

“With AI driving disruption in the job market, especially for entry-level jobs, governors feel a lot of urgency to cut red tape, focus on outcomes and accountability, and work closely with the private sector to align training with real-world, real-time job opportunities in their states and territories,” says Tatum.

Despite the budget outlook, McKittrick is reasonably optimistic about the future. Some of the most successful programs are becoming more targeted, which could be increasingly important in a tighter budget environment.

Governors remain uniquely positioned to align agencies around shared goals, McKittrick says, and can use state funding to fill gaps in federal programs. An important question going forward is whether they can identify strategic investments that change how systems operate and build on system-level gains.

The Kicker: “One of the key lessons from these cases is that workforce investments can generate value beyond the services they directly fund,” she says, “by creating new partnerships, governance structures, employer relationships, and coordination that can persist even as funding declines.”

Indiana’s Youth Apprenticeship Push

One of the most ambitious efforts by a state to bring education and careers closer together is Indiana’s bid to create 50K youth apprenticeships by 2034. The state is attempting to build this new system as apprenticeship faces a make-or-break moment in this country.

Indiana Governor Mike Braun, a Republican, backs the Indiana Career Apprenticeship Pathway, as Colleen Connolly reports this week for Work Shift. So does the Richard M. Fairbanks Foundation, which has chipped in more than $25M for the program, which is based on the Swiss model of apprenticeship.

Yet to reach a scale for high school apprentices that’s rare in this country, the program will need a lot of employers to sign up to host apprentices.

“The No. 1 challenge that everybody faces is employer engagement,” Claire Fiddian-Green, president and CEO of the Richard M. Fairbanks Foundation, told Connolly. “That’s why we’ve been digging in on that, because that’s what Switzerland has figured out. We’re trying to figure out how we can do something similar here.”

Click over to read Connolly’s reporting on the high-stakes push by Indiana.

Four Waves of Progress in Job Training

Matthew Muench has thought a lot about workforce development’s scale problem. The former head of jobs and skills for JPMorganChase Global Philanthropy argues that the field can no longer afford another decade of admiring promising pilots and modest growth.

“If AI disrupts labor markets faster than previous shocks, rapid scale with quality is essential,” he writes in an issue brief for Work Shift.

Muench proposes a new model for understanding the evolution of workforce development across four successive waves of noncollege training providers. At each stage, the organizations have grown more ambitious, more commercial, and more capable of meeting workforce needs at scale.

Insights from these four waves of training models can be used to cultivate a workforce ecosystem that effectivelyconnects 2M–3M people each year to good jobs, argues Muench. Getting there, however, means moving fast and making some hard choices.

“The newest generations might be capable of population-level impact in the aggregate,” he says, “but only if funders, policymakers, and operators abandon habits built for lesser ambition.”

Read Muench’s road map for scaling workforce development here, and let us know what you think.

Open Tabs

AI Upskilling
Autodesk is committing $350M over three years to provide free technology access, training, and certifications for AI-powered jobs that “design and make the physical world.” The software company says the investment will be aimed at job roles in construction, manufacturing, and the skilled trades, as well as architecture and engineering. AI-related job listings are expanding fast across those industries, Autodesk says, and the fastest-growing roles are creative.

First-Rung Jobs
With young workers substantially exposed to AI-driven task change (69% in North America), entry-level hiring should be an explicit component of strategic workforce planning, with targets to maintain or grow intake alongside AI adoption, finds a report from the World Economic Forum, which was produced with PwC. The report calls for a move from fixed role-based workforce structures toward more capability-based models of talent development.

Cities and AI
The cities getting AI right are investing in workforce upskilling, writes David Kertai for the Center for Data Innovation. He cites strategies by D.C., San José, Seattle, and Cleveland, which is building AI readiness by prioritizing governance and workforce preparation before large-scale deployment. Cleveland’s Urban Analytics and Innovation team is developing an AI adoption strategy that moves from small pilots to broader testing and full deployment.

State Funding
California appears unlikely to re-up its recent surge of state investments in workforce development programs, including high-road job training aimed at long-lasting, living-wage employment, reports CalMatters’ Adam Echelman. The current budget proposal from the state, which is facing a deficit, includes $250M in new workforce funds, compared to $2.2B in FY 2022–23. The California Workforce Development Board could lose 20% of its staff.

Working Learners
The federal government should create a “second chance” program that would cover tuition costs for working adult students who pursue credentials at a community college, proposes the Milken Institute. The program would cost an average of $2.2B annually but would produce net federal budget gains through increased tax revenue. An estimated 1.5M learners could earn a credential through the policy during its first decade.

Job Moves
Nathalie Gazzaneo has been hired by OpenAI in a policy development and operations role. Gazzaneo, who recently stepped down as director of the Project on Workforce at Harvard University, will be working on OpenAI’s workforce and economic transition agenda.

Sean Murphy has been hired by the Bipartisan Policy Center as director of workforce and postsecondary pathways. Murphy is stepping down as a director at Walmart, where led philanthropic efforts on economic mobility, workforce systems, and talent strategies.

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