2024 Tax Preference Review:

Customized workforce training

24-05 FINAL REPORT | DECEMBER 2024


Eric Whitaker, Dana Lynn, Research Analysts
Stephanie Hoffman, Deputy Legislative Auditor; Eric Thomas, Legislative Auditor

Legislative Auditor's conclusion

The B&O tax credit has met the Legislature’s threshold for continuation. However, use has declined 86% from its peak, and the credit’s effect on business retention and expansion is unclear.

Key points

Earlier JLARC reviews
JLARC staff reviewed this preference in 2020. The 2021 Legislature extended the expiration date to July 1, 2026.
2020 review

  • The preference is a B&O tax credit that allows businesses to reduce costs for customized employee training by 50%.
  • Use of both the training program and tax credit declined since 2018. It is unclear if the credit affected business retention or expansion.
  • The tax credit met the Legislature’s target for continuation. As of December 2023, 77% of the loans were repaid on time and in full. The rest are in active repayment.
  • Credit use is concentrated in four counties and the manufacturing industry. Four schools conducted 81% of the trainings.
  • The Legislative Auditor makes two recommendations: one to the Legislature and one to the State Board for Community and Technical Colleges (SBCTC).

About this preference

Estimated savings: $34,000 (2025-2027 biennium) Tax type: Business and occupation (B&O) tax
Expiration date: July 1, 2026 Applicable statute(s): RCW 82.04.449

Executive summary

The Legislature created the Customized Training Program (program) and associated business and occupation (B&O) tax credit in 2006.

Preference reduces training costs by half

To receive the B&O tax credit, a business must work with its training institution partner to complete four steps:

  1. Develop the training.
  2. Apply to the State Board for Community and Technical Colleges (SBCTC) for funding. SBCTC pays for the training up front.
  3. Complete the training.
  4. Repay the SBCTC for the full cost of the training within 18 months.

The business earns a tax credit for 50% of the amount it repays.

Use of the training program and preference have declined

During the study period:

  • The number of businesses using the training program fell 76%, from 17 in 2017 to four in 2023. Beneficiaries can claim the tax credit at any time after they repay the training cost.
  • The number of beneficiaries fell 86%, from 21 in fiscal year 2018 to three in fiscal year 2023.
  • The amount of credit beneficiaries claimed fell 84% from $141,000 in fiscal year 2018 to $22,000 in fiscal year 2023.
Figure 1: Training program and preference use have declined
Three bar graphs. One shows a decrease in the number of businesses using the program. One shows a decrease in the number of beneficiaries claiming credit. One shows a decrease in the amount of credit claimed.

Note: Fiscal year 2018 is 7/1/17 through 6/30/18 and fiscal year 2023 is 7/1/22 through 6/30/23

Source: JLARC staff analysis of training program applications and Department of Revenue confidential tax return detail

Unclear if preference affected business retention or expansion

The 2021 Legislature stated the preference’s objective: retain and expand existing Washington businesses. The evidence is insufficient to say if it has been achieved.

From 2018 through 2023, a total of 27 businesses used the training program, some more than once.

  • All 27 businesses that used the preference in the last six years were still open as of December 31, 2023. However, there is no data to show whether their continued presence is due to the B&O tax credit.
  • JLARC staff surveyed the businesses and six responded. Four businesses reported that they expanded their business, products, or services. All six said they would use the training program again. These results cannot be generalized to all beneficiaries.

Preference met the target for continuation

In 2021, the Legislature extended the preference’s expiration date to July 1, 2026. It also set a target: if 75% of participating businesses completed their training and repaid their loan, the expiration date should be extended.

The preference met the performance target. For the 31 loans:

  • 24 were (77%) repaid in full and on time.
  • 7 are in the statutory 18-month repayment timeframe.

Businesses are primarily manufacturers located in a few counties. Most trainings are done by four institutions.

The training program is available statewide, but 23 of the 27 businesses (85%) were based in King, Pierce, Snohomish, or Thurston County. Also, 78% were manufacturers.

Since 2018, businesses provided 31 different trainings through the program. Four institutions conducted 25 (81%) of the trainings. They are in Pierce, Snohomish, and Clark counties.

Figure 2: Businesses and training institutions are concentrated in a few counties
Two maps. One shows the location of businesses using the training program. The other shows the location of the training institutions providing the trainings.
Source: JLARC staff analysis of training program applications and post-training reports

Legislative Auditor’s recommendations

  1. The Legislature should extend the preference’s July 1, 2026, expiration date.
    • The preference met the target metric that at least 75% of participating businesses complete their training and repay their loans to the SBCTC.
  2. The SBCTC should determine how to increase training program and preference use.
    • The SBCTC should also report its implementation and progress to relevant legislative committees before the 2026 legislative session.

SBCTC concurs with the recommendations.You can find additional information in the Recommendations section.

Commissioner's Recommendations

  1. Regarding recomendation #1: The commission endorses the Legislative Auditor's recommendation with comment. The Legislature may want to consider a capital injection into the revolving fund that supports this program.
  2. Regarding recommendation #2: The commission endorses the Legislative Auditor's recommendation without comment.

Committee action to distribute report

On December 4, 2024 this report was approved for distribution by the Joint Legislative Audit and Review Committee. Action to distribute this report does not imply the Committee agrees or disagrees with Legislative Auditor recommendations.

Part 1.
Tax credit

Credit allows businesses to reduce costs for customized employee training by 50%

Businesses that contract with the State Board for Community and Technical Colleges (SBCTC) to provide employee training through the Customized Training Program (program) may receive business and occupation (B&O) tax credit worth 50% of their training costs.

  • The Legislature created the training program and the tax credit in 2006.
    • The 2017 Legislature repealed the program’s expiration date.
    • The credit currently has a July 1, 2026, expiration date.
  • In 2021, the Legislature set a public policy objective for the preference: provide training assistance to retain and expand existing Washington businesses.

Businesses receive credit when they repay the cost of customized training

Training institutions

Institutions must be in Washington and either a state community or technical college or a licensed private career school or college.

A business must work with its training institution partner to complete four steps before the business receives a tax credit.

  1. The business and training institution develop the training.
  2. The training institution applies to the SBCTC for funding. SBCTC pays the cost of the training up front.
    1. If approved, the course may be waitlisted if sufficient funds are not available.
  3. The business and training institution complete the training.
  4. The business repays the SBCTC for the full cost of the training.
    1. 25% of the total cost is due upon completion of the training.
    2. The remaining balance is due within 18 months.

After a business makes a payment, the SBCTC notifies the Department of Revenue (DOR), which issues a B&O tax credit for 50% of the payment. The credits may then be used against a business’s B&O tax liability on tax returns.

The SBCTC pays for the program through a revolving loan fund. The Legislature made an initial appropriation. Since then, the fund has been replenished as businesses repay their loans. The maximum amount available from the fund is $330,000. The actual amount available changes based on the amount of outstanding loans for training.

Businesses may use credit over multiple years

Businesses can carry forward earned credit until it is used. The entire process from course development to tax credit use can take multiple years to complete.

Figure 3: The time between application and full repayment can extend two or more years
CTP Process Length of Time

Application review and approval decision

Approximately 30 days

Waiting list

Up to 6 months

Training

Varies – From 1 to 16 months. 68% completed in 1 to 4 months

Repayments

Varies – up to 18-month limit

Credit use

No time limit once earned

Note: Training time estimate is based on 2018-2023 data

Source: SBCTC and RCW 82.04.449

Part 2.
Credit use

Number of beneficiaries has declined since peak in 2018

Over the last decade, the number of beneficiaries varied. As shown in the graph:

  • In the five years that precede the current study period, the number of businesses varied, showing growth between 2016 and 2018.
  • The number of businesses using the credit reached a high of 21 in 2018 and has steadily declined since. It reached a low in 2023 with only three beneficiaries.
Figure 4: Number of beneficiaries using tax credit peaked in fiscal year 2018
Bar chart with data showing the number of beneficiaries using the tax credit each year between 2013 and 2023.
Source: JLARC staff analysis of DOR confidential tax return detail, fiscal years 2013-2023

Businesses may claim credit over several years. DOR tax return data shows 37 distinct businesses claimed the credit at least once from fiscal year 2018 through 2023 (the current study period). Some of these businesses used credit that they earned before 2018.

Beneficiary savings have declined since peak in 2018

From fiscal year 2018 through 2023, beneficiaries saved a total of $448,000. The total amount of tax credit claimed by beneficiaries decreased each year. In fiscal year 2023, it reached its lowest point in the past 11 years.

JLARC staff estimate the beneficiary savings for the 2025-27 biennium will be $34,000, assuming the credit expires as scheduled on July 1, 2026. This figure reflects average use in the last three fiscal years.

Figure 5: Beneficiary savings peaked in fiscal year 2018 and fell to the lowest level in fiscal year 2023
Bar chart with data showing the beneficiary savings each year between 2013 and 2023 and estimated beneficiary savings in 2024 through 2026.

Note: Estimated future savings are based on the average credit claimed for the three-years since the Legislature extended the preference (fiscal years 2021-23)

Source: JLARC staff analysis of DOR confidential tax return detail, fiscal years 2013-2023

Annual Tax Performance Reports supply more information about credit use

Businesses that use the tax credit must file an Annual Tax Performance Report (ATPR) with DOR to receive the full value of the credit.

Appendix A lists the business names and amount of credit claimed for calendar years 2018 through 2022. This information from the reports is publicly disclosable and is the most recent data available for this report. Detail provided in Appendix A differs from Figures 4 and 5 because it is based on calendar year reports and some businesses did not file a report as required.

Part 3.
Performance goals

From calendar year 2018 through 2023, 27 businesses used the program to conduct 31 trainings.

  • Some also used the tax credit they earned. They are included in the data shown in Part 2.
  • Others have not yet used the full amount of the tax credit.

The program applications and post-training reports they submitted to the SBCTC include details such as how long a business has operated in Washington.

Preference met the legislative target for continuation

In 2021, the Legislature set a target for continuing the preference: at least 75% of participating businesses must complete their training and repay the loan within 18 months.

The preference met the performance target. For the 31 trainings completed as of December 31, 2023, businesses:

  • Repaid 24 training loans in full and on time (77%).
  • Are in the repayment period for 7 training loans.

Unclear if preference achieves the objective to retain and expand existing Washington businesses

In 2021, the Legislature defined a public policy objective for the preference: provide training assistance to retain and expand existing Washington businesses.

While all 27 businesses were still open as of December 31, 2023, there is no data to show whether their continued presence in Washington was due to the B&O tax credit.

  • According to the applications, 21 (78%) have been in business at least 11 years.
  • None were new to Washington.

To learn more, JLARC staff surveyed businesses that used the program since fiscal year 2018. Six businesses responded.

  • Four reported expanding their business and products or services after completing their training.
  • Three reported adding jobs.
  • Four reported keeping more than 75% of the employees trained through the program.
  • All six reported they would offer more training through the program in the future.

The survey results are not representative of the larger beneficiary group or of the program in general. The evidence is not sufficient to determine if the preference achieved the Legislature’s objective.

Part 4.
Program use

The program applications and post-training reports that businesses submit to the SBCTC include details such as total employees, employees trained, business location, training institution, and type of training provided.

Number of businesses using the training program peaked in 2017 and has declined

Training program use declined in recent years. The number of businesses starting training through the program fell 76% from 17 in 2017 to four in 2023.

Figure 6: The number of businesses using the program peaked in 2017
Bar chart with data showing the number of businesses using the training program each year between 2013 and 2023.

Note: Year reflects when the business started the program with SBCTC. As noted in Part 1, completing the training and repayment can take multiple years

Source: JLARC staff analysis of program applications, calendar years 2013-2023

Participating businesses have similar locations and tend to be manufacturers. They employ fewer than 800 people each.

The 27 businesses that used the program were in eight counties. However, 85% were based in either King, Pierce, Snohomish, or Thurston County. Just two were in Eastern Washington.

Most businesses (78%) were manufacturers. This is consistent with JLARC’s 2020 report, which found 73% of participants were manufacturers.

Statute says that the SBCTC should prioritize trainings for businesses with fewer than 50 employees. However, the agency said it offers the program on a first-come, first-served basis as it receives applications. It also noted that due to the small number of applicants, it has not had to prioritize small businesses when approving training contracts. It would apply the prioritization only if it received two applications simultaneously, which has never occurred.

Figure 7: Businesses applying for the program during 2018-2023 had fewer than 800 employees
Bar chart with data showing a count of businesses based on the number of employees they have. Nine businesses had fewer than 50 employees. Four businesses had between 50 and 99 employees. Ten businesses had between 100 and 300 employees. Four businesses had between 301 and 800 employees.
Source: JLARC staff analysis of SBCTC program applications

Four schools in three counties provided most trainings

The businesses provided 31 employee trainings through the program. While most did one training each, one business contracted for three different trainings and two others contracted for two each. The average cost per training was $30,000, and 81% were done at one of four schools.

Figure 8: Four training institutions offered 25 (81%) of the trainings

Schools

Counties

Trainings

College of Electronic Manufacturing*

Clark

8

Invista Performance Solution**

Pierce

7

Everett Community College

Snohomish

6

Clover Park Technical College

Pierce

4

Five others

King, Grant, Spokane

6

* The College of Electronic Manufacturing travels onsite to employer locations. It provides specialized soldering and related training.

** This was a consortium consisting of Pierce College, Clover Park Technical College, and Tacoma Community College. According to the SBCTC, the partnership has since ended.

Combined, the businesses trained 650 employees. The employees held a variety of positions, from managers and supervisors to production, sales, and administrative staff.

The 31 trainings covered a variety of topics. JLARC staff categorized them into three general types:

  • 47% - Process improvement/LEAN training (e.g., process examination and revision, communications improvement).
  • 31% - Certificated trainings (e.g., soldering, welding).
  • 22% - Industry-specific trainings (e.g., food safety, geometric dimensioning, certain software programs).

Race and ethnicity characteristics for beneficiary businesses not available

Neither the SBCTC nor the training institutions collect detail on the race or ethnicity of businesses or the employees who were trained. JLARC staff tried several different strategies to determine the race and ethnicity characteristics of businesses or the trainees, as detailed below.

  • None of the beneficiary businesses are registered with the Washington Office of Minority and Women’s Business Enterprises.
  • In 2022, DOR began asking preference beneficiaries to report the race and ethnicity of their employees on the ATPR. JLARC staff cannot report detail on this data because taxpayer confidentiality restrictions prohibit disclosure of taxpayer information when there are three or fewer beneficiaries.
  • JLARC staff surveyed businesses that used the program and received six responses:
    • Six responded that they were not minority-owned or women-owned.
    • Five of the six gave partial detail about race and ethnicity. However, it was not consistently reported and cannot be generalized to the larger group of beneficiaries.

The customized training program is the smaller of two SBCTC-sponsored employee training programs

In addition to the Customized Training Program, the SBCTC administers the Job Skills Program (JSP). Both programs allow businesses to design and tailor trainings for employees.

Statute assigns the JSP a specific purpose: enhance economic growth and employment in areas of high unemployment and poverty. The SBCTC notes that training institutions more often refer businesses to the JSP than to the Customized Training Program. The Legislature increased funding for the JSP from $5.45 million in 2019 to $15.45 million in 2021.

The programs also differ in sources of funding and repayment requirements, as shown in the table below. Appendix B includes information about other employee training programs in Washington.

Figure 9: Job Skills and Customized Training programs differ in funding sources, funding levels, and application process

Program Detail

Job Skills Program

Customized Training Program

Funding source

Education Legacy Trust Account (appropriated)

General Fund – State (appropriated)

Employment Training Finance Account (revolving fund)

Fund maximum

$15.45 million per biennium

$330,000

Availability

Fiscal year 2024 allocation was fully committed before 7/01/2023

Fiscal year 2025 applications were due 5/16/2024

Ongoing.

Each business repays their loan and replenishes the revolving fund over an 18-month period

Award process

Competitive grants

Ongoing application cycle

First-come, first-served

Funding

Grants awarded for 50% of training cost

Business provides 50% of cost as cash or in-kind match; in-kind includes the wages and benefits paid to employees while they are in training

Interest-free loan that must be repaid within 18 months after training completed

50% of the repaid amount is returned to the business as a B&O tax credit

Source: JLARC staff analysis of SBCTC interviews and publicly available documents

Recommendations

The Legislative Auditor makes one recommendation to the Legislature and one recommendation to the SBCTC.

Recommendation #1:
Legislative Auditor’s recommendation to the Legislature

The Legislature should extend the preference's July 1, 2026, expiration date. The preference met the target that at least 75% of participating businesses complete their training and repay their loans to the SBCTC.

Legislation Required: Yes.

Fiscal Impact: Yes.

Implementation Date: Depends on legislative action.

 


Recommendation #2:
Legislative Auditor’s recommendation to SBCTC

The SBCTC should determine how to increase training program and preference use. This might include:

  • Broadening use of the credit beyond the four counties where most of the beneficiaries are located and the four institutions that have to date provided most trainings.
  • Encouraging use of the credit by more industries.

The SBCTC should also report its implementation and progress to relevant legislative committees before the 2026 legislative session.

Legislation Required: No.

Fiscal Impact: JLARC staff assume the work can be completed within existing resources.

Implementation Date: December 31, 2025.

Agency Response: SBCTC concurs.

 


Commissioners' Recommendation

Regarding recommendation #1:

The commission endorses the Legislative Auditor's recommendation with comment. The Legislature may want to consider a capital injection into the revolving fund that supports this program.

Regarding recommendation #2:

The commission endorses the Legislative Auditor's recommendation without comment.

Agency Response

SBCTC concurs with the recommendations. See attached letter (PDF).

The Office of Financial Management (OFM) and the Department of Revenue (DOR) were given an opportunity to comment on this report. They responded that they do not have any comments. See attached letter (PDF).

Current Recommendation Status

JLARC staff follow up on the status of Legislative Auditor recommendations to agencies and the Legislature for four years. The most recent responses from agencies and status of the recommendations in this report can be viewed on our Legislative Auditor Recommendations page.

Appendices

Appendix A: Beneficiaries and credit amounts claimed, CY 2018-2022 | Appendix B: Other Washington employee training programs | Appendix C: Applicable statutes | Appendix D: Study questions & methods | Appendix E: Audit authority | Appendix F: Study process

Appendix A: Beneficiaries and credit amounts claimed, CY 2018-2022

Businesses that use the preference are required to report the value of their B&O tax credit on a calendar year basis. This information is publicly available on DOR’s web site. At the time this review was finalized, detail was available through 2022. Thirty businesses filed a report. This is less than the total number of businesses that claimed the credit due to:

  1. The difference in time between calendar years and fiscal years.
  2. Some businesses that claim a credit on their tax return may not file an ATPR as statutorily required. Consistent with RCW 82.32.534 (4), these businesses are penalized, but still receive some portion of the tax credit earned from repaying their loan.

As demonstrated below, it takes some businesses more than one year to use their credit, depending on the B&O tax liability and the amount of credit they receive for their loan repayments.

Figure 10: Beneficiary businesses and calendar year tax savings, as detailed through Department of Revenue ATPRs, calendar years 2018-2022

Business Name

CY 2018

CY 2019

CY 2020

CY2021

CY 2022

Total

AGC Biologics, Inc.

  $19,800

  $19,800

Astareal, Inc.

  $1,069

  $1,959

  $1,247

  $4,275

Cascade Coffee LLC

  $3,765

  $3,765

Crane Electronics, Inc.

  $7,146

  $1,881

  $9,027

EKOS Corporation

  $8,502

  $8,502

Financial Pacific Leasing, Inc.

  $2,730

  $2,730

Grant County Hospital Dist 1

 

  $4,875

  $4,875

Hill Aerosystems, Inc.

  $6

  $6

Hy-Security Gate, Inc.

  $15,025

  $14,630

  $29,655

I.S.S.C., Inc.

  $6,708

  $4,792

  $11,500

IDD Aerospace Corp.

  $17,416

  $7,350

  $2,069

  $26,834

Jamco America, Inc.

  $4,884

  $6,899

  $11,784

Kelly, Bridget Tyn Ellen

  $200

  $200

Korry Electronics

  $50,255

  $17,500

  $17,500

  $85,255

Liquidplanner, Inc.

  $77

  $77

Moses Lake Industries, Inc.

  $13,900

  $13,900

Onamac Industries, Inc.

  $394

  $525

  $919

Pacific Crest Industries, Inc.

  $12,615

  $1,261

  $13,876

Retail Association Services, Inc.

 

  $4,933

  $4,933

Rite, Inc.

  $3,000

  $3,000

RPI Print, Inc.

  $3,716

  $3,716

Safe Boats International LLC

 

  $16,292

  $4,792

  $21,083

Schoeben & Schoeben, Inc.

  $3,800

  $483

  $4,283

Seattle Espresso Machine Corporation

 

  $7,178

  $16,381

  $2,142

  $25,700

Senior Operations LLC

  $4,097

  $4,097

SGL Carbon Fibers America LLC

  $2,500

  $2,500

Shining Ocean, Inc.

  $6,459

  $4,614

  $11,073

Sports Art America, Inc.

  $1,949

  $2,162

  $2,221

  $939

  $7,270

Technical Cable Applications, Inc.

  $6,551

  $13,076

  $9,373

  $3,276

  $32,276

Vigor Marine LLC

  $8,750

  $8,750

Total

  $156,411

  $114,464

  $86,073

  $6,881

  $11,833

 $375,662

Source: JLARC staff analysis of the DOR’s tax incentive public disclosure web page as of February 2024

Appendix B: Other Washington workforce training programs

In addition to the Customized Training Program and the Job Skills Program, the SBCTC identified the following programs.

Washington registered apprenticeship

Administered by the Department of Labor and Industries (L&I), registered apprenticeships combine classroom training (college credit courses) and paid on-the-job training and last one to five years. Apprentices are eligible for lower college tuition rates.

After successfully completing the program, apprentices earn a journey-level certificate of completion from L&I’s Apprenticeship and Training Council. Several community and technical colleges throughout the state offer related supplemental instruction for registered apprenticeship programs.

Job readiness training

WorkSource is a partnership of state and local government agencies (including the Employment Security Department), colleges, and nonprofit organizations that offer employment services for job seekers and businesses. About three dozen full-service WorkSource centers are open to the public across the state, plus several dozen satellite sites that offer a smaller array of services. Available services include:

  • Assessments.
  • Job listings, referrals and hiring events.
  • Resume and application assistance.

Pre-apprenticeship (or “apprenticeship preparation”) programs offer another form of job readiness training as an on-ramp to registered apprenticeship programs (see above). These programs are offered by a variety of organizations, including community and technical colleges, public school districts, regional skills centers, labor unions, and nonprofits.

Workforce professional development

Washington community and technical colleges offer non-credit, self-supported professional development through their continuing education departments. These offerings are available for public enrollment and by contract for corporate training. They also offer credit-bearing professional-technical programs that may be used for professional development.

Some colleges offer micro-credentials and micro-pathways that help people advance in their careers quickly, while also connecting to an educational pathway for further learning. This is an emerging instructional model.

The Worker Retraining Program provides access to training and funding to assist unemployed, dislocated, and at-risk workers upgrading their skills or training for a new career.

Grants through Governor’s Strategic Reserve Fund

Originally, WorkStart was a separate program led by the Department of Commerce (Commerce) to provide workforce development grants funded through the Governor’s Strategic Reserve Fund (SRF). Commerce notes that since 2019, these grants no longer have the “WorkStart” designation and have been folded into the SRF program. Commerce continues to be the lead on SRF grants, which vary between $2 million to $5 million per biennium.

The type of projects funded through the SRF program between 2021 and 2023 include business retention and expansion, recruitment, and workforce development. Businesses receiving the grants were in sectors such as aerospace, food processing, and clean technology. The individual awards tend to be in the $100,000 to $350,000 range.

Appendix C: Applicable statutes

(1) In computing the tax imposed under this chapter, a credit is allowed for participants in the Washington customized employment training program created in RCW 28B.67.020. The credit allowed under this section is equal to 50 percent of the value of a participant's payments to the employment training finance account created in RCW 28B.67.030. If a participant in the program does not meet the requirements of RCW 28B.67.020(2)(b)(ii), the participant must remit to the department the value of any credits taken plus interest. The credit earned by a participant in one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year. No credit may be allowed for repayment of training allowances received from the Washington customized employment training program on or after July 1, 2026.
(2) A person claiming the credit provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534.
(3) By December 31, 2024, the college board, as defined in RCW 28B.50.030, shall submit to the higher education committees of the legislature a report on:
(a) Industries supported by the program;
(b) The geographical location of companies utilizing the program;
(c) The number of employees trained;
(d) The types of occupations included in the training;
(e) The wages of employees trained prior to program entrance and the wage growth one year after training;
(f) Retention of employees for a period of one year after training; and
(g) Credential attainment of employees upon completion of the training, if applicable.

NOTES:

Finding—2021 c 116: "The legislature finds that due to the COVID-19 pandemic, there is new urgency for employer-affordable programs supporting worker training. It is the objective of the legislature to aid in the recruiting, retaining, and expanding of existing small businesses in Washington by extending the expiration of the customized employment training program tax credit to July 1, 2026." [ 2021 c 116 § 1.]
Tax preference performance statement—2021 c 116: "(1) This section is the tax preference performance statement for the tax preference contained in section 3, chapter 116, Laws of 2021. This performance statement is only intended to be used for subsequent evaluation of the tax preference. It is not intended to create a private right of action by any party or to be used to determine eligibility for preferential tax treatment.
(2) The legislature categorizes this tax preference as one intended to accomplish a general purpose, to provide customized workforce development and skill development training that enhance worker skill sets.
(3) It is the legislature's specific public policy objective to provide customized training assistance that retains and expands existing businesses in Washington.
(4) If a review finds that 75 percent of participating businesses complete the training and repay the customized employment training program loan, then the legislature intends to extend the expiration date of this tax preference.
(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to any data collected by the state." [ 2021 c 116 § 2.]
Effective date—2021 c 116: "This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2021." [ 2021 c 116 § 4.]
Effective date—2017 c 135: See note following RCW 82.32.534.
Application—Finding—Intent—2010 c 114: See notes following RCW 82.32.534.
The legislature finds that the provision of customized training is critical to attracting and retaining businesses, and that the growth of many businesses is limited by an unmet need for customized training. The legislature also finds that workforce training not only helps business, it also improves the quality of life for workers and communities. Because of the statewide public benefit to be gained from instituting a customized training program, the legislature intends to create a new program to fund workforce training in a manner that reduces the up-front costs of training to new and expanding firms.

 

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
(1) "Board" means the state board for community and technical colleges.
(2) "Costs of training" and "training costs" means the direct costs experienced under a contract with a qualified training institution for formal technical or skill training, including basic skills. "Costs of training" includes amounts in the contract for costs of instruction, materials, equipment, rental of class space, marketing, and overhead. "Costs of training" does not include employee tuition reimbursements unless the tuition reimbursement is specifically included in a contract.
(3) "Participant" means a private employer that, under this chapter, undertakes a training program with a qualified training institution.
(4) "Qualified training institution" means a public community or technical college or a private vocational school licensed by either the workforce training and education coordinating board or the *higher education coordinating board.
(5) "Training allowance" and "allowance" means a voucher, credit, or payment from the board to a participant to cover training costs.
(6) "Training program" means a program funded under this chapter at a qualified training institution.

NOTES:

*Reviser's note: The higher education coordinating board was abolished by 2011 1st sp.s. c 11 § 301, effective July 1, 2012.
(1) The Washington customized employment training program is hereby created to provide training assistance to employers locating or expanding in the state.
(2)(a) Application to receive funding under this program must be made to the board in a form and manner as specified by the board. Successful applicants must receive a training allowance from the board to cover the costs of training at a qualified training institution. Employers may not receive an allowance for training costs which exceed the maximum annual training cost per employee, as established by the board, and are not eligible to receive an allowance or allowances of over five hundred thousand dollars per calendar year.
(b) Allowances must be granted for applicants who meet the following criteria:
(i) The employer must have entered into an agreement with a qualified training institution to engage in customized training and the employer must agree to: (A) Upon completion of the training, make a payment to the employment training finance account created in RCW 28B.67.030 in an amount equal to one-quarter of the amount of the training allowance; and (B) over the subsequent eighteen months, make monthly or quarterly payments, as specified in the agreement, to the employment training finance account created in RCW 28B.67.030 in an amount equal to three-quarters of the amount of the training allowance. During calendar years 2009 and 2010, participants may delay payments due under this section for up to eighteen months. The payments into the employment training finance account provided for in this section do not constitute payment to the institution.
(ii) When hiring, the employer must make good faith efforts, as determined by the board, to hire from trainees in the participant's training program. The agreement with the qualified training institution provided for in (b)(i) of this subsection must specify terms for reimbursement or additional payment to the employment training finance account by the employer if the participant does not, when hiring, make good faith efforts to hire from trainees in the participant's training program.
(iii) The training allowance may not be used to train workers who have been hired as a result of a strike or lockout.
(c) Preference is given to employers with fewer than fifty employees.
(d) Preference is given to training that leads to transferable skills that are interchangeable among different jobs, employers, or workplaces.
(3) Qualified training institutions may enter into agreements with four-year institutions of higher education, as defined in RCW 28B.10.016, in accordance with the interlocal cooperation act, chapter 39.34 RCW.
(4) The board and qualified training institutions may solicit and receive gifts, grants, funds, fees, and endowments, in trust or otherwise, from tribal, local, federal, or other governmental entities, as well as private sources, for the purpose of providing training allowances under chapter 112, Laws of 2006. All revenue thus solicited and received must be deposited into the employment training finance account created in RCW 28B.67.030.
(5) Qualified training institutions must make good faith efforts to develop training programs using trainers preferred by participants.
(6) For employers who (a) have requested training under the job skills program created under chapter 28C.04 RCW but are not able to participate in the job skills program because the funds have all been committed, and (b) desire to become participants in the Washington customized employment training program, the board shall ensure a seamless process toward participation.
(7) The board may adopt rules to implement this section.
(1) All payments received from a participant in the Washington customized employment training program created in RCW 28B.67.020 must be deposited into the employment training finance account, which is hereby created in the custody of the state treasurer. Only the state board for community and technical colleges may authorize expenditures from the account and no appropriation is required for expenditures. The money in the account must be used solely for training allowances under the Washington customized employment training program created in RCW 28B.67.020 and for providing up to seventy-five thousand dollars per year for training, marketing, and facilitation services to increase the use of the program. The deposit of payments under this section from a participant ceases when the board specifies that the participant has met the monetary obligations of the program. During the 2013-2015 fiscal biennium, the legislature may transfer from the employment training finance account to the state general fund such amounts as reflect the excess fund balance in the account.
(2) All revenue solicited and received under the provisions of RCW 28B.67.020(4) must be deposited into the employment training finance account to provide training allowances.
(3) The definitions in RCW 28B.67.010 apply to this section.

NOTES:

Effective dates—2013 2nd sp.s. c 4: See note following RCW 2.68.020.
Effective date—2009 c 564: See note following RCW 2.68.020.

 

This chapter, being necessary for the welfare of the state and its inhabitants, shall be liberally construed to effect its purposes. Insofar as the provisions of this chapter are inconsistent with the provisions of any general or special law, or parts thereof, the provisions of this chapter shall be controlling.

 

This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect June 30, 2017.

 

Appendix D: Study questions

This study aimed to answer the following questions, which were presented to JLARC in November 2023 (view here).

  1. To what extent have Washington businesses continued to use the customized workforce training credit since JLARC’s review in 2020?
    1. How many and what types of businesses have applied for the credit? Where are beneficiary businesses located?
    2. How many employees have been trained, and what types of training have been provided using the program?
    3. How long have beneficiary businesses been operating in Washington and have they expanded since completing the training?
  2. What are the racial and ethnic characteristics of those who use the credit and the employees who are trained?

  3. What percentage of businesses have completed the training and repaid the customized employment training program loan from the SBCTC?

Methods

The methodology JLARC staff use when conducting analyses is tailored to the scope of each study, but generally includes the following:

  • Interviews with stakeholders, agency representatives, and other relevant organizations or individuals.
  • Site visits to entities that are under review.
  • Document reviews, including applicable laws and regulations, agency policies and procedures pertaining to study objectives, and published reports, audits or studies on relevant topics.
  • Data analysis, which may include data collected by agencies and/or data compiled by JLARC staff. Data collection sometimes involves surveys or focus groups.
  • Consultation with experts when warranted. JLARC staff consult with technical experts when necessary to plan our work, to obtain specialized analysis from experts in the field, and to verify results.

The methods used in this study were conducted in accordance with Generally Accepted Government Auditing Standards.

More details about specific methods related to individual study objectives are described in the body of the report under the report details tab or in technical appendices.

Appendix E: Audit authority

The Joint Legislative Audit and Review Committee (JLARC) works to make state government operations more efficient and effective. The Committee is comprised of an equal number of House members and Senators, Democrats and Republicans.

JLARC's nonpartisan staff auditors, under the direction of the Legislative Auditor, conduct performance audits, program evaluations, sunset reviews, and other analyses assigned by the Legislature and the Committee.

The statutory authority for JLARC, established in Chapter 44.28 RCW, requires the Legislative Auditor to ensure that JLARC studies are conducted in accordance with Generally Accepted Government Auditing Standards, as applicable to the scope of the audit. This study was conducted in accordance with those applicable standards. Those standards require auditors to plan and perform audits to obtain sufficient, appropriate evidence to provide a reasonable basis for findings and conclusions based on the audit objectives. The evidence obtained for this JLARC report provides a reasonable basis for the enclosed findings and conclusions, and any exceptions to the application of audit standards have been explicitly disclosed in the body of this report.

Appendix F: Study process

View guide to JLARC Tax Preference Reviews here.

 


JLARC members on publication date

Senators

Bob Hasegawa

Liz Lovelett

Mark Mullet, Chair

Ann Rivers

Jesse Salomon

Shelly Short

Lynda Wilson, Secretary

Keith Wagoner

Representatives

Emily Alvarado

Stephanie Barnard

April Berg

Jake Fey

Keith Goehner

Stephanie McClintock

Ed Orcutt, Vice Chair

Gerry Pollet, Assistant Secretary

Citizen Commission for Performance Measurement of Tax Preferences

Voting members

Andi Nofziger-Meadows, Chair

Dr. Grant D. Forsyth, Vice Chair

Ronald L. Bueing

Dr. Sharon Kioko

James Orr

Non-voting members

Mark Mullet, JLARC Chair

Pat McCarthy, State Auditor