Teacher positions will remain funded at Launceston's Studentworks program until the end of the year following a crisis meeting between the board and the Education Department this week.
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However, the program's future remains unclear as it undergoes a review of how best it can support students now and in the future.
Education Minister Roger Jaensch confirmed on Wednesday funding for the program would continue at its current level until the end of the year.
"A productive meeting was held between Studentworks' Board and the Department of Education on Tuesday night and it was agreed the current model would run for the remainder of the year," Mr Jaensch said.
"Over the next six months we will work with the Board to determine how Studentworks can continue to evolve and support Launceston's young people into the future."
This followed concerns unearthed by Bass Labor MP Michelle O'Byrne, who had met with members of the Studentworks board to discuss the withdrawal of funding for teacher positions previously confirmed by the department.
Community concern has centred around the potential closure of the facility if teacher positions are withdrawn, robbing it of crucial funding for its operation.
Any future funding model is not certain beyond the end of the year and will be subject to the findings of an ongoing review of the organisation.
An Education Department spokesperson said the department had done significant work to ensure schools provided inclusive education.
"In contrast to when Studentworks first started, DoE now provides a wide range of inclusive vocational educational provisions that are school based, including school-based apprenticeships, trade training centres, traineeships, and approved learning packages for students to access and learn skills for their transition to work," the spokesperson said.
"DoE has introduced purpose-built re-engagement programs, the flexible and tiered provision within schools. The introduction of the Inclusive Practice Team, which includes 16 coaches located throughout the state, continues to deliver additional support for schools.
"These experienced teachers are accessible to all schools as and when needed and provide on the ground support for children and young people with diverse learning needs."
Studentworks was started by Launceston woman Marjorie Knox 40 years ago and offers work experience education programs for at-risk students.
Mr Jaensch said Studentworks had made "a significant contribution" in supporting young people, and the government would support the program "now and into the future".
However, Australian Education Union Tasmania president David Genford said the decision to withdraw teacher positions was "hard to understand" and called on the government to ensure the ongoing viability of the institution.
"This outstanding program has significant support within the community and is strongly endorsed by local business leaders," Mr Genford said.
"It is difficult to understand how these students will be catered for in their local school, particularly given the severe shortage of teachers."
AEU state manager and Studentworks board member Brian Wightman took to social media this week to lament the decision before the crisis meeting, saying he was "at his wits' end", trying to understand.
The post dismayed several people, including some former board members or students.
Mr Genford said schools would be hard pressed to deliver this type of education in public schools, with many under-resourced and over-worked.
"Every Tasmanian public school is currently underfunded $1289 per student per year and the state is in the middle of a teacher shortage leaving many schools struggling to cope. No school will be able to support these types of programs when they are already struggling to staff classes," he said.
The spokesperson did not confirm that if the department withdrew the funding post-2022, it would be re-injected into public education.
However, they said in recent years, initiatives to increase school capacity and the reintroduction of purpose-built re-engagement programs had impacted Studentworks enrolments.
"DoE has introduced purpose-built re-engagement programs, flexible and tiered provision within schools. The introduction of the Inclusive Practice Team, which includes 16 coaches located throughout the state, continues to deliver additional support for schools. These experienced teachers are accessible to all schools as and when needed and provide on the ground support for children and young people with diverse learning needs."
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