The Critical Industry Skills Act amends the Workforce Innovation and Opportunity Act (WIOA) to empower states to better address critical workforce needs. It allows Governors to reserve up to 10 percent of certain federal workforce development funds to establish either a critical industry skills fund or an industry or sector partnership and career pathways development fund . This reservation requires matching funds from federal or state sources, ensuring a shared investment in workforce initiatives. The critical industry skills fund is designed to provide performance-based payments to eligible entities, such as employers or industry partnerships, for delivering skills development programs. These programs must be in industries and occupations identified by the Governor as critical, leading to employment or retention with a participating employer. Payments are structured, with a portion made upon program completion and the remainder after six months of participant employment. To encourage broader participation, the federal share of costs for these skills development programs is capped based on employer size: 90 percent for employers with 25 or fewer employees, 75 percent for those with 26 to 99 employees, and 50 percent for those with 100 or more employees. Eligible skills development programs include work-based education or occupational skills instruction, excluding basic onboarding or professional development. States are required to report annually on participant numbers and performance outcomes for these funds. The industry or sector partnership and career pathways development fund aims to establish or expand partnerships and career pathway programs in high-growth or high-wage industries. Grants from this fund would help build capacity, prepare jobseekers and incumbent workers, and improve training opportunities, especially for individuals with barriers to employment. The bill emphasizes strengthening coordination between these partnerships and existing one-stop partners. Grant awards, typically for up to two years, prioritize geographic diversity and partnerships that include 2-year public institutions of higher education. Priority is also given to partnerships demonstrating long-term sustainability and the ability to serve underserved populations, including individuals with disabilities, dislocated workers, and those in rural areas. Applications must detail the partnership, industry, targeted workers, labor market analysis, and include an employer commitment for at least one year of employment post-training. Funds can be used for engaging businesses, developing education and training programs that lead to recognized postsecondary credentials, and implementing apprenticeships or work-based learning. They can also support the development or expansion of career pathway programs, including dual-enrollment strategies, and provide supportive services to participants. Similar to the critical industry skills fund, the federal share of costs for these partnership programs is capped based on the size of participating employers, ranging from 70 percent for small employers to 40 percent for large employers. The bill also modifies provisions for reallocating funds among local areas, linking reallocations to performance-based incentive payments for areas that meet or exceed performance levels for youth, adult, and dislocated worker programs. Finally, it mandates a study by the Secretary of Labor, within four years, to review the usage and effectiveness of the statewide critical industry skills funds, focusing on targeted industries, occupations, and performance outcomes.