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Texas is beginning to tie community college funding to outcomes

State funding for Texas community colleges, long distributed primarily based on student credit hours, would reward institutions for helping students transition, graduate, and move into high-demand fields, under a new model proposed by a state commission. The recommendations in a report released Thursday by the Texas Higher Education Coordinating Board, if approved by state legislatures, would create a much more outcomes-based approach that is expected to result in increased funding, particularly for small and rural community colleges.

The proposal has broad support among community college leaders, who believe the move would significantly increase state allocations and support funds for their institutions and help them build capacity to meet the training needs of the workforce of the state’s growing population.

“Our commission believes the new funding model needs to do three things: reward colleges for positive outcomes, particularly in completion and transfer of transcripts, ensure equitable access through financial support, and help community colleges increase their capacity to meet rapidly changing labor needs,” said Woody Hunt. Chairman of the Texas Commission on Community College Finance wrote in the report. The commission, made up of lawmakers, community college leaders, business people and policy experts, was tasked by the Texas legislature last year to propose a new funding system.

The recommendations could have major implications for the state’s 50 community college districts. Funding would be tied to student success metrics, including the number of degrees and certificates awarded, the number of qualifications earned in high-demand fields, transfer rates to four-year universities, and the number of students pursuing dual-credit courses.

Under the current funding formula, most state funding for Texas community colleges is allocated based on the number of credit hours taken by students, a measure that depends on enrollment. A portion of the funding, 17 percent, is allocated through a performance-based funding model that includes success metrics for students over the past three years, such as: B. The number of students who completed their first college-level mathematics course and the number of students who successfully completed their first 15 credits.

State grants account for only about 26 percent of total community college funding in the state, according to the Education Trust, a research and advocacy organization focused on filling gaps in education. Community colleges otherwise rely on tuition and local property taxes, which can vary widely by institution.

Jonathan Feinstein, Texas director of the Education Trust, said smaller rural colleges, which are often in communities with lower wealth and less likely to approve taxes, are suffering under the current model. The existing formula is also based in part on how institutions perform in relation to each other, while the new model would judge universities on how much they improve over time.

“Schools were competing with each other for a solid pie,” he said. “What is being proposed in this new system, which I think is really important, is that we will assign a fixed value to these outcomes, which means that if the institutions improve their outcomes, they will actually get more funding. So they compete with themselves or with an earlier version of themselves to get access to additional government investment.”

According to the report, one of the goals of the new model, along with a greater emphasis on student outcomes, is to “provide more consistent core funding for tuition and operations at the community colleges” and create a model that ensures “small and rural colleges with lower real estate values.” have the resources needed to serve students both in and out of their service areas and meet the labor needs of local employers.”

The report includes plans to financially assist low-income students in dual-credit courses and one-time seed grants to colleges that expand programs in high-demand areas to meet government labor needs. Colleges would also receive a base amount for operating and tuition expenses so that institutions that bring in less money through local property taxes are adequately funded. It also proposes that the state increase funding for Texas Educational Opportunity Grants, with the goal of allowing at least 70 percent of qualified low-income students to attend two-year or four-year institutions in the state.

Harrison Keller, the Texas commissioner of higher education, said The Texas Tribune that he expects the changes to cost an additional $600 million to $650 million initially. Despite the possible additional costs, he was encouraged by the “encouragement that we have received from across the political spectrum”.

Robert Kelchen, professor and director of the Department of Educational Leadership and Policy Studies at the University of Tennessee at Knoxville, described the recommendations as the product of “thoughtful” thought. He was part of a team of scholars that prepared a paper to advise the commission last month.

“It balances the political and economic needs of the state, where funding must be tied to student outcomes, and also provides additional funding for groups that have historically been underrepresented and may need more resources to thrive,” said he.

He added that a funding model based largely on credit hours, like the current one, could disadvantage smaller institutions and institutions that serve students with high levels of financial need. The new model has the potential to correct that.

“If some students need more funding to be successful, the current allocation doesn’t work as well,” he said.

Austin Community College District Chancellor Richard Rhodes said that previously only 22 percent of eligible low-income community college students received Texas Educational Opportunity Grants. He expects the model to increase both federal aid to students and federal funding for his district.

He also commended the commission for gathering the perspectives of a variety of stakeholders, including community college presidents and trustees and legislators from rural and urban regions of the state.

“I’m pleased with the entire process that has led to these recommendations,” he said. “The process was inclusive. It contained all the viewpoints needed to develop good policy…I think that alone will lead to bipartisan support.”

The new model has received significant support. A poll of 5,000 Texans funded by the Bill & Melinda Gates Foundation and Educate Texas found that 65 percent of Texas residents supported basing community college funding on outcomes rather than enrollment. The recommendations also received unanimous support from the Texas Association of Community Colleges, a community college advocacy group in the state, and its 48 member colleges, according to a press release from the association.

Ray Martinez III, the association’s president and CEO, said its leaders “have worked hand-in-hand with the commissioners to ensure that these recommendations reflect the concerns of our diverse institutions, large or small, rural or urban, equally.”

Jay Barrett, regent at Amarillo College and executive chairman of the Community College Association of Texas Trustees, said the recommendations “will empower all colleges to better serve our diverse communities.”

“As stewards of public funds, elected trustees and legislators can have confidence that these policies will deliver a strong return on investment and enhance the local workforce to ensure Texas’ prosperity well into the future,” he said in a press release.

The majority of states have some form of outcomes-based funding for higher education, including Texas, which has had its version of performance-based funding since 2013. And with some of these transitions come growing pains for colleges. For example, when California introduced a merit-based funding model in 2018, faculty groups and community college leaders raised concerns about potential funding losses and expressed doubts about the effectiveness of these models in improving student outcomes. Several studies of performance-based funding models have shown lackluster results, while others suggest these formulas have potential, particularly when they include metrics to improve educational equity.

The report recognizes that strategies should be in place to address any “unintended negative consequences” of the model as universities make the transition. It also recommends providing colleges with “hold-in” funds to ensure that the use of the new formula does not result in them losing funding.

San Antonio College interim president Francisco Solis said rural colleges may be more afraid of an outcomes-based funding model like this when they face declining enrollment and are in areas where students have less access to a variety of jobs. But enrollment at his institution is growing and he expects students to be going to high-demand areas in a busy city like San Antonio, so he sees positive implications for his institution.

“I think San Antonio College and really all Alamo Colleges are willing to see that as an advantage,” he said.

According to Kelchen, research on performance-based funding models tends to show that they don’t have a large impact on improving student outcomes, but that doesn’t mean they don’t have value. He believes that this model in particular was designed with thought and care.

“I’m skeptical that this is the silver bullet,” he said. “But could this be beneficial because it brings in extra funding and forces thoughtful conversations? Yes.”

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