Dive Brief:
- Texas Gov. Greg Abbott signed into law Friday a new funding model for community colleges that will tie the majority of their state allocations to performance-based measures.
- Performance criteria include the number of “credentials of value” a community college awards. Texas’ higher education coordinating board will determine whether credentials are valuable by analyzing the costs and wages associated with each.
- Community colleges will also receive more funding based on the number of credentials in high-demand fields they award, the number of students who successfully transfer to four-year universities, and the number of high school students who complete sequences of dual-credit courses.
Dive Insight:
The new funding system, which comes with a $683 million allocation in the state budget, takes effect Sept. 1. Texas community colleges currently rely on tuition and property taxes for the majority of their funding, according to a report last year from the Texas Commission on Community College Finance.
The commission — which included academics, lawmakers and policy experts — was tasked with recommending a new funding system for the state’s 50 community college districts. They found that the old model led to wide disparities in per-student funding, in part because of differences in property taxes and values across the state.
Performance-based funding is meant to incentivize the state’s community colleges to award the types of credentials that the commission predicts will be required for more than 60% of Texas jobs over the next decade.
In a survey of 5,000 Texans for the commission’s report, roughly two-thirds of respondents said they supported basing community college more on student outcomes. And about 9 in 10 said they think it’s important for community college credentials to meet the needs of the region’s employers.
However, the new model will also still provide base funding levels for community colleges’ instruction and operating costs. Part of that base funding will account for the higher cost of educating certain students, including those who are ages 25 and older or those who are economically or academically disadvantaged.
Texas isn’t the only state revising how it funds community colleges. Oregon’s higher education coordinating commission last week also approved a new performance-based funding model to replace one that made allocations almost entirely based on enrollment.
Under the new model in Oregon, community colleges will receive extra funding based in part on the number of students enrolled from underserved groups. That includes low-income students, adult students and members of racial and ethnic minority groups.
Performance-based funding models have been around for decades, with 41 states having tried them at some point as of fiscal year 2020, according to research first published early last year by InformEd States, which analyzes state higher education funding policies.
Research examining the model's effectiveness has yielded mixed results.
Research published in 2022 found that performance-based funding policies widened racial disparities in certificate completion in Tennessee and bachelor’s degree completion in Ohio.
Peer-reviewed research published earlier this year, however, found that performance-based funding for public colleges was linked to higher SAT scores for students in the bottom quarter. But moderately selective colleges saw enrollment declines among students in racial minority groups as more of their funding was tied to their performance.
Another 2020 analysis looking at two decades of studies, meanwhile, found performance-based funding models to usually be associated with “null or modest positive effects” on retention and graduation.
They can also come with a host of unintended consequences. For instance, they seem to push community college students into short-term certificates — rather than longer-term associate degrees that typically lead to greater labor market returns, according to InformEd States.
