Draft recommendations make ‘major’ changes in college funding formulas

Under draft recommendations by the Texas Commission on Community College Finance, community colleges could be moving toward a more outcomes-based funding formula, but it has to be approved by the Texas Legislature.

Renzo Soto, a policy advisor at Texas 2036, works specifically on higher education and workforce policies.

“The major change they are suggesting is to move from a primarily seat time, or enrollment methodology, of distributing state funds to community colleges to an outcomes based formula. Currently, about 79 percent (of funding) that goes out to community colleges is based on contact hours … Seventeen percent is the success points formula, which is the state’s current outcomes based formula; then the remainder comes out of a formula called the core operations formula, which is just a flat dollar amount that every community college in the state gets,” Soto said in a recent phone interview.

Another change the commission is recommending is shifting from the contact hours formula primarily to the success points formula and having the success points formula be “dynamic.”

“That’s a really big change because currently the way that the formula works is that instead of letting the community college’s outcomes dictate how much funding they should get, the legislature … chooses an amount of available funding and uses the formula to allocate funding for each of the state’s community colleges,” Soto said.

“That has created a situation where if you’re … a small college, or a rural college, and you grow in the outcomes that you’ve hit compared to a previous year but you didn’t grow as fast as say a large college, it’s possible based on the amount of funding that the legislature puts in there … that you’ll actually lose out on funding. So making it a dynamic formula with a settle up process … allows community colleges to know that if they focus on their outcomes and they grow it by a certain amount year over year that they’re going to be reimbursed and awarded funding by the state in accordance with the outcomes they have produced,” Soto said.

Another recommendation is to take the outcomes based formula that currently has 11 components of success and simplifying it so it links to the state’s higher education goals.

“The initial proposal identifies things like completion of credentials of value that are tied to high-demand industry needs, as well as the successful transfer of a community college student up to a four-year university,” Soto said.

“The other big funding formula funding recommendation from the commission is to provide a state-guaranteed yield of funding for community colleges whose tax base or student population is not large enough to meet their instructional and operations cost,” Soto added.

He said the way the state will calculate that is to figure out how much the instructional and operations costs at each community college are on a per student basis, as well as the type of program, whether it’s credit or not for credit, that a student is taking and add that up into their foundation level of funding.

“The state will then use that district’s ability to raise property tax revenue and tuition and fees to fill that bucket first. Then whichever community college is not able to fill that bucket all the way up, they will be, as the commission puts it, leveled up with state dollars to make sure that every community college in the state has enough dollars to meet their instruction and operations costs,” Soto said.

In determining those costs, they’ll factor in higher costs associated with educating students who are economically or academically disadvantaged, as well as adult learners who are looking to reskill or upskill, Soto said.

“I think one important caveat that the commission has mentioned here is that this is not recapture like how it is in the public school finance system, so there will be no recapture at all,” Soto noted.

The other recommendations are more grant or policy based.

“They’re not necessarily dealing with the formulas. That includes increasing the level of funding going to the needs-based financial aid program for community colleges, the Texas Education Opportunity Grant program, or TEOG, (and) funding at parity with the Texas Grants program, which is the needs-based financial aid program for four-year universities. That would mean taking it from currently serving 28 percent of eligible students with TEOG to 70 percent,” Soto said.

Financial aid for high school students who want access to dual credit programs is also being recommended.

“You would identify who qualifies for this by looking at students that are on the free or reduced price lunch program,” Soto said.

They also want to expand the amount of paid work based learning opportunities at community colleges by increasing the number of internships, work-study and apprenticeships that are available to students, Soto said.

Other recommendations, Soto said, are:

>> To provide one-time seed grants to community colleges so they can expand or establish program capacity in high-demand industry fields.

>> They also want the Higher Education Coordinating Board to support and facilitate shared services for things like technology infrastructure needs, course sharing and other types of inter-institutional partnerships.

>> Develop a state standardized “crosswalk” of how the skills and knowledge that you learn as a student through a non-credit workforce education program can be applied to a for-credit program.

If you’re an HVAC technician and you earn a certain type of competency or skill, they will have a standardized way to recognize that non-credit skill into a future for-credit program like an associate degree, a different type of certificate, or a bachelor’s degree.

Soto indicated the package has a good chance of becoming a reality with the make-up of the commission because it includes people with budget and subject expertise.

Odessa College Board Chair Gary Johnson said the thing they are concerned about is that for so long community colleges have done a lot of workforce development, but they are not “really getting compensated from the standpoint of what we’re putting out.”

People look to community colleges to provide education to people who have never had it before, yet every year the colleges are funded less and less, Johnson said.

Some of the proposals will help this. For example, high-demand fields in different areas like trucking and oilfield workers should be funded here.

Johnson added that community colleges are funded based on what they did two years before.

“Whatever funding we receive now is based on ‘18 and ‘19, not anything that has been done since then,” Johnson said.

He added that OC’s enrollment has increased and it has added programs. In fall 2020, 6,978 students were enrolled at Odessa College and 1,354 students graduated with a degree or certificate in fiscal year 2020, according to Texas 2036.

Johnson said on a yearly basis they should look at what community colleges are excelling at and fund them that same year.

He added that it’s hard to plan when you have to base it on funding from what you did two years ago.

“They’ve always been basically funding us on contact hours. Students sign up and if they take 12 hours that’s OK, except back in the ’70s we were funded at 75 percent of our contact hours. Now we’re 28 percent. The best thing about the proposal is there’s a lot of let’s reward colleges based on success. … That’s what we want. If we’re doing a good job, we want to be rewarded for that,” Johnson said.

The last time the community college finance system was looked at comprehensively was in the 2013 legislative session. It was implemented in 2014 and 2015, “so other than that, this formula system has been the same since before the 2000s,” Soto said.

“It’s really important that the legislature consider these recommendations as an entire package, rather than piecemeal, because the proposals work well together,” Soto said.

In a statement, the Texas Association of Community Colleges said it was encouraged by the initial draft of recommendations by the Texas Commission on Community College Finance.

“We are pleased to see broad alignment with the commission’s draft recommendations and recommendations made by TACC at the commission meeting in June,” TACC President and CEO Ray Martinez III said in the statement.

“The draft recommendations address the imperative need for a state funding formula that reflects community colleges’ critical role in providing students of all backgrounds with access to high-quality and affordable academic programs, workforce education training, and continuing education opportunities. These draft recommendations can be transformational for Texas community colleges and, ultimately, for helping Texans achieve their full potential while uplifting the entire state,” Martinez said.

He added that TACC will continue to work with the commission on issues that need more clarity such as shared services and inter-institutional partnerships, uniform tuition rate for dual credit students, and the guaranteed yield for colleges with low taxable valuations.

Texas 2036 is a nonprofit organization building long-term, data-driven strategies to secure Texas’ continued prosperity for years to come. It engages Texans and their leaders in an honest conversation about the future, focusing on the big challenges, its website said.