With new funding formula, community colleges can better prepare students for Texas workforce, experts say

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Texas legislators overhauled the state’s community college funding model in June with a landmark investment in Texas’ two-year public institutions.

The passage of House Bill 8 sets aside $683 million for community colleges and rewards schools based on performance metrics like the number of job credentials, degrees or certificates students complete, college courses they take during high school, or transfers to four-year schools.

At a Texas Tribune event Wednesday on how the new law will impact Texas community colleges, Denisa Gándara, an assistant professor at The University of Texas at Austin, said the change will help schools better meet the needs of students and prepare them to enter high-demand industries.

“This really is a historic investment in community colleges, and it's a historic investment in the state of Texas,” Gándara said. “I think this bill has significant potential to really bolster the prosperity — economic and non-economic — for this state.”

A new, outcome-based funding model 

Texas’ old funding formula allocated money to community colleges based on the total hours of instruction students received. It was dependent on student enrollment, which differs from school to school.

HB 8 overhauled that method, introducing a new, outcomes-based formula. Schools now get money when students earn “credentials of value,” or certificates and degrees proven to help workers earn higher wages than they could with only a high school diploma.

Colleges earn extra funding when students gain credentials in high-demand industries. They can also gain funding when students transfer to four-year universities or complete dual-credit courses.

Educators hope that tying funding to student achievement will push colleges to focus more on preparing students to enter Texas’ workforce, said Brenda Hellyer, chancellor of San Jacinto College and a member of the Texas Commission on Community College Finance. The commission helped the Texas Legislature to develop the new funding model.

“I think it’s going to change what we’re doing to meet the workforce needs in the state, and meet the economic development opportunities that this state has,” Hellyer said.

Educating everyone, everywhere 

Under the new funding model, small colleges in rural areas also receive additional support to pay for the cost of operations and instruction. These schools profit less from tuition and property taxes than larger schools in more urban areas, Gándara said. The extra funding will help schools statewide cover basic costs and focus on offering certificate and degree programs, panelists said.

“It was really important for the [Commission on Community College Finance] that that was a focus,” Hellyer said. “We wanted to make sure that we were providing for those rural and small colleges because community colleges need to serve the entire state.”

Best practices for student success 

Texas community colleges received an additional $210 million for the 2024 fiscal year under the new formula. Panelists stressed the importance of best practices for gaining future funding while focusing on student needs.

In other states where performance-based funding was introduced, Gándara said, some colleges changed their recruitment strategies, motivated by securing funding. Schools introduced test score minimums and earlier deadlines for admission to recruit students who were more likely to graduate.

Panelists said Texas’ funding model, which awards extra money to schools for educating low-income and academically disadvantaged students, should discourage those kinds of strategies. Instead, schools should focus on offering students upskilling and retraining programs in industries with job opportunities, Hellyer said. This way, community college stays accessible to all, students graduate ready to work and schools secure more funding, she said.

“We need to make sure we’re meeting those needs, from hydrochemical to cybersecurity, to logistics, to health care, and also commercial aerospace,” Hellyer said. “That's what you're seeing from community colleges, it’s really making sure industry is at the table and helping us define those credentials that are being funded.”

Focusing on the future 

The new funding formula will also give schools room to better support students, panelists said.

Julian Cotto, a recent graduate of Austin Community College who now works full-time, earned his associate’s degree in computer programming while supporting two children. Additional funding in the future could support better childcare options for students caring for young children, he said.

“Having a place where your kids can be safe and play, and they're also close to you in case of an emergency, would have been very beneficial for me and my wife,” Cotto, who is now pursuing a bachelor’s degree and whose wife is also in school, said.

Through student surveys and focus groups, panelists said, colleges can assess students’ needs and use funding to make necessary changes. These could include more education opportunities for new mothers or continued investment in training programs for emerging industries.

“This work is never done, and that message is never going to be done about the significant role that community colleges play in the social and economic mobility of the state, and making us a competitive state,” Hellyer said. “We’ve just got to work together on that.”

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