In the last month, two states have decided to address their higher education systems’ most pressing issues by leveraging state funding to reward institutions that can deliver—and deprive those that can’t.
Legislatures in Indiana and Texas are remodeling their financial allocation to colleges and universities based on an outcomes-based formula rather than blanket recommendations based on enrollment as each state grapples with higher education’s most prevailing trends: student workforce preparation and faltering enrollment.
“The current model is one that’s based upon contact hours, heavily influenced by enrollment and type of courses offered,” says Ray Martinez III, president and CEO of the Texas Association of Community Colleges (TACC), according to Diverse. “What do we need to do as a matter of state policy to ensure that students have the support they need, the scaffolding to ensure they can complete a post-secondary credential?”
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Texas tackles workforce demands at the community college level
Texas Gov. Greg Abbott approved legislation on Monday to increase its community college biennium funding by nearly 25% for $2.2 billion, according to Dallas Innovates. Aside from the increase in funding, the legislation also marks a bold new direction for which colleges will earn the lion’s share. Texas will now fund its community colleges based on upward student transfer rates, high school dual degree completion, and whether they’re awarding “credentials of value.” Credentials of value include badges, certificates and degrees that “position graduates for well-paying jobs” in high-demand fields.
Texas’ former community college state funding formula relied almost entirely on contact hours, according to the Texas Commission on Community College Finance (TxCCCF), which strongly recommended the outcomes-based changes to the state. TxCCCF found that 2021 was Texas’ worst year for community college enrollment, which is particularly damaging for the state considering that the sector makes up more than 40% of its post-secondary student enrollment.
By repositioning the state’s 50 community colleges to deliver credentials of values while promoting college affordability, TxCCCF and Texas legislatures believe they are in a prime placement to recoup state enrollment by churning out workforce-ready individuals.
“A highly educated and skilled workforce is critical for Texas to remain the most attractive state to do business, and community colleges are ground zero for students to access the necessary skills and training for in-demand careers,” said Sen. Brandon Creighton, according to the Austin American-Statesman. “This new funding framework will only encourage more successful programs for Texas to train the workforce of the future.”
Indiana wants to bring students back
With only 48% of Indiana’s citizens being credential or degree earners, Gov. Eric Holcomb wants to increase the rate of Hoosiers with postsecondary education to 60% by 2025. With public college tuition and fees decreasing 4% over the past five years and the state recuperating from one of its lowest enrollment rates in recent history, Indiana’s 2023 legislative session seeks to bump state college funding by $130 million in the next biennium budget.
With a revamped budget comes an updated budget strategy. On top of the base funding each college and university will receive, they will also be eligible for additional funding based on five metrics: quality and career relevance, completion, college-going rate, quantity of adult students and graduation retention rates.
For example, colleges that score 80% of their forecasted goal on one of those five metrics will receive 80% of the additional funding they were promised. That additional funding earned in the first year of the biennium would be guaranteed in year two. It then has the potential to build from there.
Equity concerns with outcomes-based funding
While more states become outcome-oriented when deciding which colleges and universities to fund, some professionals believe doing so can hurt minority-serving institutions.
Institutions that serve students and color and those from lower-income households are already under-resourced. If they can’t deliver on state metrics, their situation will never improve, creating a “self-fulfilling prophecy,” wrote Dr. Kalya C. Elliott, interim director of Education Trust and co-author of the report cautioning against outcomes-based funding.
