The idea of judging colleges by how well their graduates do in getting jobs, or what those jobs pay, makes plenty of institutions nervous. Not the Texas State Technical College system.
The 12,000-student system likes the idea so much, in fact, that it now uses a simple formula weighing those factors to determine nearly all of the instructional money it requests from the state.
The “returned value” formula is based on the number of students who land jobs and how much above the minimum wage students earn once they leave college. The system tracks wages for all students who have taken at least nine credits, and calculates the salary differentials based on a five-year average. (Before it makes a final request, it also factors in a discount to ensure the sum it’s seeking isn’t completely out of line with requests from previous budget cycles.)
In effect, it’s as if the college is asking to be paid on commission for its students who land successfully in jobs that pay well.
The approach sits at the intersection of two growing trends in higher education, performance-based funding and the measurement of students’ labor-market outcomes, notes Andrew P. Kelly, director of the Center on Higher Education Reform at the American Enterprise Institute. “At least rhetorically, the system is saying, ‘You’re funding us for success.’”
Officials of the technical-college system began developing the approach about eight years ago, as members of the Texas Legislature began showing more and more interest in accountability funding.
Over the past few weeks, several of the system’s leaders have become more visible in highlighting it at national meetings, mindful of growing public expectations that colleges will play a role in helping students get jobs. At the same time, the system’s chancellor, Michael L. Reeser, is quick to note that he is not arguing that the approach be adopted across the board.
“The niche that we fill in higher education is narrow,” he says, citing the system’s mission to train skilled workers for high-demand jobs. “This wouldn’t be appropriate, necessarily, for others.”
‘Outcome-Based’ Recommendations
Funding public colleges based almost entirely on a job-and-salary-centered formula is very unusual.
Still, the Texas system’s approach raises some interesting questions. Will it lead the colleges to discourage some students from enrolling, to avoid being held responsible for their job outcomes? Will the colleges suffer financially if the minimum wage goes up? How does using a returned-value formula rather than an enrollment-driven one alter the programs and courses that the colleges offer?
The system is just beginning to sort out some of the answers to those questions. In part that’s because the formula is still new. More to the point, its impact hasn’t yet been felt because, for now, the formula doesn’t actually determine the budget request. It just informs it.
The system submits its request for each two-year budget cycle to the Texas Higher Education Coordinating Board, which sends its recommendations to the Legislature.
In fact, the increase the coordinating board is recommending for the technical colleges under the returned-value formula for the next biennium actually isn’t all that different from what the board is recommending for the community colleges and the state colleges, both of which are seeking funding under a traditional enrollment-driven formula. (The board recommended increases of 13.2 percent for the state colleges, 13.4 percent for the technical colleges, and 13.8 percent for the community colleges.)
“We look at what we think is a reasonable ask” of the Legislature, says Susan Brown, assistant commissioner of higher education in Texas.
Two years ago, had the coordinating board followed the technical-college system’s formula to the letter without making any adjustments, it would have recommended an appropriation double the size of the one for the previous biennium. Instead, the board recommended about two-thirds of what the formula had suggested.
For the 2015-17 biennium, Ms. Brown says, the commission is recommending an appropriation equivalent to 74 percent of what the formula called for. Although the recommended funding for the technical colleges isn’t all that different from those for the other systems, the rationale is distinct. Ms. Brown says lawmakers see that: “Our recommendation is based on outcomes. Everybody seems to like the theory behind it.”
Curricular Changes
“A cynic would say it hasn’t changed anything,” Mr. Kelly says of the reworked approach. But Mr. Reeser says it has. The technical-college system used to plan degree and certificate programs based on whether it had the appropriate faculty members and whether it believed students would sign up. Now those decisions are based on a new calculus: “Will the grads get good jobs that pay well?”
Not surprisingly, with two giant shale-oil formations now being developed in South and West Texas, several of the new programs are designed to train students for jobs in the oil patch, where truck drivers can earn $50,000 to $60,000 a year and welders make in excess of $75,000.
In addition to degrees and certificates in those fields, the college has created a program to train technicians to repair and replace the bits of a drill pipe used in oil wells. For $3,000, students who previously would have gone through a full associate-degree program in oil-field technology can now earn a 12-credit certificate to become a “downhole tool technician.” Mr. Reeser says he knows of one former bartender who took the program and traded his $30,000 in annual pay for a job that earns $75,000.
Under the formula, that pays off for the colleges, too. The system has closed some programs it used to offer, among them a continuing-education course of study for probation officers and probationers, which is now being offered by a community college.
As for the concerns that the colleges might discourage some students from enrolling, Mr. Reeser says the system sees its role as providing technical training “to everybody who comes to us.”
If resources were more limited, he says, the system might someday feel forced to limit access to the most promising students. For now, he says, it balances the potentially conflicting incentives by focusing on counseling.
At the same time, Mr. Reeser says, he wants to imbue the incentives of the returned-value plan throughout the system. By next spring, the system plans to award faculty pay with some of the same criteria of that approach in mind.
Gainful-Employment Parallels
The formula raises issues that have parallels in the debate over the U.S. Department of Education’s proposed “gainful employment” rule, due out in final form by the end of the month.
The regulation, which applies to career-oriented and technical programs, would indirectly penalize colleges for programs whose graduates can’t earn enough to justify the cost of the programs. The big difference: The federal rule is designed to punish colleges for programs whose cost can’t be justified. The Texas formula relies more on incentives to promote certain kinds of programs and discourage others. The federal rule is regulatory; the Texas policy is, as Mr. Kelly puts it, “more market responsive.”
For example, colleges with programs covered by the gainful-employment rule say the regulation would punish them for economic conditions outside their control—just as low wages in parts of Texas could hurt the technical-college system under its returned-value formula.
Colleges also say the gainful-employment rule could lead them to favor students who seem more likely to eventually pay off their loans, leaving some students with fewer educational options. (Supporters of the rule say that would prevent the colleges from victimizing students with debts they can’t manage.)
At the same time, in anticipation of the rule, several for-profit colleges have ditched expensive programs or shortened them to make them more affordable, much in the way Mr. Reeser says the Texas system has “appropriately sized” some of its programs.
