Why a dozen states are eyeing Texas’ new community-college funding model
A funny thing happened on Texas’ way to a new funding formula for its 50 community-college districts. Lawmakers — yes, in Texas — unanimously agreed that those colleges’ traditional degrees in liberal-arts majors like humanities and arts count as “credentials of value.”
At first hearing, I thought that was the formula’s most notable feature, especially considering all the focus these days on degrees that seem more directly tied to work-force development and an economic payoff.
The more I learned, however, the more intrigued I became about the rest of the model. That’s because the new law also rewards colleges for a host of other important outcomes, like graduating older students, low-income students, and those who start college needing extra academic help. It rewards colleges for enrolling high-schoolers into dual-enrollment courses and for graduating students into high-demand fields.
Starting this academic year, the formula even pays colleges for badges and other nondegree certificates offered in conjunction with programs like Grow with Google or Coursera. Texas officials say those third-party providers are needed, particularly in fields being changed by artificial intelligence, because the colleges don’t always have the capacity themselves to stay abreast of developments affecting the economy.
After years of funding community colleges based largely on their general enrollment, now nearly all the state’s funding for community colleges is allocated under this new formula, and the Legislature threw in about 30 percent more in state money to boot. (The law enacting the new formula also sets aside about 5 percent of overall state funding to help equalize support for poorer, smaller, and rural districts.)
The basis for Texas’ credential-of-value model is whether the typical wages of people who hold that credential are higher after 10 years than are the typical earnings of a person with only a high-school diploma, after also factoring in the cost of obtaining the degree. Because Texas spent the past 20 years developing one of the nation’s most extensive systems for tracking the income of its residents, it’s able to make those calculations based on actual earnings data, and to update them annually to reflect real-time circumstances.
The Texas formula has been drawing positive attention. Harrison Keller, the state’s commissioner of higher education until becoming president of the University of North Texas this month, told me that officials from more than a dozen states — red and blue — have already come to Texas to learn more about the formula, and I heard it mentioned often last week during the policy meeting of the State Higher Education Executive Officers Association, in Washington, D.C.
As for my first reaction: I was impressed to learn that all the existing community-college degrees had passed that “minimum value threshold,” but — reality check — of course, deciding to measure value after 10 years, rather than within a shorter time frame, was one reason all the programs passed. Even David Troutman, an official who helped create the formula, allowed that “it’s a pretty low bar.”
Troutman, the deputy commissioner for academic affairs at the Texas Higher Education Coordinating Board, and Keller said that particular baseline was a conscious choice, designed to ensure that the state didn’t undercut programs that prepare students for careers, like those in early-childhood teaching, that might be low-paying but are still important to society. As with many movements for public-school accountability, Keller said, it was also politically easier to start a performance-based program like this with a baseline that wasn’t that difficult to meet. All 50 community-college districts supported the law when it was up for a vote, in May 2023.
All of which is not to say that this bill wasn’t a tough sell. Keller told me that during the first go-round on the idea with lawmakers, in 2021, he heard a lot of resistance to funding “bullshit credentials,” and the post-Covid decline in community-college enrollment didn’t help. “There were policymakers who said out loud, ‘Maybe people were voting with their feet,’” about community colleges, Keller told me. But the more they saw the data showing that the degrees did actually pay off for individuals and the state (albeit faster for IT, say, than education or the arts), the more lawmakers came around.
“This wasn’t just about community colleges,” Keller said. It was about “what does the state need.” Having those outcomes, he said, “was the key to success.”
I see some lessons and caveats here:
- As Keller told me, colleges should “stop being so defensive” about the value of liberal-arts programs, although it certainly helps having data to back up any assertions of value.
- Texas enacted this measure without a cap on funding, so the colleges aren’t all competing for a limited pool of money. Troutman told me that’s encouraged collaboration on best practices among the colleges. But not all states will have the luxury of budget surpluses when considering their own plans.
- I’m also eager to see how the state manages to evaluate the ROI on third-party credentials. Nationally, only about half of all states even fund community colleges for noncredit courses, according to a report released this week by the Association of Community College Trustees, and even among those states, the scope of that funding is often limited. For this year, support for such credentials with third-party content in Texas is still based on enrollment, but for the next academic year, they’ll be assessed on a cost-benefit basis. Given the growing role of such credentials in the education ecosystem — and the growing interest among state leaders in ways to crank them into their funding formulas — many will be watching the Texas experience.
Also worth noting, as Troutman told me last week: “This is just the first step.” Over time, Texas may raise the bar on what counts as a credential of value, or, as he hopes, perhaps give more weight in the funding formula for colleges that enroll students who are parenting and to reward other outcomes.
In Texas, and with a group he leads, the Postsecondary Employment Outcomes Coalition, that includes nearly 1,000 institutions in more than 30 states, Troutman and colleagues also are exploring the disparities in earnings by gender, race, geography, and other factors. The coalition (not to be confused with the Postsecondary Commission, which is an aspiring accreditor, or the Postsecondary Value Commission, which is a Gates Foundation-backed effort to define the value of higher ed) has a partnership with the U.S. Census Bureau to highlight the economic and noneconomic value of higher education by linking educational data with federal, state, and local data.
The funding formula is an important piece, Troutman said. But understanding the differences in earnings outcomes is the broader and more interesting goal.
Join me at the Chronicle Festival next month
The Chronicle’s annual ideas festival, this year focused on “The Road Ahead to 2035,” takes place online September 10-12. As part of the program, I’ll be talking with Eboo Patel, founder of Interfaith America, on how higher ed can prepare students to live and work in our increasingly fragile democracy. I’m sure we’ll cover some of the themes in his recent Chronicle piece about colleges’ needing to prepare for a chaotic fall. If you’ve got questions for Patel, send them my way.
The agenda also includes many other terrific guests, with several of my colleagues as moderators. We hope you’ll join us for some or all of the programs. Registration is free. Sign up here to watch live or later on demand.
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