Texas poised to tie community college funding to ‘value’ and jobs

The state’s community colleges have been starved for resources. A new proposal would boost state funding by $650M—and tie much of it to economic outcomes.

Editor’s Update: The Texas governor signed the new community college funding formula into law in June 2023. The final legislation provided about a $400 million increase in funds for the colleges over the next two years, less than the $600 million originally estimated but still sizable.

Major changes could be coming to Texas’ community colleges—with lawmakers set to consider a proposal that would modernize the state’s 50-year-old funding model and put jobs and “value” front and center.

A panel of lawmakers, community college presidents, and policy experts has been working on an overhaul for the past year. This month, members approved a proposal that would dramatically increase funding for community colleges and tie much of it to workforce outcomes. The model also would—for the first time—include substantial funding for short-term programs.

“That speaks to the value that community colleges provide,” says Michael Flores, chancellor of Alamo Colleges. “It shows that community colleges are the critical linchpin for economic development within the state and filling those high-wage, high-demand jobs.” 

“Community colleges are the critical linchpin in providing potential talent.”

The big idea: The proposed shift puts Texas squarely in the middle of far-reaching conversations about the role and benefits of higher education, especially public colleges, and community colleges in particular. Given the financial and opportunity costs of pursuing higher education, the thinking goes, what is the value of a credential to students and to society as a whole?

And as different kinds of learning—from microcredentials to new-collar apprenticeships—become more common, how do colleges adapt? Many community colleges are thinking much more about their role not just as education providers but as hubs for social and economic mobility.

The new model in Texas would, in many ways, take that idea and codify it in funding. It’s an acknowledgment of major challenges around supply and demand in the labor market—and Texans’ shifting ideas around education and economic opportunity.

By 2030, 62% of jobs in the state will require a postsecondary credential. Currently, fewer than half of adult residents—47.5%—have some sort of credential. And the state has a goal of raising that to 60% of adults ages 25 to 64 by the end of the decade. 

Further complicating the issue, Texas, like other states, has seen a decline in the number of students enrolling at community colleges since the pandemic.  

“To solve these challenges, being incremental is not enough,” commission chairman Woody Hunt told lawmakers in a letter accompanying the draft report. “We need to be bold.”

Students at Palo Alto College in San Antonio (Courtesy of Alamo Colleges)

A post-pandemic take on performance funding

Under the new funding proposal—unanimously approved by the Texas Commission on Community College Funding—the majority of the state support would be tied to measurable outcomes aligned with state goals: 

  • The number of students earning a “credential of value,” including degrees, certificates, and other credentials from credit and noncredit programs that equip students for continued learning and greater earnings.
  • The number of students who complete a credential tied to a “high-demand field” for the state. 
  • The number of students who transfer to a four-year institution.

Harrison Keller, Texas’ higher education commissioner, estimates the changes would increase funding for community college by about $600 and $650 million over the next two years, with additional money likely in the future as colleges start to respond to the funding incentives in the formula, according to The Texas Tribune

Under the current formula, that state is expected to spend about $1.8B in the current biennial budget on community colleges, largely tied to enrollments and the types of courses offered. The current state funding makes up less than 25% of community colleges’ budgets and is allotted in a way that often forces them to compete against one another.

Lawmakers are expected to approve a version of the overhaul in the upcoming legislative session, which begins in January. If they do, they certainly won’t be the first state to shift heavily to performance-based funding. Texas itself currently has a more limited version of it for community colleges tied to students’ academic progression and graduation. 

But tying funds so directly—and at such a size—to workforce needs is a significant shift. So is writing the idea of a “credential of value” into state legislation. Thus far, that term has mostly been used in philanthropic and research efforts, such as in Lumina Foundation’s attainment work, Strada Education Network’s research, and the Postsecondary Value Commission funded by the Bill & Melinda Gates Foundation.

Other states will be watching how Texas defines those terms and how lawmakers ultimately weight the various metrics in the funding formula.

“The devil is in the details,” says Renzo Soto, policy advisor at Texas 2036, a policy organization, led by former U.S. secretary of education Margaret Spellings, that supports the new model.

What is known, Soto says, is that funding for community colleges would be a lot more predictable and sustainable than under the current system—which fluctuates with enrollment changes, property taxes, and competition with the state’s other community colleges for a set pot of money tied to outcomes. 

Students at St. Philip’s College’s Southwest Campus, which specializes in technical education and industrial training. (Courtesy of Alamo Colleges)

The recommendation includes foundational funding for colleges, as well as money for programs tied to workforce needs. The move represents a big shift from a traditional funding formula tied mostly to seat time and enrollment, Soto says. It takes into account regional workforce demands and looks at how to better reward community colleges that are doing a good job establishing a “robust pipeline” for regional employers, he says. 

“For the first time ever, we are saying, if you are graduating students in the short-term credential pathway or through continuing education, even if it’s a noncredit course, we will recognize that success if it leads to a credential of value, and you will get the outcomes-based funding affiliated with that,” Soto says.

Extra funding, extra support 

The commission also recommended lawmakers give additional weight to colleges that educate large numbers of students who may need additional support services, including students from lower-income backgrounds, those who are less academically prepared, and adults who are looking to reskill or upskill.

It also calls on lawmakers to dedicate direct federal funds, or use state funds, to increase work-based learning. And it emphasizes the importance of funding short-term credentials, alongside degrees. 

The committee is proposing various supports for these short-term credentials, including:

  • One-time seed grants for programs in high-demand fields, prioritizing short-term workforce programs developed in partnership with employers.
  • The inclusion of noncredit workforce programs in the state definition of “credentials of value.”
  • Updating state policies to build on the work of individual colleges to provide noncredit programs that can be converted into or “stacked” with credit-bearing programs.  

For students, the commission recommends the state restructure its need-based aid program to allow students to use aid for noncredit programs that lead to a “credential of value.”

Jacob Fraire was part of the push to fund short-term credentials when he served as president of the Texas Association of Community Colleges. He and other college leaders see such credentials as a way to quickly lift students out of poverty and help people who cannot afford the time or the cost of a longer program.

“That’s going to be really important for a whole lot of students who currently don’t have that avenue available to them,” says Fraire, now the director of policy and strategy at the Diana Natalicio Institute for Hispanic Student Success at the University of Texas at El Paso.

San Antonio College (Courtesy of Alamo Colleges)

On the ground: At Alamo Colleges, which educates more than 68,000 students in the San Antonio region, these types of short-term programs are underway, designed as pilot programs and paid for through COVID relief funds and grants. 

Flores, the chancellor, says he’s excited for the chance to grow these programs and offer them to more students, and potentially to returning graduates who might be looking to switch careers or earn more money.

An example: Alamo paired with Google to offer a Grow With Google certificate at no cost to students. In the first week, 600 students signed up, many of them women between the ages of 25 and 40, which is reflective of their student population, Flores says.

“Imagine if we had a dedicated funding source to be able to offer this year-round,” he says.    

In the healthcare field, Alamo is working with a local hospital system that guarantees it will give an interview to students who earn a healthcare-management microcredential. 

It would be an institutionalized way, a financing mechanism from the state that’s dependable, that then we can create these programs at scale. So they are not pilots, it’s not a categorical onetime grant,” Flores says. “This is a dedicated revenue source that then Alamo and the 49 other community colleges within the state can rely on to really upskill our workers within our community.”

A national conversation 

The move in Texas is part of a broader national conversation about the role and value—and therefore the funding—of higher education.

In recent years, the role colleges play in improving or hindering economic mobility has become a much bigger focus. So, too, has the question of whether they are graduating enough people with the skills needed to meet labor market demand. The Texas model attempts to account for both.

But there’s a tension there, says Nikki Edgecombe, a senior researcher at the Community College Research Center at Teachers College at Columbia University, who studies community college finance and equity. It will be important, for example, how the state decides to define “credentials of value” and “high-demand fields” when few others have done so.

“It’s both an opportunity for Texas—they are in a position to determine that—and a risk,” Edgecombe says.

A lot of in-demand jobs, including entry-level roles in healthcare and early childhood education, don’t pay family-sustaining wages. It will be important, Edgecombe says, to balance the interests of industry and workers in order to ensure that the economic growth the state is pursuing also advances workers’ economic mobility and doesn’t leave them behind.

“It’s an important consideration as this work gets done,” she says.  

And it’s something the field has been struggling with for a long time, Edgecombe says. “What these workforce-forward policies do is elevate that conversation a bit more—hopefully for good,” she says. “It makes people ask questions that historically they haven’t had to ask, when what they’ve mostly been legislating about or thinking about are incentives for industry.” 

A student at Palo Alto College (Courtesy of Alamo Colleges)

Looking ahead in Texas

There are plenty of unknowns and unanswered questions as the proposal moves forward into the state’s legislative session. 

Lawmakers will need to decide exactly what percentage of funding will be performance based and how much will be foundational. There is also the question of what data will be used to measure whether students are earning credentials of value. Texas has one of the most robust higher education and workforce data systems in the country, but, Fraire says, it will still need to collect more data on the incomes of its college graduates.

Community college leaders and supporters are enthusiastic and hopeful about the commission’s recommendations to increase aid to colleges that serve large populations of less prepared, economically disadvantaged, and adult learners—three groups that are overrepresented at community colleges.  

Another big unknown is what Texas will do during the intervening years while the new performance-based outcomes take effect. “There’s a lot of anticipation around it,” Edgecombe says. 

Fraire sees a possibility for generational change in helping community colleges educate more Texans who can then get better-paying jobs.

“We might have an opportunity for a generation of individuals to come out of poverty,” he says. “Then the kids, the next generation, have an opportunity to thrive.” 

Related Posts
Download the Work Shift Guide to Understanding New Collar Apprenticeships