Below are questions and answers regarding the formula funding provisions of House Bill (HB) 8. This page will be updated as additional questions are received. Unless otherwise specified, the answers below are specific to how HB 8 will be implemented in Fiscal Year (FY) 2024 and reflect current drafts of emergency rules, so some changes may occur as rules are finalized and in fiscal years beyond FY 2024.
HB 8 outlines a groundbreaking policy designed to shift Texas community college formula funding from a static model based on historical success points, core operations, and contact-hour funding to a dynamic funding formula based primarily on student outcomes and aligned with state higher education goals and state and regional workforce needs.
This new funding model includes two tiers and performance tier funding. HB 8 is funded through a contingency rider included in the state’s general appropriations bill, HB 1. Under HB 1, community colleges have been awarded nearly $2.3 billion in total formula funding under the new outcomes-based model for the upcoming biennium (FY 2024-25), an increase of 23.3% from the previous biennium.
HB 8 splits funding into base tier funding and performance tier funding — will every college receive funds in both tiers?
No. Every college will receive performance tier funding based on the fundable outcomes achieved by their students in FYs 2020-22. These outcomes include completion of 15 semester credit hours of dual credit, transfer to a general academic institution (or co-enrollment) with 15 semester credit hours, and completion of an academic or workforce credential.
A college will receive base tier funding only if its revenue estimate from local taxes and tuition/fees (based on a $0.05 maintenance and operations, or M&O, tax and the average tuition/fee rate), is less than what the college requires for its basic instruction and operations (I&O). In that case, the college will receive state funding. A college’s basic I&O is an estimate of operating needs based on characteristics of its student body (“basic allotment”) and courses taught (“contact hours”).
No. Some colleges will gain more than others, but no college will have decreased formula funding than it did in FY 2023.
No. Unless a college or THECB discovers data/processing errors in the middle of the year, formula funding should not deviate from the payment schedule we publish before the start of the fiscal year.
THECB has published a formula funding run reflecting rules for the new funding model, including funding rates and weights.
Emergency rules enabling the implementation of the new funding system beginning September 1, 2023. The Board also plans to adopt final rules in January for Fiscal Year 2024, and final rules in April 2024 for FY 2025.
THECB is replacing the Ten-Pay schedule with a new “Three-Pay” schedule. Under this schedule, all non-formula support items (formerly known as “special items”) will be fully paid for the year by September 25; half of formula funding will be distributed by October 15; one-quarter of formula funding will be distributed by February 15; and the remaining quarter will be distributed by June 15.
No. Both the base tier and performance tier of formula funding will be recalculated each fiscal year to account for the availability of new data.
Understanding the Funding Formulas
The basic allotment is one of two key components (along with contact hours) of each college’s estimated I&O in base tier funding.
The basic allotment is based on the number of annual full-time student equivalents (FTSEs) at a college, plus added weights for students who were economically or academically disadvantaged or at least 25 years old. This total “Weighted FTSE” is multiplied by a set dollar amount to determine the basic allotment amount, which is added to the contact-hour amount to produce the total I&O amount.
Contact hours are not a major driver of state funding under the new formula but still remain part of the system, as one of two key components (along with the basic allotment) of the I&O amount calculation in base tier funding. This calculation will be virtually identical to the old contact-hour funding calculation: THECB calculates an average dollars expended per contact hour through the Report of Fundable Operating Expenses, applies the respective averages to all fundable contact hours that the district reports for the base year, then multiplies the sum by a specified percentage. The only change from the current contact-hour methodology is the removal of the “critical fields” bonus, which relied on an outdated methodology that was not well aligned with changing workforce needs. In the new funding model, high-demand fields are addressed in the performance tier.
The new formula adds weights to the FTSE calculation when students are academically disadvantaged (not college ready), economically disadvantaged (received Pell Grants), or are at least 25 years old. The THECB has rulemaking authority to establish definitions for these categories.
Colleges that serve more of these students are more likely to qualify for base-tier funding and will receive more funding if they do qualify, contingent on the amount of local funding they can access through local property taxes. The formula also adds weights to the performance tier to increase funding awarded when students in these categories achieve the funded outcomes. All of these weights are additive; for example, if a student is both economically disadvantaged and older than 25, they will count for both weights.
Transitioning from Student Success Points
No. The new model for community college financing replaces the old success points model.
The key differences in the performance tier are the implementation of extra weights for disadvantaged and adult students, the outcomes that are funded, and the use of specific dollar values instead of point values. The performance tier uses a smaller set of outcomes that align with Building a Talent Strong Texas goals. Funded outcomes include completion of a sequence of 15 semester credit hours (SCHs) of dual credit that applies toward academic or workforce program requirements at the postsecondary level; transfer to a general academic institution (or co-enrollment) with at least 15 SCHs; and completion of an academic or workforce credential. A wider set of credentials count as fundable completions in the new funding model, including noncredit workforce credentials, and the amount of funding awarded differs among credentials and based on whether the credential is in a “high-demand field.”
The student success points model assigned a point value to each funded outcome, such that colleges were ultimately in competition with each other for funding and specific dollar amounts were unpredictable. In the new funding model, the performance tier specifies a direct dollar amount for each funded outcome. For FY 2024, colleges receive credit for every outcome completion, even if they were achieved by the same student in the same year.
A further change is the use of a “best of” component: Instead of always using the average of the most recent three years available, THECB will determine (on an outcome-by-outcome basis) whether a college receives more funding with the three-year average or the most recent year and fund, whichever is more advantageous to the college.
Assisting Smaller Colleges
HB 8 includes two key policies targeted to assist smaller colleges. The basic allotment adds extra weight when a college enrolls 5,000 or fewer FTSEs. This extra weight scales up evenly the smaller the student body is and scales down evenly the larger it is, zeroing out at 5,000 to avoid any “funding cliff.” HB 8 also charges the THECB to establish and operate a center for institutional collaboration and shared services, which will focus on making more resources available to smaller and rural colleges at lower cost.
Will my institution be required to use services offered through THECB’s center for collaboration and shared services?
No. Institutions may engage in shared services with other institutions, local industry partners, local community partners, or other partners to help scale resources and improve operational efficiency. Through this new center, THECB will be providing options to help ensure more resources are available for the colleges at lower cost. Institutions that receive base tier funding will be required to report to THECB their participation in those shared services through THECB or other partnerships.
Yes. THECB has published its public-facing version of the model as an Excel file, including the underlying data, and made all of the code (along with plain-language descriptions) that generated the data available as well. We encourage you to review this data to let us know if you notice anything amiss or have any questions.
Yes. HB 8 removed community colleges from the Formula Advisory Committee process and created a Standing Advisory Committee. This committee consists of community college leaders from various positions and all peer groups and will meet periodically to review the operations of the community college finance program and issue an annual report of recommendations.
Financial Aid and Student Assistance
Yes. A contingency rider in the state budget (HB 1) reflects other important provisions from HB 8, many of which were recommended by the Texas Commission on Community College Finance Commission, including substantially increased funding for student financial aid.
Grants for the new Financial Aid for Swift Transfer (FAST) program are estimated at $78.6 million for the FY24-25 biennium, and the Texas Educational Opportunity Grant (TEOG) program has an increase of $133.5 million from the FY22-23 biennium, to help remove financial barriers for at least 70% of qualifying students.
The Financial Aid for Swift Transfer (FAST) program provides funding to participating public institutions of higher education so they can offer dual credit courses to educationally disadvantaged students at no cost to these students.
A dedicated FAST webpage and applicable FAQs were created to assist institutions with understanding this new program.
Questions and answers on this page are for general guidance and do not have any formal legal bearing.