Frequently Asked Questions

The 88th Texas Legislature passed House Bill 8 in 2023. It 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.

While HB 8 lays out the basic funding structure, the actual funds are appropriated by the legislature, generally as part of the state’s biennial General Appropriations Act (GAA). For FY 2024-25 HB 8 is funded through a contingency rider included in the GAA, House Bill 1. Under HB 1, community colleges were awarded nearly $2.3 billion in total formula funding under the new outcomes-based model for FY 2024-25, an increase of 23.3% from the previous biennium.

No. Every college received performance tier funding based on the fundable outcomes achieved by their students in FYs 2020-22 for FY24. For FY25, every college will receive performance tier funding based on the fundable outcomes achieved in FYs 2023-2025, using projections for FY24 and FY25 outcomes until the data are available. These outcomes include completion of 15 semester credit hours of dual credit (only hours that are applicable to an academic or workforce education program), transfer to a general academic institution (or co-enrollment) with 15 semester credit hours, and completion of an academic or workforce credential of value.

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 for each of FY 2024 and FY 2025, no college will experience a decrease in formula funding compared to 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.

Yes. Under the proposed rules for FY 2025, when preliminary data on FY 2024 performance tier outcomes become available in mid-year, the FY 2025 performance forecast will be re-calculated. A college whose updated forecast provides an increase in funding will receive additional funding in that amount, but no college will see decreased funding mid-year as a result of the updated forecast.

THEBC will publish a near-final formula run after the April 25, 2024, Board meeting. A final formula run will occur after the July 25, 2024, Board meeting.

For FY 2024, THECB replaced the Ten-Pay schedule with a new “Three-Pay” schedule. Under this schedule, all non-formula support items (formerly known as “special items”) are fully paid for the year by September 25; half of formula funding is distributed by October 15; one-quarter of formula funding is distributed by February 15; and the remaining quarter is distributed by June 15. There are presently no plans to adjust this schedule for FY 2025.

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.

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 and tuition and fees. 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. For performance tier outcomes, the determination of these categories uses “look-back” periods to check for the characteristic over a defined period in the past.

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. 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.

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.

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 published its public-facing version of the FY 2024 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. THECB will also make this information available for FY 2025.

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.

Yes. The state budget (HB 1) for the FY 2024-25 biennium includes funding for HB 8 priorities, including $78.6 million for the Financial Aid for Swift Transfer (FAST) program and $139 million in new funds for the Texas Educational Opportunity Grant (TEOG) program to ensure at least 70% of qualifying students receive a grant.

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 program.