Formula Funding

Because of the passage of House Bill 8 (HB 8), Texas community colleges now receive state funding primarily through an outcomes-based model that is aligned with state higher education goals in Building a Talent Strong Texas and regional and state workforce needs. HB 8 established a new funding model through which colleges receive a majority of their state funding through a formula based on measurable, student-focused outcomes and data.

This innovative financing model is among the first of its kind in the nation, transforming Texas community college funding from a static allocation system tied to a student’s time in the classroom to a dynamic funding formula designed to educate and train Texans for the workforce of the future. By focusing on outcomes, this system rewards colleges for equipping more Texans with the knowledge, skills, and experiences they need to enter the labor market and maintain our state’s economic competitiveness.

This model also ensures colleges have access to the resources they need to support their core educational functions while developing new academic and workforce education opportunities. While every college receives performance tier funding based on the fundable outcomes achieved by its students, a subset of colleges will be eligible for additional base tier funding based on the availability of local resources.

See the dynamic funding model and the full list of corresponding formula runs for Fiscal Year 2024 using the links at the right. Read more about the updates for base and performance tier funding models below.

Performance tier funding is based on measurable, student-focused outcomes aligned with the goals of the state’s strategic plan for higher education, Building a Talent Strong Texas, and state and regional workforce needs. This funding is calculated based on the number of credentials the college awards, with an emphasis on credentials for high-demand occupations; the number of students who earn at least 15 credit hours and transfer to (or are co-enrolled in) a four-year public university; and the number of high school students who earn at least 15 credit hours through academic and workforce dual credit programs. The amount of funding will differ among credentials and include additional funding for credentials in high-demand fields.

Performance Funding = sum across outcomes of: Weighted Outcome Completions*Outcome Funding Rate

Weighted Outcome Completions = Outcome Count + (Weight Counts*Weights)

Outcome Count — The number of times an outcome was achieved by students at an institution, for funding purposes.

Weight Count — The number of times an outcome was achieved by students with a weighted characteristic at an institution.

For a given outcome, the Outcome Count and Weight Counts will be based on the counts from the most recent fiscal year (for example, FY 24 or FY 22) or the most recent three-year average (for example, FY 20-22), whichever yields the greater total of Weighted Outcome Completions.

Outcome Funding Rates — The dollar amounts a college earns for each Weighted Outcome Completion, which are set by THECB within parameters of the General Appropriations Act and in alignment with Building a Talent Strong Texas.

Outcomes

1. Dual Credit or Dual Enrollment Fundable Outcome: Students who completed 15 semester credit hours (SCHs) of fundable dual credit or dual enrollment (at a single college district) that meets requirements for a degree or workforce credential.
2. Transfer Fundable Outcome or Structured Co-Enrollment Fundable Outcome: Students who earn at least 15 SCHs or equivalent (in addition to the 15 hours that resulted in completion of the dual credit outcome, for students who earned that outcome) at a single college district and a) transfer to a Texas Public University or b) were enrolled in a reported, structured co-enrollment program.
3. Credentials Awarded
   1. Includes the following:
      1. Bachelor’s degrees
      2. Associate degrees
      3. Certificates (Advanced Technical Certificates, Level 1 and Level 2 Certificates, and Continuing Education Certificates)
      4. Occupational Skills Awards (OSA)
      5. Institutional Credentials Leading to Licensure or Certification (ICLC)
      6. Transcripted third-party credentials recognized by the American Council on Education’s National Guide
   2. Conditioned on the following additional criteria:
      1. For degrees/certificates: Credentials of value that provide a positive return on investment within 10 years (on average), such that cumulative earnings will exceed students’ initial investments.
      2. For other workforce credentials in FY 24-25: meets program definition criteria and a minimum contact-hour threshold.
   3. With additional funding for high-demand fields, defined for FY 25 as:
      1. Is associated with the ten occupation groups (four-digit SOC) with the most projected 10-year growth statewide; or
      2. Is associated with the five occupation groups not included on the statewide top-ten list with the most projected 10-year growth in the college’s Texas Comptroller region; or
      3. Is included as an Emerging or Essential Field.

Outcomes will be weighted by the following student characteristics:

• Economically disadvantaged students, defined as Pell recipients, receive an additional weight of 25%.
• Academically disadvantaged students, defined as students who are not Texas Success Initiative (TSI) ready in any subject area, receive an additional weight of 25%.
• Adult learners, defined as 25 years or older, receive an additional weight of 50%.

An outcome qualifies for these weights if the student had the qualifying characteristic within a certain time period before achieving the outcome (a “lookback period”) as specified in rule.

A subset of colleges with relatively low taxable property values will receive base tier funding. Colleges will receive this funding if the costs of their operating needs (Instruction and Operations, or I&O) exceed the amount they can expect to access via $0.05 of tax effort and average tuition and required fees (the local share amount).

Base Tier Funding = Greater of [(Instruction & Operations – Local Share), 0]

If I&O is greater than local share, the college receives the difference; otherwise, zero.

Instruction & Operations — An estimate of a college’s operating needs based on characteristics of its student body (“basic allotment”) and courses taught (“contact hours”), where the amounts for each are summed.

Basic Allotment Funding — The number of weighted full-time student equivalents (Weighted FTSEs) multiplied by the basic allotment rate, which is a statewide rate established by THECB within parameters set by the General Appropriations Act.

FTSEs will be weighted for the following characteristics: economically disadvantaged, academically disadvantaged, or adult learner. Weights include:

• Economically disadvantaged students, defined as Pell recipients, receive an additional weight of 25%.
• Academically disadvantaged students, defined as not TSI ready in any subject area, receive an additional weight of 25%.
• Adult learners, defined as 25 years or older, receive an additional weight of 50%.

Colleges with less than 5,000 FTSEs receive a Small College Scale Adjustment, which is based on a sliding scale. The difference between 5,000 and the college’s FTSEs is multiplied by 0.4 and added to the Weighted FTSE total.

Contact Hour Funding — Funding based on base-year contact hours, weighted by discipline as determined by the Report on Fundable Operating Expenses (RFOE), then funded at a statewide percentage.

Local Share — A measure of a college’s local resource availability for meeting its I&O needs, which is a function of its tax revenue and enrollment (tuition/fees), where the amounts produced by each are summed.

Tax Revenue — An estimate of the amount that would be raised with a $.05 Maintenance and Operations (M&O) tax rate. This tax revenue estimate is determined by the THECB and does not depend on what colleges raise each year or local tax rate changes.

Tuition/Fees —An estimate of the amount that would be raised with average in-district tuition/fees per FTSE (calculated from the THECB IFRS collection) for non-dual credit students and the FAST rate for dual credit (DC).

• Calculation = (FY 22 non-DC FTSEs*IFRS rate) + (FY 22 DC SCHs*FAST rate)

Please note: this information is intended to provide guidance and has no legal bearing.