Texas higher education leaders have endorsed a report that favors performance-based funding. It recommends tying more funding to student success and graduation rates instead of enrollment numbers.
File Photo/Dallas Morning News
The Texas Higher Education Coordinating Board recommended Wednesday that the Texas Legislature consider funding public, four-year universities based on what fields students study and how long students stay enrolled.
At the board’s quarterly meeting in Austin, a committee of university representatives from across the state presented its report on how Texas could use a performance-based funding model for four-year universities. The Texas Legislature commissioned the report last year.
Related: Texas borrowers are falling behind on student loans. New data shows how much
Article continues below this ad
The board unanimously approved the report’s findings, and the Texas Legislature will have the report in hand as it works on the state’s 2028-29 budget next year.
“This is a major policy opportunity for the state of Texas,” said Wynn Rosser, commissioner of the Texas Higher Education Coordinating Board.
A performance-based funding model allocates money to schools based on degree completion and progress. The proposal comes as state lawmakers have increasingly scrutinized whether Texas’ schools are sufficiently preparing students for the workforce.
Texas implemented performance-based funding for community colleges in 2023, allocating funds based on how many students earned credentials or transferred to universities in an effort to incentivize schools to better prepare students for the workforce. However, the board advised a more modest approach for four-year institutions.
Related: Is a college education worth it? Tell us what you think here
Article continues below this ad
The report recommended that performance-based funding should complement, rather than replace, existing funding formulas based on enrollment, citing that the current structures account for the higher cost of teaching certain programs, like engineering or nursing.
Under the board’s proposed funding model, attaining a credential of value would account for 60% of funding, with additional weight given to master’s degrees, doctoral degrees and degrees earned in high-demand fields.
The other 40% of funding would come from “progression and persistence.” Students are most vulnerable to dropping out within the first quarter of their degree, so universities would receive the highest funding rate when a student completes 30 credit hours, with decreasing rates as they reach the 60- and 90-hour milestones. Most colleges require 120 credit hours to earn a bachelor’s degree, and full-time students must take a minimum of 12 credit hours each semester.
Currently, public four-year universities receive state funding based on enrollment, along with “institutional enhancements,” from a $423 million fund that supports faculty recruitment and other operations. Last year, some state lawmakers unsuccessfully pushed to remove the institutional enhancement fund. The Legislature did direct the higher education board to investigate whether a performance-based funding model could redirect schools away from enhancement funding.
Since some schools rely more on enhancement funding than others, the report approved on Wednesday recommended that funding be phased out over several years rather than being immediately eliminated at the end of 2027 as the Legislature wanted.
Article continues below this ad
“We want to avoid any kind of implementation where there would be a significant financial hardship to any institution,” said Daniel Harper, vice chancellor and chief financial officer of the Texas State University System.
Related: Dallas College unveils plans, names developer for new downtown El Centro campus
As the board backed performance-based funding for four-year universities, it ran into some complications with that model at the community college level. Student success far exceeded lawmaker’s expectations, meaning the state can no longer afford the funding model it approved in 2023.
The board scaled back funding for academically and economically disadvantaged students and adult learners over age 25 beginning in fiscal year 2027. The Dallas College District will see a 2.8% decrease in funding from this year — over $3 million — but some community colleges could see drops of over 15%.
Article continues below this ad
The DMN Education Lab deepens the coverage and conversation about urgent education issues critical to the future of North Texas.
The DMN Education Lab is a community-funded journalism initiative, with support from Bobby and Lottye Lyle, Communities Foundation of Texas, The Dallas Foundation, Dallas Regional Chamber, Deedie Rose, Garrett and Cecilia Boone, Judy and Jim Gibbs, The Meadows Foundation, The Murrell Foundation, Ron Steinhart, Solutions Journalism Network, Southern Methodist University, Sydney Smith Hicks, and the University of Texas at Dallas. The Dallas Morning News retains full editorial control of the Education Lab’s journalism.