Community College Finance
Frequently Asked Questions
Overview
The Texas Higher Education Coordinating Board seeks to provide community colleges and other stakeholders with information about the structure of the community college finance (CCF) program. This FAQ page contains common questions, and you may also refer to the current administrative rules that govern the program: Texas Administrative Code, Title 19, Part 1, Chapter 13 Financial Planning.
The 88th Texas Legislature passed House Bill 8 in 2023. It outlines a groundbreaking policy that shifts Texas community college formula funding (i.e., the calculations that determine each college’s allocation of the state legislature’s main appropriation to community colleges) 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
No. In FY 2024, every college received performance tier funding based on the fundable outcomes achieved by their students in FYs 2020-22. Starting in FY25, every college will receive performance tier funding based on the fundable outcomes achieved in the current year and two prior years, using projections for the outcomes from the current and previous years until the data are available. 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 I&O is an estimate of operating needs based on characteristics of its student body (“basic allotment”) and courses taught (“contact hours”).
Some colleges will gain more than others, but for both FY 2024 and FY 2025, Board rules establish that no college will experience a decrease in formula funding compared to FY 2023.
Yes, for some colleges. Under the rules for FY 2025, when preliminary data on FY 2024 performance tier outcomes become available mid-year, the FY 2025 performance forecast will be re-calculated. A college whose updated forecast shows an increase in funding will receive additional funding in that amount – this is called the “dynamic adjustment”, and it will be disbursed to eligible colleges in February. No college will see decreased funding mid-year as a result of the updated forecast.
THECB published a final initial formula run here. By necessity, this formula run does not account for the February dynamic adjustment, since the FY 2024 outcomes data is not available as of Fall 2024.
Starting in 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. The only change to this schedule for FY 2025 is the addition of the dynamic adjustment to the February payment for colleges whose FY 2024 preliminary outcomes exceed projections.
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 are one of two key components (along with the basic allotment) of the I&O amount calculation in base tier funding. The contact-hour calculation is virtually identical to the old contact-hour funding calculation: THECB calculates 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 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.
Both the base tier and performance tier formulas add weights when students are academically disadvantaged (not college ready), economically disadvantaged (received Pell Grants), or are at least 25 years old (adult learners). The THECB has rulemaking authority to define 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 revenue 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 during the specified lookback period, 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).
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: For FY25, 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 forecasted counts for FY25 or the three-year average of FY23, forecasted FY24 and forecasted FY25.
There are almost no restrictions on a colleges’ fundable outcomes from a single student in a single year. One important restriction is that if, in a single year, a student earns multiple Occupational Skills Awards (OSA) or Institutional Credentials Leading to Licensure or Certification (ICLC), or at least one of each, and any of those credentials share contact hours, then only one credential of those that share contact hours may be reported for funding. Other than that, the THECB has no formal restrictions on how many outcomes a student can earn in a year. For example, a student might complete an OSA in the fall, finish their associate degree in the spring, and then start taking courses at a Texas public university that summer. If each of those accomplishments independently met the criteria for funding eligibility, the college would receive credit for all three in the same fiscal year.
THECB removed the double counting of dual credit semester credit hours (SCH) that previously would contribute to both the dual credit and transfer outcomes. Dual credit hours now contribute to the transfer outcome only after the dual credit outcome is met (at 15 SCH) or after the student enrolls at the college after high school graduation. The transfer outcome has also been clarified to ensure that only one college is credited for each transfer (except in rare cases) and that a student can achieve the transfer outcome only once.
Whereas the Credential of Value Baseline is a statewide determination that is standard across all community colleges, the Premium is individual to the student. THECB uses students’ cost data, including their total out of pocket cost and lost earnings relative to a high school graduate over the course of their time to degree, and calculates the time until a student hits a positive return on investment (ROI) if they experience the median earnings trajectory for graduates with the same degree. If the resulting estimated time until the student achieves a positive ROI is at least one year less than the median, the college is credited with a Credential of Value Premium outcome in its performance tier.
The new funding model forecasts an institution’s performance for the current and previous year based on a six-year historical data trend (e.g., for initial FY25 funding, performance outcomes are forecasted for both FY24 and FY25). The forecast method weights more recent data more heavily than earlier data. Since outlier years can produce unrealistic results, THECB applies “guardrails” to the outcomes projections (not the funding amounts). This limits the growth of an individual outcome from exceeding 10% or dropping more than 5% year-over-year. The data used for the foundation payment funding calculation is actual data from two years prior and forecasted prior and current year data, with the guardrails applied; however, guardrails will not be applied to the actual data that replaces forecasted amounts to make later funding adjustments.
As actual data for a given year is collected, it replaces the forecasted data for that year, the model is re-run at set intervals, and funding is adjusted in accordance with the dynamic payment process. For example, if FY24 outcomes are higher than projected, additional funding will be applied to the February FY25 payment. If actual FY24 outcomes are lower than projected, a reduction will be made to the first FY26 three-pay installment in October 2025. Additional funds based on FY25 outcomes overperformance would first be funded in February 2026, and funding reductions based on FY25 underperformance would be made to the October 2026 payment in FY27, at which point the FY25 funding process will be complete. All funding is subject to legislative appropriations.
Understanding a College’s Funding
Yes! THECB published two tools to help people understand how these new formulas produce funding results for individual colleges. Both can be accessed as Excel file downloads using the links on our CCF Formula Funding page.
The Performance Visualization Tool shows detailed breakdowns of each college’s fundable outcomes data, including the historical data, projections, and percentages of the total that have qualified for student weight and high-demand field bonuses. It also shows how the different outcomes contribute to a college’s total performance tier funding and how the composition of its performance tier changes over time and compares to other institutions.
The Financial Simulation Tool allows users to replace forecasted outcome counts – the basis for initial or “Foundation” payments – with custom inputs to generate the financial implications of different performance funding hypotheticals. College staff may find this tool particularly useful for understanding how changes in their future performance outcomes (or known performance outcomes from the recent past that are not yet reflected in the funding model due to the data collection lag) will affect future state funding by the conclusion of the dynamic payments process.
High-Demand Fields
For more information on high demand fields, click here.
High-demand fields are academic fields that are associated with high-demand occupations. HB 8 establishes that a college receives additional performance funding when it confers a credential “in a high-demand occupation”. To make this determination, the THECB analyzes projected growth for all occupations in the state of Texas, identifies high-demand occupations for the state and each of its economic regions, and publishes lists of all the academic fields considered to provide pathways into those occupations. These are the high-demand fields.
A college earns the high-demand fields bonus when it confers a credential of value in an academic field that is on either the statewide list or its regional list. The regional analysis and colleges’ region assignments use the Texas Comptroller Economic Regions, though a college can request reassignment to a different region that also overlaps with its service area.
Determining which academic fields to place on the high-demand fields list starts with projections of employment growth from the U.S. Bureau of Labor Statistics and Texas Workforce Commission. These projections estimate how many more people will be employed in an occupation in ten years, both in Texas and in each of Texas’ 12 economic regions (as defined by the Texas Comptroller).
THECB excludes all occupations with a typical entry-level education requirement of a high school diploma (or less) or at least a bachelor’s degree to target those that can be accessed through most community college programs; however, some occupations listed as being high-school or bachelor’s level are added back in because THECB has data or other information demonstrating that community college programs do provide a reliable path to them.
For the state and each of the 12 regions, THECB clusters occupations into groups and ranks these groups by their total projected employment growth. The statewide list contains the ten occupation groups with the greatest projected growth statewide; each regional list contains the five groups with the greatest projected growth in that region, excluding those that are already on the statewide top ten.
THECB uses a database from the U.S. Bureau of Labor Statistics and the U.S. Department of Education to find all the academic fields linked to the occupations that are on the statewide and regional occupation lists. These academic fields are placed on their respective lists, and the ones appearing on both the statewide and one or more regional lists are removed from the regional list(s) to avoid redundancy.
Information about current and historical high demand fields lists can be found here.
Determining which academic fields to place on the high-demand fields list starts with projections of employment growth from the U.S. Bureau of Labor Statistics and Texas Workforce Commission. These projections estimate how many more people will be employed in an occupation in ten years, both in Texas and in each of Texas’ 12 economic regions (as defined by the Texas Comptroller).
THECB excludes all occupations with a typical entry-level education requirement of a high school diploma (or less) or at least a bachelor’s degree to target those that can be accessed through most community college programs; however, some occupations listed as being high-school or bachelor’s level are added back in because THECB has data or other information demonstrating that community college programs do provide a reliable path to them.
For the state and each of the 12 regions, THECB clusters occupations into groups and ranks these groups by their total projected employment growth. The statewide list contains the ten occupation groups with the greatest projected growth statewide; each regional list contains the five groups with the greatest projected growth in that region, excluding those that are already on the statewide top ten.
THECB uses a database from the U.S. Bureau of Labor Statistics and the U.S. Department of Education to find all the academic fields linked to the occupations that are on the statewide and regional occupation lists. These academic fields are placed on their respective lists, and the ones appearing on both the statewide and one or more regional lists are removed from the regional list(s) to avoid redundancy.
Information about current and historical high demand fields lists can be found here.
An institution can only be in one region. There is a provision in rule, subchapter 13T, that allows institutions to request reassignment to another region that overlaps with their service area prior to March 1st. Once requested, the college would be on that list beginning the following September 1 and for at least the next four fiscal years. For FY25, regional assignments are based on the address of the main campus.
THECB will announce instructions on how a college can submit the change request.
Workforce and Continuing Education
In the definition, contact hours refers to a continuing education credential and semester credit hours (SCH) refers to a for-credit credential.
The current model only provides funding for fundable outcomes achieved. For continuing education, this can include Occupational Skills Awards (OSAs), Institutional Credentials leading to Licensure or Certification (ICLCs), Continuing Education Certificates, and third-party credentials in FY 2025. Funding requires that these programs award a credential.
Short-term professional development credentials for mandatory Continuing Education Units are not fundable credentials.
Both OSAs and ICLCs must meet a minimum of 5 SCH or 80 contact hours to receive funding in a high demand field for funding. For OSAs and ICLCs that are not in a high demand field, they must have a minimum of 9 SCH or 144 contact hours. These Credentials under these thresholds are not fundable credentials.
All provisions of an OSA apply to an ICLC except that the occupation that the credential is focused on is not required to be included in the local workforce board’s target occupation list. If the occupation is not on the local workforce board’s targeted occupations list, an external advisory committee must recommend the content of the program.
The external advisory committee will help an institution document the need for an OSA or ICLC and ensure that the program’s curriculum provides students with the knowledge, skills, and abilities essential for employment. The advisory committee is one of the principal means of ensuring meaningful business and industry participation in program creation and revision.
It is the responsibility of the third-party credential provider to submit the credential to the American Council on Education for review and inclusion in the ACE National Guide.
A third-party credential must be listed in the ACE National Guide and have recommended SCH. ACE endorses the credential. Coursera and other entities are platforms that provide the third-party content, assessment, and credential of an ACE-recognized credential.
Industry certifications are not fundable credentials.
Credentials that are fundable are listed and defined in the community college finance rules in Texas Administrative Code, Subchapter 13S.
An industry-based certification may be recognized for course credit through Prior Learning Assessment. Accreditation requirements specify at least 25 percent of the credit hours required for an undergraduate degree are earned through instruction offered by the institution awarding the degree and may apply.
Assisting Smaller Colleges
HB 8 includes two key policies targeted to assist smaller colleges. The basic allotment adds extra weight to the I&O estimate in the base tier 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 provide 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.
Providing Input
Yes. THECB published its public-facing version of the FY 2025 model as an Excel file, including the underlying data, and made all code (along with plain-language descriptions) that generated the data available to institutions. We encourage our institutional partners to review this data to let us know if you notice anything amiss or have any questions. Even after the model is finalized, institutions can seek data error corrections as laid out in subchapter 13R.
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.
Community college personnel can also submit formal comments on proposed THECB Board rules through the public comment process. We encourage all concerned parties to monitor the Texas Register for notifications regarding relevant proposed rules and open comment periods.
Financial Aid and Student Assistance
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 can assist institutions with understanding this program.
Contact
People with additional questions about the community college finance program may contact Emily Schmidt, Director of Fiscal Management; she will be happy to provide a response or direct you to the appropriate individual.
