Year 1 of Texas’ House Bill 8, the legislation that created an outcomes-based funding formula for the state’s community colleges, went well and its sophomore campaign should go better, according to people knowledgeable with the process.
Backed by $684 million from the state, the legislation provides funding for additional financial aid as well as to build their academic programs and connections to industry based on the number of students who complete a degree or certificate or transfer to four-year universities or pursue a job in a high-demand field, among other outcomes. Under the previous method, about 80% of state funding was focused on the number of enrolled students, the number of courses they took and the amount of time they spent in class.
William Serrata, president of El Paso Community College, said the uncertainties of the new funding mechanism will create budgeting concerns initially, but added that every college district from large to small would appreciate it as they familiarize themselves with the process.
For example, EPCC received an extra $7.1 million from the state last year as part of HB 8. Part of it went to increase faculty and staff salaries by 6% and to offer more courses in high-interest fields such as business and health care. Campus leaders expect these investments to pay off with more positive student outcomes.
“If you’re at a community college that is producing and helping students get to the finish line, the state will reward you for that good work,” Serrata said. “A dynamic (changing) system is going to be one that is going to challenge us, but at the same time, it’s going to be one that ensures that we are providing on the promise that we’ve delivered to our students and our community.”
EPCC projected that its fiscal year 2025 funding from HB 8 will be almost $44 million. The previous amount was $43.3 million with summer Financial Aid for Swift Transfer (FAST) for dual credit students pending. The college’s 2023-24 budget was $158 million. Its Board of Trustees will vote on its 2024-25 budget at its Aug. 28 meeting.
Serrata said the college is studying the preliminary data from the pilot year to discover trends and project outcomes for 2025. He added that the college will continue to work with its faculty and regional partners to develop efficient academic and technical programs that address student and workforce needs.
Birth of House Bill 8
El Paso businessman and philanthropist Woody Hunt has been a student of workforce trends for many years. He said he began to notice a comparative decline in education levels among the state’s adult population – ages 25 to 64 – since 1980.
He knew that Texas needed to be more engaged in workforce education because there were not enough candidates to fill positions in fields such as health care, data analysis, advanced manufacturing, automotive technology, commercial driving and construction management, to name a few.
In 2022, Texas Gov. Greg Abbott appointed Hunt to lead the 12-member Community College Finance Commission to overhaul how community colleges are funded. The committee was made up of state legislators, policy experts and community college officials. The results of the commission’s investigation, which focused on employers, student success and institutions, were the backbone of House Bill 8.
The bill was the first in 50 years to review how community colleges were funded, and put the emphasis on performance outcomes as opposed to enrollment and credit hours as a way to earn state funds. The bill passed both houses of the legislature unanimously. Abbott signed the bill into law June 9, and the program launched Sept. 1.
Hunt called it an intervention by the state to reverse the downward trend in education levels, and to show that it understands the value of an educated workforce.
“My hope – my expectation – is that the second year of the biennium, the (Texas Higher Education Coordinating Board) will be going back to the state and saying, ‘Hey, we’re producing more degrees than what we had initially planned, and we need more money,’” Hunt said. “I would define that as success.”
Harrison Keller, the outgoing commissioner of the THECB, said community college leaders have told him that they are being more strategic with their funds to develop additional workforce education programs, especially in high-demand fields.
Keller accepted an appointment last month to become the next president of the University of North Texas. He takes office Aug. 1.
While generally happy with the plan, Keller seemed most proud of the additional financial aid programs. One will benefit students who enroll in short-term workforce programs that last six to 12 months. Another will pay colleges that could not afford to offer free dual credit courses to students who qualify for free or reduced lunches. That program also pays for books and other materials. He also was excited about the provisions to help fund college efforts to educate students who were not college-ready when they graduated from high school, or adult learners who needed additional support to relearn positive academic habits.
Because of the need-based Texas Educational Opportunity Grant, the percentage of community college students who can receive help will jump to 70% from 28% through their Free Application for Federal Student Aid and the Texas Application for State Financial Aid.
Evolving the plan
Ray Martinez, president and CEO of the Texas Association of Community Colleges, said the association continues to consider ways to improve the funding policy based on feedback from its members.
In a case that Martinez and others cited, they want to correct an oversight when it comes to transfer students. The rule was that colleges were credited when their students transferred to public universities. Officials later realized that the rule penalized colleges whose students transferred to one of the state’s approximately 30 or so private universities.
“When you make that kind of a change, you do it with as much information as possible, but you also do it knowing that as we implement, we need to take a look at what’s working the way we hoped and intended it would work, and what we can improve upon if necessary, as we move forward into the next legislative session,” Martinez said.
Officials said that new rules will be created to address that and other concerns during the Board of the Texas Higher Education Coordinating Board’s quarterly meeting July 25 in Austin, and would go into effect in Fiscal Year 2025.
Hunt said that five years from now it will be easier to see which colleges benefited the most from the new system. He said it was possible that more than 80% could increase the number of degrees or credentials issued and that would be beneficial for the state and mean more money for the colleges. He said that would be an economic – and political – success.
However, if the success is too concentrated around the heavily populated areas, then it could become a political challenge. He said there could be some colleges that are not suited to take advantage of this system because of structural limitations such as a smaller property tax base or the lack of large employers, but have nothing to do with competency.
Massey Villarreal, chairman of the Texas Association of Business, is a TACC adviser who is familiar with the new funding formula and sees its benefits for graduates, industry and the state.
Villarreal said he met recently with government officials from the United States, Mexico and Canada who are interested in the state’s workforce. He said one of the things that makes Texas an attractive destination for industry is a skilled workforce, but the state has to produce more of those workers to remain viable.
He said one way to attract high tech businesses is to have a pipeline to employees with high tech skills. That means there needs to be colleges and universities nearby that can address the needs of the different industries.
“I’m sure (this transition) is not easy,” Villarreal said. “It’s not like you can snap your fingers and it’s done, but this is what we need to be more competitive.”
