Community colleges in Texas should be funded based on student performance, according to a commission of state lawmakers, community college executives and business leaders.

At its final meeting on Oct. 18, the Texas Commission on Community College Finance unanimously approved its recommendation to overhaul the state’s complicated allocation system and focus primarily on measurable student outcomes. The commission, which was established by the Texas Legislature in 2021, was asked to find a new way to fund community colleges.

Student outcomes include graduation and transfer rates, credentials of value and credentials earned for high-demand fields.

The commission’s 14-page report breaks down its three top priorities for the finance system redesign: a switch to funding based on student outcomes; an increase in need-based financial aid and work-based learning opportunities; and greater investments in college capacity through grants and cross-campus partnerships.

The report includes minor changes to draft recommendations released in September, which were widely supported by educators and workforce leaders across the state, including the Texas Association of Community Colleges.

The recommendations will be handled by the Texas Higher Education Coordinating Board, which is expected to provide a final report to lawmakers by Nov. 1. The board will then draft legislation to be introduced during the 2023 legislative session, which begins Jan. 10.

Under the existing finance system, each community college district receives a flat sum of approximately $1.3 million, then state lawmakers provide additional funding based on enrollment, growth, operational costs and more.

But schools essentially compete with one another for funding, as the system “considers how colleges perform in relation to one another,” according to the commission’s report.

Renzo Soto, a policy advisor for nonpartisan think tank Texas 2036, told Community Impact that under the existing system, a smaller college may improve outcomes and increase enrollment, yet still lose funding to a larger school that grew more.

The new model will allow Texas’ 50 community college districts to “really grow those institutions” with necessary support, chair Woody Hunt told the commission.

“It totally changes the dynamics from being limited and not knowing to [a system] that if they invest and they complete, [schools] are going to get rewarded for it,” Hunt said.

Colleges would be rewarded for credentials of value, credentials awarded in high-demand fields, students who successfully transfer to four-year universities and high school students who complete dual credit courses toward an academic or workforce program, according to the report. A credential of value is a postsecondary degree or certificate that prepares a student for economic success.

“To secure the future of our students, our population and our great state, we’ve got to have this educated workforce,” Sen. Larry Taylor said at the meeting. “The most efficient, effective way to do that is through our community colleges.”

For more in-depth information about the commission’s recommendations, check out Community Impact’s previous reporting.