Texas community colleges are getting millions in additional money as the state rolls out its new model for financing the higher education institutions.

Under House Bill 8, which was signed into law in June, the state’s 50 community college districts will move to merit-based funding — shifting away from the previous enrollment metrics model — and receive state money based on how many degrees, certificates, transfers and “credentials of value” they award.

After a dizzying summer of preparing for the change and the first state payments deposited in the fall, Texas is in the program’s implementation stage, but it’s “already driving these new dollars to community colleges,” Harrison Keller, the Texas Higher Education Coordinating Board’s commissioner, told the American-Statesman.

“The governor asked me how it’s going, and this is sort of the year of rulemaking … each (board meeting) will have a lot of rules we will have to adopt,” he said.

The state budget is allocating $683 million in additional money to community colleges under the new funding model. Under HB 8, Austin Community College is receiving an additional $6.8 million, almost doubling its net revenue, according to an announcement during the college’s December board meeting.

In total, community colleges were awarded 23.3% more in formula funding for fiscal 2024-25 compared with the previous biennium, for a total of $2.3 billion, according to the coordinating board’s website.

How is HB 8 affecting Texas?

Keller said the Higher Education Coordinating Board was able to fast-track the first funding allocation to community colleges because of the strong relationship and trust between the Legislature and higher education leaders.

Emergency rules enabled the board to allocate the funding Sept. 1. This month, the board plans to adopt its final rules for fiscal 2024. In April, it plans to adopt the final rules for fiscal 2025.

Ray Martinez, the president and CEO of the Texas Association of Community Colleges, said the coordinating board will distribute the funding in three payments, the first of which was sent in mid-October.

“There’s been a lot of work and still more to come,” he said.

The Legislature drafted and adopted the bill after the Texas Commission on Community College Finance approved recommendations for success-based funding. The bill seeks to address workforce and community needs stemming from the COVID-19 pandemic as well as the important role community colleges play in Texas.

“It’s a game changer, not just for bottom line revenue that will come to our colleges, which is sorely needed, but it is a game changer again because it will really allow us to focus on what we’re really there for and that is to serve the students that grow in our colleges,” Martinez said.

HB 8 is also designed to better support smaller and rural-serving community colleges. In addition to performance-tier funding, colleges can also receive additional base-tier funding if revenue from tuition, fees and local taxes do not meet their basic instruction and operations costs. For smaller, rural colleges that don’t make as much revenue from property taxes, this bill is a “welcome change,” Martinez said.

Additionally, colleges are also being offered incentives to focus on workforce needs and equity. The bill allocates more money to schools that graduate students with degrees in high-demand fields and when they enroll students who are 25 or older or who are economically or academically disadvantaged, as defined by the coordinating board. Colleges also are rewarded for the number of high school students who complete 15 semester credits of dual-enrollment courses.

Austin Community College

At ACC, the additional money will be invested to support students to graduation and funnel more money into high-need and high-success programs, officials said.

Jenna Cullinane Hege, ACC’s vice chancellor of institutional research and analytics, serves on the advisory committee for HB 8. Cullinane Hege has been involved in hosting “Roadshow” sessions at ACC to educate the community about the new funding model. She said the bill is a “major shift” in funding, but that the outcomes-focus model already reflects ACC’s mission.

“People are excited about the opportunity,” she said. “When we have $6.8 extra million, that allows us to be creative and thoughtful and strategic to invest in the things that are going to be most helpful for our students, most helpful for our community, most helpful for the state.”

Neil Vickers, ACC’s executive vice chancellor of finance and administration, said ACC is in brainstorming mode right now, collecting data to find successful programs for students that are scalable, and prioritize those in the budget.

“I think you’ll see more innovation from community colleges that are reaching out there and trying to find new ways to move these needles, knowing that there’s dollars available if you’re successful doing that,” he said. “And that’s definitely one of the things that ACC will be doing.”

Cullinane Hege said ACC has been strong in transferring students, which is also a fundable outcome under HB 8, but also has successful outcomes in the health sciences and advanced manufacturing areas.

HB 8 also reinforces work that ACC is already doing to support students. In October, ACC opened three centers to help connect students to more resources such as food, housing, child care and community, with the goal of helping them stay and finish in school.

In Vickers’ more than two decades at ACC, this is the most positive energy he has seen around state appropriations, he said. The bill signals to him that the state sees the value of community colleges in addressing state workforce needs, and he said that ACC will live up to the task.  

“Even just that messaging by itself is really important for everybody, including community colleges. We need to hear that, too, from time to time that we’re valued,” he said. “It’s all being viewed as opportunities and positive challenges for us to do better, and to make sure that we’re serving our communities.”