Texas community colleges are facing a funding shortfall after producing more student outcomes than state officials initially projected under the state’s new performance-based funding system.
Three years ago, the Texas Legislature passed House Bill 8, which significantly changed how community colleges receive state funding.
Before HB 8, community college funding was based largely on factors such as historical success points, college operations, and student contact hours. The new system instead places a greater emphasis on measurable student outcomes.
Under the new model, colleges receive performance funding based on outcomes such as students earning credentials, transferring to four-year institutions, and completing qualifying dual-credit or dual-enrollment coursework. Additional funding can be tied to credentials in high-demand fields.
The formula was designed to reward colleges for improving student outcomes. However, colleges have reported that their performance has outpaced the projections used when state funding was initially allocated.
North Central Texas College Chancellor Brent Wallance told Spectrum News 1 that the college could be missing as much as $4.7 million in state funding.
“At the end of the day, we’re proud that we over-achieved,” Wallace said. “The legislature said, ‘We want workforce education programs; we want meaningful pathways to universities.’ We did that, but we did it so well that now we have a shortfall between what was needed for this biennium to pay that dollar amount.”
Additionally, Austin Community College Chancellor Dr. Russell Lowery-Hart also raised concerns about the funding system while speaking before lawmakers.
Lowery-Hart said Austin Community College received about $6 million less in state funding than the college had anticipated.
“Colleges shouldn’t be faced with financial penalties or instability for exceeding the performance goals you set before us,” said Lowery-Hart.
The Texas 2036 analysis reached a similar conclusion about the early results of HB 8.
Grace Atkins, a policy advisor for Texas 2036, reported that community colleges produced more qualifying outcomes than lawmakers had anticipated when the new funding formula was initially funded in 2023.
“The strongest early proof that HB 8 was working showed up in the appropriations process. Colleges generated more qualifying outcomes than lawmakers anticipated when they funded the new formula in 2023, requiring approximately $89.5 million in supplemental appropriations for fiscal year 2025,” Atkins wrote. “Rather than exposing a flaw in the model, the additional funding reflected colleges responding to the incentives embedded in HB 8 and producing outcomes at a scale that exceeded expectations.”
During a recent meeting of the Texas House Committee on Higher Education, Republican state Rep. Gary VanDeaver said lawmakers should provide funding for the outcomes colleges have already achieved.
“Let’s step up and do the right thing and fund what’s already been earned,” Vandeaver said.
The funding debate is expected to continue as lawmakers prepare for the next legislative session.
The 90th Texas Legislature will convene Jan. 12, 2027.
