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Tennessee rethinks its higher education funding formula

Tennessee governor Bill Lee asked the Tennessee Higher Education Commission to rethink the state’s higher education funding formula. Right now, Tennessee is the only state that relies exclusively on outcomes to determine higher education funding.

So, the Tennessee Higher Education Commission (THEC) made some recommendations to increase the number of STEM graduates. THEC also wants to address the needs of certain high-demand fields in the state. The plan reduces state subsidies to community colleges that use third-parties to provide workforce development services. It also tries to the cost of higher education administration and decreased state funding for low-income residents of other states that enroll in Tennessee higher education institutions.

Using outcomes to determine the state’s higher education funding formula gives the state more leverage to address public policy issues. For example, the THEC proposes to increase funding for schools that recruit and graduate students in high demand fields. These fields (along with their average salary in TN) include:

  • Agriculture and related sciences, $50,000-$80,000
  • Natural resources and conservation, $60,000
  • Computer science, engineering, and engineering technologies $80,000-$105,000
  • Biomedical and biological sciences $70,000
  • STEM fields and statistics $70,000

New higher education funding formula focuses on outcomes

The new higher education funding formula incentivizes schools to recruit, retain and graduate students with these skills. This is something of a tall order because unemployment in Tennessee is currently at 3.8%, a two-year low. With fewer workers available in the workforce, Tennessee will rely on colleges and universities to produce workers to fill these positions.

Additionally, Tennessee will discourage community colleges from using third-parties to provide short-term, canned workforce development courses. The state has indicated its unwillingness to invest in this kind of low-cost, low-reward training.

The THEC has adjusted to higher education funding formula to reduce the state subsidy for equipment and utilities for campus buildings. This approach will force higher education institutions to reduce these costs add eliminate waste.

Finally, the state will no longer reward institutions that enroll a high proportion of low-income, out-of-state students. This signals the state’s desire to focus Tennessee’s higher education funding on its own residents.

There’s a lot to unpack in the recommendations, but Tennessee is clearly upping its game in terms of workforce development. Incentives to build larger STEM and skilled workforces will enable Tennessee to compete more effectively for high tech, high wage jobs.

Introducing more outcome-based qualifiers into the Michigan higher education funding formula would focus the state’s resources on productive workforce development activities. It would eliminate wasteful and diversionary projects like the Health and Fitness Center. It would also place limits on programs like the summer trades programs, which consume a lot of resources, but don’t make lasting contributions to local workforce development.

Photo Credit: Jasosn , via Flickr