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Texas offers details about performance-based funding

I wrote about performance-based funding in Pennsylvania yesterday. The state has not yet adopted this community college funding model, but will consider it. Texas announced last year that it would institute performance-based funding and is creating models to implement it.

The Texas Higher Education Coordinating Board will determine exactly how performance-based funding will work there. Currently, the model calls for a 5% base amount that has no performance requirements attached. An institution’s performance will determine the rest of an institution’s state funding.

Performance currently includes the number of degrees, certificates, transfers and “credentials of value” a community college awards. Note that “value” applies to degrees, certificates, and transfers, too. It is not simply enough to award a degree; the state must have previously deemed the degree to be “of specific value” to the State of Texas

The Texas Higher Education Coordinating Board currently gets to determine what constitutes “value.” Currently, the state budget provides funds to develop these high-wage programs even though the programs have not yet been fully identified. A “valued” program is one that enables community college graduates to make more money than the typical high school graduate and recover their cost of attendance within 10 years of graduation, based on average earnings in Texas.

Today, that figure stands at about $34,800. According to federal graduation data, more than half of Texas community colleges are at risk of being “dis-funded.” So, what happens when a school does (or does not) meet the state-established benchmarks?

If a college confers more credentials of value than predicted, it becomes eligible to receive more funding in the following budget session. However, if a college confers fewer credentials of value, it must repay the difference between what it received and what it should have received for lower performance.

Schools could lose money through performance-based funding

In other words, community college that miss the mark will owe the state money. Presumably, that money – which will have already been spent by the time the state identifies failures – will come out of the school’s appropriation in the next budget cycle. The other side of rewarding “performance” is punishing failure. That’s the not-so-pleasant side of performance-based funding.

The specifics of what constitutes “value” will change perhaps as often as every state budget session based on recommendations by community college administrators, legislators, and the Governor’s office. In other words, Texas has established a moving target for its community colleges.

Of the community colleges that are currently at risk, many serve the largest cities in Texas. They already record low graduation rates and low earning potentials. But the Texas Higher Education Coordinating Board has already put its thumb on the scale in terms of graduate earnings. The Texas Higher Education Coordinating Board is collecting wage data from Texas employers via the Texas Workforce Commission. If employers collude to maintain artificially low wages for certain workers, the state’s community colleges could unwittingly feel the pinch when their degree programs don’t pass the “value” test.

Worse, if employers collude to maintain wages at a sufficient level to pass the “value” test (to ensure a steady stream of low-wage workers) but lower than where the natural market forces would settle, the performance-based funding system could maintain workers in a near-poverty state indefinitely.

Performance-based funding is dangerous to the most vulnerable students in our higher education system. It has the real potential to destabilize higher education institutions, reduce the number of educational options, and create a system that traps certain workers on the economic margins indefinitely.

Photo Credit: Sam and Laura Gustafson