Last year, lawmakers in Texas passed a bipartisan bill known as HB 8 meant to strengthen the state’s community colleges by establishing a new performance-based funding system that elevates and invests in credentials of value—including quality non-degree credentials. The bill makes a historic $682 million investment in Texas’ community college funding model and focuses on reducing inequities and accelerating conferment of credentials of value. The bill makes a shift toward rewarding student outcomes and incentivizing collaboration among community colleges and employers and better prepares students for the workforce.
The bipartisan HB 8 was among the top legislative priorities during Texas’ 88th Regular Legislative Session and received near-unanimous support from state lawmakers. The effort had support from Republican and Democratic lawmakers, key advocacy groups, including businesses and all fifty community college systems in the state.
This new law means that community college workforce programs will be funded in the same way as academic programs, putting Texas at the forefront of efforts to make college work for working people and businesses. The law promises to be transformative for postsecondary outcomes in Texas and can be a case study for other states as they consider large scale funding overhauls in the future. “HB8 is a landmark policy that will provide a welcome increase in funding for Texas community colleges, including for all the programs and services they provide to students pursuing quality workforce education and training. The new financing model will allow Texas to develop clarity around its non-degree credential ecosystem and help define what non-degree credential value looks like for Texas learners and workers,” says National Skills Coalition Managing Director, Jeannine LaPrad.
Reforming Community College Financing to Address Workforce Gaps
Texas tops the nation as home to the most Fortune 500 companies and is a leading destination for companies relocating from other states. Though the region has a robust business environment, companies across the state struggle to find local talent to fill open jobs. Data suggests that the state is experiencing record-low unemployment, averaging close to 4%; but more in-depth analysis reveals a significant imbalance between the number of skilled job openings and the number of skilled workers available to fill them.
It’s been projected that by 2030, 62% of all jobs in Texas will require some sort of education after high school, according to Anthony Carnevale Director and Research Professor at The Center on Education and the Workforce at Georgetown University. That finding doesn’t even take into consideration the anticipated labor shortage (1.1 million workers) that the country is likely to face after infrastructure investments create millions of jobs.
Fortunately, Texas’ community colleges are uniquely positioned to help address these workforce gaps. The Texas Association of Community Colleges estimates that community colleges provide more than 90% of credit-bearing technical education in the state. Moreover, community colleges enroll the largest share of postsecondary students in Texas.
In the effort to improve the state policies to support the community college system’s ability to quickly train people for workforce gaps, Texas looked toward a familiar model. In 2018, Texas established a commission tasked with studying the state’s public school finance system, then spent a year developing and building consensus around a set of recommendations before approving a landmark school finance bill in 2019.
In 2021 Senate Bill 1230 established a similar commission to study community college funding and the Governor, Lt. Governor, House Speaker, the Texas Association of Community Colleges (TACC), and the Community College Association of Texas Trustees (CCATT) appointed twelve members forming the Texas Commission on Community College Finance (“the Commission”). The group included lawmakers, community college leaders, and experts in policy and workforce issues from across the state. Throughout 2022, the Commission worked to thoroughly understand the challenges of the state’s community college funding model, identify opportunities for reform, and assess the needs of Texas employers and workers. Members focused on reviewing research, gathering, and analyzing data, and listening to the entire range of stakeholders statewide.
How Businesses Influenced the Legislation
The Dallas Regional Chamber (DRC) is the Business Leaders United affiliate lead in Texas, working to convene business leaders in the state to develop and advocate for a skills training policy agenda that helps businesses grow and compete. In this role, DRC convened a working group of North Texas business leaders to learn about the state’s existing community college funding model, meet with community college presidents and Commission members, and develop a set of recommendations for the Commission’s consideration. These individual business champions continued to advocate for the new funding model and stay engaged in multiple postsecondary initiatives. The DRC also coordinated its recommendations with Aim Hire Texas, a statewide coalition of business, education, and nonprofit organizations as well as the Texas Business Leadership Council, a nonprofit corporation that provides public policy research and recommendations to Texas’ elected leadership.
The recommendations encouraged the Commission to consider reforming and expanding outcomes-based funding for community colleges, targeting resources toward disadvantaged student populations, streamlining supports for employer-college partnerships, and establishing dedicated authority over community colleges within the Texas Higher Education Coordinating Board. Several of these proposals were included in the Commission’s report.
The Commission’s central recommendation included shifting the majority of state funding for community colleges towards an outcomes-based model. The Commission also suggested weighting funding for certain student populations, including educationally- or economically-disadvantaged students and adult learners. Other recommendations included standardized support for dual-credit offerings and a centralized collaboration center for community colleges. All of these were included in the new legislation.
The report and the recommendations largely aligned with advocacy and recommendations from community colleges, key advocacy groups, and student perspectives - informing the state legislature and influencing language in the bill. Thanks to the breadth and depth of support, the bill passed in 2023 with near-unanimous support, although the legislative session was otherwise contentious.
Rewarding Student Outcomes
HB 8 passed in May 2023 and went into effect in September of the same year. Here’s what’s happened since then:
- Now that funding is based on student outcomes – with greater funding for the conferment of credentials of value (including non-degree credentials of value), degrees in high demand fields, as well as the number of students who transfer to four-year institutions—every community college in the state saw an increase of state funding for the 2023-24 school year.
- Community colleges are more intentionally considering how they partner with employers to ensure that they’re prioritizing programs that are aligned with regional business needs.
- Students know programs are time- and cost-efficient and better aligned with emerging workforce demands – and can feel more confident about the ROI from enrolling in college.
- Colleges are receiving funding for students based on student needs, which colleges can invest in wraparound supports to help reduce barriers to program completion for students.
- It is important to note that this also means smaller colleges across the state have potential to receive additional funds because they don’t have the economies of scale that larger colleges with much bigger student populations have
The state is still working to implement permanent rules, such as exact funding amounts per student outcome and definitions for credentials of value and high-demand fields, but this is a transformational shift in the way Texas funds its community colleges. The initial infusion of $682 million marks an unprecedented state investment in 2-year institutions. In addition, HB 8 provides an organic way for community colleges to increase their state funding moving forward.