College funding could be focused on college outcomes, not enrollment, in 2023

Houston, Texas– Community colleges across the state, including the Lone Star College system, may see a change in how they receive government funding in the coming years.

The video shown above is from a previous report on the Lone Star College System adding e-learning opportunities for Fall 2022.

Coming into Texas’ 88th legislative session in 2023, the state could shift from enrollment to student outcomes when determining college funding.

Information from the Texas Commission on Community College Finance, which was appointed by the state in 2021 and is overseeing the proposed changes, shows that 65% of 5,000 respondents to a July-August survey by the Texas Higher Education Coordinating Board support a change in state funding to be results-based.

LSCS Chancellor Stephen Head, who serves on the commission, said funding for LSCS could increase by $8 million to $10 million as early as fall 2023 if lawmakers approve the changes. However, he said the changes would be more beneficial to smaller, more rural community colleges.

“What’s driving this is a disconnect between a number of community colleges,” Head said. “There are 50 in the state, and 22 of them have fewer than 5,000 enrollments. Colleges like ours spend about $50 million on technology. … These other universities cannot keep up.”

The final proposed changes are expected to go to the legislature in November, and Head said he and the commission are optimistic they could be passed at the next session.

As the LSCS awaits the possibility of additional government funding, the college system is considering increasing the homestead tax exemption after residents at budget workshops weighed in on the university’s tax exemption rates, a change that could cost millions in annual tax revenue.

“I think you’re seeing a real effort to give everyone more opportunities,” Head said.

Result-oriented financing

According to information from the Dallas-based nonprofit Texas 2036, community colleges will receive $1.3 million for core operations, with additional funding available based on factors such as the number of student contact hours or hours of scheduled instruction.

The higher education system has seen a decline in both system-wide student enrollment and contact hours since 2017. Enrollment fell from 89,319 to 85,164, and contact hours fell from about 11.9 million hours to about 11 million, according to LSCS data.

LSCS budget documents also indicate that tuition decreased after fiscal year 2019-20, falling from around $130 million to around $124 million for fiscal year 2022-23.

A Sept. 12 presentation by the Texas Commission on Community College Finance said there is a need to align funding with three key outcomes: credentials of value, credentials in high-demand areas, and transfer success. Head said he believes the changes will bring greater benefits to smaller community colleges outside of Houston, Dallas and Austin, which are seeing greater business and population growth. He added that there are also efforts to fund the economically and academically disadvantaged.

“We would benefit from that; … 57% of the students in our independent school districts are economically disadvantaged,” he said.

LSCS will receive approximately 20% of its total revenue from the state, 29% from tuition, 48% from local taxes, and 3% from various sources in fiscal year 2022-23. Budget Documents Federal funding for the project for fiscal 2022-23 will be approximately $83 million, unchanged from last year. Head said the additional proposed funds could be used for purposes such as hiring additional staff, opening new facilities or replacing revenue lost from the increase in the homestead exemption, if approved by the board.

Matthew Fuller, a professor of college leadership at Sam Houston State University, said he broadly supports the changes.

“Any education funding formula has winners and losers,” Fuller said. “These community colleges that attract students who might be less college-ready … they have a little bit more of an uphill battle when it comes to getting those students to graduate.”

Fuller said he also wonders how lawmakers will define student success.

“I think there are people who will look forward to that … who have traditionally been left behind in the current funding system,” he said.

state angle

State Senator Brandon Creighton, R-Conroe, is among the commissioners working to bring the proposed changes into the 88th legislative session.

“By prioritizing strategic outcomes for student and workforce needs, the entire Texas economy will benefit,” Creighton said in an email statement. Creighton said he believes the proposed changes would be beneficial to both the LSCS and Woodlands communities.

Matt Olmstead, an independent researcher on performance-based funding in higher education who has worked with SHSU, said that state performance-based funding has been in place since 2012 and accounts for about 10% to 15% of the total funding available to community colleges placed.

“There haven’t been many changes to this model over time,” Olmstead said.

Olmstead said he was concerned about how the guidelines would be interpreted.

“What is implemented for a large urban community college system is the same metric as a small community college in east Texas,” he said. “Through the research, that’s the big challenge at this point.”

Olmstead found that an unintended consequence of the shift towards a greater emphasis on performance-based funding would be the fulfillment of individual institutional roles. He said larger community colleges may be at a slight disadvantage compared to smaller institutions because they have to show they’re completing metrics rather than having a larger student body.

check exceptions

Another potential change to LSCS revenue streams would be to increase the amount of property tax exemption allowed for homeowners residing in the district upon resident re-registration.

LSCS has a 1% or $5,000 exemption, whichever is greater, for homeowners within its limits. According to the Texas Court of Accounts, a homestead tax exemption removes a portion of the home’s value from taxation.

Texas allows an exemption of up to 20%, and residents asked that the exemption be increased to the maximum amount during a Sept. 8 board of trustees meeting. LSCS taxpayer Susan Scruggs said residents were feeling the pressure from high valuations and inflation.

“I’m asking you to look into your budget and figure out how you can free the people you’ve supported for so many years,” Scruggs said at the Sept. 8 meeting.

During the meeting, LSCS Chief Financial Officer Jennifer Mott shared a phased approach to increasing exemptions over five years.

According to Mott, an immediate move to a 20 percent tax exemption would mean $17 million in less revenue based on an average home appraisal of $285,000, and would save the average taxpayer about $56.14 annually.

Head said the board of trustees will begin evaluating exemption increases in February and changes to the exemption rate must be finalized by July 1.

“Right now we have a lot of unknowns,” Head said. “We want to be really careful with that.”

This article is courtesy of our ABC13 partners at Community Impact Newspapers.

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