Texas Legislature Approves New Outcomes-Based Funding for Community Colleges 

“The future is brighter for students in the Lone Star State, thanks to a new funding strategy for community colleges. By rewarding these schools for positive results and providing additional support for disadvantaged students, Texas lawmakers are prioritizing student success, not just in their upcoming careers but throughout their lives. 

“I applaud Gov. Greg Abbott for rewarding results and making outcomes-based funding a top priority and Rep. Gary VanDeaver and Sen. Brandon Creighton for sponsoring this legislation. Their work reflects a commitment to ensuring community colleges are responsive to the needs of their students and to regional workforce demands. This legislation opens the door to new postsecondary educational opportunities for all Texans and incentivizes pathways to higher quality and in-demand careers.” 

About the Legislation

Under HB8, most state funding for Texas’ community colleges will now be based on student outcomes. Community colleges will generate tiered performance funding when students complete 15 credit hours, successfully transfer or co-enroll in bachelor’s degree programs or earn a credential of value—with additional funding for placement in high-demand occupations. The performance tier also incorporates additional weights when these outcomes are achieved by students from special populations, including those who face academic challenges or are from socioeconomically disadvantaged households. 

The state’s contribution to base funding, which is based on student enrollment, also includes additional weights for these special populations. This will ensure that all community colleges receive a guaranteed level of operations and instruction funding that considers the unique needs of their students. The Texas House and Senate have appropriated $650 million in their budgets toward the new community college funding model. 

Additionally, HB8 will:  

• Create the Financial Aid for Swift Transfer (FAST) program to cover dual-credit tuition for educationally disadvantaged students.  
• Launch the Texas Direct associate degree program to help streamline transfers from community colleges to four-year universities.  
• Significantly improve transparency regarding the quality, value and employment/wage outcomes of postsecondary programs within Texas’ labor market, empowering prospective students and families to make informed decisions about their futures. 
• Establish the Opportunity High School Diploma pilot program for adult learners without a high school diploma. The program allows them to concurrently enroll in a competency-based high school diploma program and a workforce education program at a community college. 

These opportunities will increase students’ access to postsecondary educational institutions and remove financial barriers for low-income students to earn college credit in high school, while also reducing the risk of “stranded” credits that will not count toward a postsecondary degree or credential.