Dive Brief:
A performance-based funding model for Texas community colleges has led to financial “growing pains,” Ray Martinez III, CEO of the Texas Association of Community Colleges, said at a Texas state Senate hearing Tuesday.
Martinez and other leaders sang the praises of the funding system less than a week after the Texas Higher Education Coordinating Board approved changes to formulas that could significantly reduce colleges’ performance-based funding. The board made the changes after the state’s community colleges achieved student outcomes that surpassed what lawmakers had budgeted.
Since the state Legislature passed the new model in 2023, formula funding for community colleges has increased from $1.8 billion to around $2.4 billion in the current two-year fiscal period, according to Martinez.
Dive Insight:
Enacted in 2023, HB 8 tied community college funding to student outcomes, such as the completion of in-demand credentials and successful transfers to four-year colleges.
Since the implementation, enrollment in Texas community colleges grew about 12% just from fall 2023 to fall 2025, while student achievement has exceeded state projections nearly across the board, said Sarah Keyton, deputy commissioner for administration at the coordinating board, at the meeting Tuesday.
For example, San Jacinto College Chancellor Brenda Hellyer said her institution’s graduating class of 7,247 last year was its largest ever. They earned 9,293 credentials, an 18% increase over the previous year.
But higher-than-expected outcomes have meant the state’s funding obligations have grown more quickly than anticipated. In response, the higher education coordinating board made changes last week to how the formula weighs certain outcomes, potentially shorting community colleges millions of dollars they had expected to receive in fiscal 2027, The Texas Tribune reported.
According to the publication, the coordinating board is managing a $1.2 billion appropriation cap for community colleges until the next legislative session, which begins in January.
This week, representatives of the state’s community colleges praised HB 8, touted their own success and said they were ready to work with the Legislature to ensure the long-term stability of the funding model.
Martinez told the Senate committee Tuesday that his sector is asking lawmakers going into the 2027 legislative session for “a supplemental appropriation that recognizes the outcomes our students have already earned, and a biennial appropriation that keeps pace with student success we are achieving, rather than lagging behind.”
Lawmakers during the previous two-year fiscal period passed roughly $90 million in supplemental funding to community colleges for money they were owed under the formula, according to the Tribune.
With HB 8, Texas community colleges have to manage uncertain funding tied to outcomes. Mario Castillo, chancellor of Lone Star College System, pointed to the risks of hiring staff such as guidance counselors funded by “HB 8 money” because it can fluctuate. Should it run out, it could force layoffs.
In response to that reality, “we don’t spend HB 8 money on anything that we couldn’t just cut essentially overnight,” Castillo said, noting that his institution was “privileged” to have that flexibility.
Going forward, several speakers pointed out that stabilizing HB 8 funding will require building better predictive models into the funding formulas.
