Texas’s Updated Funding Formula for Allocating State Funding to Community Colleges



In 2023, the Texas state legislature adopted a new funding formula for the first time in over a decade to determine how over one billion dollars of state funding is allocated to community colleges. The new formula shifts funding from being primarily based on enrollment to being primarily based on student outcomes, like credential attainment and transfer to a four-year institution. It also includes innovations not common in other state funding formulas, like limiting funding tied to credentials to only those that produce a positive return in the labor market.

The new Texas funding formula, which has generated significant interest among higher education stakeholders in Texas and elsewhere, creates an important learning opportunity for the field. Working with the Texas Higher Education Coordinating Board (THECB), MDRC is studying the new funding formula by drawing on research activities in five key areas:

  1. Quantitative analyses to understand how each community college’s level and share of funding changed between the old and new funding formulas, the institutional factors that contributed to those changes, and the extent to which the new funding formula provides greater financial incentives for colleges to implement evidence-based student success interventions.
  2. Analyses of key innovations and details of the funding formula, such as the definitions of credentials of value and the minimum funding required for basic instruction and operations.
  3. Preparation for long-term evaluation of the effects of the funding formula, considering appropriate research designs and data sources.
  4. Interviews with THECB staff and college administrators to better understand key details of the funding formula and how colleges are understanding and responding to the changes.
  5. Work with THECB to share lessons from the research as it continues to implement the funding formula, communicates changes to college administrators, and operationalizes the data necessary to implement the funding formula.