Texas Colleges Could See Funding Tied to Graduation, Student Progress

The Texas Higher Education Coordinating Board is recommending a performance-based funding model for Texas public universities and colleges that would prioritize measurable, student-focused outcomes.

According to the new funding plan, the formula would calculate funding based on measurable, student-focused outcomes “that align with Texas’ strategic plan for higher education and state and regional workforce needs.”

The board states that the performance-based funding plan would not replace the current model but would serve as an additional factor.

Thomas Lindsay, policy director for the Higher Education and Next Generation Texas initiative at the Texas Public Policy Foundation, told the Daily Signal that the new method is an improvement over the current system.

“A system that at least asks whether students finish something of real intellectual substance is better than one that ignores results entirely,” said Lindsay. “The core recommended model is a clear improvement in that direction—it rightly rewards completion and real student progress rather than mere enrollment.”

Another aspect of the funding plan includes 60% of new funding being tied to the number of students who earn a “credential of value,” which the board defines as a “a degree that leads to a return on investment for students because increased earnings exceed the cost of education.”

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The board notes in its proposal that all bachelor’s degrees obtained at a public college meet the standard of the “credential of value” and that the “focus is on building career-ready proficiency that meets Texas’ workforce needs.”

Based on the board’s findings, high-demand occupations in the state include agricultural business and management, veterinary and animal health technologies and technicians, computer programming, and preschool, elementary, middle, secondary, and special education teachers. 

The other 40% of funding from the new plan would go toward students’ academic progression and persistence. Under the proposal, the board would track students who “reach the 30-, 60-, and 90-credit-hour milestones. The 30-hour milestone receives the highest funding rate due to higher initial investment in student success.”

Public universities would also be rewarded for keeping students enrolled from fall to fall, but that funding would be capped at 25% to discourage longer graduation timelines.

Lindsay says the Texas Public Policy Foundation “approves of incentives for actual completion over pure enrollment funding,” but said the proposal could be strengthened by pairing performance incentives with clearer expectations around civics education.

“Survey after survey demonstrates that even college graduates suffer from civic illiteracy—with one study showing that only 23% of native-born Texans, under the age of 45, can pass the U.S. Citizenship Test. In contrast, 90% of immigrants to this country pass the test the first time,” Lindsay said. “Our graduates cannot be expected to defend a country that they don’t even understand. And too many today lack that basic understanding.”

“So, ensuring that graduates leave with a solid grounding in the principles of self-government, the Constitution, and the American Founding would help elevate the model from primarily economic metrics toward the deeper civic and intellectual purposes of higher education,” Lindsay added.

The Texas Higher Education Coordinating Board’s proposal will go before the Texas Legislature in January 2027, when lawmakers convene.