The Texas State Technical College system is preparing for a new appropriations model that could be instructive to policy makers considering rewarding colleges for performance or punishing them for graduates who don’t make enough money.
Beginning in September 2015, the dozen locations of the technical-college system will get state funds based entirely on how much money students earn after they leave the system.
The new formula is another example of the growing trend of allocating state money to colleges based on outcomes, such as credit completion or graduation, rather than enrollment. Tennessee, for example, appropriates all of its money for public colleges based on such measures.
In Texas, however, the completion of a certificate or degree program isn’t enough to trigger funds. The new formula, which applies only to the technical colleges, will pay out based on small percentages of the earnings of every student who finishes about three classes or more.
While that approach may be the first of its kind in the nation, Michael L. Reeser, the system’s chancellor, said he was optimistic that the new formula was a good fit for the technical colleges.
“For decades, the major thrust of what we do is employability,” he said. “It doesn’t scare us.”
A Working Model
The new appropriations model, developed in 2012 by the state’s Higher Education Coordinating Board and the technical-college system and passed as law this year by the state’s Legislature, requires a partnership between the college system, the coordinating board, and the Texas Workforce Commission, which will track job and earnings data on every student who completes at least nine credit hours before leaving the system.
Using a five-year average, the system will receive about 26 cents for every dollar students earn above minimum wage, completely replacing all appropriations based on enrollment.
The system is already making changes to do as well as possible under the new formula, testing students to determine a compatible career path and using more advising to help them complete that program on time or sooner.
Programs are also being evaluated for their successes or failures, the chancellor said, which may lead to shrinking or eliminating programs whose students don’t go on to relatively high-paying jobs. For example, the colleges have offered a wide array of credentials for diesel-equipment technology, including several associate degrees, he said. But using job and wage data, the system has found that some certificate programs in that field have just as much earning potential as the degrees do, and require many fewer credits.
Some programs, such as nursing, may also become more selective as a result of the new approach. Shawntay Sparks, director of the associate-degree nursing program at the system’s West Texas campus, said the admissions standards there had already become more stringent. While there were spots for 25 students in the fall, the program accepted only 16. “We don’t want to set anyone up for failure,” Ms. Sparks said.
Those examples, however, are exactly the kinds of reasons that some may oppose the new formula.
Policy makers and legislators should definitely be looking at the employment outcomes of such institutions, said Davis Jenkins, a senior research associate at the Community College Research Center at Columbia University Teachers College, but tying such data to appropriations could lead to the elimination of valuable programs in education and health care that lead to lower-paying jobs.
“Another problem with paying colleges based on job outcomes is what happens to colleges in depressed labor markets,” Mr. Jenkins said. “Their students may not be earning a lot for reasons having to do with structural or cyclical economic factors and very little to do with the training received at the college.”
The Bigger Picture
The new system for Texas’ technical colleges speaks to two issues now on the minds of lawmakers and higher-education leaders in Washington and across the country: How colleges are performing and how much their students eventually earn.
In August, President Obama proposed a national performance system for higher education, recommending that federal student aid be tied to new ratings that would consider measures of access, affordability, and student outcomes.
That proposal was met with skepticism from some higher-education leaders, who fear that a ratings system will create unintended incentives to cherry-pick students or lower academic standards.
The U.S. Department of Education also recently released a new draft of its “gainful employment” rule, which would penalize colleges whose graduates have too much debt from student loans compared with the amount that they earn and their discretionary income.
In 2012, after a lawsuit was filed by an association of for-profit colleges, a federal judge struck down the previous regulation on gainful employment, saying that the Education Department’s standard was “arbitrary and capricious.”
The latest proposal, which has yet to be finalized, is still opposed by the Association of Private Sector Colleges and Universities, which represents for-profit colleges, as well as by advocates for an even tougher standard.
While some community and technical colleges have also opposed the new rule, Mr. Reeser said that the mission of his system is tailor-made for such measures: “We have been living by the gainful-employment rulebook for a long time.”