Texas Commission on Community College Finance Hearing Summary (Dec. 13, 2021)

Presiding Office​r Woody Hunt began the hearing and the Commission discussed that they would spend more time on the enrollments and the current community college finance system. They discussed data that illustrated that the pandemic devastated community college enrollments and saw declines in dual-credit programs that had been growing over a decade. They noted there is an urgent need for workforce education to address rapid changes in regional and state economies. They said they are working with institutions to improve data collection and reporting as there are gaps in some populations of students.

The Commission continued to discuss who pays and that there is variation across the college, but their average tuition rates are lower than the national average. They mentioned that 90% of state funding comes from formula funding for community colleges, although there are other supports. They noted that many community colleges were not held harmless, despite some numbers looking like they were. They noted there is an equal amount of funding for each community college regardless of side for operations, and then additional allotments driven by student enrollments and contact hours. Each contact hour is funded depending on the type of course it is, and those rates are driven by studies on the costs required to provide those courses. They noted that most of the bachelors degree programs are funded in similar methods, but there are four legacy colleges that are funded at the same level as four-year institutions.

The Commission discussed success points and that during the last legislative session, the weights for some of those metrics were revised for increasing weights on transferring to four-year universities or other specific outcomes. They said these result in fairly small movements of funding but there can be winners and losers. They said this is a discussion for the legislature but if funding isn't added that goes with changing the weights, it is just redistribution of funds.

The Commission discussed federal legislation that provided an influx of one-time funding to community colleges, which totaled around $2.5 billion. They said that this did not go through the state but directly to the colleges, and generally tracks with student enrollments. They discussed how this worked in budget negotiations during the session and that they were primarily intended to address coronavirus related costs with some marked off for student financial aid. They mentioned that the federal stimulus funds have strings attached and have quick timelines on having to be expended. They noted there are reports that the colleges are working on that should come out early next year that can provide a better understanding of how this funding was utilized.

The Commission discussed recapture but that a similar program for community colleges would probably be unconstitutional. They mentioned school district funding is changed on certain factors like socio-economic status or other needs, but community colleges do not have similar factors but all students are students. They discussed how enrollments going down during the pandemic can severely impact their financials compared to K-12 where the formula is more dynamic to adapt to disruptions like that.

The Commission asked about tax collections as they continue to climb each year and how much was tied to values or rates, which they said was mostly due to an increase in property values. The Commission mentioned it is important to look at MNO and INS rates separately instead of the combined tax rate as those are arrived at in different manners.

Dr. Joe May – Chancellor, Dallas College

Dr. May testified that he would be discussing in a broader context for community colleges and their business models and that part is an allocation, some they have to earn from things they are doing, and some comes from meeting the needs of their communities. He said the business model they put together is very important decisions to have the funding come together in a way that meets outcomes they need to meet. He noted that community colleges were intended to expand beyond the taxing district but has devolved to become more locally focused institutions, and as they have seen that shift, that has put pressure on local entities to meet the needs of taxing districts and non-taxing entities, which creates tensions between the taxing district and non-taxed entities addressed by the colleges. He said colleges have chosen to associate different costs and how they charge out of district students, which can be anywhere from 56% - 220% more.

Dr. May continued that colleges have been the ones left with having to adapt and adopt a business model to ensure equity to the populations they are trying to serve. He said they end up focusing on the regions providing local tax support and less so those outside of those areas and it is an important discussion that they need to ensure equitable servicing of their communities.

Dr. May went on to discuss federal aid but argued it isn't a revenue source for community colleges as it is mostly a passthrough. He said there is a small shift as they shift away from state as an overall percentage of funding to community colleges to that being made up by local tax revenue to offset. He said they often talk about the three-legged funding from the state, local, and student sources, but the only time that broke out to 1/3rd each was in 2005.

Dr. May said every college can choose to have a different business model and choose to increase tuition and lower taxes or vice versa, but at the end of the day, the drivers will be determined locally. He said if they go back to 2014 through today, from a state allocation point of view, those dollars haven't fluctuated at all. He said there was a shifting of contact hours to student success points within the same allocation in the past few years. He said the state decides how to divide the pie but the main piece is the core funding in terms of impact to community colleges, especially for smaller colleges. He noted it is 0.15% of Dallas College's overall funding while some smaller colleges can have that up to 15%.

Dr. May commented on student success points and said that he is a fan of performance funding, but this is not funding but rather an allocation. He said they have tried to mix a funding concept into an allocation model and it doesn't work very well. He said they don't have a lot of sway in that model and if they did have impact, it would create havoc moving from biennium to biennium. He added that it is impossible to replicate the calculation once it is done initially and the institution can't really see what happened to them. He noted there is no difference between it and contact hour funding as it stands right now and the ability to plan is reactive instead of strategizing on how to move forward on student success points.

On contact hours, Dr. May said that as that varies and depends on what your neighbor is doing as opposed to the allocation you're going to get, making it highly unpredictable. He said even if an institution grows but misses below the average of everyone else's growth, they can get penalized despite reaching outcomes they wanted to see.

Dr. May said there are no two institutions operating on the same business model and all have different revenue streams and the various three components are handled differently. He said some are primarily locally funded institutions based on local tax revenue but others are primarily tuition and enrollment driven as that is their source of revenue. He said there is an unintentional design in this that encourages more enrollment and those institutions will have to lean more towards more is better, whole some institutions are more focused on that other piece in the allotments. He said nothing here out of design focuses on student success in graduating and getting jobs.

Dr. May went on to say this breaks out into three fundamental business models that operate. He said policy becomes hard to uniformly apply when all colleges are operating under different business models with different focuses on their revenue. He said institutions that are more locally funded meaning they do what they do because they have resources as opposed to trying to get resources. On tuition revenue focused, those instutions will rely on getting more students. Then he said there are some that are more balanced in their approach to revenue, and this is the group that policies will apply more to.

Dr. May said all community college districts cost over $9,000 to fully educate a student with 25% being paid for by the student. He went on to describe Dallas College's business model as more reliant on local tax revenue and that their goal is to keep tuition low and the big variance is their ability to get local tax support and what they do on the tuition rates. He discussed Blinn College as one that is heavily reliant on enrollment and have extremely low local tax support and the state is pretty much the same for what it is at Dallas College. He mentioned their cost for full time students is lower because they don't have that third leg of revenue to meet that need. He mentioned Tyler College as one that is more balanced in each of the three revenue sources and gives them a balanced budget.

Dr. May discussed service areas and said he doesn't believe the existing model does well in addressing that as it puts institutions into one of the three boxes of revenue driven by enrollment, local taxes, or balanced among all three.

Dr. May was asked about the flaws with the student success points and how to address that. He said he does believe they need goals and that is why they are having these conversations with the Commission as they think about 60x30 and needs of the economy. He clarified that the allocation model as it is now designed will not lead to achievement of those goals. He said they are working against the money in many cases and making decisions in the best interests of their students and institutions. He said they need goals that are more than just shuffling of dollars but to provide incentives for institutions to meet the needs of the population they are trying to serve.

Dr. May was asked about the rate of student success points as it has gone up and down and speaks to that reallocation of funds. He said if there was funding as opposed to making an allocation, that would make a difference, as it right now is just a redistribution.

Dr. May was asked about local tax dollars including MNO and INS, which he said he believes it does capture total tax rate.

The Commission discussed with Dr. May that the vast majority of student growth has been in low income populations and they have a tough task in educating all students equitably when community colleges have such varying methods of getting revenue. The Commission asked on any models that are out there they could implement and Dr. May reiterated that changing student success points away from an allocation model would do a lot to fix that problem.

Dr. May was asked the percentage of Texans not in a community college district,  which he said he believes it to be around 70% because the urban areas cover a significant number of the student population.

Dr. G. Brent Wallace – Chancellor, North Central Texas College

Dr. Wallace discussed the challenges they have in serving rural Texans as well as one of the fastest growing communities in Denton County. He said they have and continue to value that area and they currently have three distinct models of getting revenue. He said they get $3 million in MNO from Cook County and they approved measures to expand health sciences and technology centers. He added they get a maintenance tax from the Graham Independent School District. In 2000, he said Bowie, Texas voted for a half-cent sales tax to support the college and have built two facilities now for workforce development, but they still do not receive a substantial operational fund.

Dr. Wallace discussed their challenges in most of their students attending the Denton County facility, causing them to pay more in tuition. He said it is an increasing concern that Denton County does not pay taxes to a community college and they are the largest county in the state to not do so. He said if they paid a maintenance tax, they would generate $50 million a year and lead to tuition reduction, but the process to garner that is cumbersome. He said they have two ways to do so, either county wide or by ISD. He said while that sounds simply, they have intersecting borders with ISDs and counties with other colleges. He added that the time and cost of holding elections is a significant burden.

Dr. Wallace said north Texas will continue to demand more workforce education, which is the most expensive programs they provide. He said they are afraid of facing a vacuum of services in the future as they grapple with finding funding sources.

Leighton Schubert – Executive Vice Chancellor, Blinn College

Mr. Schubert provided an overview of Blinn College and how they thrive with their business model. He said they serve a 13-county central Texas service area and Washington County residents receive discounted rates due to tax support the county provides. He said its impact extends beyond those boundaries and 70% of their enrollment consistently comes outside of their service area. He said Blinn attracts students from all over the state and mentioned districts in other parts of the state that provide more students than their service area.

Mr. Schubert discussed their tax rate, which is the lowest amount for a college in the state. He said they generate $2.95 million on those and represents less than 2% of their revenue. He provided the Commission some graphs and maps that shows the tax collections and service areas. He noted that they receive the highest percentage of revenue from tuition among all community colleges. He said a majority of community colleges rely on tax revenue to provide their operations, but they heavily rely on tuition. To ensure students are attracted to Blinn, they have to provide unique services and discussed partnerships with other entities and four-year universities including Texas A&M. He said their transfer rate is the highest of any community college in Texas.

Mr. Schubert concluded that their taxing district is significantly smaller than others in the state and they have been proactive in fostering a culture of collaboration and offering unique programs to bolster their enrollment.

Mr. Schubert was asked about raising tuition, which he said they have done, particularly in the wake of the pandemic due to enrollment declines, but they are very wary of doing that as they don't want to put that burden on the students.

Dr. Cheryl Sparks – President, Howard College

Dr. Sparks testified on her extensive history with Howard College and that they are very invested in what they can do for the state. She said she liked the statement on demographics and it isn't destiny but also decisions. She noted their college district that is rural serving and what demographer's predicted on population density in the golden triangle in west Texas. She pointed out that Howard College's taxing district is not he most populous in the area and change has created a lot of differences in the way they approach what they have done.

Dr. Sparks continued that the decisions that were made driven by how to best serve their part of the state. She said the majority of the counties they represent are low in density and 10 of the 13 counties did lose populations since the last census, although there was an overall increase in population of 3%. She said the larger population areas saw an increase while the rural areas saw a decline. She said being small and rural, so much of what they do is trying to reach out and work with all of those different school districts and counties because in some instances, they are the only hope those populations may have. She discussed dual-credit and how they made a strong commitment to get out to all those school districts that are 1A and 2A and help the area of the state that they are responsible for.

Dr. Sparks went on to budgets and when working in an area like theirs, they find themselves one way in the county that is taxed and another way in the other counties. She said there is a lot of complexity in what they do and the people in the other communities are staying in their particular areas and have to count on the money they get from the state, which makes it a tough and complex challenge to navigate.

On the pandemic, Dr. Sparks explained they saw fluctuations in enrollment. She said 55% of their enrollment today is in dual-credit and was a decision on how to best address their part of the state. She said things happen in small towns and are very reactive to an industry leaving or other economic shifts.

Dr. Robin Satterwhite – South Plains College

Dr. Satterwhite provided an overview of South Plains College and their campuses that he said also largely serves rural populations. He said they have enrollment of about 8,900 students and serve 13 counties, but their taxing district is only one county and one ISD in another county. He said they are misaligned in their taxing district and service area and the large majority of their students come from outside the service area. He noted the City of Lubbock is in their service area but not taxing district. He said there has been a declining population in their area and that they have a financially challenged population as well.

Dr. Satterwhite continued that students they serve do have to choose between dinner one night or getting gas for commuting to school the next day. He said 91% of their students are commuter students and can often be a long way away considering the 13 county service area they cover. He said enrollment is largely outside of the taxing district with only 8% coming from within, with Lubbock County accounting for about 55%.

Dr. Satterwhite discussed infrastructure challenges for rural colleges, noting broadband access as a challenge for the populations they serve, making online education a challenge. He went on to discuss the challenges they have with taxing districts and that they have the highest taxing rate and only accounts for 15% of their budget. He added a decline in evaluation of property values as another challenge and forces them to be more reliant on enrollment for revenues.

Dr. Pamela Anglin – Paris Junior College 

Dr. Anglin discussed their taxing district in Lamar County and elections in 2016 brought them in but several other counties did not agree to annex. She said they meet all financial indicators of the Coordinating Board and overviewed their partnership with ISDs in the area.

Dr. Anglin said the population in the area has seen little or no growth over the last several decades but it is projected their region will grow in population by 7%. She said only 8% of their workforce is under the age of 25 and they are blessed with some big industries as economic drivers in their areas. She said they have large additions that are in the economic development pipeline as well.

Dr. Anglin said that enrollment peaked at over 6,000 students in 2010 and the college was named as one of the 50 fastest growing in 2010 and 2011, noting this happened at a time the economy was struggling. She said as the economy came back, their enrollment began to decline and students began taking more dual credit, which now makes up 40% of their enrollment. She noted more students going to the four-year universities that has put them in a position to add more student supports and wrap-around services on their campuses.

Dr. Anglin said they began a comeback in 2018 in terms of enrollment until COVID, which hit their enrollment especially hard. She said their pre-COVID contact hours dropped 28%. She discussed nursing programs and how important they are for the healthcare system in the area. She said they are hoping to reach new populations for workforce programs and will target underemployed adult populations that need re-training as well as upskilling and reskilling.

Rep. Todd Hunter (R – Corpus Christi) 

Chair Hunter opened with statistics aiming to highlight the important issues facing the Commission. He noted Texas ranks last in population attaining associate degree of high education among 12 peer states or similar economies and the median income is 8% below the national average according to statistics from Texas census data and THECB. He said the attainment of a degree has a substantial impact on one's ability to make a livable wage ($50,000/yr) and an associates degree increases a person's likelihood of meeting this threshold by two times, a bachelor by two times an associate. There is roughly a $22,000 difference between degree status.

Chair Hunter went on to refer to the data of students progressing from 8th grade (2009) to college. Only 23 out of 100 attain a secondary degree as opposed to the state goal of 60%. There has been a severe decline in enrollment generally even before the onset of the pandemic. From a geographic perspective, Houston consistently has the highest rate of follow through at roughly 30% of students where the rest of Texas is even lower especially in lower income areas irrespective of their rural or urban status.

Chair Hunter discussed that beginning this year, all students in Texas will be required to fill out their FAFSA before they may attain their high school diploma. He said the out of district cost for community college students is 1.8 times higher than within the district. Additionally, the rate of tuition is increasingly high the lower the income of their local feeder district. This is due to the lower amount of funding received from local property taxes, whose cost is then transferred onto the student body. He said when the state provided information to school systems on the number of their students who have filled out FAFSA, enrolled in college, or been accepted, this state intervention has greatly increased the high school's amount of students continuing into higher education. In Harris county for instance, the increased enrollment by 22% due to this available information.

Chair Hunter closed saying the state spends $160,000 to educate a child from pre-k to 12th grade and that only 1 in 4 students complete higher educational degrees. This is in contrast to the trend of employment requiring higher degrees for a much higher number of jobs. He thus concludes that investing more money in these students' education would be a good investment into the state of Texas.

Dr. Sara Goldrick-Rab - Professor of Sociology & Medicine, Temple University 

Dr. Goldrick-Rab the greatest issue facing Texas is the issue of non-tuition living expenses. There is a misunderstanding that this financial struggle is due to the burden of taking on an extra cost, that of tuition. However, there is a strain overlooked which is that by enrolling, students' cost of living unrelated to tuition increases significantly. She said this is due to the increased cost of living near a college or of transportation for classes, the increased cost of food in those areas, and notably the increased cost taken on because students have significantly less available time to work. Another hidden consequence is that many low-income individuals lose eligibility for aid they hadprior to enrollment. For instance, public housing does not cover those enrolled in college.

Dr. Goldrick-Rab stated that in effect there are Texas policies that directly de-incentivize the pursuit of a college degree. During the pandemic, a study compared the education outcome of women with children who received an additional $250 to those who received no additional funding. The graduation rate of women with help increased from 11% to 22%.

Dr. Jennifer Kent – President, Victoria College 

Dr. Kent spoke on the average situation of their student body, utilizing a woman Mary as an example. She described Mary as a 27 year old, Hispanic, parent, first-generation college student who was raised in deep generational poverty. Due to her necessary life responsibilities, Mary could only attend part time. She makes an effort both to improve her own life and the outcome of her own children.

Next Dr. Kent spoke of the context of Victoria county. They lost over 5,000 jobs and this trend is expected to persist, the majority of lost jobs being those without degree or certificate requirements. However, their population remains relatively stagnant so their rate of poverty, which is already high, increased. 1 in 6 adults lack a high school diploma or GED. The greatest barrier according to students is the lack of access to affordable child-care, a problem only aggravated by the circumstances of the pandemic. Additionally, she said due to their rural nature transportation concerns are high priority. Victoria College's students have an increasing need for access to healthcare and to technology.

Dr. Cesar Maldonado – Chancellor, Houston Community College 

Dr. Maldonado reported on the general state of HCC. It is the country's leader for national student enrollment. He referred to Houston as a prophetic city, meaning its trends are likely to predict those for the rest of the country. HCC has had a vast growth in the percentage of students of color enrolled, in part time students, in adult students, and in long term education seekers.

Dr. Gregory Williams – President, Odessa College

Dr. Williams discussed the state of Odessa College. He stated they served the largest area in the state by square miles, tending to have more land than students. Recently, they have increased their enrollment rate to the highest in the history of their institution even in the midst of a challenging pandemic. One difficulty he felt prevalent to enrollment was the fact that the area has many well paying jobs in oil that require no degree, which also is a contributing factor to a low high school graduation rate. The most pressing factors, however, are those of poverty. Students cannot afford food, housing, technology, or even the cost of attending dual credit classes. He said the current student body is more politically engaged than any other, more unwilling to go into debt for a degree, and more interested in online education.

When asked why he believes Odessa has been able to increase attendance, Dr. Williams replied their student resources such as food banks, community gardens, eight week courses, try first class free, and many other miscellaneous strategies were implemented. Additionally, he said they have implemented a new system of characterizing students by certain more personalized categories, ex. Veteran returning for a career change, and this approach has helped them provide a more direct kind of help.

Texas Higher Education Coordinating Board – Innovation, Data, and Educational Analytics (IDEA) Committee 

The next panel represented the THECB's Innovation, Data, and Educational Analytics (IDEA) Committee and began by speaking on the background of educational gaps of their incoming students. Mr. Stephen Jacobs said the key to their success is three-fold. First they provide reliable housing, second they implement a mutual commitment by not giving up on students, which takes the form of helping with miscellaneous needs such as obtaining uniforms, and tools, and third they utilize a strategy of intrusive case management. The average student of theirs is low-income, in need of a high school diploma of GED, many have already attempted college, and 80% are people of color.

The next panelist spoke on her own personal experience of the program. She said her mother inspired her, passing on a passion to educate and help others. Then she was seriously injured in her youth and was moved by the exemplary care of her nurses. Unsure what path to pursue, she faced many struggles. She said one of the main contributions to her success was her own case navigator, as she was extremely invested and supportive of her education.

They then spoke on how a multiple year grant for St. Davis demonstrated the utility of their program in moving people from poverty. Over 20 years their return rate is expected to be 501%, which comes out to 17% annually. Their average expenditure per student per case was $2,000-3,000 a year on top of the students tuition coverage. The average age of their clients is between 28 and 30 years. As the expe​nditure per student rose, the expenditure per graduate lowered. Because transportation is of considerable concern, many believe virtual education could mitigate its effect. Additionally IDEA does help students attain affordable or free childcare.

Mr. Hunt closed the meeting mentioning their next hearing planned for Jan. 18.

Source: McWilliams Governmental Affairs Consultants