Technical College System Working to Link State Funds to Student Jobs

Texas State Technical College System officials say their top priority is placing students in good jobs. And they're preparing to put their money where their mouths are. 

While some university leaders have balked at the idea of linking graduations or other outcomes to the amount of money they receive from the state, administrators at TSTC, a network of public two-year institutions that provide technical training, have embraced it. And they are working with the Texas Higher Education Coordinating Board to develop a model that bases the system's entire state funding amount on the job placements and projected earnings of graduates.

“You won’t find a better example of total accountability, because we won’t get paid for a student until we put him in a job,” said TSTC Chancellor Michael Reeser.

The details of what is called the “returned-value model” are still being hammered out and are expected to be ready by October. Some observers, though, question whether the job data available to the state is capable of yielding accurate results. And even officials at TSTC say their model will not translate to all other institutions.

With lagging graduation rates and mounting concerns over the country's future workforce, there is a push nationally to use government funding to incentivize the results of the higher education pipeline rather than simply encouraging schools to funnel in more students, as some allege the current enrollment-based funding does.

In February, President Obama announced an $8 billion fund to encourage two-year colleges to produce 2 million skilled workers for the country’s high-demand industries. Part of the fund will go to a “pay for performance” program designed to use financial bonuses to encourage institutions to find quality job placements for their graduates.

In Texas, efforts in the last legislative session to tie up to 10 percent of public universities’ funding to the number of students they graduate each year fell short. But many believe that a move to such a system looms on the horizon, and legislators have asked to review other proposals in the coming session.

The coordinating board's latest proposals for how outcomes-based funding might work for four-year universities and community colleges are expected to be released soon, but they are unlikely to focus on the same metrics as TSTC's model. Officials at both TSTC and the coordinating board stressed that the returned-value approach is not intended or necessarily appropriate for other higher education systems in the state.

“That is a profound shift in the way higher ed is funded,” Reeser said. “It is so radical that I can tell you for sure that it wouldn’t work at other schools.”

The idea of funding technical colleges based on their economic impact first surfaced in the Legislature in 2009, when lawmakers approved a bill calling on state Comptroller Susan Combs to study the feasibility of basing part of the state funding for technical training programs on how much they benefit the state economically.

According to a 2010 letter from Combs to Lt. Gov. David Dewhurst and Speaker Joe Straus, the study was met with ”several data challenges.” Among them was the fact that the Texas Workforce Commission’s unemployment insurance database, from which the jobs data for the funding model would be gleaned, does not differentiate between full-time or part-time employees.

“Given the data available, it would be extremely difficult to attribute economic benefit entirely to any particular program or institution,” Combs wrote.

George Reamy, a former conflict resolution officer at the TSTC System who now runs a website where he writes about higher education and TSTC in particular, said of the database, “It’s a blunt instrument at best.”

While he sees promise in the returned-value model, Reamy said it was important to accurately measure the outcomes the approach is attempting to incentivize. “If we’re going to reward any old job, then that’s what we’re going to get — any old job,” he said.

Susan Brown, assistant commissioner for planning and accountability at the coordinating board, acknowledged that there are limitations to the state’s jobs data. At this point, she said, they have gathered a large amount of information and they are “in the process of developing a workable model.”

Reeser said TSTC’s workforce-driven mission already causes it to make decisions based on specific outputs, such as working with companies to design training programs tailored for their equipment and operations, and that makes such a funding model right for them.

“We have no casual students,” he said. “We have no students who go just to pick up a class or two. That’s what makes us uniquely suited to go to a 100 percent outcomes-based funding formula.”