The Texas Higher Education Coordinating Board voted to add a performance‑based supplement to university funding, tying a portion of state dollars to graduation rates and degree progress.
The board voted to add a performance‑based component to the state’s university financing formula.The proposal will be submitted to the Texas Legislature in January 2027.
The Texas Higher Education Coordinating Board (THECB) approved a recommendation to modify the public university funding system on July 22, 2026, during its quarterly meeting in Austin, Texas. The recommendation proposes that state appropriations increasingly reflect student success indicators—such as graduation rates and progress toward degrees—rather than relying primarily on credit‑hour enrollment figures [1][2].
Board members presented the proposal alongside the existing enrollment‑based model, outlining a supplemental formula that would allocate additional funds to institutions that demonstrate higher rates of degree completion and student progress [3][4]. The recommendation is slated for legislative review when the Texas Legislature reconvenes in its regular session in January 2027 [1][2].
Funding Recommendation Details
The THECB report suggests a two‑track funding approach. The first track retains the current per‑credit‑hour allocation, which has funded Texas public universities for decades. The second track introduces a performance‑based supplement that distributes dollars based on measurable outcomes, including four‑year graduation rates, three‑year graduation rates, and credit accumulation toward a degree [3][4].
The board’s analysis estimates that the supplemental component could represent up to 15 percent of total state higher‑education funding by the 2028-2029 fiscal year, depending on institutions’ achievement of the defined metrics [1]. The formula assigns weighted points to each metric, with higher weights for graduation rates to encourage institutions to focus on timely degree completion [4].
The board’s analysis estimates that the supplemental component could represent up to 15 percent of total state higher‑education funding by the 2028-2029 fiscal year, depending on institutions’ achievement of the defined metrics [1].
THECB officials emphasized that the new model would not replace enrollment funding but would “supplement” it, aiming to align financial incentives with student outcomes while preserving baseline support for teaching loads and research activities [2][3].
The recommendation will be incorporated into the state budget proposal prepared by the Office of Management and Budget and forwarded to the House and Senate committees on higher education in January 2027 [1][2]. Lawmakers will need to enact statutory changes to authorize the performance‑based formula, a process that could involve hearings, amendments, and stakeholder testimony from university presidents and advocacy groups [3].
If approved, the performance‑based funding would become effective for the fiscal year beginning September 1, 2028, giving universities a transition period to adjust reporting systems and align internal policies with the new metrics [4]. The board has scheduled follow-up workshops with university finance officers in late 2026 to clarify data collection requirements and compliance timelines [2].
Potential Impact on Texas Higher Education
Universities that improve graduation rates or increase the proportion of students earning degrees within four years could receive additional state dollars, potentially influencing budget allocations for academic programs, student services, and infrastructure [1][3]. Conversely, institutions with stagnant or declining outcome metrics may see a reduction in supplemental funding, prompting reviews of retention strategies and advising models [4].
Students may experience expanded support services, such as enhanced tutoring, career counseling, and financial aid advising, as institutions allocate resources to meet the performance criteria [2]. The shift also aligns Texas with a broader national trend toward performance‑based funding, which research indicates can incentivize institutions to focus on completion and equity outcomes [3].
Educators and administrators are expected to adapt reporting practices to capture the required data on credit accumulation and degree progress, potentially increasing administrative workload in the short term [4]. However, THECB officials assert that the new system will provide clearer performance signals, enabling more data‑driven decision‑making at the institutional level [2].
Key Facts
Students may experience expanded support services, such as enhanced tutoring, career counseling, and financial aid advising, as institutions allocate resources to meet the performance criteria [2].
What: Texas Higher Education Coordinating Board recommends adding a performance‑based supplement to public university funding, emphasizing graduation and degree‑progress metrics.
When: Recommendation approved July 22, 2026; legislative review scheduled for January 2027; implementation projected for FY 2028-2029.
Jason Arday, Cambridge's youngest Black sociology professor, stepped down on August 5, 2026 after the university opened a plagiarism and credential investigation.
Impact: Universities may receive additional funds for higher graduation rates, influencing resource allocation, student support services, and institutional reporting practices.
Sources
Texas Higher Education Coordinating Board recommends changing public university funding system to focus on student success metrics – The Daily Texan
Texas agency suggests performance-based funding for universities – Texas Tribune
Texas board rethinks funding models for public universities – Dallas Morning News
Texas Board Proposes Pay‑For‑Performance For Public Universities – Hoodline
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