Community colleges beat student outcome predictions. Now Texas can’t afford related incentives.

By Sneha Dey, The Texas Tribune
July 22, 2026

Three years after Texas reinvented how community colleges earn state funding to reward them for getting more students to graduation, the schools are delivering.

But the colleges are short the millions they planned to receive as a result as their successes outpaced what lawmakers budgeted, prompting limits to the state’s performance-based funding.

Texas Higher Education Coordinating Board officials adjusted the funding formula during their Wednesday meeting, trimming the incentives that trigger additional dollars when schools educate high-need students. Colleges will now see smaller bonuses for getting low-income students and adult learners to graduation.

“These changes are necessary to ensure the financial sustainability of the CCF [community college finance] program,” Andy McLaurin, the THECB assistant commissioner of funding and financial aid, told board members.

Some colleges could see massive drops in state dollars in fiscal year 2027 in part because the state needed to proportionately reduce funding for all community colleges to stay within budget.

Nearly a dozen colleges would see state funding drop by at least 15%, compared to the prior year, according to THECB estimates. The Texarkana, Navarro and McLennan community college systems would be hit the hardest, with projected drops of at least 20%.

THECB spokesperson Bobbi Kessler said the state is navigating a cap of about $1.2 billion that it can distribute to colleges until the next legislative session, during which lawmakers will consider allocating additional dollars. Kessler emphasized that community colleges are “receiving more funding than ever before” under the state formula.

State lawmakers approved a revamped funding formula for community colleges in 2023 with near unanimous support to get more students ready for the workforce.

House Bill 8 gives colleges money primarily based on how many students complete industry certificates or associate’s degrees, transfer to universities or participate in dual credit. Bonuses are given based on educating high-need students, including those who are economically and academically disadvantaged as well as nontraditional adult learners.

Community college advocates celebrated the move away from a static, enrollment-based funding and toward a dynamic one. But while the new formula opens the door for more money from the state, it also introduces uncertainty that can be difficult to plan budgets around.

Education advocates criticized reducing the incentives community colleges get for educating low-income students and adult learners, the very students who need to go to college the most.

“These high-need student groups — students from low-income families, students who maybe were not entirely prepared for college when they completed high school — are the ones who really stand to gain the most,” said Jonathan Feinstein, the Texas state director of Education Trust. “It does raise concern in terms of this being a precedent so early.”

Feinstein said the funding weights for high-need students recognized that getting them to graduation requires more resources and costs more.

Yvonne Munoz, the chief of staff for state Rep. Vincent Perez, an El Paso Democrat who is on the Texas House Higher Education Committee, said Wednesday that lowering incentives for educating high-need students work against the students and the institutions that HB 8 set out to support.

Community colleges overshot expectations on student performance before.

Texas legislators during the last biennium approved a nearly $90 million supplementary budget to get schools the dollars they were owed. THECB officials can recommend a similar request this session — but it would be considered at a time when Texas’ top officials are ordering agencies to cut overall spending by 3%.

Paris Junior College president Stephen Benson wrote an editorial this month publicly urging the state to close the gap between the money community colleges earned and the money they will receive. The East Texas junior college could see a drop in funding of $1.4 million at a time when its enrollment increased by 20%.

“Successful colleges should not be penalized for exceeding expectations,” Benson wrote. “The timing couldn’t be worse. PJC is serving record numbers of students, expanding workforce programs, strengthening partnerships with school districts and employers, and producing outstanding student outcomes.”

As colleges navigate the funding gap, Ray Martinez III, the president of the Texas Association of Community Colleges, said in a statement to The Tribune that his group was partnering with the coordinating board to ensure that funding “keeps pace with the results students and colleges have earned.”

Martinez added that community colleges outperforming funding predictions is evidence that HB 8 is a success.

“When the Legislature passed House Bill 8 in 2023, it made a generational commitment — a bold and deliberate policy decision to tie state funding to student outcomes rather than enrollment,” Martinez said. “Our colleges answered that challenge, made significant institutional investments, and delivered results that exceeded projections.”

The Texas Tribune partners with Open Campus on higher education coverage.

Disclosure: Open Campus and Texas Association of Community Colleges have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in The Texas Tribune’s journalism. Find a complete list of them here.

This article first appeared on The Texas Tribune.