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All Eyes on Texas: Community Colleges Focus on Preparing the Workforce of Tomorrow

III. Change in the works

Texas’ push for community college reform didn’t happen in a vacuum. It’s a response to the state’s changing economy.

In the first two months of the pandemic, Texas shed 1.4 million jobs, sending the unemployment rate soaring to 12.6 percent.[52] The federal government pushed out billions in aid to colleges, money that could be used for scholarships, emergency aid, improved online programming and broadband access.

In Texas, the governor and the coordinating board drew on this funding to create a series of grant programs to help community colleges put Texans back to work. Yet even as they delivered this emergency assistance, Texas educators and policymakers were mindful of deeper challenges that predated the pandemic and would persist in the years ahead.

Bachelor’s degrees remain essential for individual Texans and the state. According to one analysis, people with bachelor’s degrees earn 67 percent more on average than those with a high school diploma.[53] However, recent research has muddied the old assumption that any and all four-year degrees are a ticket to the middle class. It turns out that some degrees and some majors pay off much better than others. Still, the median lifetime return on investment is more than $300,000 for students who complete a four-year degree on time. And community colleges make bachelor’s degree attainment easier and cheaper for many students.

Shorter courses—even noncredit programs shorter than a semester—can be stepping stones to further higher education.


It’s no accident that one of the first initiatives undertaken by the Texas coordinating board when a new commissioner was appointed in 2019 was a statewide overhaul of the transfer process, smoothing the way for learners to move from two- to four-year schools by streamlining requirements and incentivizing partnerships among two- and four-year colleges.

At the same time, in Texas, as nationwide, among the leading symptoms of the way the economy is changing is a growing interest in short job-focused programs and nondegree credentials. As new technology automates routine tasks and displaces even skilled, experienced workers, many adults seek to return to school to reskill for new jobs. And many of these learners have no time for the full college experience, either two- or four-year college.

Some fast, job-focused learning leads directly to the labor market. In other cases, shorter courses—even noncredit programs shorter than a semester—can be stepping stones to further higher education.

This shift doesn’t happen automatically; educators must design and embed short, “stackable” upskilling programs in ways that make the transition possible. This is a top concern at many community colleges in Texas and elsewhere, providing pathways for learners who start with a short job-focused credential with value in the labor market and later return to college at their own expense or their employer’s.

The challenge confronting Texas community colleges and the Texas Higher Education Coordinating Board: not only building capacity to offer short, job-focused programs and alternative credentials, but also ensuring they are aligned with the local economy. Skills taught in college must match the skills employers need, and the supply of trained talent must meet regional economic demand.

From scholarships to capacity building

Gov. Greg Abbott took a first, important step in spring 2020 when he decided to dedicate a large portion of Texas’ federal coronavirus stimulus funding to higher education, including short upskilling and reskilling programs to put unemployed Texans back to work.

One of just a handful of state executives to spend federal Governor’s Emergency Education Relief (GEER) funds this way, the governor and the coordinating board doubled down several times over the next 20 months. By the end of 2021, Texas had allocated $107 million in new funding for short, job-focused college programs leading to credentials with value in the labor market.

The money was disbursed through a series of competitive grant programs. The grant criteria changed somewhat over time, but there were three fundamentals. First, grants could be used only for programs that colleges had determined were aligned with the local labor market. Second, offerings could be credit or noncredit, so long as they led to credentials with value in the labor market. Third, colleges were encouraged to use the funding for stackable or convertible programs, both credit and noncredit, that learners could later leverage for academic credit.

All told, over two years, the coordinating board issued more than 220 grants, ranging from $40,000 to $2 million.

In retrospect, some colleges felt that some of the coordinating board’s grant criteria were too restrictive, making it difficult to find eligible students or programs, particularly short, noncredit programs. San Jacinto College, for example, some 25 miles southeast of Houston, could find only two noncredit students eligible for the first round of scholarships.[54] But a few months later, when the school devised a way to use other, less-restrictive federal funding for short, job-focused programs, it was overwhelmed with student demand—a surge of interest so strong that it crashed the college’s phone and email systems.[55]

Elsewhere, colleges that used GEER grants to support short, job-focused programs reported significant positive outcomes. Texas State Technical College, a network of 10 campuses devoted exclusively to workforce training, measured student persistence. Did learners complete a course and reenroll the next semester in the same field of study? Depending on the semester, scholarship students were 13 to 25 percentage points more likely to reenroll than those not receiving aid.[56]

The coordinating board’s takeaway from the GEER grant experience: There was an urgent need across the state not only for scholarships, as the agency expected, but also for capacity building—creating shorter job-focused programs, developing credentials and buying new equipment, among other uses. “Many colleges had difficulty engaging adult learners,” recalls higher education commissioner Keller. “Others were unable to use the money effectively. Some didn’t even ask for it because they knew they couldn’t use it.”[57]

It’s no accident that several later GEER-funded grant opportunities were devoted to institution building—money for equipment, teacher training and developing new programs that culminate in short-term credentials designed to align with local industry needs.

The higher education board’s primary goal had shifted from emergency support to systemic change, and the last installment of GEER funding was used as a down payment on a larger, longer term, state-supported grant program, the Texas Reskilling and Upskilling through Education (TRUE) initiative, authorized but not fully funded by the Legislature.

A funding formula that rewards employment outcomes

It was a watershed moment at Texas State Technical College (TSTC) that was all but unimaginable at most other colleges in America.


In 2020, the college’s business outreach unit came upon some surprising data about the school’s electrical line worker programs. As with most community college offerings, line worker instruction traditionally led to one of two kinds of credentials— either a two-year associate degree or a one-year certificate for students who felt a year of study would be enough to launch them on a career.

The outreach unit’s striking finding: Certificate holders earned on average $72,000 a year and associate degree holders $78,000—just $6,000 more despite spending twice as long in a classroom.[58]

For TSTC, the next step came easily: The college began planning to shut down its associate-degree line worker program and channel future students into the shorter option. “The employer doesn’t really care whether you have an associate or a one-year certificate,” explains TSTC Chancellor Michael Reeser. Eliminating the two-year program will allow the college to graduate twice as many line workers each year. “It’s the same as doubling our lab capacity and doubling our faculty,” Reeser says, “because students are able to complete in half the time.”[59]

TSTC differs from other two-year colleges in Texas on a number of dimensions. Its 10 campuses are scattered across the state and operate parallel to, but distinct from, the community college system. TSTC’s mission is tightly focused on training students for skilled technical careers. Perhaps most important, its funding model is radically different from the traditional higher education approach.

Instead of being judged like most colleges on the basis of its activities—generally the number of students enrolled and the number of hours spent in class—TSTC is funded entirely on the basis of outcomes: students’ postgraduation earnings.

Outcomes-based funding isn’t new. More than 30 states, including Texas, allocate some portion of higher education spending on the basis of performance. But in Texas and elsewhere, outcomes-driven dollars are often only a small portion of college revenue, and the formula is rarely geared as closely to the college’s mission as it is at TSTC.

TSTC’s “returned-value formula” was several years in the making. At the request of the Legislature, the Texas Higher Education Coordinating Board, the Texas Workforce Commission, the state comptroller and the Workforce Center at the University of Texas at Austin worked with the college to develop an approach that matched student records with unemployment insurance data. Their goal: to measure graduates’ direct and indirect economic contribution to the state—postgraduation wages, resulting tax revenue and the multiplier effect on the local economy.

Introduced at the college in 2014, the formula has driven a dramatic transformation at TSTC, or what one administrator calls “far-reaching cultural change.”[60]

The business intelligence unit scrubs every course and produces a “vitality scorecard” to assess whether the program is pulling its weight under the new formula. More than a dozen programs have been shut down and personnel laid off. Every decision made by every department is scrutinized under the new lens: Is it helping more students get better jobs and increasing the economic return for the state?

“There isn’t a function within the college that wasn’t touched by this mind shift,” Reeser says, “whether it’s … the time I spend every day on a task, the way I write curriculum, the pathways that students have through material, the way that we recruit students or the way that we place them.”

Among the most significant effects has been closer, more focused and more intentional relationships with employers in a position to hire TSTC graduates.

What used to be casual, take-it-or-leave-it advice from local companies is suddenly much more important to educators. “They really listen now,” says one employer.[61] And the college has much higher expectations of the regional firms it partners with. “If they’re not hiring, we’re not interested,” says one TSTC administrator. “And it has to be for good jobs— well-paying and permanent, with opportunities for advancement.”[62]

But the ultimate payoff is for students. Graduation rates have increased steadily since the formula was introduced. The average graduate’s wages grew from $25,710 in 2016–17 to $35,761 in 2022–23. And the college’s return on investment—the value it creates for the state—jumped from $265 million in 2016–17 to $390 million six years later.[63]

“We had to make some hard choices,” recalls Michael Bettersworth, TSTC’s vice chancellor and chief innovation officer. “But in the end, they’ve paid off for students and for the local labor market.”

Texas State Technical College logo

Short-term credentials

Among the most important themes running through Texas’ current community college reform effort is the emphasis on short-term credentials that pay off in the labor market.

Both learners and employers can benefit when job training culminates in a credential. Occupational certifications and other career-oriented awards send a signal to employers about the skills workers bring to the job. They can also position learners for the future, beyond a first, entry-level position, by ensuring they are learning more than the skills needed at one company.


The challenge is differentiating among job-focused credentials, which have proliferated wildly in recent decades. Along with shorter college awards, such as associate degrees and certificates usually earned after a year or less of study, students now earn a sometimes-confusing array of noncollege credentials that include badges, licenses, microcredentials, apprenticeship certificates and industry certifications.

Some nondegree credentials are designed by educators, others by companies. Google, for example, and Siemens both issue awards with wide currency in the labor market. But most certifications are developed by employer groups—industry associations representing, say, automotive employers or manufacturing firms.

Like occupational licenses, generally awarded by a state agency, industry certifications are issued on the basis of third-party competency tests administered by someone other than an educational institution. But unlike licensure, which often works to limit who can enter a profession, industry certifications are generally designed to find and recruit qualified talent.

What’s challenging for students, educators, employers and policymakers: sifting through this flood of new awards to separate the wheat—credentials that signal in-demand workforce skills and align with local labor market needs—from the chaff.

According to the coordinating board, all five GEER-funded grant opportunities were designed to encourage college experimentation with new credentials. Grant criteria stipulated that eligible programs must lead to high-value awards. Yet the board never specified what this meant—what counted as a credential of value. “We were deliberately vague and open-ended,” explained staffer Sheri Ranis. “There is so much uncertainty and ambiguity about what does and doesn’t add value. We wanted to encourage experimentation.”[64]

The next step, an important turning point, was revising the state’s higher education strategic plan to include attainment of noncollege credentials. Like all but a handful of states, Texas has what educators call an “attainment goal.” The original objective, approved by the Legislature in 2015, stipulated that by 2030, 60 percent of Texas adults, ages 25 to 34, have a college degree or certificate.


Both learners and employers can benefit when job training culminates in a credential.

By 2021, two things were clear: that the state was not on track to meet this goal and that the pace of economic change required more flexibility from higher education. Marketable skills were evolving so fast that traditional college credentialling could not keep up.

In fall 2021, the coordinating board responded by amending the state strategic plan to include nondegree credentials of value in the labor market. The new plan, Building a Talent Strong Texas, posits a definition of value: Ten years after attainment of any credential, workers’ earnings will exceed what they would have made had they ended their education after high school.[65]

The coordinating board will match student data with employment records gathered from state businesses to determine learners’ postgraduation outcomes. THECB staff say they plan to start with current outcomes, then track them over time, one year, three years, five years and 10 years after graduation. The aim, according to the THECB, is “to tie completion goals directly to the wage premiums associated with postsecondary credentials.”[66] The new plan also expands the reach and scale of the state attainment goal to include not only 25- to 34-year-olds, but also older adults ages 35 to 64.

The next frontier, included in the strategic plan but not mapped out, is ensuring that nondegree credentials are indeed stackable and convertible so that students in noncredit training can later return to school to earn a degree or credit-bearing certificate. “Even as we advance short-term credentials,” says Fraire, the former Texas Association of Community Colleges president, “we have a responsibility to ensure they are not terminal credentials.”[67]


The third and perhaps most important pillar of Texas’ ongoing overhaul of two-year public colleges—along with funding for short, job-focused programs and new emphasis on credentials valued by employers—is the Commission on Community College Finance created by the Legislature in early 2021. Consisting of 12 members—community college presidents, employers and legislators—the commission issued a slate of recommended reforms in late 2022 in advance of the upcoming legislative session.[68]

The group is charged with revamping an approach dating back to the 1970s that was built for a dramatically different state economy and much less diverse population.

Like most states, Texas provides both institutional support for colleges and scholarships for students. Every Texas community college has traditionally received three types of institutional funding—an allocation of state dollars determined by a funding formula, a local infusion based on property taxes and student-paid tuition. A small portion of the state’s share of college funding is performance-based: Schools receive student “Success Points” for relatively high graduation and transfer rates, among other metrics.

Alongside this institutional support, Texas learners draw on five relatively modest types of state student financial aid. But as is generally the case with federal student aid, none of these state scholarship programs provide support for noncredit students, even those in job-focused programs.


State formula funding has been declining for many years leaving the burden on local tax districts or, in districts with scant property tax revenue, on the backs of students.

State formula funding has been declining for many years. In 1980, it accounted for 68 percent of community college revenues. By 2020, the share had shrunk to just 26 percent, leaving the burden on local tax districts or, in districts with scant property tax revenue, on the backs of students.[69]

In districts with the highest tax intake, local funding accounts for more than half of college budgets and tuition for around 20 percent. In districts with the lowest tax revenue, where, by definition, students are poorer, local funding covers less than 5 percent while tuition covers upward of 60 percent.[70]

Community college financing

Four existing Texas funding mechanisms and initiatives offer models for reformers:

  • Texas State Technical College funding formula. TSTC’s 10 campuses are funded dramatically differently than the state community college system, with a formula based on how much students earn after graduation. Once seen as a radical experiment in outcomes-based funding, this approach has been recognized nationwide as a potential model for other states.[71] (For more on the TSTC funding formula, see “A funding formula that rewards employment outcomes”.)
  • Equal institutional funding for noncredit workforce programs. Unlike many states, where noncredit education receives little or no institutional funding, Texas funds noncredit workforce programs on a par with credit offerings. Credit or noncredit, programs that incorporate the common course numbering system’s learning outcomes and prescribed lengths are treated similarly and funded on an all but equal basis. Virtually no other state in the nation offers parity of this kind.
  • Texas Reskilling and Upskilling through Education (TRUE) grant program. Authorized by the Legislature in 2021 but only partially funded by state dollars—the higher education coordinating board made up the difference with federal stimulus money—the TRUE program builds on what the state learned from two years of experimentation with federally funded competitive grants.

    TRUE awards are designed to cover the institutional cost of capacity building, creating, redesigning and expanding workforce programs that lead to short-term credentials with value in the labor market. Credential programs must be shorter than six months in duration. Noncredit trainings are eligible, and colleges are encouraged to seek employer input in designing instruction.
  • Skills Development Fund. Among the funding mechanisms valued most highly by community college workforce educators across the state, Skills Development Fund grants are designed to help Texas companies enhance the skills and wages of their existing employees. Administered by the Texas Workforce Commission using a mix of state and federal dollars, grants are paid directly to community colleges and other education providers that partner with eligible firms to provide training.

    Companies benefit from the subsidized upskilling. Colleges use the money to cover the cost of equipment and other capacity building that benefits not only the partnering firm’s workers, but also other students, credit and noncredit, enrolled at the college. (For more on how one college uses Skills Development Fund grants, see “Blurring the line between credit and noncredit to respond to employers”.)

All four promising models provide seeds for potential reforms in the years ahead, perhaps alongside or building on the recommendations of the community college finance commission.