Texas agency suggests performance-based funding for universities

July 23, 2026 - 08:11

AUSTIN -- The Texas Higher Education Coordinating Board has put forward a new recommendation for state lawmakers, urging them to overhaul how public universities receive funding. Instead of basing allocations primarily on enrollment numbers, the board suggests a model that ties money directly to student outcomes.

Under the proposed system, universities would be rewarded for metrics like graduation rates, the number of degrees awarded in high-demand fields, and successful job placement after graduation. The goal is to shift incentives away from simply admitting more students and toward ensuring those students actually complete their degrees and enter the workforce.

Board officials argue that the current funding formula does not adequately push schools to improve graduation rates or close achievement gaps among different student populations. They believe a performance-based approach would encourage universities to invest more in academic support, advising, and programs that lead to timely completion.

The recommendation comes as Texas faces growing pressure to produce a more skilled workforce to keep pace with economic demands. Lawmakers will now consider the proposal during the next legislative session. Some university leaders have expressed cautious support, though they warn that funding tied too rigidly to outcomes could penalize schools that serve large numbers of nontraditional or at-risk students. The board acknowledges these concerns and says any new formula must include adjustments for student demographics.