Texas has been steadily moving toward tying higher education funding to student results rather than to enrollment alone.
In 2023, the Legislature passed House Bill 8, which overhauled how the state funds community colleges by rewarding outcomes such as credentials of value, transfer to four-year institutions and dual credit completion.
During the 2025 legislative session, lawmakers directed the Texas Higher Education Coordinating Board (THECB) to study how a similar performance-based funding approach could work for the state’s four-year public universities.
In 2025 and 2026, THECB convened an Executive Committee of representatives from public universities across Texas. The committee reviewed funding models used in other states and gathered input from university leaders, legislative staff and outside stakeholders.
The committee presented its recommendations to THECB at its July 2026 quarterly board meeting.
This is the first part in a three-part blog series that discusses performance-based funding, the precedent set by community colleges, and the recommendations set forth by the THECB Executive Committee.
What is performance-based funding?
Under a traditional enrollment-based model, a university’s state funding rises and falls mainly with how many students it enrolls. A performance-based model adds a second question: not just how many students enroll, but how many make progress, complete a credential and go on to see value from that credential.
In other words, the state would tie at least some funding to results rather than enrollment alone.
The committee’s recommendations outline the possible distribution of performance-based funding, but they do not establish or recommend the total amount of funding the Legislature would dedicate to the model. That decision would ultimately be up to lawmakers.
The Community College Precedent
The proposed university model builds on a major change Texas has already made for community colleges.
Before 2023, state funding for community colleges was based largely on enrollment. HB 8 changed that by tying 95% of state funding to student outcomes, including credentials of value, transfers and completed dual credit. The model also provides additional funding when colleges help economically disadvantaged, academically disadvantaged and adult students succeed.
The Executive Committee’s work was intended to bring a similar focus on student outcomes to four-year universities, while recognizing that the university finance system is structured differently from community college finance. The committee recommends adding a performance-based component on top of the existing university formulas rather than redesigning the broader funding system around outcomes.
That distinction matters. The university proposal borrows the outcomes-focused philosophy of HB 8 without proposing the same scale of transformation.
Texas is not starting from scratch
Performance-based funding is not new or untested. About half of states already use some form of it for their four-year universities, and several have run their models for more than a decade.
As part of its study, the THECB committee examined how these models work in practice, looking closely at Florida, Tennessee, Ohio and Colorado.
The states differ in their approaches, but several common design choices emerge:
- Most preserve some form of stable funding for core operations. The share of total state appropriations funding tied to performance varies significantly, from 21% in Florida to 80% in Tennessee and Ohio.
- Many account for differences among institutions and the students they serve. A regional university serving large numbers of first-generation students, for example, may not be measured in exactly the same way as a flagship research university. Some states also provide additional weight when institutions help priority populations succeed, including low-income, first-generation and adult students.
- Most reward a similar set of outcomes. These typically include student progression, degree and credential completion and total awards. Some states are also beginning to consider what happens after graduation, such as whether students find employment and earn strong wages. Ohio, for example, recently became the first state to tie a portion of university funding directly to graduates’ employment outcomes.
These experiences give Texas models to learn from as it considers its own approach. They also show that performance-based funding is not a single policy. Its impact depends heavily on which outcomes the state chooses to reward, how much funding the state attaches to them and how the model accounts for differences among universities.
