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As mentioned in yesterday’s post, the new funding model that the Texas State Technical College System Administration has been lobbying for since 2008, when it paid Waco economist Ray Perryman to conduct a study, will be in effect for the coming 2014-2015 biennium, which begins this fall. A good overview of the new model, which I’ve copied from the 2014-15 General Appropriations Act special provisions for TSTC (go to the last couple of pages), appears below. It’s worth a read to see what TSTC gets money for. See if you can spot what is NOT said.

11. Returned Value Funding Model for Texas State Technical Colleges. Funding is recommended for an allocated among Texas State Technical Colleges (TSTCs) based on the additional direct and indirect state tax revenues generated as a result of the education provided to students by the TSTCs. The funding methodology is based on the following components:

a. The model includes the cohort of TSTC graduates (earning an associate’s degree or certificate), transfers, and leavers (students who were not found in Texas higher education for two years following the last time they were enrolled in the TSTC) with a minimum completion of nine semester credit hours from 2006 and 2007.

b. The cohorts were matched with Unemployment Insurance wage records for employment and wage information for five years after the students graduated from or left the TSTC to establish annual wages for each student. Direct value-added was defined as the incremental state tax revenue attributable to former TSTC students’ jobs, based on the difference between former TSTC students’ annual wages and a base wage representing a full-time employee earning minimum wage (7 percent of the wage delta). Indirect value-added was defined as the direct value-added multiplied by 1.5, an economic multiplier derived from a U. S. Bureau of Economic Analysis study. Total direct and indirect values added were summed for each group of students by campus across five years.

c. Values-added were reduced by a certain percentage, based on the assumption that the benefits would accrue both to the state and TSTCs but with only a portion of the added value included in the formula calculations.

d. Values-added by campus were divided into the total TSTC value-added to define each institution’s proportional share of overall formula funding.

The Texas State Technical College System shall continue to work with the Texas Higher Education Coordinating Board, the Legislative Budget Board and other relevant agencies to refine the new Returned Value Funding Formula for the TSTCs. It is the intent of the Legislature that recommended adjustments to the formula shall be ready for implementation in the 2016-17 biennium and shall further the goal of rewarding job placement and graduate earnings projections, not time in training or contact hours.

First, let’s give a nod to the word you will NOT find next to “job” or “employment” or “placement” in the language above. That word, dear reader, is “technical.” This technical college system and its campuses will not be rewarded for students who find technical jobs. It will be rewarded for students who find any job, provided those jobs turn up in the state’s Unemployment Insurance database. I guess, however, that is unavoidable since the state’s database, the same one used by the state to figure “placement,” doesn’t even have the occupation or job title of the employees it lists. Here’s an excerpt from a letter written by the Texas State Comptroller’s Office that discusses the weaknesses of the database (click on image to enlarge):

Comptroller Discussing Database Limitations

Comptroller Discussing Database Limitations

In short, the database is a very, very blunt instrument that doesn’t know if a webmaster working for, say, Dairy Queen, is building websites or ice cream cones. It doesn’t know which higher education institution is responsible for student success, either. My favorite part of the formula is the bit that provides funding for the colleges even if students only managed to complete about three courses, 9 semester hours, before leaving. The part about students paying off for the institution if they transfer to another college is good, too. But at least administrators and politicians get to make a bunch of new claims about funding for results. Great.

Having said all that, the new funding model doesn’t seem to be having much impact, money-wise anyway. As readers can see from the previous post, everybody got just about what they got last time, although Waco and West Texas lost money. For the 2012-2013 biennium, Waco got $37,792,070. For the 2014-2015 biennium it got $36,420,977. In terms of percentages, it wasn’t much of a hit: a loss of around 3.5% or so. On the other hand, TSTC West Texas got $12,472,965 for the 2012-2013 biennium and only $11,323,233 for the 2014-2015 biennium, a significant drop of over 9%.

Now, let us remember that this new funding is based on cohorts going back to 2006 and 2007, when enrollment was good and getting better at TSTC West Texas. They’ve got an even better couple of cohorts coming up in the 2008 and 2009 groups. After that, the college’s funding is going to start heading south in earnest.  Remember, those transfers and leavers TSTC gets credit for come funding time? Of course, for students to transfer from or leave TSTC West Texas, they’ll have to enroll first. Enrollment is hurting out there right now. Even the number of graduations is falling, as well, from a high of 421 in 2007 to a low of 333 in FY 2012.

TSTC West Texas Total Degrees Awarded FY 2006 - FY 2012 130614

The number of graduates isn’t falling at the same catastrophic rate as enrollment, however. Enrollment for fall 2012 (810) was well less than half of what it was in 2008 (1,882). I would expect the grad rate to be more resilient. Compared to other colleges, TSTC West Texas has got to have a great student to faculty member ratio since its enrollment has been absolutely hemorrhaging. I would think its staff and faculty would be highly-motivated to keep those paying students until they graduate, as well.

The numbers, however, are all pointing downward, and TSTC West Texas has some pretty thin cohorts warming up in the batter’s box to take a swing at the new funding model. I suspect the other colleges are going to have to help the one that has been preparing for the new model since 2008, eh?

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