In June 2023, Texas passed House Bill 8, an innovative new model for funding the state's 50 public community colleges. Empirical findings from a recent Regional Educational Laboratory (REL) Southwest research study, which examined the costs of Texas community colleges, influenced the development of the bill.

Role of REL Southwest's research in the development of Texas House Bill 8

Public community colleges serve a vital role in providing individuals from diverse backgrounds with affordable pathways to careers, financial stability, and socioeconomic mobility. For community colleges to be equitable, however, funding systems must account for the different levels of resources necessary to provide students with different needs with an equal opportunity to succeed.¹

In developing House Bill 8, policymakers in Texas were interested in what levels of funding would enable community colleges to provide equitable opportunities for students to achieve. At the request of the Texas Higher Education Coordinating Board (THECB), and to advance the work of the statutorily created Texas Commission on Community College Finance, REL Southwest conducted a study to examine the extent to which Texas community colleges receive adequate funding for reaching desired levels of student outcomes.

Texas House Bill 8 uses dynamic funding formulas informed by the results of REL Southwest's study. The bill rewards positive student outcomes, such as attaining credentials of value and transferring to four-year institutions.² At the same time, the bill provides additional funds to support small and rural-serving colleges in areas with lower property values and to assist students with higher needs, such as students older than 24 or students who are economically disadvantaged. A new Financial Aid for Swift Transfer program also enables high school students who are economically disadvantaged to enroll in dual credit courses at no cost.

"By leveraging our data and analyzing findings from the REL study, we were able to gain a better understanding of the cost environment and the drivers needed to advance community colleges across Texas," said Commissioner Harrison Keller. "This transformational change in our state finance system will help more Texans earn credentials of value and acknowledges the essential role community colleges play in building a talent-strong Texas."

About our study: Examining the costs of Texas community colleges

Prior to House Bill 8, the majority of state funding for Texas community colleges was based on contact hours, such as enrollment and the number of hours and types of courses students took. In addition, a small portion of funding was allocated based on success points milestones, including 11 different student outcomes such as passing a college-level course, earning 15 credit hours, earning 30 credit hours, attaining a credential, and transferring to a four-year institution.

Due to decreases in community college enrollment over the past decade, this funding system created challenges for many Texas community colleges, particularly small and rural colleges. Furthermore, performance-based funding systems, such as the Texas student success points, do not take into account that the cost of achieving desired student outcomes will likely vary based on student characteristics and context—factors that have long been considered in K–12 funding policy.

REL Southwest's study represented the first attempt to apply methods used in K–12 school finance research to estimate the costs of providing an equitable opportunity to succeed for community college students who have different levels of need and attend colleges in different contexts. The study consisted of analyses of the relationships between student needs, student outcomes, and spending to determine the cost of providing equitable opportunity.

The key findings included the following:

• Community colleges with higher percentages of first-generation college students, students who are economically disadvantaged, students older than 24, and English learner students required additional funding to achieve the same level of outcomes as colleges without these student needs.


• Community colleges with fewer than 30,000 students enrolled required additional funding to achieve the same level of outcomes as colleges with larger enrollments.

These findings indicated that Texas leaders should consider funding adjustments for particular student needs and institutional contextual factors to improve the adequacy and equity with which funding for Texas community colleges is allocated.

>> Read about REL Southwest's study, An Examination of the Costs of Texas Community Colleges, and see the related blog post, infographic, and webinar to learn more.

A call for further research

REL Southwest is proud to be part of the groundbreaking research that shaped this innovative state funding model for community colleges. Now that the new funding system is going into effect, Texas policymakers are considering additional research to determine impacts on student outcomes to help refine the model over time and ensure access to high-quality education opportunities for all Texans.

In addition, policymakers in other states may want to consider providing additional funding for community colleges that are smaller or serve students with higher needs to support equitable opportunities for all students to succeed in college.³ The findings of our study also point to a potential need to pursue this line of research in other states to better understand whether other community college funding mechanisms could be made more equitable.

The study's lead author, Jesse Levin, an economist at the American Institutes for Research®, noted, "While the study findings are powerful by providing the first empirical estimates of the differential costs associated with providing an equal opportunity to community college students in Texas, it also begs the question of what results might be found for other states."

Related resources

Browse these REL Southwest resources to learn more about our work to support affordable, accessible, and equitable pathways to a postsecondary certificate or degree for students.

• Descriptive Study: An Examination of the Costs of Texas Community Colleges


• Blog Post: A new study examines adequacy and equity in Texas community college funding


• Infographic: How Is Texas Modeling Costs to Inform Performance-Based Financing of Community Colleges?


• Webinar: Informing Policy Development About Equitable Funding Levels for Texas Community Colleges