Explainer: What’s going on with Texas higher education finance?

State lawmakers and university presidents are considering possible changes to higher education funding. (AP Photo/Eric Gay, File) State lawmakers and university presidents are considering possible changes to higher education funding. (AP Photo/Eric Gay, File) Photo: Eric Gay, STF Photo: Eric Gay, STF Image 1 of / 1 Caption Close Explainer: What’s going on with Texas higher education finance? 1 / 1 Back to Gallery

In hours of hearings at the state Capitol, Texas lawmakers have grilled college and university leaders on several potential changes to how the state funds their institutions.

A joint committee on higher education funding – comprised of state Senators and Representatives, Democrats and Republicans – has now held two hearings on potential changes to the appropriations process. They’ll put together a report by April, said committee co-chair Sen. Kelly Hancock, R-North Richland Hills.

Lawmakers and college presidents have discussed formula funding, the multibillion-dollar Permanent University Fund, special funding for items outside of the formula and whether independent institutions like Texas Southern University would be better served in one of the state’s higher education systems.

The issues are crucial for universities, who say money from the state is a critical – yet unstable – resource. They’ve argued that eroding state support leads to higher tuition.

Here’s what we learned from those hearings:

Background: Why are state lawmakers having these hearings now?

For a basic explainer on the current process, read the Texas Tribune’s detailed primer published last week on special items and formula funding.

Last legislative session, state Senators tried to change the process by which money is doled out to campuses by eliminating so-called special items, money given outside of the standard formula to fund specific projects or centers, in an early draft in the appropriations process.

The final budget reverted back to the process that was in place, but lawmakers pledged to study the issue in the interim.

Where do things stand on special item funding?

This was the focus of Tuesday’s panels. College leaders said the universities most dependent on this money are small institutions. In contrast, Texas A&M University System Chancellor John Sharp said the system’s flagship’s budget includes just $2.4 million out of a few billion dollars in special item funding.

The special items, these leaders say, fund both general operations (like faculty salaries and research) and entities outside of what many people would consider standard to higher education. A&M, for example, receives special item funding for a program to reduce the impact of diabetes, asthma and infectious diseases in the 27 counties in South Texas.

UH Chancellor Renu Khator said special item funding was especially important for universities that don’t have access to the Permanent University Fund, the massive endowment that gives money exclusively to A&M and the University of Texas System.

One idea floated several times was a sunset process for special item funding, so that line items in the budget are systematically reviewed.

Smaller university representatives argued Tuesday that special item funding is crucial because it takes several years for higher enrollment to be rewarded by the current formula.

If a college recruits 1,000 more students, for example, it won't immediately get more money from the state. That means that universities need to educate more students without more resources before the next legislative session.

Can changes to the formula better serve Texas’ universities?

Texas Southern University President Austin Lane said yes. When asked, he said the university would do better financially if there was a formula that rewarded meeting objectives in graduating more students.

This idea – called performance-based funding – echoes what’s been long pushed by the state’s higher education coordinating board. The model is in place in more than half of U.S. states and some of Texas’ community and technical colleges.

Last week’s hearing delved into the topic more deeply. There, representatives from universities and the coordinating board largely praised the idea of giving universities extra money for each student they graduated. If the student is low-income or not prepared academically when they first entered college, they’d get an extra bonus.

For more on that, read our coverage here.

Would independent universities like TSU and Texas Woman’s University be more successful in the legislative sessions if they were part of a university system?

Texas has many higher education systems, which are clusters of universities and, sometimes, health institutions overseen by one board of regents and a chancellor. (The University of Houston System, for example, has four universities with four different presidents.)

But a few of the state’s universities aren’t part of the systems. Sen. Lois Kolkhorst, a Brenham Republican, asked Lane and other leaders of those institutions whether they would do better in lobbying for money if they joined a system.

The university presidents didn’t say that they were as effective in lobbying as the systems' institutions. But they did say that staying independent was important to their mission.

Lane said it was “one of the first questions I received when I was interviewed” for the job and called TSU's independence critical.

Still, he called the topic “sensitive” and pledged to continue to make improvements.

“If we’re going to stay independent, we’ve got to do some things to make sure we’re moving in the right direction,” he said.

What’s next?

The joint committee will submit recommendations due by April 15. The committee’s charge is to “examine how higher education institutions are funded and how they use special item project funds.”

Hancock said last week that he would be “more than happy to have more hearings” on the topic.

Lindsay Ellis writes about higher education for the Chronicle. You can follow her on Twitter and send her tips at lindsay.ellis@chron.com.