1. Texas Higher Education Coordinating Board Texas Higher Education Finance and the Formulas Coordinating Board Meeting, April 28, 2016

2. Formula Advisory Committee members nominated by chancellors and presidents and appointed by the Board (April-July 2015) Formula Advisory Committees draft recommendations (August 2015-February 2016) Formula Advisory Committee chairs present committee recommendations to Commissioner (February 2016) Formula Advisory Committee chairs present committee recommendations and Commissioner presents his recommendations to CAAP (March 2016) Board adopts formula recommendations (April 2016) Staff forwards formula recommendations to Legislative Budget Board and Governor’s Office (by June 1st, 2016) Legislature decides how much to appropriate (May 2017) Formulas allocate the funds appropriated equitably Appropriations Process and Timeline 2

3. Overview of Community and Technical Colleges Formula Funding 3

4. Formula Funding is a Small Piece of the Revenue Pie for Community Colleges 4 Note: Federal revenues includes Pell and Perkins grants.

5. Majority of funding based on contact hours Primarily Contact Hour Funding SCH Funding for Bachelor’s of Applied Technology Core funding Student Success Points Community college formula funding has four components… 5

6. Student Success Point Funding Supports 60x30TX Developmental Education Completion of development education course Math-1 point Reading-0.5 pts Writing-0.5 pts Gateway Course Completion of first college level course with a “C” or better Math-1 point Reading-0.5 pts Writing-0.5 pts College Credit Attainment Completion of first 15 college credits and first 30 college credits 1 point each Credentials Awarded Completion of an associate degree, certificate, or bachelor’s degree (where offered) 2 points each 2.25 for STEM credentials Transfer to a General Academic Institution Transfer to a general academic institution after completing 15 semester credit hours 2 points 6

7. Academic and Vocational/Technical Education Community College Contact Hour Formula Education and General Space Support General Academic Institution Formula Small Institution Supplement General Academic Institution Formula at half the rate 7 State college formula funding has three components…

8. Instruction and Administration (Returned-Value) Education and General Space Support General Academic Institution Formula Small Institution Supplement General Academic Institution Formula at half the rate 8 Current Texas State Technical College formula funding has three components…

9. 9 Texas State Technical College Returned-Value Funding Model Student Attends TSTC – completes at least 9 SCH and THECB Captures ID and data Student leaves TSTC and enters Workforce – THECB captures earnings from TWC THECB compares earnings to minimum wage in Texas, surplus is “value-added” by TSTC Current-Value discounting is applied for each quarters’ wages to make dollars current Standard tax- rate and economic multiplier is applied to the “value-added” to determine return value to the state Instruction and administration formula Funds allocated on a percentage of the student’s returned-value Returned-Value estimated using workforce data

10. Texas Higher Education Coordinating Board Community and Technical Colleges Formula Advisory Committee Recommendation Dr. Dusty Johnston President, Vernon College April 28, 2016

11. Increases for projected growth Increases for an inflation rate of 2.3 percent for the biennium Increases for rewarding successful student outcomes (community colleges and general academic institutions) General Overview of the CAAP Committee’s Recommendations 11

12. Increases for projected growth Increases for an inflation rate of 2.3 percent for the biennium Focus on successful student completions CAAP Committee’s Recommendations for the Community and Technical Colleges Support 60x30TX 12

13. CAAP Committee Recommends a 9.1% Increase for the Community Colleges Formula Advisory Committee's Recommendations CAAP Committee’s Recommendations In MillionsFunding% ChangeFunding% Change 2016-17 Appropriations: Excluding Core Operations$1,693.8 2016-17 Appropriations: Core Operations50.0 Increase for Core Operations25.01.4%25.01.4% Increase for Projected Growth Less $25M Transferred to Core Operations 53.23.1%53.23.1% Rate Increase: 2.3% Inflation 40.82.3% Rate Increase: Contact & Semester Credit Hours109.36.3% Rate Increase: Student Success Points13.00.7%39.82.3% 2018-19 RECOMMENDATION$1,944.311.5%$1,902.69.1%  Transfers $25 million from Contact Hour Funding to Core Operations, which will help small colleges  Increases the rate per student success point from $173 to $215 13

14. CAAP Committee Recommends a 5.4% Increase for the State Colleges Formula Advisory Committee's Recommendations CAAP Committee’s Recommendations In MillionsFunding% ChangeFunding% Change 2016-17 Appropriations$42.9 Increase for Projected Growth0.40.9%0.40.9% Increase for 60x30TX Completion 0.92.1% Rate Increase: 2.3% Inflation for Educational & General Space Support 0.10.2% Rate Increase: 2.3% Inflation for All Formulas 1.02.4% Rate Increase1.94.4% 2018-19 RECOMMENDATION $45.35.6%$45.25.4% 14

15. CAAP Committee Recommends an 11.3% Increase for the Technical Colleges Formula Advisory Committee's Recommendations CAAP Committee’s Recommendations In MillionsFunding% ChangeFunding% Change 2016-17 Appropriations$140.7 Increase for Projected Growth12.48.8%12.48.8% Rate Increase: 2.3% Inflation 3.52.5% Rate Increase3.62.6% 2018-19 RECOMMENDATION$156.711.4%$156.611.3%  Projected growth includes an additional $1.5 million for the Small Institution Supplement, because the Legislature has authorized two new campuses  Incorporates E&G Space Support funding in Instruction and Administration, using the returned-value formula 15

16. Competency-Based Education Advisory Committee – Funding for students who are enrolled in a competency-based education course/module on the census date CAAP Committee – Funding upon completion of a competency-based education course, with a 10 percent formula adjustment Critical Need Fields Advisory Committee – Maintain the current critical need fields and request that the THECB review statewide critical needs and make recommendations to be considered in 2017 CAAP Committee – Concurs CAAP Committee Recommends Increased Support for Competency-Based Education and Updated Critical Need Fields 16

17. Board Discussion of Community and Technical Colleges Funding 17

18. Overview of General Academic Institutions Formula Funding 18

19. Formula Funding is a Small Piece of the Revenue Pie for the General Academic Institutions All Funds Formula 19

20. Majority of funding based on weighted semester credit hours Operations Support (includes teaching experience supplement) Education and General Space Support Small Institution Supplement Current General Academic Institutions Funding Model (2016-2017 biennium) 20

21. GENERAL ACADEMIC INSTITUTIONS FORMULA ADVISORY COMMITTEE FY 2018-2019 BIENNIAL APPROPRIATIONS REPORT ON THE COMMISSIONER’S CHARGES Dana G. Hoyt President Sam Houston State University April 28, 2016

22. CHARGE 1: STUDY AND MAKE RECOMMENDATIONS FOR THE APPROPRIATE FUNDING LEVELS FOR THE OPERATIONS SUPPORT AND SPACE SUPPORT FORMULAS AND THE PERCENT SPLIT BETWEEN THE “UTILITIES” AND “OPERATIONS AND MAINTENANCE” (O&M) COMPONENTS OF THE SPACE SUPPORT FORMULA. Return formula funding to the 2010-11 biennium appropriated rates ($62.19 for Operations Support and $6.21 for Space Support) over the next three biennia 2018-19 Biennium Funding Recommendations  Fund approximately $5,146 million to the formulas  Assumes 3.9% increase for growth in weighted semester credit hour (WSCH)  Operations Support and Teaching Experience Supplement at a rate of $58.99 per WSCH  Increase of $3.60 or 6.5%

23. CHARGE 1 (CONTINUED): STUDY AND MAKE RECOMMENDATIONS FOR THE APPROPRIATE FUNDING LEVELS FOR THE OPERATIONS SUPPORT AND SPACE SUPPORT FORMULAS AND THE PERCENT SPLIT BETWEEN THE “UTILITIES” AND “OPERATIONS AND MAINTENANCE” (O&M) COMPONENTS OF THE SPACE SUPPORT FORMULA. 2018-19 Biennium (continued)  Space Support at a rate of $5.86 per square foot  Increase of $0.31 or 5.6%  Small Institution Supplement at a rate of $750,000 annually for institutions with fewer than 5,000 headcount and incrementally reduce this supplement as institutions’ headcount approaches 10,000.  Funds required of $18.2 million or a decrease of $700,000 (3.7%)

24. CHARGE 2: STUDY AND MAKE RECOMMENDATIONS FOR ALTERNATIVE APPROACHES TO INCORPORATING UNDERGRADUATE STUDENT SUCCESS MEASURES INTO THE FUNDING FORMULAS AND COMPARE THE EFFECTS OF FUNDING THE SUCCESS MEASURES WITHIN THE FORMULA VERSUS APPLYING THE SUCCESS MEASURES AS A SEPARATE FORMULA. Fund $200 million to new Graduation Bonus for advising, tutoring and other interventions many students need to earn a degree by funding the three-year average of the following:  $600 for bachelor’s degrees awarded to students who are not at risk  $1,200 for bachelor’s degrees awarded to students who are at risk

25. CHARGE 3: STUDY AND MAKE RECOMMENDATIONS ON THE TREATMENT OF COMPETENCY-BASED COURSES IN FORMULA ALLOCATIONS. Fund competency-based education courses (not modules) using the existing formula calculation and updated expenditure-based weights for the 2018-19 biennium. Expenditure data from the Texas A&M University-Commerce program was insufficient in determining the appropriate funding formula for competency-based education.

26. CHARGE 4: STUDY AND MAKE RECOMMENDATIONS ON THE TREATMENT OF PHARMACY HOURS FOR PROFESSIONAL PRACTICE PHARMACY COURSES. Update the pharmacy funding policy to fund pharmacy courses with pharmacy expenditure-based weights and the standard enrollment adjustment methodology. Weight pharmacy undergraduate semester credit hours using pharmacy undergraduate course expenditures and hours. Remove directions to use science weights. Adjust Pharm-D program course enrollments in the same manner as enrollments for all other programs.  Weight hours for graduate level students (master’s, doctoral, and professional-practice) enrolled in pharmacy professional practice courses at the pharmacy professional practice weight.

27. CHARGE 5: STUDY AND MAKE RECOMMENDATIONS ON CHANGES TO THE FUNDING MODEL THAT WILL ENABLE INSTITUTIONS TO MEET THE GOALS OF 60X30TX. State funding is an essential resource for institutions to meet the 60x30TX goals. Over the course of the 15 years during the Closing the Gaps plan, general academic institutions increased enrollments 45 percent and increased graduation rates over 11 percentage points (from 49.5 to 60.5 percent). These strides require quality faculty and staff motivated to reaching a higher standard of education for our students and our state. Since fiscal year 2000, these same institutions received decreasing amounts in state support on a per full-time student equivalent basis – a trend that must be reversed if the state intends to educate 3 out of 5 citizens, nearly double the annual graduates, and increase students’ awareness of their marketable skills, all while keeping student debt levels from rising.

28. Increases for projected growth Increases for an inflation rate of 2.3 percent for the biennium Focus on successful student completions by funding the Graduation Bonus CAAP Committee’s Recommendations for the General Academic Institutions Support 60x30TX 28

29. CAAP Committee Recommends a 9.0% Increase for the General Academic Institutions Formula Advisory Committee's Recommendations CAAP Committee’s Recommendations In MillionsFunding% ChangeFunding% Change 2016-17 Appropriations$4,676.3 Increase for Projected Growth162.23.5%162.23.5% Rate Increase: 2.3% Inflation116.02.5%110.92.4% Graduation Bonus200.04.3%150.03.2% Rate Increase: 1/3 Back to 2010-11191.14.1% 2018-19 RECOMMENDATION $5,345.614.3%$5,099.49.0% 29

30. To reach the completion goal of 60x30TX, more low-income students and more students who are academically at risk will need to graduate These students require more services The Operations Support formula provides more money for high cost programs, but not for high cost students The new formula will provide funding for advising, tutoring, and the other interventions many students need to earn a degree Two metrics, based on a three-year average: Bachelor’s degrees awarded to students who are not at risk Bachelor’s degrees awarded to at-risk students Graduation Bonus 30

31. Graduation Bonus Advisory Committee CAAP Committee $200 million $150 million $600 per graduate who is not at risk and $1,200 per graduate who is at risk $500 per graduate who is not at risk and $1,000 per graduate who is at risk The first priority is to fully fund the Operations Support formula in support of basic operations The decision about whether to prioritize Operations Support or student outcomes should be left to the Legislature to determine based on the larger budget picture 31

32. Competency-Based Education Advisory Committee – Funding upon completion of a course CAAP Committee – Funding upon completion of a course, with a 10 percent formula adjustment. This is consistent with his recommendation for the community and technical colleges. Pharmacy Funding Advisory Committee – Update the pharmacy funding policy to fund pharmacy courses with pharmacy expenditure-based weights, and use the standard enrollment adjustment methodology CAAP Committee – Concurs CAAP Committee Recommends Increased Support for Competency-Based Education and Concurs with the Formula Advisory Committee’s Pharmacy Funding Recommendation 32

33. Board Discussion of General Academic Institutions Funding 33

34. Overview of Health-Related Institutions Formula Funding 34

35. Formula Funding is a Small Piece of the Revenue Pie for the Health-Related Institutions 35

36. Majority of Funding based on Full-Time Student Equivalent Enrollment for Allied Health, Nursing, and Medical Students Instruction and Operations Education and General Space Support Research Enhancement Mission Specific Graduate Medical Education Health-Related Institutions Funding Model 36

37. Health Related Institutions Formula Advisory Committee Funding Recommendations for FY 2018-19 John A. Harman, MBA, CPA, CGMA, CMPE Committee Chair April 28, 2016

38. HRI Challenges and State Workforce Needs 2015 U.S. Census: Texas has fastest growing population HRIs produce majority of Texas healthcare professionals Texas ranks 43rd in active physicians per 100,000 population Workforce shortages persist in healthcare professions/communities Nearly 60% retention of physicians trained in Texas Two recently established medical schools will help address shortages Funding for students, space, research and residents is significantly below the levels from 15 years ago HRIs are challenged to address state workforce needs, maintain program quality and meet goals of the 60x30TX Strategic Plan HRI- FAC FY 2018-19 Funding Recommendations38

39. Cost Containment and Improved Efficiencies Electronic libraries Online programs Energy savings contracts and sustainability projects Building construction and Leed certification Group purchasing coalitions Increased credit hour productivity per FTE faculty Student Centers for Academic Performance/Success Administrative efficiencies HRI- FAC FY 2018-19 Funding Recommendations39

40. HRIs are Committed to 60x30TX Goals Easing the transition from undergraduate to graduate studies, health professions Accelerated programs and expanded on-line course offerings appeal to broader spectrum of students Enrollment growth continues because of valuable and marketable skills HRIs are sensitive to growing student debt loads, upon graduation, when developing tuition strategies Student support and assistance programs to insure student success and program completion HRI- FAC FY 2018-19 Funding Recommendations40

41. FY 2018-19 Formula Funding Recommendations (includes two new medical schools) Increase Instruction and Operations formula rate 5.3% to $10,347 (currently $9829) Increase Infrastructure formula rate 23.6% to $7.73 for UTMDACC and UTHSCT (currently $6.26) 22.7% to $8.16 for all other HRIs (currently $6.65) Increase Research formula rate 44.0% to 1.77% (currently 1.23%) Increase GME rate 34.8% to $8444 (currently $6266) Increase Mission Specific Support- UTMDACC and UTHSCT In accordance with Article III, Section 28, Special Provisions, Paragraph 9, Mission Specific- Increase by average growth in funding recommended for the I&O formula No change in weights and no additional formulas HRI- FAC FY 2018-19 Funding Recommendations41

42. Summary Recommended FY 2018-19 Funding (includes two new medical schools plus funding for projected growth) Per Unit Growth Existing HRIs Per Unit Growth w/ New Schools FY 2016-17 Appropriations FY 2018-19 Requested $ Change% Change Instruction & Operations Formula3.82%4.22% $ 1,170,698,696 $ 1,286,894,426 $ 116,195,7309.93% Infrastructure Formula4.21%7.45% 265,414,098 350,564,702 85,150,60432.08% Research Enhancement Formula1.26%2.08% 74,562,294 101,834,078 27,271,78436.58% Total $1,510,675,088 $ 1,739,293,206 $ 228,618,11815.13% Mission Specific3.82%4.22% $ 323,162,046 $ 355,236,952 32,074,9069.93% Graduate Medical Education3.20% 70,249,148 97,700,292 27,451,14439.08% Total All Formulas $1,904,086,282 $ 2,192,230,450 $ 288,144,16815.13% HRI- FAC FY 2018-19 Funding Recommendations42

43. Summary Recommended FY 2018-19 Funding (segmented by existing HRIs and two new medical schools) Per Unit Growth Existing HRIs Per Unit Growth w/ New Schools FY 2016-17 Appropriations FY 2018-19 Requested $ Change% Change Existing HRIs Instruction & Operations Formula3.82%4.22% $ 1,170,698,696 $ 1,277,059,010 $ 106,360,314 9.09% Infrastructure Formula4.21%7.45% 265,414,098 339,849,056 74,434,958 28.04% Research Enhancement Formula1.26%2.08% 74,562,294 95,638,296 21,076,002 28.27% Total $1,510,675,088 $ 1,712,546,362 $ 201,871,274 13.36% Mission Specific3.82%4.22% $ 323,162,046 $ 355,236,952 32,074,906 9.93% Graduate Medical Education3.20% 66,539,954 92,549,282 26,009,328 39.09% Total- All Formulas HRIs $ 1,900,377,088 $ 2,160,332,596 $ 259,955,508 13.68% New Medical Schools Instruction & Operations Formula $ - $ 9,835,416 Infrastructure Formula - 10,715,646 Research Enhancement Formula - 6,195,782 Total $ - $ 26,746,844 Mission Specific $ - - Graduate Medical Education3.20% 3,709,194 5,151,010 1,441,816 38.87% Total- All Formulas 2 New Medical Schools $ 3,709,194 $ 31,897,854 $ 28,188,660 Total- All Formulas (HRIs & 2 New Medical Schools) $1,904,086,282 $ 2,192,230,450 $ 288,144,168 15.13% HRI- FAC FY 2018-19 Funding Recommendations43

44. Questions HRI- FAC FY 2018-19 Funding Recommendations44

45. Increases for projected growth Increases for an inflation rate of 2.3 percent for the biennium Increases for two new medical schools Dell Medical School at UT Austin UT Rio Grande Valley Medical School Increases for Graduate Medical Education General Overview of the CAAP Committee’s Recommendations for the Health-Related Institutions 45

46. CAAP Committee Recommends an 8.5% Increase for the Health-Related Institutions Formula Advisory Committee's Recommendations CAAP Committee’s Recommendations In MillionsFunding% ChangeFunding% Change 2016-17 Appropriations$1,904.1 Increase for Projected Growth (Existing HRIs)71.03.7%71.03.7% Increase for Projected GME Growth2.20.1%2.20.1% Additional GME Funding 18.00.9% New Schools24.11.3%24.51.3% Rate Increase: 2.3% Inflation 43.62.3% Rate Increase: 2.3% Inflation – GME 2.10.1% Rate Increase: 1/3 Back to 2000-01190.810.0% 2018-19 RECOMMENDATION $2,192.215.1%$2,065.58.5% 46

47. Board Discussion of Health- Related Institutions Funding 47

48. Advisory CommitteesCAAP Committee Projected Growth All Inflation at 2.3% State Colleges (Educational & General Space Support only) & General Academic Institutions All Rate Increase AllNone (see Student Success Point increase below) 60x30TX/Student Outcomes General Academic Institutions (Graduation Bonus), Community Colleges (Student Success Points), TSTCs (Returned Value) GAIs (Graduation Bonus), Community Colleges (Student Success Points), TSTCs (Returned Value), State Colleges (60x30TX) Additional GME Funding NoneHRIs Overview of the Formula Advisory Committees’ and the CAAP Committee’s Recommendations 48