Lone Star College System awaits possible state funding changes in 2023

ByVanessa Holt Community Impact Newspaper logo
Tuesday, October 18, 2022
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HOUSTON, Texas -- Community colleges across the state, including the Lone Star College System, may see a change in how they receive state funding in the coming years.

The video featured above is from a previous report on Lone Star College System adding e-learning opportunities for fall 2022.

Going into the 88th Texas legislative session in 2023, the state may shift from focusing on enrollment to student outcomes in determining funding for colleges.

Information from the Texas Commission on Community College Finance, which was appointed by the state in 2021 and is overseeing the proposed changes, indicates 65% of 5,000 respondents to a July and August survey by the Texas Higher Education Coordinating Board are in favor of changing the state funding to be outcome-based.

LSCS Chancellor Stephen Head, who serves on the commission, said there could be an $8 million to $10 million increase in funding for LSCS as early as fall 2023 if the Legislature approves the changes. However, he said the changes are more beneficial for smaller, more rural community colleges.

"What is driving this is a disparity gap between a number of community colleges," Head said. "There are 50 in the state, and 22 of them have an enrollment of less than 5,000. Colleges like ours that spend around $50 million in technology. ... These other colleges cannot keep up."

The final proposed changes are anticipated to be presented to the Legislature in November, and Head said he and the commission are optimistic it could pass in the next session.

As the LSCS awaits the possibility of additional state funding, the college system is considering increasing its homestead exemption after area residents spoke out regarding the college's exemption rates during budget workshops, a change that could cost millions in annual tax revenues.

"I think you are seeing a real effort to provide more opportunities for everyone," Head said.

Outcome-based funding

Community colleges receive $1.3 million for core operations with additional funding available based on factors such as the number of student contact hours, or hours of scheduled instruction, according to information from Dallas-based nonprofit Texas 2036.

The college system has seen a decrease in both its systemwide student headcount and contact hours since 2017. Enrollment dropped from 89,319 to 85,164, and contact hours decreased from around 11.9 million hours to around 11 million, according to LSCS data.

LSCS budget documents also indicate tuition revenue declined following fiscal year 2019-20, dropping from around $130 million to around $124 million for fiscal year 2022-23.

A Sept. 12 presentation from the Texas Commission on Community College Finance stated there is demand to align funding with three major outcomes: credentials of value, credentials in high-demand fields and transfer success. Head said he believes the changes will provide greater benefits to the smaller community colleges outside of Houston, Dallas and Austin, which see greater business and population growth. He added there is also a push to fund the economically and academically disadvantaged.

"We would benefit from that; ... 57% of students in our independent school districts are economically disadvantaged," he said.

The LSCS will receive around 20% of its total revenue from the state, 29% from student tuition, 48% from local taxes and 3% from miscellaneous sources in FY 2022-23. Budget documents project state funding will total around $83 million for fiscal year 2022-23, the same as the previous year. Head said the additional proposed funding could be used for purposes such as hiring additional staff, opening new facilities or replacing revenue lost from increasing the homestead exemption if the board approves it.

Matthew Fuller, a professor of higher education leadership at Sam Houston State University, said he is largely in support of the changes.

"Every educational funding formula has winners and losers," Fuller said. "Those community colleges who attract students that are perhaps less prepared for college ... they have a little bit more of an uphill battle in terms of getting those students to completion."

Fuller said he also questions how the Legislature will define student success.

"I think there are people that will look forward to this ... that may be traditionally losing out in the current funding system," he said.

State angle

State Sen. Brandon Creighton, R-Conroe, is among the commission members working to bring the proposed changes to the 88th Legislature.

"Through prioritizing strategic outcomes for student and workforce needs, the entire Texas economy will benefit," Creighton said in an email statement. Creighton said he believes the proposed changes would be beneficial for both LSCS and The Woodlands community.

Matt Olmstead, an independent researcher in the field of performance-based funding in higher education who has worked with SHSU, said performance-based funding from the state has been in effect since 2012, making up around 10%-15% of the total funding provided to community colleges.

"Over time, there have not been a lot of changes to that model," Olmstead said.

Olmstead said he is concerned how the guidelines will be laid out.

"What is implemented for one large urban community college system is the same metric as a small community college in East Texas," he said. "Through research, that is the major challenge at this point."

Olmstead noted an unintended consequence of shifting to more emphasis on performance-based funding would be meeting individual institutional missions. He said larger community colleges may be at a slight disadvantage compared to smaller institutions as they will have to show they are completing the metrics rather than having a larger student body.

Examining exemptions

Another potential change for LSCS' revenue sources would be increasing the amount of the property tax exemption permitted for homeowners residing in the district following resident feedback.

LSCS has a 1% or $5,000 exemption, whichever is higher, for homeowners within its boundaries. According to the Texas comptroller's office, a homestead exemption removes part of the home's value from taxation.

Texas allows up to a 20% exemption, and residents asked that the exemption be increased to the maximum amount during a Sept. 8 board of trustees meeting. LSCS taxpayer Susan Scruggs said residents are feeling pressure from high appraisals and inflation.

"I am asking you folks to look into your budget and find out how you can do an exemption for the people who have supported you for so many years," Scruggs said at the Sept. 8 meeting.

During the meeting, LSCS Chief Financial Officer Jennifer Mott provided information on a phased approach to increasing the exemptions over five years.

Mott said an immediate shift to a 20% exemption would mean $17 million less revenue based on an average home appraisal of $285,000, and the average taxpayer would save around $56.14 annually.

Head said the board of trustees will begin assessing the exemption increases in February, and changes to the exemption rate will need to be set by July 1.

"Right now, we have a lot of unknowns," Head said. "We want to be really careful with this."

This article comes from our ABC13 partners at Community Impact Newspapers.

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