Subsidizing Success, Not Enrollment: The Texas State Technical College Funding Model

Key Highlights

Challenges

Transitioning to a 100% outcomes-based funding model in 2013 required TSTC to completely rethink its systems, requiring an overhaul of its budgeting process to align funding with student job outcomes, as well as revamped communications to help stakeholders understand the new approach. 

At the same time, TSTC needed to adapt its program offerings in response to rapidly evolving technologies like AI to ensure graduates are prepared for the future workforce.  

Opportunities

State appropriations for TSTC are tied to how much more students earn after leaving TSTC, in comparison to full-time minimum-wage workers. This value-added approach shifts the focus from enrollment to real-world results, aligning the college’s financial incentives with student employment outcomes.

This model has driven major improvements across TSTC, including increased state appropriations that allowed the college to hire top-tier faculty, keep compensation competitive, and invest in high-performing programs. 

The institution’s focus on outcomes also led them to phase out underperforming courses and enable a higher share of students to graduate quicker than before. Faculty and staff are rewarded for student success, and TSTC reinforced this accountability by offering unemployed graduates a money-back guarantee.

Enrollment has grown faster than at peer institutions with the new innovations to TSTC curriculum, reflecting a strong demand for this approach.

Findings and Next Steps

• Through this outcomes-based funding model, Texas policymakers gain more efficient use of public funds, while faculty and staff are rewarded for their performance.
• TSTC graduates secure better jobs with higher salaries.
• As the college has received increased funding, it was able to improve faculty pay — and enhanced its reputation across the higher education landscape.