In Texas, everything is bigger. But at Texas State Technical College (TSTC), the goal isn’t necessarily boosting its 11,000-student enrollment or adding to its existing 11 campuses — it’s finding a better way to meet the state’s growing need for skilled workers.

To better serve its students and the community, TSTC recently made a bold switch to a new accountability-based funding model that calculates capital based on results, not enrollment. Under this model, the school receives funding based on student incomes, if they are above minimum wage, for the first few years they are out of school. The idea is that the school will be motivated to better prepare students for careers where they are truly needed and can earn a livable income.

Although 2014 is the first year TSTC has used this funding model, school administrators are optimistic it will benefit not only the school, but also its students, the community, businesses, and the state of Texas. Meanwhile, HVACR contractors and educators are both curious and cautiously optimistic about the funding model, which could have implications for technical schools across the country.


TSTC chancellor Michael Reeser said the suggestion of overhauling how the school earns its funding first came up in 2007.

“Sen. Steve Ogden was chairman of the Senate Finance Committee during the 80th legislative session and [he] had been asking all higher education agencies, ‘Would you consider doing some accountability funding?’ And I was caught off guard when our then-chancellor, Bill Segura, said, ‘yeah, sure, we’ll do that.’”

TSTC has been preparing operationally for “quite some time,” Reeser said, though this is the first year the new funding model is in place. The college will draw on existing data collected by the Texas Workforce Committee and use a predetermined formula to calculate funding.

Reeser said the new funding model makes far more sense for technical schools than enrollment-based funding. “Most education is funded on a census basis, and so the bigger you are at any given period, the more funding you get,” he explained. “If census is your primary driver, then, as an institution, you have an inherent interest in keeping people in school as long as possible and making every program as big as possible because the more students in the seats, the more you get paid. It’s like having a manufacturing firm that gets paid for how long it takes to manufacture its products.”

Instead, TSTC is working on creating programs for students that concentrate on exactly what employers need. “The industry is actually the place we start when we develop our programs — if we don’t produce the graduates that have the skills the industry is seeking, they don’t get placed, they don’t get a salary, and we don’t get funding,” Reeser said.

And though it may take a little while for the financial benefits of its results-based funding model to be known, TSTC has already benefited in other ways.

“Being the first school that we’re aware of that has its state funding driven by the placement of a job and salary, we’re beginning to get a lot of interest from folks who didn’t know we existed before,” Reeser said. “And when a school becomes better known, that’s good for the school and the students, which we certainly appreciate.”

Big Benefits

The long-term effects of the funding model are multifaceted and benefit several stakeholders, including TSTC, employers, the state, and especially the students.

“By decoupling the daily census from our funding, we’re free to pursue innovative ways to get people trained and into the workforce in a more optimized size,” Reeser said. “The benefit to the student is they can come here and know that our overarching objective is to get them the kind of training they need to get a high-paying job, and that we’re going to do it as quickly and effectively as we can.”

Reeser added the state benefits by way of a lower unemployment rate and increased income from students who find gainful employment after leaving TSTC. “The state knows that by funding us this way, it’s optimizing its tax dollar investment with us and treating us in a way that causes us to be very concerned with high-quality outcomes.”

Stephen Pape, an IE3 (Indoor Environment and Energy Efficiency) contractor and director of industrial technology at TSTC North Texas in the Dallas/Fort Worth, Texas, area, said the state’s HVACR industry will surely benefit from the college’s new funding model.

“This should be a great thing for both students and their employers including HVACR [IE3] contractors,” he said. “I know firsthand that there is a huge need, and I am looking forward to helping to meet this labor training need, one quality student at a time. This incentive-based funding should be a win-win-win for students who want to work, employers who need trained workers, and for TSTC.”

Curious Contractors

Texas contractors — who stand to benefit from an influx of technicians under the new funding model, should it prove effective — admitted to being both curious and hopeful about TSTC’s new funding model.

“I think it’s an excellent idea,” said Ann Kahn, president of Kahn Mechanical in Dallas. “Accountability is critical for business success, so why wouldn’t it be so for educational success? In the long run, I believe it will improve the depth and quality of students’ knowledge.”

Larry Taylor, owner, AirRite Air Conditioning, Fort Worth, Texas, said the funding model might be a good model for other schools, too. “Anytime you can create a program based on performance pay, you will come out better off,” he said.

However, contractors also admitted to having some hesitations about the funding model and the problems it may encounter. Steve Saunders, CEO at Tempo Mechanical Services Inc., Dallas, said that while the model is an intriguing idea, he has had problems hiring HVAC technicians fresh out of technical school in the past and fears the students entering the workforce may not be adequately prepared.

“They come out of school lacking the ability to be in a service truck by themselves, and they do not know that they lack skill, but [they] have done well [in school] and therefore think they are ready,” he said. “I do not want the expectation of this intriguing effort to over-promise and then get canceled because of under delivery.”

Saunders added that new technicians often have unrealistic salary expectations, though he said the problem “may be ours — not theirs.”

Thomas Murrell, senior vice president at Tempo Mechanical, suggested adding summer internships to the schools’ curriculums to help solve the problem. “[The students] need to roleplay with knocking on a person’s door and entering into their most personal domain, their home. They need to learn how to manage their trucks, inventory, maintenance, time, etc. They need to be learning and understanding building science and the green side of HVAC and energy.”

Taylor predicted that startup and transition will be the biggest issues for schools interested in implementing the TSTC funding model. “In today’s world, most everything is based on short-term results,” he said. “I think this would be a longer-term investment for all involved.”

Still, Taylor is applauding the school’s and state’s initiative. “I am excited to see any government evaluating new methods of accomplishing something other than just increasing the base tax.”

In response to contractors’ concerns about student preparedness, Reeser said TSTC’s new model includes a deeper, richer conversation with industry leaders to address and solve those issues.

“We are ensuring we thoroughly understand what it is the employers are seeking in the skilled workforce we are training them for,” he said. “It’s a new level of dialogue than they have had in the past.”

Ahead of the Curve

If TSTC’s results-based funding model proves to be as effective as school leaders anticipate, it could have broad implications for technical school funding across the country.

“There’s a lot of very serious talk in Tennessee, Kentucky, and up in Oregon, and the Carolinas, of doing a better job of funding, at least in part, on outcomes and not just census,” Reeser said.

But, transitioning from census-based funding to some kind of accountability-based funding model may only be an option for career and technical schools in the U.S. for another few years. Soon, it may be mandated across the country.

Howard Weiss, executive vice president of HVAC Excellence, said revisions to the Perkins Act and Higher Education Act may soon include provisions requiring career and technical schools to prove their students are finding jobs and/or passing industry exams after leaving school. “They’re saying, ‘I’m giving you money, and, in exchange, I want to make sure we’re putting people in a field that’s growing, that people are getting training that leads to a certificate, and that they have high placement,’” he said.

Coy Gibson, director of technical education and standards at HVAC Excellence, agreed that the federal government is looking to tether funding to results in the near future.

“Times are changing,” Gibson said. “The government is saying, ‘I want my money’s worth — if I’m going to pay for people to go to college, I’m going to pay for them to complete.’”

“Those Perkins proposals have to do with alignment, some kind of accountability, and collaborations,” Reeser added. “This new funding formula is exactly the same thing. If we don’t prepare our programs with the workforce in mind, we’re already losing money.”

Although it’s called the Lone Star State, Texas is not alone in tying its funding to measurable results. At least one other state recently passed legislation that directly ties program funding to certification.

“Florida passed the CAPE [Career and Professional Education] Act, where it’s giving $1,000 in funding per student to the school, whether high school or college,” Weiss said. “For them to get Perkins funds, it requires that a student pass an approved, rigorous industry certification.”

While TSTC is leading the way into relatively uncharted funding territory, industry leaders are encouraging other technical schools across the country to consider transitioning to results-based funding models sooner rather than later.

“Texas is smart in that they see the funding pattern and how it’s going to unfold over the next four or five years,” Gibson said. “Soon, they’ll all start changing. Texas is just ahead of the curve.”

Publication date: 6/30/2014 

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