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APPROVED 08/18/2022<br />
RETURNED-<br />
VALUE FORMULA<br />
PERFORMANCE<br />
TSTC’s unique returned-value funding formula<br />
is now established as an effective model for<br />
performance-based higher education funding<br />
in Texas. In the most recent official formula<br />
calculation used for the 87th legislative session,<br />
the number of graduates included in the formula<br />
remained consistent with prior years, while the<br />
average wages of those graduates over the fiveyear<br />
calculation period climbed to higher levels.<br />
These higher wages resulted in the increase in<br />
formula funding TSTC realizes for fiscal years<br />
2022 <strong>and</strong> 2023.<br />
TSTC continues working to increase its capability<br />
for estimating future returned-value forecasts.<br />
With increasing but less than full confidence,<br />
TSTC anticipates that the number of former<br />
students counted in future formula calculations<br />
will likely trail off as a result of program closures<br />
that occurred in fiscal year 2019 along with<br />
p<strong>and</strong>emic induced enrollment dips, but the<br />
trend of higher wages is expected to continue<br />
for at least two more biennia. By solely focusing<br />
on training in programs with high performance<br />
pay outcomes for students, TSTC has benefited<br />
from the funding drivers embedded in the<br />
formula, <strong>and</strong> the State of Texas continues to see<br />
the related economic growth, just as the original<br />
formula design intended.<br />
In the near decade under pay-for-performance<br />
funding, the state’s general revenue derived<br />
from TSTC’s former students grew 41% when<br />
comparing the cohort revenue production<br />
between the 83rd <strong>and</strong> 87th sessions. Based<br />
on the continued production of talent in high<br />
dem<strong>and</strong> fields, TSTC expects student prosperity<br />
(<strong>and</strong> the growth in returned-value to Texas) to<br />
continue as illustrated in Figure 08 below.<br />
Figure 08<br />
TSTC's Returned-Value Formula<br />
Actual<br />
Forecast<br />
2014-2015<br />
83rd<br />
2016-2017<br />
84th<br />
2018-2019<br />
85th<br />
2020-2021<br />
86th<br />
2022-2023<br />
87th<br />
2024-2025<br />
88th<br />
2026-2027<br />
89th<br />
TSTC Student<br />
Wages<br />
275.47M<br />
264.96M ▼4%<br />
340.22M ▲28%<br />
366.79M ▲8% 389.51M ▲6%<br />
454.29M ▲17%<br />
660.94M ▲45%<br />
Commission Rate 36%<br />
36%<br />
36%<br />
36%<br />
36%<br />
36%<br />
36%<br />
Funded Rate 33% 36%<br />
28%<br />
36%<br />
36%<br />
TBD TBD<br />
238M<br />
Returned-Value<br />
Funding<br />
98M<br />
94M<br />
Earned<br />
Funded<br />
121M<br />
132M<br />
140M<br />
163M<br />
TBD<br />
TBD<br />
90M<br />
94M<br />
94M<br />
132M<br />
140M<br />
STRATEGIC PLAN & BUDGET REPORT<br />
21
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