Tennessee Higher Education Committee (THEC) Executive Director Dr. Steven Gentile presented some of the changes under consideration for higher education funding to the committee’s leadership team on Friday, as well as some ideas that may be ruled out.¶
The state is in the process of updating the Outcomes-Based Funding (OBF) formula, which provides financial incentives to institutions of higher learning based on how well they help students succeed, such as progressing through college, graduating, and entering the workforce.¶
Considerations and General Feedback
Gentile said that, where possible, the goal is to streamline and simplify the formula.¶
“When people start asking me or telling me what they think should (be added) to the formula, I ask in return, ‘What should we take out of the formula as well?’” Gentile said. “How can we streamline and simplify it so that it's best understood by our institutions, who ultimately need to work with this?”¶
He also said three possible changes were discussed the most:¶
- Moving the metric that rewards schools for graduating students on time from six years to four years. This change is required through a new state law.
- Revising the formula to better incentivize dual enrollment.
- Eliminating awards/degrees per 100 full-time equivalent enrollment calculations.
FTE enrollment can be more relevant to institutional revenue because students often switch between full-time and part-time status.¶
Gentile also detailed the new OBF criteria that the THEC will likely not be moving forward with:¶
- Changing the age at which a student qualifies as an adult learner from 25 to 23 years old.
- Changing the weights for focus populations, like low-income students.
- Including secondary student hours in the workforce training metric.
He said there are also a few things still being worked through, including revising the Workforce Investment Premium and looking into the impact of growth at the University of Tennessee in Knoxville on other institutions.¶
Gentile conceded that UT Knoxville’s enrollment has substantially grown, but measures such as placing the school in its own separate formula or distribution, or even adding a hold harmless stipulation, under which THEC determines the maximum and minimum amounts institutions can earn, are not yet needed.¶
“My take on it is that for the first 15 years of the formula's existence, this has not been an issue,” Gentile said. “UT Knoxville has traditionally not been the number one or number two highest performer, and again, performance in the formula is in comparison to who you are as an institution last year compared to now. Yes, UT Knoxville has the highest graduation rates, but we reward based on the growth in your base graduation rate, no matter who you are.”¶
Review Timeline
In the spring and summer of 2025, THEC began identifying “key stakeholders” and started its preliminary review, which involved presidents of institutions, the Finance & Administration (F&A) commissioner, and the state Comptroller’s office. Last fall, THEC continued its collaboration and added individual check-ins with group leaders and meetings with the Tennessee State Rehabilitation Council (SRC), an advisory board that evaluates the state’s public Vocational Rehabilitation (VR) program.¶
Gentile said the review process will continue through this summer, and an official overview of changes to OBF will be presented at THEC’s July meeting.¶
