A Tennessee Higher Education Commission (THEC) committee meeting on Wednesday offered encouragement to those who want to see the state use higher education funding more strategically to support jobs.¶
Members of the THEC Statutory Review Committee offered no opposition to proposed changes to the state’s Outcomes-Based Funding (OBF) formula, which provides financial incentives to institutions based on how well they help students succeed.¶
Chief among these changes are tweaks to the OBF’s Workforce Investment Premium designed to create a better return on higher education dollars by allowing leaders to more directly target funding to education programs that lead to in-demand, good-paying jobs.¶
THEC Executive Director Steven Gentile conceded that hasn’t always been the case with the premium.¶
“What I like about this approach is that there have been things that have popped up over time that (have) people scratching their heads, that have not been included in our current metric,” Gentile said. “For instance, it’s well known that we have (a) great K-12 educator need, or social worker need. This new definition captures both of those.”¶
What is the OBF and Workforce Investment Premium?
The OBF formula was created in 2010 to change how state universities are funded. Instead of funding being based only on enrollment, the formula created incentives for schools to graduate students on time with degrees and for community colleges to graduate students who then continued to four-year institutions.¶
The Workforce Investment Premium, also known as the High-Need Premium, was added to the OBF formula in 2022. It financially rewards public higher education institutions for producing graduates in specific fields, primarily in STEM (science, technology, engineering, and math) and healthcare undergraduate programs.¶
THEC’s Proposed Recommendations
The proposed change to the Workforce Investment Premium would consider the median earnings for careers aligned to a particular program and projected job growth in that field. Instead of the existing “shotgun approach” of assigning the premium to all programs in a given field, the proposed revision will evaluate each program individually and assess its return on investment by using objective data.¶
Under the proposal, educational programs or credentials must lead to a career with minimum median earnings of at least $43,196 and a job growth outlook of at least 0.8 percent between 2022 and 2032 to qualify for the Workforce Investment Premium.¶
“Throughout our conversations, there was a common theme of ensuring the new Workforce Investment Premium included an alignment to high-needs fields that meet or exceed a baseline wage threshold,” said THEC fiscal policy analyst Stone Watson.¶
Workforce Pell Included
THEC’s proposed changes would also make community college programs that are eligible for the Workforce Pell Grant eligible for the Workforce Investment Premium.¶
The grant is designed to help low-income students pay for short-term (8-14 weeks) credential programs aligned with the labor market demand.¶
These could include nursing assistant, commercial driver, and welding programs, among others.¶
Institutional Nominations of Academic Programs
The final recommended change to the Workforce Investment Premium would establish an annual process allowing institutions to nominate programs for the incentive that meet a regional workforce need or are experiencing increased student interest.¶
“This would be an annual process to create a Workforce Investment Premium that is agile to the changing workforce landscape in our state,” said Watson. “Our hope with this is that this approach gives institutions the flexibility to highlight what's happening on the ground in their regions while still keeping the statewide goals in focus.”¶
Why it Matters
A recent study by the Burning Glass Institute and the Strada Institute for the Future of Work illustrated the challenge students face that these changes are designed to address.¶
That study found that more than half of college graduates were underemployed in their first year, meaning they held jobs that did not require a degree. Those numbers improved only slightly over time, though 45 percent of students were still underemployed a decade later.¶
THEC will vote on the proposed changes to the Workforce Investment Premium and the OBF at its July meeting.¶
