Last year, the Tennessee General Assembly approved a record $165 million higher education investment to build a new chemistry building for the University of Tennessee, Knoxville. The project had long been considered one of UT’s most critical needs, as the chemical industry itself has invested more than $400 million in the state and created more than 2,000 jobs.¶
The Tennessee Higher Education Commission (THEC) has also recognized the importance of degrees in chemistry and other physical sciences by including them as a Workforce Investment Premium in the state’s Outcomes-Based Funding (OBF) formula, which rewards institutions for graduating more students in these fields.¶
What is the OBF
The OBF is designed to provide financial incentives to institutions based on how well they help students succeed. The Workforce Investment Premium is one component, alongside degrees, credentials earned, and other measures of success. For example, a college that graduates a higher percentage of students might receive more OBF funding than its peers.¶
Tennessee implemented the OBF in 2010, and this year, lawmakers approved $39 million for OBF growth.¶
THEC is currently working to update the formula, and the latest proposal for the Workforce Investment Premium would more specifically target in-demand, higher-wage careers such as chemistry, while also providing institutions with additional flexibility.¶
How Could the Workforce Investment Premium Change
The existing Workforce Investment Premium isn’t tied to workforce earnings and is largely concentrated in STEM (science, technology, engineering, and math) and healthcare undergraduate programs. This excludes many occupations that some education leaders and advocates believe the state should incentivize, as they offer a better return on investment.¶
“A critical gap remains between the credentials students earn and the workforce opportunities available to them in the job market,” wrote education organization SCORE in an OBF report last year. “On average, postsecondary credentials provide significant earnings and employment benefits, but not all pathways deliver the same economic return, which leaves too many students uncertain about whether their credential will lead to economic opportunity.”¶
The proposal, set for review later this month, would begin addressing this concern by changing the Workforce Investment Premium to use a more specific 4-digit Classification of Instructional Program (CIP) code, rather than the current 2-digit code, to determine which degrees and credentials qualify for incentives.¶
Under the current OBF, for example, all degrees coded under physical sciences (CIP 40) qualify for the Workforce Investment Premium. That includes chemistry, physics/ astronomy, atmospheric sciences/meteorology, and other physical sciences.¶
Changing to a 4-digit CIP code will allow THEC to continue providing the Workforce Investment Premium for chemistry degrees while removing it for atmospheric sciences/meteorology and physics/ astronomy. ¶
Rewarding High-Wage and High-Need Careers
THEC’s proposal would incorporate these 4-digit CIP codes into a three-star system to determine which programs provide a solid return on investment and which don’t.¶
To be considered for a star, a degree or credential must lead to a job in growing demand that provides a minimum income of $43,196 after five years. Credentials that don't meet one-star criteria that can be combined with others that do, frequently referred to as stackable credentials, can also qualify for a star. Programs receiving three stars lead to even higher-paying jobs ($77,753+), along with greater demand.¶
In total, the Workforce Investment Premium change under consideration would remove more than 100 academic programs from the incentives list and add more than 50 new ones that are viewed as a better use of higher education dollars. This includes programs in categories beyond healthcare and STEM that weren’t previously eligible for the financial incentive, such as education, construction, transportation, and business/management/marketing.¶
“THEC staff heard a need for the Workforce Investment Premium to incentivize high-need and high-wage programs not only statewide, but also at the regional level,” the recommendations report stated. “Incorporating 4‑digit CIP codes provides greater specificity and allows the formula to target high‑demand and high‑wage fields more precisely.”¶
Under the proposal, institutions would additionally have the opportunity to request that academic programs be included based on regional workforce needs, allowing for greater alignment of state investments.¶
Next Steps
THEC’s Statutory Review Committee will vote on the proposed change to the Workforce Investment Premium next week.¶
Any changes would also require approval from THEC at its July meeting.¶
