Board of Regents approves new five‑year funding formula emphasizing workforce outcomes

The Board of Regents approved a redesigned five‑year funding formula Wednesday that increases the share of funding tied to outcomes and adds short‑term workforce credentials to the metrics used to distribute state higher‑education dollars.

The new model raises the base share to 65% and sets outcomes at 35%, moves several former “cost” elements into the base, limits research allocation, and for the first time includes validated skills and learning (short‑term workforce credentials) and noncredit enrollments in the annualized full‑time‑equivalent (FTE) calculations. The board approved the change after a multi‑month work group and discussion among system and campus leaders.

Why it matters: Regents staff said the redesign aims to align funding with the state’s workforce needs and the Board’s master plan goal that 60% of working‑age adults hold a high‑value credential or degree by 2030. Backers said the changes reward completions in high‑demand fields while preserving a stable base for campus planning.

Deputy Commissioner for Finance and Administration Elizabeth Bentley Smith framed the action as the Board’s constitutional role to “provide a fair and equitable distribution of funding” and said the work group deliberately rebuilt — rather than tinkered with — the old model. Doctor Tristan Denley, deputy commissioner for academic affairs and innovation, told the board the team “really did take it back to the studs and start again” to simplify the formula and refocus it on outcomes.

Supporters pointed to specific technical changes. The base will absorb portions of the previous cost components — including facilities and support services — and the outcomes measure will include annualized FTE tied to credential length so shorter validated skills carry proportionate weight. The formula continues to reward bachelor’s‑level completions at four‑year institutions and associate and shorter credentials at two‑year institutions.

Regent May, identified as president of energy (speaking in support), described the project as a major economic “win” for the state and said the formula change is the beginning of a broader shift in investment strategy: “This is akin to, and maybe I exaggerate a little bit, winning gold against Russian judges, right?”

Limitations: Regents staff emphasized the formula will not be applied automatically in fiscal 2026 under a “standstill” budget. The board will only “run the formula” and implement new distributions if the governor and Legislature provide additional funding. Staff said they will return to the board to show the distribution effects if and when new appropriations are available.

Board action and next steps: The Board voted to approve the five‑year funding formula model. Regents staff said they will work with campus and system leaders to refine implementation details, continue analysis of noncredit and validated skills reporting, and present distribution scenarios when new funding is appropriated.

Clarifying details not previously available in the meeting: board staff estimated higher education remains underfunded by roughly $750 million (staff provided this statewide funding gap figure during discussion). The formula reform explicitly includes noncredit validated skills and learning in annualized FTE, and campuses will report credential length so longer credentials are weighted more heavily in outcomes.

The board asked staff to provide distribution scenarios and to present results and any recommended adjustments at upcoming meetings if additional state funds become available.