Appropriators debate weights, inflation index and reversions in community college funding formula

The Joint Appropriations Subcommittee on Education spent the bulk of its work session reviewing technical and policy choices in the community college funding formula, including a proposed increase to the general-education weight, options for applying inflation to the funding factor established in 2021, and how to treat reversions when enrollment projections differ from actual FTE.

The executive branch recommended raising the general-education weight from 1.0 to 1.35. Budget-office analyst Ben presented charts showing FTE category trends and said the proposed change drew on campus-level FTE data. "This data comes from OCHE, directly... This first chart... shows you a percentage breakdown of the FTE categories," Ben said. Committee Chair Beattie said he was not persuaded the record justified a 35% increase: "I just don't believe 35%, under any circumstances. So I... will be bringing a DP to set the funding factor at 1."

Committee discussion focused on two distinct approaches: (1) change the weighting factors among course categories (general ed, CTE, dual/concurrent enrollment) to reflect relative delivery costs and/or incentives; or (2) adjust the underlying funding factor ($6,250 per additional general-ed FTE, set in 2021) for inflation so all categories rise proportionally. Chair Beattie signaled a preference for the second approach and said he would sponsor a decision package to reexamine the funding factor and its inflation treatment.

Staff and analysts will run multiple scenarios. Shauna Lyons, OCHE director of budget and planning, told the committee that community colleges currently are subject to the K–12 statutory inflation cap (a three-year average capped at 3%) but suggested the higher-education price index (HEPI) might better reflect college-specific cost pressures: "The nice thing about using higher education price index is that they do break it down by a type of institution where 2 year colleges would be in their own category within HEPI." Committee staff (Kurt) said he would run capped and uncapped three-year CAGR scenarios beginning with 2021 to project funding-factor values for fiscal years 2026–27.

Members also debated the asymmetric treatment of increases and decreases in projected FTE. Under the current formula, the positive funding factor is $6,250 while the negative (decrease) factor is $3,125. Chair Beattie questioned whether that differential creates an artificial boost to adjusted bases and said it may reward overprojection. Flathead Valley Community College President Jane Karas defended protections for community colleges against sudden enrollment shocks, citing the challenge of serving many part-time students and the operational costs that persist when headcount fluctuates.

Why it matters: these parameters determine how much state money community colleges receive as enrollment shifts and drive base funding in future biennia. Small changes in weights or the funding factor scale to significant dollar differences as they apply to campus enrollments statewide.

Next steps and implementation issues: Committee staff will prepare a concise fact sheet showing multiple scenarios: (a) capped K–12 three-year inflation method; (b) uncapped three-year CAGR beginning in 2021; and (c) HEPI adjustments for two-year colleges. Chair Beatty said he will take ownership of a DP to reexamine the funding factor and requested the fiscal office and OCHE provide standard fact-sheet materials and the precise methodology used to derive the $6,250 base.

No formal votes were taken during the work session. Several staff directions and assignments were made for executive-action preparation.