NSHE recommends phased funding formula to boost community colleges, asks state to cover hold‑harmless costs

Nevada System of Higher Education leaders urged the Legislature to adopt a phased implementation of a redesigned funding formula that would shift the system’s allocation method away from 100% weighted student credit hours to a three‑part, “balanced” approach.

Chancellor Patty Charlton told the joint subcommittee the recommended distribution is 75% weighted student credit hours, 10% student‑based funding (headcount and credit hours to better reflect part‑time students) and 15% outcome‑based funding tied to relative performance across institutions.

The change is intended to recognize differences in mission and student populations across NSHE’s institutions. “The core cost of instruction, the enrollment, the FTE, the headcount — those credit hours — using some of what we already include, but it also did not recognize the differential of students,” Charlton said during the hearing.

CFO Chris Fatone explained technical features: the weighted credit‑hour share would be calculated using the greater of a three‑year average or the most recent count to smooth volatility; the student‑based component would use a three‑year average of headcount and credit hours; and the outcome pool would use the same performance measures previously in the carve‑out but distribute funds based on relative year‑over‑year performance among institutions.

The formula committee recommended raising the small‑institution factor threshold from 100,000 to 125,000 weighted student credit hours and increasing the factor from $30 to $40 per credit hour (tied to the higher‑education price index). That change would bring Western Nevada College and Great Basin College back into the small‑institution adjustment, the system said.

Because the proposed redistribution would reduce allocations to the two research universities, NSHE proposed a phased approach and a hold‑harmless mechanism so UNR and UNLV would not experience disruptive cuts. The system asked for an implementation phase of 20% in FY26 and 40% in FY27, then further adjustment in later biennia.

Chancellor Charlton and presidents who testified said the committee set constraints on its charge and that further work is needed, including an adequacy and equity study and follow‑up examination of whether weighted student credit hours remain the best measure for small institutions. Charlton said the system will return with additional analysis and recommended refinements before the next major budget cycle.

Why it matters: NSHE officials said the change aims to correct long‑standing imbalances that favored research campuses when the current allocation model was adopted, and to better fund community colleges that serve many part‑time, Pell‑eligible and first‑generation students.

What the subcommittee heard: Regents and institutional leaders emphasized that Nevada’s two R1 universities operate with less funding per FTE than national R1 peers and that any redistribution without added state investment would shift costs onto some institutions. UNLV’s officer in charge, Chris Heavey, said, “We are R1 institutions funded at an R2 level,” and estimated a national peer gap for UNLV on the order of hundreds of millions annually.

Next steps: NSHE asked lawmakers to consider the phased implementation and to support additional recurring funding for the recommended changes, plus continued formula review and an adequacy study. The system also requested that the Legislature treat certain set‑asides (small institution factor and research O&M) as priorities outside the allocatable pool when running the new distribution.