Joint Interim Committees hear national experts on outcome-based higher-education funding; no bill adopted

Lawmakers on the Joint Interim Committees heard a presentation from AccelonEd policy experts Miranda Thomas and Matthew Joseph on adopting outcome-based funding for Alabama higher education and explored how other states have used incentives to link state dollars to student results. The committee did not vote on any proposal and no bill was introduced at the meeting.

Why it matters: Outcome-based funding directs state education dollars toward measurable results such as program completion, in-state employment at a set wage threshold, transfers to four-year institutions or enlistment. AccelonEd’s national review identified three design priorities that states use to try to improve graduation and employment outcomes: offering a meaningful share of funding as incentives, choosing a small number of clear targets, and adjusting metrics to avoid penalizing institutions that enroll higher-need students.

Miranda Thomas, introduced herself as representing AccelonEd, an education organization that works with more than 30 states on school and higher-education policy. "Alabama is making very impressive strides with policies like the RAISE Act," Thomas said, "however, there is a significant opportunity to build on that success by implementing outcomes based funding in higher education." Matthew Joseph, AccelonEd’s funding expert, summarized evidence from states that have modernized their systems, saying, "Outcomes based funding works. It is a great carrot." Joseph cited examples where states retooled formulas and then saw measurable changes in institutional behavior and student outcomes.

Key evidence and numbers presented: Joseph told the committee that some states attach a large share of an institution’s state funding to outcomes — for example, Kentucky at roughly 35 percent, Tennessee around 40 percent for certain sectors and Texas roughly 30 percent — and said Alabama currently ties "less than 1%" of higher-education funding to outcomes. He estimated that a meaningful incentive pool for Alabama could fall in the "30 to $40,000,000 a year" range depending on design and phase-in, but said the committee would need to calculate precise figures.

Questions and reservations from committee members focused on causation, data and volatility. Several members asked whether observed gains in Kentucky and other states can be causally attributed to funding changes; Joseph acknowledged that perfect causation is difficult to prove but said many analysts see a temporal relationship and institutional-level improvements after formula changes. Members also asked how post‑graduation employment is tracked; Joseph noted states often use unemployment insurance wage records and that Alabama could begin with proximate measures (graduation, passing licensure exams or six‑month employment checks) while improving long‑term data collection.

Equity and unintended consequences were a central concern. Joseph emphasized the need to adjust incentives for students with higher needs — adult learners, first‑generation students, Pell‑eligible students or students with disabilities — because without adjustments institutions could be rewarded for excluding harder‑to‑serve students. He cited examples where states multiply bonuses for higher‑need student success (he said, for instance, an 80 percent uplift in Tennessee in some adjustments, and 50 percent in Texas) so that institutions enrolling larger shares of those students are not disadvantaged.

Implementation advice and next steps: Joseph recommended avoiding rigid, overly prescriptive statutory language and instead establishing an ongoing review process — for example, an advisory council of business leaders, institutional representatives, students and policymakers to adjust metrics and respond to labor‑market changes. Several committee members stressed aligning outcomes with the state’s new Department of Workforce and the Alabama Community College System to encourage in‑state retention and to match academic outputs with employer needs.

The committee did not draft or adopt legislation at this meeting. Members said they expect continued discussion with university leaders and aim to have a bill or discussion draft available for review at a future meeting. Chairman Garrett closed the session saying, "No decisions at this point," and adjourned the meeting.

What’s next: Committee members asked AccelonEd and staff to help refine design options, explore data sources and produce budget estimates; a draft bill was discussed as the next procedural milestone but was not available at this meeting.