The House Standing Committee on Community Colleges gave a unanimously favorable report Thursday to a $99 million bill to change how the state funds community colleges. The bill goes in front of the House appropriations committee next.

House Bill 1069 is the result of Propel NC, the community college system’s effort to align course funding with industry needs and its top legislative priority this session. It would allocate $99 million for fiscal year 2024-25 and $93 million in recurring funds.

“Community colleges are the most important organizations in our state today,” said Tom Looney, chair of the State Board of Community Colleges, to committee members. “If we’re going to continue to be the No. 1 state for business, we’ve got to get this right, and Propel is the first step. And we’ve got to move at the speed of business.”

The bill would change the tiers that determine how much the state funds community college courses. The current model has four tiers, based on program characteristics like how much it costs to run the program and what skills gaps exist in communities. Colleges then receive funds in proportion to the number of full-time equivalent (FTE) students they enroll in each of their programs.

The new model would shift the current FTE funding tiers to workforce sectors and allocate funding based on labor market outcomes like salary levels and job demand. This would also mean that curriculum and continuing education courses would reside in the same workforce sector and receive the same levels of funding. The current model places higher value on curriculum courses.

The proposed sectors focus on health care, technology, and trades. According to previous reporting from EdNC’s Hannah Vinueza McClellan, courses that do not fall under one of the sector categories would be held harmless and retain their same value. There would be a catch-all sector for transfer and general education courses.

The system’s proposed model requests an annual $68.5 million to change the funding model, and an additional $24.5 million to raise the base allocation colleges receive, for a total of $93 million in recurring funds, according to Alex Fagg, the community college system’s director of government relations. The funding formula has not changed since 2013, and the base appropriation has not changed since 1980.

If passed, the bill has an effective date of July 1, 2024.

Looney said all 58 community college presidents back this plan, as well as more than 200 businesses and organizations like the state Chamber of Commerce.

“Organizations that would normally stand on the sidelines have stood up and cheered for us for this new funding model,” Looney said.

Other tweaks to the model

The bill also allows the State Board of Community Colleges to allocate excess tuition receipts back to community colleges according to a formula adopted by the board. Those receipts currently fund an enrollment increase reserve.

Instead, the bill asks for a one-time $6 million appropriation from the state to fund that reserve. The reserve would provide colleges with a fixed amount per FTE if the college exceeds its budgeted enrollment by 5% or more than 325 students.

“Colleges right now do not have a sustainable, reliable way to deal with enrollment spikes throughout the year,” Fagg explained to committee members.

The final component of the bill would allow community colleges to implement a tuition surcharge of up to 10% of the statewide rate to support instruction in certain programs. The idea is to help cover the costs of programs that require expensive equipment and specialized instructors.

“They’ve done a very good job of funding programs, but they’re funding them a piece here, a piece there,” said Rep. Matthew Winslow, R-Franklin, a primary bill sponsor of the bill. “Well, we want them to be the shining stars of the state. And so to be the shining stars, you want to put the technology that is available today and is advanced.”

Students who are eligible for tuition waivers would not be impacted by the tuition surcharge.

The bill sponsor and community college representatives highlighted the proposed model’s ability to be tailored to the needs of specific communities. The course rankings would be updated every three years.

“Propel NC … really is a new business model to ensure the community college system can stand up and deliver for businesses, deliver for workforce,” Fagg said.