Promising Practices in Funding for Non-Credit Programs

Government funding has complexities and restrictions, which require close monitoring and diligence to ensure that all allowable costs are being allocated and reimbursed and that money is not left on the table. We found several promising examples of non-degree programs and community college leaders finding creative ways to maximize and diversify their government funding streams.

Maximizing Performance-Based Funding

In 2013, the Texas Legislature approved a “Success Point” model to measure community college performance in a way that incentivizes student achievement and determine what percentage of the state funding should be allocated to community colleges. The state awards points for following a proposed sequence of milestones, starting with college readiness and semester credit hour attainment, followed by degree and credential attainment near the end.

Dallas College takes a different approach to how milestones are sequenced in its program. It uses a certification-first program model, based on the philosophy of helping students achieve quick wins by earning industry-recognized credentials and securing well-paying jobs. These early successes can then encourage students to pursue additional education.

This certification-first model has the benefit of doubling the amount of success point payments that the college could collect. The state’s proposed model only allows funding for one award per student for each fiscal year, so in the case that a student received a certification at the same time as an associate degree, the college would only receive one success point award. By awarding the certification first, Dallas College is eligible for points for both milestones, since they would typically be achieved in different fiscal years. This different sequence of milestone payments did not need to be approved by the state because it is just a reflection of Dallas College’s program model.

This example highlights the importance of practitioners being the ones to define what success looks like and how to achieve it, especially as outcomes-based funding becomes more prevalent in government and other social sector funding streams.

Identifying Nontraditional Sources of Government Support

We identified several examples of community colleges tapping into government funding sources outside of the traditional federal, state, and local workforce and education departments, including economic development incentives to incentivize private sector growth.

• Monroe Community College in Rochester, New York received a $4 million grant for its health care and social and human services program from the Finger Lakes Provider Performance System (FLPPS), a regional health care entity with the mission to improve the design and delivery of care for Medicaid patients. FLPPS is designated as a Long-Term Care Workforce Investment Organization by the New York State Department of Health under New York State’s Medicaid redesign process. Associated funding is provided through Medicaid savings that the state was allowed to keep and reinvest in system redesign under a federal waiver, with the goal of improving Medicaid recipient health and reducing hospitalizations and costs. Having a stable, well-trained workforce is a key factor in improving patient outcomes, particularly in an occupation marked by turnover.
• The Michigan New Jobs Training Program creates a revenue stream for community colleges to offer customized trainings to new hires of employers that have created new jobs in the state. The program is designed as an economic development incentive, encouraging companies to relocate to, or grow in, the state and create good jobs. The new employees trained must earn at least 175 percent of the state’s minimum wage. Community colleges shoulder the up-front costs of the trainings and are repaid by the state through an allocation of income tax from the new employees’ wages.
• Brazosport College uses tax abatements, another established economic development incentive, as a tool for long-term financial planning. Tax abatements are a reduction or exemption in the tax liability of an individual or corporation, usually used to incentivize or encourage certain activities, like job creation or real estate investment. The college, which is a taxing jurisdiction within Brazoria County where it is located, considers and grants abatements to private employers who are planning expansions in the area. The value of the abatement is based on the number of new jobs the employer projects. The abatements essentially act as deferred revenue for the college, while also generating an annual fee during the abatement period (typically 7–10 years). The deferred revenue acts as a flexible source of funding that goes into the college’s general funds to support the operating budget. Being able to project future revenue allows the college to develop new programs, knowing that they will have flexible resources in the budget to support programs once they are operational. Granting abatements also generates goodwill with industry partners, who act as employers of graduates of both college degree and non-degree programs and as potential funders of other projects at the college.

The focus of our research was on program-level financial dynamics and programs cannot typically build up financial reserves, which is a key to financial health and adaptability at the institutional level. However, we did find several examples of programs that have benefitted from the strong financial positions of their host institutions.

Community colleges operate in the resource-constrained environment of public funding and state budget processes, so improving financial health requires creativity and entrepreneurialism. One promising strategy we heard about was asset monetization, such as selling or leasing some of the physical assets—land and buildings—of a college, in light of declining enrollments and a switch to more virtual or hybrid instruction environments. This strategy can result in episodic infusions (e.g., from the sale of a piece of land) or recurring sources of flexible revenue (e.g., from a long-term lease) that can then be used for internal needs, including building change capital.

• Broward College in Fort Lauderdale, Florida has taken advantage of its prime urban real estate to generate revenue through land sales and leases. Strategies like this have given it the flexibility to expand its reach, as in the example of Broward UP (Unlimited Potential), conceived as a way of extending the college’s reach into low-income communities with disproportionately high rates of unemployment and low rates of educational attainment and enrollment at the college. In 2018, Broward started expanding its existing partnerships with community-based organizations to use their space to offer free non-credit classes. The college invested $1 million of its own flexible resources in seeding this program over its first three years. From this investment, the college has leveraged an additional $47 million in grants and contributions specifically for this program, including CARES Act funding and philanthropic contributions from local and national donors. Now, just three years later, Broward UP has formal partnerships with more than 25 organizations, including affiliates of national organizations like the National Urban League, Boys & Girls Club of America, the YMCA, and local organizations providing services like child care, housing, adult basic education, and other social services. The college has invested resources in these organizations to embed case managers who can help students in Broward UP communities access the support they need to make the transition to college enrollment.

Partnering with Organized Labor

We have noted various examples of industry partnership as a source of financial and non-financial resources for non-degree programs, but our research identified several other ways in which industry representatives can contribute.

In industries and regions that have high rates of unionization, like health care, manufacturing, and construction, employee benefit funds can be a source of funding for worker education and training. These funds are determined through the labor contract negotiation process, and typically are structured as a per worker, per hour contribution from the employer. Employee benefit funds could be a particularly good fit for upskilling programs to move entry-level workers into middle-skill and middle-wage jobs, since the funds are associated with incumbent workers.

Potential Sources and Uses of Debt

Debt can be used at the institutional level to benefit non-degree programs. The main source of debt that we heard about from community college leaders was bonds, which some community colleges have the power to issue. But there are other sources of debt that they may be able access, particularly for uses that have positive economic and community development outcomes.

Community Development Financial Institutions (CDFIs)

The field of community development financial institutions (CDFIs) includes loan funds, banks, credit unions, and venture capital funds that have a mission to create economic opportunity and access to affordable financial services and products in economically underserved communities. The CDFI designation comes from the U.S. Department of the Treasury, and CDFIs may receive capital from this department as well as from a range of private investors, including individual and institutional investors. One common source of CDFI capital are banks that are beholden to the Community Reinvestment Act of 1977 (CRA), which compels them to meet the credit needs of communities in which they do business, including low-income communities. Banks can meet their CRA obligations by providing loans, investments, and financial support for a range of activities that benefit low-income communities, including workforce development and job training. There are more than 1,000 CDFIs nationwide that operate locally or with a national footprint, and some have specific areas of focus—as with NFF, a CDFI focused on lending to the nonprofit sector. Tapping into this source of financing requires community colleges to get to know the local CDFI community or identify national entities whose area of focus aligns with the potential uses of financing, like small business development and job creation, affordable housing, commercial revitalization, and so on.

New Markets Tax Credits

The New Markets Tax Credit is a program of the U.S. Treasury Department’s CDFI Fund designed to attract private investment to projects located in or serving low-income and rural communities. Investors receive a credit against their federal income taxes equal to 39 percent of their investment, spread over a period of seven years. The investments, made through intermediaries known as Community Development Entities, are typically structured as debt to the beneficiary organizations, with the option that the debt will be forgiven at the end of the seven-year compliance period. New Markets Tax Credits are commonly used for real estate projects, including schools and training facilities; community facilities, including space for day cares and social service providers; mixed-use commercial spaces; and manufacturing facilities. In 2021, Ivy Tech Community College in Indianapolis opened its new $14 million, 59,000-square-foot Automotive Technology Center to house the college’s array of automotive technology programs, including non-degree certificates, an associate degree, and education opportunities with corporate partners General Motors and Toyota. The new building was financed in part by a New Markets Tax Credit deal involving Cinnaire, PNC Bank, and the City of Indianapolis. With the new building, the college hopes to double enrollment, currently at 300, in its automotive technology programs and serve more current Ivy Tech students who live in the community where the new facility is located.

Public Loan Funds Revolving loan funds are a potential source of flexible financing that community colleges could use to fund the development and/or expansion of new non-degree programs. Twenty years ago, Kentucky established a $1.5 million state-supported "venture capital fund” designed to help colleges jump-start online learning programs without having to go through sluggish budget procedures or apply for competitive, time-intensive federal grants. Under the model, colleges could apply for interest-free loans to finance such projects (already used “jumpstart online learning projects” above. The Kentucky Community and Technical College System sought a loan and secured funding in a fraction of the time a traditional budget proposal process would take, which allowed it to quickly capitalize on the booming online education market.

Community colleges could benefit from access to similar financing mechanisms to fund the start-up costs of new non-degree programs. Start-up costs typically include instructional design, faculty hiring and onboarding, accreditation, and outfitting instructional facilities and labs. Loan repayment can be funded by program revenues, including the mix of public funding, tuition, and other external support that programs secure.