Revised higher education funding formula to prioritize degree, workforce outcomes

July 31, 2026 - 23:36

The Indiana Commission for Higher Education is rolling out changes to how it distributes state money to public universities and community colleges. The revised formula, called Outcome-Based Performance Funding, will shift the focus away from simple enrollment numbers and toward what students actually achieve after they leave campus.

Under the new system, schools will be rewarded for producing more graduates in high-demand fields, especially in areas like healthcare, technology, and skilled trades. The formula will also weigh workforce outcomes, meaning colleges get credit when former students land jobs that pay a living wage or fill roles where the state has a shortage of workers. Completion rates for low-income students and adults returning to school will carry extra weight too.

The move comes after years of flat state funding and growing pressure to show that higher education is worth the investment. State officials say the old model rewarded colleges for getting students in the door but did little to push them across the finish line. Commission leaders argue that a degree only matters if it leads to a stable career, and the new formula is meant to align campus incentives with the state's economic needs.

Some college administrators have raised concerns about the speed of the transition, noting that programs in the liberal arts or basic sciences could lose funding even if they are academically strong. But the commission says it will phase in the changes over several years and will give schools time to adjust their advising, curriculum, and job placement services. The new formula is set to take full effect for the 2026 budget cycle.