Building Financial Structures to Support Community College Bachelor’s Degrees

Arizona is taking innovative steps towards increasing the number of residents with bachelor’s degrees. Educational attainment in Arizona trails the national average. In 2020, only 34 percent of working Arizonans had at least a bachelor’s degree compared to 39 percent nationally. And attainment gaps are particularly large in rural communities, where fewer students pursue a postsecondary education. Without accessible options to earn bachelor’s degrees, many Arizonans may face barriers to securing high-quality, family-sustaining jobs. Now, Arizona is using an unexpected tool to address these gaps.

It passed a law authorizing community colleges to offer bachelor’s degrees in May 2021. After over 20 years of discussion, debate, and strong resistance from four-year colleges, the law opened the door for the Grand Canyon State’s 19 community colleges to confer bachelor’s degrees in career-oriented areas of study. Chancellor of the Maricopa Community College District Steven Gonzales said, “to suddenly say that everyone has an opportunity to pursue a four-year baccalaureate through an open-door institution should be something that should be celebrated across our state, across our country.”

But while there is much to celebrate, there is also more work to do before students can take advantage of community college bachelor’s (CCB) programs in Arizona. Allowing community colleges to offer bachelor’s degree programs is only the first step to creating a healthy ecosystem of CCBs to meet state attainment goals. The next crucial step is ensuring these programs are adequately funded. Starting and sustaining these programs can be expensive. Community colleges must update their institutional accreditation, which can include upgrading library holdings and hiring faculty with higher level, terminal degrees. Some programs require additional laboratory equipment and specialized accreditation, which comes with yet more expensive requirements.

Arizona’s law requires colleges to demonstrate that they have adequate funding to operate CCBs, which is no small thing for a sector of colleges that is often underfunded. With significant enrollment drops over the course of the COVID-19 pandemic across the country, community colleges are navigating new financial challenges. Maricopa Community Colleges are no exception. “We’re as strapped as any other community college when it comes to funding, so we want to be able to do this with existing resources as much as possible,” Chancellor Gonzales said. Arizona community colleges will need to carefully use their resources and implement funding policies that keep programs affordable and pave the way for sustainable investment in CCBs.

States certainly have reason to invest in CCB programs. Evidence is emerging around the use of CCBs to support older and low-income students who might not otherwise pursue a bachelor’s degree. Students already familiar with a community college may be more interested in returning to a trusted institution for a bachelor’s degree. Recent research shows students felt these programs were designed with adult learners like them in mind, making them feel supported and able to complete the bachelor’s degree program.

Bachelor’s degree holders are less likely to experience poverty or be unemployed, earning significantly more than peers with less education. The annual earnings of Americans with bachelor’s degrees are, on average, 85 percent higher than for those with only a high school diploma and 25 percent higher than those with associate degrees. Bachelor’s degree holders are also less likely to experience periods of prolonged unemployment or poverty. Communities with higher levels of bachelor’s degree attainment are, on average, more prosperous than communities with lower levels.

“With students leaving higher education with mounds of student debt, this would be an opportunity to have access to high-quality, affordable [education] and hopefully leave community college with little to no debt and a bachelor’s degree in hand,” said Chancellor Gonzales. Finding ways to make CCBs affordable and accessible requires navigating a series of funding tradeoffs.

There are as many ways to approach CCB funding as there are authorizing states, some offering valuable lessons for state leaders about priorities and strategies. State financing strategies can change to accommodate the costs and benefits of offering bachelor’s programs at institutions that have, historically, not been charged with doing so. Comparing and contrasting states’ current strategies to fund these programs sheds light on the many options available to ensure CCB programs thrive and confer the greatest possible outcomes for students and the state. Our goal is to present the trade-offs states must navigate when deciding how to most appropriately and effectively fund CCB programs and to offer a menu of options for consideration in states exploring or fine-tuning their CCB financing strategies.

Our first step in creating a landscape of CCB funding strategies was to identify an appropriate sample of CCB states. We began with New America’s inventory of CCB states, institutions, and programs and narrowed our sample from all CCB-authorizing states to a subset of 10 states (shown in Table 1) where any community college in the state could offer a bachelor’s degree program and where at least five CCB programs are currently operating. After document review to locate funding data, we discussed our findings with leaders in all states but one included in this analysis.[1]

The 10 states in this sample direct resources toward CCBs through multiple avenues. In the following sections, we illuminate the variety of ways states have (or have not) leveraged start-up resources, tuition policy, and funding formulas to provide resources for CCBs.

If a state wishes to incentivize the development of CCBs, it may be useful to provide start-up resources toward the initial cost to the college. Typically, a college’s first bachelor’s degree is the most expensive, as it is at this point that colleges would need to substantively change their regional accreditation and comply with any new institutional or program-level accreditation requirements for a bachelor’s degree-conferring institution.

There may be a variety of reasons why a given state authorizes CCBs, from lower-cost access to bachelor’s degrees to addressing specific workforce opportunities in the community. When it comes to the resources needed to propose, develop, and launch a CCB program, states must consider whether to meet costs with state resources or to rely on institutions to absorb early costs of these new programs.

If a state is using CCBs as a bachelor’s degree attainment strategy for older students, for example, it may wish to offer start-up grants or other one-time funds to community colleges aiming to launch a new program with clear need. However, if the state is prioritizing stability in a tight funding environment, it may wish to avoid start-up funding for CCBs in favor of allowing colleges with more local and institutional resources to launch these programs and accept that colleges with tighter budgets might not be able to pursue CCB offerings right away or at all. Securing state appropriations or other resources for CCB start-up funds may prove difficult: the only states in our sample to offer start-up resources did so for a limited time. None have been able to sustain this practice.

California, Texas, and Washington are examples of states which offered start-up resources to colleges proposing their first bachelor’s program or programs. However, in each of these states, start-up funds were only available during the pilot phase of CCB authorization. For example, California passed a law authorizing a CCB pilot program of 15 colleges, each with one program, in 2014. The state provided $6 million for these colleges to share to meet start-up costs. In 2021, the Golden State passed a second piece of CCB legislation, removing the program from pilot to permanent status and authorizing up to 30 new CCB programs to be approved per year. However, new institutions and colleges proposing bachelor’s degree programs will not be able to access any start-up funds and must demonstrate their ability to meet up-front costs on their own.

Those states which authorized early and which are not governed by a state or system board (e.g., Texas and Washington) did offer start-up funding. Other early adopters, such as Georgia and Nevada, are governed by system/state boards and did not offer any additional resources to community colleges pursuing a first bachelor’s degree.

Convincing state legislators to appropriate resources for new CCB programs may be no easy feat, especially if the process of getting CCB-authorizing legislation passed was arduous or if no time limits are placed on additional resources allocated for CCBs. Case in point: no state first authorizing CCBs in the past five years included provisions for start-up resources in legislation. States must consider which community colleges are best situated to offer these programs. If colleges with more constrained resources could make a sizeable impact on bachelor’s degree attainment and/or geographic access to bachelor’s degrees, start-up resources will be needed. We recommend that states wishing to support CCBs at particularly resource-constrained institutions provide funding to defray start-up costs.

States setting CCB funding policy will need to weigh trade-offs around tuition policy as well. For clarity and simplicity’s sake—to say nothing of affordability—states may wish to require community colleges to keep upper-division tuition level with associate degree program tuition. On the other hand, states may consider allowing community colleges to charge more for upper-division tuition if the cost of operating bachelor’s programs places a strain on institutional finances through faculty or facilities costs, for example. Deciding how much colleges may charge for CCB tuition forms an integral part of state CCB financing strategy.

In Washington, Nevada, and Michigan, tuition for upper-division courses at community colleges is higher per credit hour than tuition for lower-division or associate degree-level classes. Higher tuition for CCBs may remove financial incentive for students to remain at their community college, rather than transferring to a university, for their bachelor’s degree. Also, if states are concerned about sustained, increased expenses from operating a bachelor’s program, higher tuition could bring in resources needed to meet program costs.

In California, the enrollment fee (akin to tuition) per credit hour is the same at the associate and bachelor’s level. However, an additional upper-division coursework fee makes the cost higher for bachelor’s degree courses than lower-division courses. With associate and bachelor’s enrollment fees at the same level, colleges may promote their degree programs to potential students with clear and simple information around the basic enrollment fee. At the same time, keeping additional fees slightly higher for bachelor’s degree programs may help colleges defray the cost of program operations. Communicating to associate degree students and graduates that their bachelor’s program enrollment fee will not be any higher could be a powerful recruitment tool for prospective students concerned about affordability.

In Florida, both tuition and fees are slightly higher for bachelor’s degree programs, and they vary among institutions in the Florida College System. On average, one credit hour at the bachelor’s level of tuition is $91.85, compared to $80.69 for associate degree and certificate programs. With required per-credit-hour fees included, one credit hour in a bachelor’s degree program totals $121.59 on average, with associate degree/certificate tuition running on average $106.85.

In Texas, upper-division tuition varies between institutions. However, differences moving forward may be most significant between institutions in Texas’s CCB pilot program and colleges that started CCBs under newer, statewide authorizing legislation. Colleges included in Texas’ CCB pilot program were permitted to charge higher tuition for upper-division courses. These colleges may continue to do so even today, though not all do. However, any community colleges launching bachelor’s degree programs after the pilot must keep upper-division tuition level with lower-division courses. Pilot institutions continuing to offer bachelor’s degrees, therefore, have more flexibility around using tuition to fund their CCB programs, while new CCB institutions will have to seek resources elsewhere to defray any additional costs of operating a bachelor’s degree program. However, if pilot institutions choose to charge more, students sensitive to the higher cost may hesitate to take advantage of available CCB programs.

Institutions will need steady resources to ensure CCBs are sustained and able to meet student and labor market need. Policymakers charged with setting tuition may opt to use this lever to ensure CCB program costs are met, especially when operating without start-up funds or without any resources in state funding formulas designated for CCBs. We recommend that states and colleges prioritize student affordability and keep CCB tuition as low—and as similar to associate degree tuition—as possible. For some states, that may mean equal associate and bachelor’s program tuition, and for others it may mean setting CCB tuition and fees slightly higher to accommodate the cost of running the program.

Most CCB programs are relatively small, which means that funding formula changes may not have a great deal of financial impact on colleges offering CCB degrees. The formulas states use should reflect their goals for CCBs. What that looks like will vary by state context.

States using CCBs primarily as a bachelor’s degree attainment strategy may wish to include a premium for bachelor’s degree completions in state performance funding. If the chief aim is to address labor market needs, a formula that rewards completions in high-need areas could offer a funding boost for CCB programs. Some states want to create an incentive for colleges to offer programs that are valuable for students and the state but more expensive for the college to offer, as is the case with many upper-division CCB programs. Creating a bonus for enrollment in or completion of these programs might fit well into that priority.

The ways that states and systems allocate funding to their community colleges are complex. Some states fund a system or board that then allocates funds to individual colleges. Others fund the colleges directly (called Direct HEI Funding in Table 4 below). Two resources provided essential information on community college funding models and formed the foundation of our analysis on these funding strategies’ relationship to CCBs: HCM Strategists’ report, Driving Better Outcomes: Fiscal Year 2020 State Status & Typology Update and an InformEd States policy scan The Landscape of State Funding Formulas for Public Colleges and Universities. These resources highlighted the use of several strategies to fund community colleges including: a percentage increase or decrease in existing funding based on the availability of state funds (base +), funding based on the enrollment at colleges (enrollment), or based on the colleges’ performance on a set of metrics (performance). Many states use a combination of these methods.

The states in our sample have the following funding formulas and, where they use performance, we have listed the types of metrics they use:

Even though most CCB programs are small and the parts of the funding formula they change are smaller still, we do see slight differences in how appropriations flow to community colleges based on the presence of bachelor’s degrees. Below, we describe if and how CCB enrollments, credits earned, or degrees earned factor into states’ funding formulas relative to other community college programs.

Slightly More Funding for CCBs in the State Funding Formula

Washington’s community and technical college performance funding formula provides a small bonus for completions in programs where the state has acute workforce needs. By definition, all CCB programs in the state are targeted to high-need occupations, because colleges must demonstrate significant labor market need in order to be approved for operation by the system. However, only about 10 percent of community college funding in Washington comes through the performance funding formula and the bonus around areas of high workforce needs is only a small part of that allocation.

Nevada takes a slightly different approach. While still providing some additional resources in the funding formula for CCBs, the mechanism lies with the level of education. The state’s formula weights upper-division courses more than lower-division courses, meaning credits earned in bachelor’s programs generate slightly more state appropriations than credits earned in associate degree programs in the weighted student credit hour calculation.

The University System of Georgia, of which Georgia State Colleges are part, uses a formula to inform its budget request to the state legislature. That formula gives more weight to upper-division course enrollment, so increased bachelor’s enrollment increases the request to the legislature. So, while Nevada rewards bachelor’s-level credits earned, Georgia’s budget request formula rewards enrollments in bachelor’s-level courses.

In Ohio, the entirely performance-based funding gives additional weight to community college programs that are more expensive for the colleges to run. As of the writing of this brief, the Board of Regents has not calculated the additional cost of CCB degrees for community colleges, but it does plan to conduct that analysis as the programs grow. If, as expected, the board finds that CCB degrees are more expensive for colleges to provide, these costs will be represented as additional weight in the state funding formula, yielding more resources for the colleges to offset these expenses.

Slightly Less Funding for CCBs in the State Funding Formula

Only one state in our sample provides less funding for CCBs than other community college programs. In California’s performance funding system for the community colleges, associate degrees designed for students transferring to universities are weighted more than bachelor’s degrees offered by the state’s community colleges. In other words, a college will be rewarded with more resources for a student earning an associate of arts degree designed for transfer than for a student earning a bachelor’s degree at the same community college.

This small penalty for CCB completions compared to transfer-focused associate degrees likely makes a very small difference for California community colleges, given that, as of this writing, there are still only 15 programs operating, each with few graduates. The penalty is most likely the result of a historical focus on transfer as the core mission of the California community college system.

The Same Funding for CCBs in the State Funding Formula

Among states in our sample, Florida, Texas, Wyoming, and Michigan have no real difference in the level of funding for bachelor’s enrollment, earned credits, or degrees earned compared to other credentials offered at the community colleges. Florida does not currently add additional appropriations for CCBs, and its general fund allocation is made by the legislature, with no clear weight for upper-division courses versus lower-division courses. In Michigan, CCBs are not acknowledged in the state funding formula. It is possible that this omission is due to the small number of CCB programs and small enrollments in these programs. Texas, however, explicitly names and weights upper- and lower-division courses at community colleges the same in the state funding formula. Wyoming does have a small performance funding component, but it does not consider CCBs. Its formula weights funding by the method of course delivery (e.g., online versus in person), rather than level of education or area of study.

Given the diversity of state funding formulas for community colleges and how CCBs are addressed within those formulas, policymakers should create policy that aligns with the priorities and goals for these programs.

States authorizing CCBs may employ a variety of strategies to finance these programs and achieve their goals for CCBs. Different state financing systems may, likewise, require different approaches to ensure that needed resources make their way to CCB institutions and programs. States where community colleges can leverage local resources may have additional flexibility around ensuring that CCBs are sufficiently funded. States are operating in constrained financial environments which do limit their options, but there will still be an array of financing strategies available to address key policy trade-offs.

Interest in CCB authorization is emerging in additional states, and some current CCB states are considering expanding authorization to more colleges and program areas. As CCB policies reach new states and the number of programs grows, funding strategies must account for these programs. There are a number of funding levers outlined in this brief available to state policymakers considering how best to fund community college bachelor’s programs. With examples from states in all regions of the country, states new to CCBs have much to draw from as they build strategies that suit their state, their community colleges, and the students they serve.

We are grateful for the generous support of the Joyce Foundation and Ascendium Education Group, without whom this analysis would not have been possible. We thank all representatives of state higher education agencies and associations who shared their time and expertise with us throughout the research process. Mary Alice McCarthy and Sabrina Detlef’s editing empowered us to more clearly communicate what we learned, and we are grateful for their insightful comments. New America’s communications team shared their time, guidance, and patience with us as we sought to bring this analysis to publication. We especially want to thank Riker Pasterkiewicz, Fabio Murgia, Rocio Montoya-Pereyra, Mandy Dean, Joe Wilkes, and Jodi Narde.

[1] Officials in Colorado did not respond to our requests to review and discuss our findings.