Senate Finance and Taxation Education committee Chair Arthur Orr, R-Decatur leads the committee's meeting on April 9, 2025 in Montgomery, Ala. Orr is exploring a new funding model for higher education. (Alander Rocha/Alabama Reflector)
The Senator chair for Alabama’s education budget committee is working on drafting a bill that could change how some higher education institutions are funded.
Sen. Arthur Orr, R-Decatur, said in an interview Friday the new model, called outcomes based funding, could push the public colleges and universities in the state to attain better graduation rates, increase workforce participation and help with research.
“How can we incentivize certain institutions to help them keep those students in school? Well, it all takes money. It takes resources. So the money that we would provide, we would say, ‘Okay, college, your four year graduation right now is 8%. We’d like to see that next year get to 10% or 12%.’ It’s gonna take time, but we’re going to reward movement.”
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At the Nov. 12 Joint Modernizing Higher Education Funding Committee, Orr said he was using the Renewing Alabama’s Investment in Student Excellence (RAISE) Act as a model for how the new higher education funding bill would look.
The RAISE Act, which passed in the 2025 regular session, gives K-12 schools extra funding to help certain classes of students, such as English language learners and special education students.
Orr said other states use a similar method to fund higher education institutions.
“What we’d like to do is follow the models other states have used called outcome based funding,” he said. “We will challenge the various schools, our 14 schools of higher education, plus community colleges to attain goals that we would like to see.”
Other states that use outcomes based funding include Tennessee, Texas, Ohio, Indiana and Missouri among others.
Under the proposal, larger schools in the state like Auburn University and the University of Alabama that have higher graduation rates will get funding help in research areas.
“We wouldn’t challenge them with that, it’d be like you do pretty good. It’s not, it’s not worth quibbling over,” Orr said. “There’s not really a return on that investment. So the flagships are in a little bit of a different area. They do a lot more research. So I think we’ll focus more on research for them than things like graduation rates.”
Other outcomes Orr’s bill will focus on are innovation and workforce development.
“What are the job needs of Alabama in the future? Well, I can tell you today, it’s teachers and educators. It’s nurses and people in the healthcare field. It’s engineers and people like that,” he said “So can we reward schools for increasing their output of students in these high demand vocations? And we may not reward them for — we’re not gonna penalize them — an ancient languages studies department, that’s probably not a needed area here in Alabama. It’s a must to help move our state forward.”
Innovation includes how the colleges and universities offer degrees, weekend classes and impact on the state.
Orr said roughly 30% of the funding for higher education in the Educational Opportunity Fund is for higher education while the other 70% is for K-12. The Educational Opportunity Fund is part of the Education Trust Fund.
“That Educational Opportunity Fund has about a billion dollars in it right now. We took over $300 million last year, and put it in, I’m calling it the RAISE Act fund, so that was strictly for K-12,” he said.
Jim Purcell, executive director for the Alabama Commission on Higher Education, said in a statement Friday the new plan could be difficult due to differences in the institutions.
“Designing performance-based funding incentives across a diverse range of university types presents challenges, given differences in mission, size, and student populations,” the statement said. “It is anticipated that any future incentive structure would include institution-specific considerations.”
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Author: Andrea Tinker