Today, the Tennessee Higher Education Commission (THEC) approved significant changes to Tennessee’s outcomes-based funding (OBF) formula as part of the comprehensive formula review process. Most notably, THEC revised the formula’s Workforce Investment Premium so that it aligns with SCORE’s Impact Credential Framework, shifting the formula’s focus from broad workforce categories to credentials that actually lead to economic independence.
The changes reflect an important evolution in how Tennessee defines student success. For years, Tennessee has led the nation in postsecondary innovation, using outcomes-based funding to incentivize public colleges and universities to help more students complete credentials. But as policymakers and higher education leaders continue to focus on improving student outcomes, an increasingly important question has emerged: Are students earning credentials that lead to economic independence?
The newly approved formula changes, set to go into effect in the upcoming fiscal year 2027-28 budget appropriation cycle, begin to address that question.
Under the current formula, the Workforce Investment Premium relies on a broad definition of high-need industries. In light of the changes, credentials will be eligible for the premium based on measurable indicators of economic opportunity for students. This approach better aligns institutional incentives with student outcomes and ensures that state investments increasingly support credentials that create stronger pathways to high-wage, in-demand careers.
THEC also adopted additional improvements to the formula, including:
- Strengthening dual enrollment incentives by rewarding completed credit hours rather than participation alone.
- Simplifying the formula through the removal of the awards and degrees per 100 full-time enrollment (FTE) metrics.
- Replacing the six-year graduation rate with a four-year graduation rate for universities.
Together, these changes represent meaningful progress toward a common goal: ensuring more students complete high-quality credentials and enter careers that enable long-term economic independence.
How the Impact Credential Framework Shaped the Changes
The new revision to the Workforce Investment Premium reflects more than two years of research, stakeholder engagement, and advocacy led by SCORE and our partners.
Over the past several years, SCORE has worked to strengthen the connection between education and workforce opportunity. To support that effort, SCORE convened a working group of higher education leaders, workforce experts, state agency representatives, employers, and policy leaders to develop a better way to define and measure the value of a credential.
Through that collaborative process, SCORE developed the Impact Credential Framework, a new approach for identifying credentials that create meaningful economic opportunity for Tennesseans. Rather than relying on broad or subjective definitions of workforce relevance, the framework evaluates credentials using three core measures:
- Earnings
- Job growth
- Stackability, or the extent to which a credential creates opportunities for continued education and career advancement
The result was a framework grounded in student outcomes and labor market evidence that can help policymakers, institutions, and students better understand which credentials are most likely to support economic independence.
Following the framework’s development, SCORE worked with state leaders to translate the framework into actionable policy recommendations. Through those conversations, it became clear that Tennessee’s outcomes-based funding formula presented an important opportunity to better align institutional incentives with workforce opportunity and student success.
THEC’s decision to incorporate the key methodology of the Impact Credential Framework into the Workforce Investment Premium represents an important step forward. It signals that student success should be measured not only by credential completion but also by whether a credential creates meaningful economic opportunity after graduation.
The Work Ahead
While these changes are significant, the work is far from complete.
Successful implementation will require practical tools and ongoing support for institutions as they adapt to the updated formula. Colleges and universities will need clear guidance on how programs align to the Impact Credential Framework and how changes in funding incentives may influence academic planning and program development. State leaders will also need transparent modeling tools and data resources to support decision-making and evaluate impact over time.
Equally important, Tennessee should continue looking for opportunities to strengthen alignment across the education-to-workforce pipeline. With that goal in mind, state leaders should:
- Establish a statewide goal for increasing the number of Tennesseans who earn impact credentials and regularly track progress toward that goal. Through TN2030, SCORE and partners across the state are working toward a goal of 64% of postsecondary students completing a degree, with 75% of those being impact credentials by 2030.
- Strengthen coordination between education and workforce data systems to improve transparency and help students make more-informed decisions about educational pathways.
- Consider labor market returns when designing state financial aid programs and investments to ensure more students have access to pathways that lead to economic independence.
- Better align K-12 advising, dual enrollment, work-based learning opportunities, and industry credential attainment with workforce needs and impact credential goals.
Tennessee has long been a national leader in outcomes-based funding. The newly adopted changes to the funding formula build on that legacy by placing greater emphasis on the outcomes that matter most to students: access to careers that provide long-term economic opportunity. As postsecondary policy conversations continue to evolve, the Impact Credential Framework offers a roadmap for ensuring that more Tennesseans can move successfully from education to employment — and ultimately to economic independence.
Aleah Guthrie is SCORE’s vice president of policy and government relations. Jack Roberts Jue is SCORE’s senior policy analyst.