(a) To finance a system of higher education and to secure an equitable distribution of state funds deemed to be available for higher education, the board shall perform the functions described in this section. Funding policies shall:
(1) allocate resources efficiently and provide incentives for programs of superior quality and for institutional diversity;
(2) provide incentives for supporting the five-year master plan developed and revised under § 61.051;
(3) discourage unnecessary duplication of course offerings between institutions and unnecessary construction on any campus; and
(4) emphasize an alignment with education goals established by the board.
(b) The board shall devise, establish, and periodically review and revise formulas for the use of the governor and the Legislative Budget Board in making appropriations recommendations to the legislature for institutions of higher education other than public junior colleges funded under Chapter 130A. As a specific element of the periodic review, the board shall study and recommend changes in the funding formulas based on the role and mission statements of those institutions of higher education. In carrying out its duties under this section, the board shall employ an ongoing process of committee review and expert testimony and analysis.

(b-1) A committee under Subsection (b) must be composed of representatives of a cross-section of institutions representing each of the institutional groupings under the board’s accountability system, other than public junior colleges funded under Chapter 130A. The commissioner of higher education shall solicit recommendations for the committee’s membership from the chancellor of each university system and from the president of each institution of higher education that is not a component of a university system. The chancellor of a university system may recommend to the commissioner at least one institutional representative for each institutional grouping to which a component of the university system is assigned. The president of an institution of higher education that is not a component of a university system may recommend to the commissioner at least one institutional representative for the institutional grouping to which the institution is assigned.
(c) Formulas for basic funding shall:
(1) reflect the role and mission of each institution;
(2) emphasize funding elements that directly support faculty;
(3) reflect both fixed and variable elements of cost; and
(4) incorporate, as the board considers appropriate, goals identified in the board’s long-range statewide plan developed under § 61.051.
(d) Not later than June 1 of every even-numbered calendar year, the board shall notify the governing boards and the chief administrative officers of the respective institutions of higher education and university systems, the governor, and the Legislative Budget Board of the formulas designated by the board to be used by the institutions in making appropriation requests for the next succeeding biennium and shall certify to the governor and the Legislative Budget Board that each institution has prepared its appropriation request in accordance with the designated formulas and in accordance with the uniform system of reporting provided in this chapter. The board shall furnish any other assistance to the governor and the Legislative Budget Board in the development of appropriations recommendations as either or both of them may request. However, nothing in this chapter shall prevent or prohibit the governor, the Legislative Budget Board, the board, or the governing board of any institution of higher education from requesting or recommending deviations from any applicable formula or formulas prescribed by the board and advancing reasons and arguments in support of them.
(e) The board shall present to the governor and to each legislature a comprehensive summary and analysis of institutional appropriation requests, and for that purpose each institution’s request must be submitted to the board at the same time at which the request is submitted to the Legislative Budget Board. Nothing in this subsection shall be construed as supplanting the duty, responsibility, and authority of an institution of higher education or the governing board thereof to express its appropriative needs directly to the legislature or any committee thereof.
(f) The board shall recommend to the governor and the Legislative Budget Board supplemental contingent appropriations to provide for increases in enrollment at the institutions of higher education. Contingent appropriations may be made directly to the institutions or to the board, as the legislature may direct in each biennial appropriations act. In the event the contingent appropriation is made to the board, the funds shall be allocated and distributed by the board to the institutions as it may determine, subject only to such limitations or conditions as the legislature may prescribe.
(g) The board shall recommend to the institutions, the governor, and the Legislative Budget Board tuition policies for public technical institutes, public junior colleges, public senior colleges and universities, medical and dental units, and other agencies of higher education and vocational and technical programs receiving support from state funds.
(h) The board shall distribute funds appropriated to the board for allocation for specified purposes under limitations prescribed by law and the rules and regulations of the board in conformity therewith, provided that no distribution or allocation may be made to any institution of higher education which has failed or refused to comply with any order of the board as long as that failure or refusal continues.
(i) Repealed by Acts 2013, 83rd Leg., R.S., Ch. 1155, Sec. 62(9), eff. September 1, 2013.
(i-1) Repealed by Acts 2013, 83rd Leg., R.S., Ch. 1155, Sec. 62(9), eff. September 1, 2013.
(j) Funds appropriated to the coordinating board for vocational-technical education may be transferred by interagency contract between the two boards as required to carry out an effective and efficient transition of the administration of postsecondary vocational-technical education.
(k) The legislature shall promote flexibility in the use of funds appropriated to institutions of higher education by:
(1) appropriating base funding as a single amount that is unrestricted to use among the various funding elements of the formula used to determine base funding; and
(2) appropriating to institutions the unexpended balance of appropriations made for the preceding fiscal year.
(l)(1) Except as provided by Subdivision (2), the board may not include in any formula under this section funding based on the number of doctoral students who have a total of 100 or more semester credit hours of doctoral work at an institution of higher education.
(2) Notwithstanding Subdivision (1), the board may approve formula funding for semester credit hours in excess of 100, not to exceed 130 total semester credit hours, for a doctoral student if the institution:
(A) provides the board with substantial evidence that the particular field of study in which the student is enrolled requires a higher number of semester credit hours to maintain nationally competitive standards;
(B) provides the board with evidence that the student’s program or research is likely to provide substantial benefit to medical or scientific advancement and that the program or research requires the additional semester credit hours; or
(C) provides the board with other compelling academic reasons that support the finding of an exception.
(3) The board shall report to the Legislative Budget Board, as part of its report on formula funding recommendations, a listing of the exceptions approved under Subdivision (2) and the associated costs in formula-based funding.
(m) For an institution that charges a reduced nonresident tuition rate under § 54.0601, the board may not include in a formula under this section funding based on the number of nonresident students enrolled at the institution in excess of 10 percent of the total number of students enrolled at the institution.
(n) In the formula applicable to Texas A&M University–Texarkana for funding instruction and operations, the board shall include any semester credit hours taught through distance education to students enrolled at that university who reside in another state and:
(1) as permitted by Section 54.060(a), pay tuition at the rate charged to residents of this state; and
(2) reside in a county in the other state that is contiguous to the county in which the university is located.
(n-1) In the formula applicable to Lamar State College–Orange for funding instruction and administration, the board shall include any contact hours taught through distance education to students enrolled at that college who reside in another state and:
(1) as permitted by § 54.231(a), pay tuition at the rate charged to residents of this state; and
(2) reside in a county or parish in the other state that is contiguous to the county in which the college is located.
(o) In addition to the other funding recommendations required by this section, biennially the board shall determine the amount that the board considers appropriate for purposes of providing funding under § 61.0596 in the following state fiscal biennium to carry out the purposes of that section and shall make recommendations to the governor and the Legislative Budget Board for funding those programs in that biennium. To the extent the board considers appropriate, the board may include in the formulas established under this section the funding to be provided under § 61.0596.
(p) In its instruction and operations formula applicable to an institution of higher education, the board may not include any semester credit hours earned for dual course credit by a high school student for high school and college credit at the institution unless those credit hours are earned through any of the following:
(1) a course in the core curriculum of the institution providing course credit;
(2) a course offered by the institution providing course credit in:
(A) a field of study curriculum developed by the board under § 61.823; or
(B) a program of study curriculum established by the board under § 61.8235;
(3) a career and technical education course that applies to any certificate or associate’s degree offered by the institution providing course credit; or
(4) a foreign language course.
(q) Subsection (p) does not apply to a course completed by a student as part of the early college education program established under § 29.908.
(r) The board shall exclude contact hours or semester credit hours related to a course for which a student is generating formula funding for the third time from the contact hours or semester credit hours reported for formula funding purposes.