Making Sense of Colorado’s Higher Education Funding Formula Review

Funding Formula Review

Colorado’s higher education funding formula determines how state dollars are distributed to public colleges and universities. The current formula uses a mix of student enrollment and student success measures to allocate funding.

Every five years, the Colorado Commission on Higher Education (CCHE) is required to review the higher education funding formula. CCHE completed this review in November 2025 and released a report clarifying important pieces of the formula and identifying opportunities to make the model more transparent, equitable, and aligned to learners’ needs.

While the review stops short of fully aligning state funding with outcomes—an approach we believe is essential to a strong education-to-employment system—it does offer important clarifications to how the current funding model operates. Read more below about why these clarifications matter and what may come next. Importantly, all of the report’s recommendations require legislation to be enacted.

The Current Formula

Although called Step 1, this step is optional and allows the legislature to add to the base funding level of an institution, which is used to calculate total funding distribution in Step 2.

This step is required; it is how the majority of funding is allocated and adjusts funding based on how each institution’s performance changes over time, comparing it only to its own past results and funding rather than to other institutions.

This step is optional and allows for one-time investments. This step has never been used.

The model is intended to reward growth and performance but, in practice, it largely prioritizes stability and continuity.

What CCHE Recommends & Why it Matters

The report recommends simplifying the model and clarifying important pieces of the formula that will improve the system.

Structure & Naming Conventions Changes (Recommendations 1 to 5)

The report recommends the following name changes and funding mechanisms to more accurately reflect how policymakers can allocate funds:

This becomes the major allocation arm supporting institution stability, and it will continue to distribute dollars based on institutional metrics such as total headcount, share of underrepresented minorities, graduation rate, and others.

This lever is modeled after the current Step 2 but more clearly defines how an institution’s prior-year funding is used to stabilize allocations from year to year, and incorporates updated metrics (see below section on modern metrics).

This mechanism allows policymakers to utilize new dollars to reward high-performing institutions.

Because Lever 2 is separate from the stabilizing calculations used in Lever 1, policymakers will have more opportunity to reward outcomes, including program and workforce alignment.

This lever allows one-time funding to support new models, encouraging innovation in creating agile systems that better serve learners.

While Step 3 was not historically used, the report recommends preserving it as a tool for growth.

Why it matters:
Colorado needs a funding model that is understandable, transparent, and aligned with results. These structural changes will help policymakers identify which levers yield the highest return on investment and create opportunities to invest in innovative strategies—advancing a system that puts learners first and remains agile in responding to Colorado’s shifting workforce needs.

Data Sources & Definitions (Recommendations 6 to 12)

The remaining recommendations focus on modernizing metrics to better reflect today’s students and the pathways they take through higher education. Students are increasingly balancing part-time school and work, transferring between institutions, and participating in partnership/bridge programs between institutions. The current formula doesn’t fully reflect all students or pathways. If adopted, the recommendations will result in a formula that clarifies the following metrics:

Resident student enrollment
Share of enrollment from special populations including Pell-grant recipients, underrepresented minorities, and first-generation students
Retention rates for full-and part-time students
Graduation rates (100% and 150% of expected time)
Number of credentials completed (including transfer students who complete at another Colorado public institution)

All these metrics can be calculated using the state-level data system already in place, rather than multiple data sources.

Why it matters:
Colorado can only expand opportunities and build stronger pathways to in-demand careers if the system reflects who is being educated, how they navigate higher education, and if they are succeeding. These metrics put learners first and create more equity in the system, ensuring the state’s investment strategy better reflects the realities of today’s students and is rooted in clear, transparent decision-making.

The report also includes a number of future considerations, including exploring additional ways to recognize success and system efficiency, and making data more transparent and accessible.

Read the Report

What’s Next

The five-year formula review process helps ensure that Colorado’s higher education funding model continues to align with evolving state needs. CCHE has formally adopted these recommendations and is requesting the legislature introduce a bill in 2026 to enact them. Until then, the formula remains unchanged, and no institutions will see changes in funding calculations.

Our Work

At Colorado Succeeds, we look at the state’s education and talent systems through the lens of what drives economic mobility for learners and a strong workforce for Colorado businesses. How the state funds higher education can play a significant role in shaping those outcomes, and we expect outcomes to align with the following business principles.

Learners First – Prioritize the needs of the learner over the system
Equity – Prioritize learners furthest from opportunity
Transparency & Accountability – Collect the right data and share it publicly
Choice & Innovation – Expand options and remove barriers
Return on Investment – Channel limited resources to opportunities for greatest impact
Agility – Respond and adapt to a constantly changing environment

These higher education funding formula refinements are a crucial step toward a funding system that is more accurate, transparent, and better aligned with both learner success and economic growth.

Colorado Succeeds will continue to monitor the policy and implementation of these recommendations, provide timely analysis, and collaborate with partners and business to ensure the state’s investment strategy aligns with the needs of learners, employers, and the communities we serve.

Header photo by Allison Shelley/Complete College Photo Library