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HB565 ENROLLED
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HB565
JPLG8FF-3
By Representative Garrett
RFD: Ways and Means Education
First Read: 03-Mar-26
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First Read: 03-Mar-26
Enrolled, An Act,
Relating to higher education; to add Chapter 5B to
Title 16, Code of Alabama 1975, commencing with Section
16-5B-1; to create the College and Higher Education Excellence
and Results (CHEER) Act; to establish a process to provide
bonus funding to higher education institutions that meet
identified student and institution performance goals and
objectives; to establish the College and Higher Education
Excellence and Results (CHEER) Fund and provide for its
funding and appropriations; and to establish the
Outcomes-Based Higher Education Funding Coordinating Committee
and provide for its duties and responsibilities.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Chapter 5B is added to Title 16, Code of
Alabama 1975, commencing with Section 16-5B-1, to read as
follows:
§16-5B-1
This act shall be known and may be cited as the College
and Higher Education Excellence and Results (CHEER) Act.
§16-5B-2
For the purposes of this chapter, the following terms
have the following meanings:
(1) ACADEMICALLY UNDERPREPARED STUDENT. A student that
started his or her academic program without meeting the
readiness requirements established by the Outcomes-Based
Higher Education Funding Coordinating Committee in discussion
with the individual institutions.
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with the individual institutions.
(2) ADULT LEARNER. A student that is 25 years of age or
older.
(3) ALABAMA COMMISSION ON HIGHER EDUCATION (ACHE). The
commission established in Chapter 5 of Title 16, Code of
Alabama 1975.
(4) AVAILABLE FUNDING MULTIPLIER. Formula used to
determine the annual amount of bonus funding available to each
eligible institution calculated like the higher education
portion of the funds appropriated from the Education Trust
Fund Advancement and Technology Fund pursuant to Section
29-9-4, excluding dual enrollment students from the
calculation.
(5) BASE YEAR. The year established by the
Outcomes-Based Higher Education Funding Coordinating Committee
in discussion with the individual institutions to reflect the
reference point prior to the performance year to be used to
measure and compare performance and outcome changes over time.
(6) COLLEGE AND HIGHER EDUCATION EXCELLENCE AND RESULTS
(CHEER) FUND. The fund created by this chapter to provide
bonus funding to higher education institutions that meet
identified student and institution performance goals and
objectives.
(7) COMMITTEE. The Outcomes-Based Higher Education
Funding Coordinating Committee established in Section 16-5B-6.
(8) COMPLETION. The number of degrees or certificates
awarded by an eligible institution.
(9) CREDIT. One semester credit hour or the equivalent.
(10) EDUCATIONAL PROGRAM. A program that leads to a
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(10) EDUCATIONAL PROGRAM. A program that leads to a
certificate, an associate degree, bachelor's degree, technical
degree, micro-credential, industry credential, graduate degree
or any other program as defined by the Outcomes-Based Higher
Education Funding Coordinating Committee in discussion with
the individual institutions.
(11) ELIGIBLE INSTITUTIONS. The following institutions:
a. Alabama A&M University.
b. Alabama State University.
c. Athens State University.
d. Auburn University.
e. Auburn University at Montgomery.
f. Jacksonville State University.
g. Troy University.
h. The University of Alabama at Birmingham.
i. The University of Alabama in Huntsville.
j. The University of Alabama in Tuscaloosa.
k. University of Montevallo.
l. University of North Alabama.
m. University of South Alabama.
n. University of West Alabama.
o. Tuskegee University.
p. Community and technical colleges that are part of
the Alabama Community College System.
(12) EMPLOYED IN A HIGH-DEMAND FIELD. A graduated
student is employed in a job with more jobs available than
qualified candidates to fill or where there will be more jobs
available in that career over a defined period of time, as
determined by the Outcomes-Based Higher Education Funding
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determined by the Outcomes-Based Higher Education Funding
Coordinating Committee in discussion with the individual
institutions.
(13) EMPLOYED IN A HIGH-WAGE JOB. A graduated student
that is employed in a job five years after graduation with a
wage that is at least one of the following, for the 25 to 34
age group, as determined by the Outcomes-Based Higher
Education Funding Coordinating Committee in discussion with
the individual institutions:
a. Ten percent higher than the state median wage for
high school graduates, if the student passed an industry
credential or completed a sub-associate or technical program.
b. Twenty percent higher than the state median wage for
high school graduates, if the student earned an associate
degree.
c. Fifty percent higher than the state median wage, if
the student earned a bachelor's degree or other
post-bachelor's degree.
(14) ENROLLED. A student is enrolled in an educational
institution.
(15) HIGHER-NEED STUDENT. A student that is likely to
require additional supports and services to achieve
postgraduation success, including low-income students,
academically underprepared students, adult learners, and other
categories of higher-need students as identified pursuant to
§16-5B-5.
(16) LOW-INCOME STUDENT. A student who received a full
or partial federal Pell Grant award at any point in the
academic year.
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academic year.
(17) PERFORMANCE YEAR. The year established by the
Outcomes-Based Higher Education Funding Coordinating Committee
in discussion with the individual institutions to reflect the
most recently completed scholastic year used to measure
performance and outcome changes from the established base
year.
(18) PREMIER RESEARCH UNIVERSITY. A public university
whose annual external grants and contracts revenues exceed
$100,000,000 based on publicly available audited financial
statements.
(19) SOME COLLEGE, NO DEGREE. Adults with some
postsecondary education, but have not earned a degree or
credential, including those who dropped out, are currently
enrolled, or took a few classes.
(20) STUDENT POSTGRADUATION SUCCESS. A student that is
enrolled, employed, or enlisted, as defined in this section,
within a time frame of graduating from or completing an
educational program established by the Outcomes-Based Higher
Education Funding Coordinating Committee in discussion with
the individual institutions.
(21) STUDENT RETENTION. Keeping students enrolled and
engaged in an eligible institution from one academic period to
the next, calculated by dividing the number of returning
students by the total number who started in the previous
academic period.
§16-5B-3
(a) There is established a fund in the State Treasury
for higher education institutions of this state which shall be
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for higher education institutions of this state which shall be
known as the College and Higher Education Excellence and
Results (CHEER) Fund. The fund shall be used to provide bonus
funding to higher education institutions that meet identified
student and institution performance goals and objectives. The
fund shall be comprised of all funds appropriated or otherwise
made available by the Legislature from whatever source for the
purposes of this chapter. All funds appropriated to the
Alabama Commission on Higher Education pursuant to Act
2023-378 for outcomes-based funding for 4-year colleges and
universities remaining unencumbered on the effective date of
this act shall be transferred to the CHEER Fund and allocated
as provided in this chapter. All funds appropriated or made
available to the CHEER Fund shall remain in the fund and not
revert or be expended for any other purpose other than those
set out in this chapter.
(b) Except for funds designated for premier research
institutions who certify every five years that external grants
and contracts revenues have grown to the chairmen of the House
Ways and Means Education Committee and Senate Finance and
Taxation Education Committee, which shall be appropriated
annually by the legislature, the fund shall be administered
and distributed by the Alabama Commission on Higher Education
(ACHE) in accordance with this chapter and the provisions of
the annual Education Trust Fund appropriations act. The
commission shall not charge a fee for administration and
distribution of the fund.
(c) The bonus funding appropriated pursuant to this
chapter is subject to and shall be allocated only in
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chapter is subject to and shall be allocated only in
accordance with this chapter or other legislative act and
shall be budgeted and allotted in accordance with Article 4,
Chapter 4 and Chapter 19 of Title 41, Code of Alabama 1975.
Any monetary interest that accrues to the CHEER Fund shall be
retained in the fund from year to year and shall be subject
only to this chapter.
(d) An eligible institution shall be eligible to
receive annual bonus funding from the CHEER Fund only if:
(1) The eligible institution provides the annual data
necessary to measure outcomes, as required by Section 16-5B-6.
(2) The annual data provided by the eligible
institution pursuant to Section 16-5B-6 is accurate and has
not been manipulated by the institution to generate bonus
funding, as determined by the committee in discussion with the
individual institutions. An eligible institution shall not
receive any portion of its current available funding related
to an outcome category with faulty or manipulated data. The
committee may also recommend reductions in future available
funding to any eligible institution that produces faulty or
manipulated data.
(3) The eligible institution is in compliance with
Article 6, Chapter 1 of Title 41, Code of Alabama 1975.
(4) The eligible institution is in compliance with the
requirements of HB_/SB_ of the 2026 Regular Session requiring
annual reports regarding the amount of state and federal funds
received and expended and plans for dealing with funding
reductions.
§16-5B-4
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§16-5B-4
(a) There shall be an outcomes-based higher education
funding program. The commission shall implement the program
commencing with the fiscal year that begins on October 1,
2026, contingent upon funding being appropriated by the
Legislature for such purpose.
(b) The bonus funding described in this chapter shall
be allocated in accordance with this chapter. The total amount
of available funding for the program each year shall be
apportioned among eligible institutions using the available
funding multiplier. An institution may receive bonuses that
total up to its available funding.
§16-5B-5
(a) Subject to available funding for the CHEER Fund for
any fiscal year of the state, the committee in discussion with
the individual institutions shall select factors for inclusion
in the performance outcome categories for CHEER Fund bonus
funding to be identified in the annual Education Trust Fund
appropriations act for each fiscal year:
(1) Student success factors, including:
a. Student postgraduate success, including:
1. Employment in a high-wage job;
2. Employment in a high-demand field; and
3. Enrollment.
b. Adult learner;
c. Completion rate;
d. Higher-need students;
e. Some college, no degree;
f. Student retention; and
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f. Student retention; and
g. Other proposals, initiatives, concepts, as deemed
necessary by the committee in discussion with the individual
institutions, to advance the creation and expansion of
institutions of excellence across all Alabama higher education
while serving the needs of the workforce and communities
throughout the state.
(2) Alignment with economic development and workforce
needs, including certificate and degree production in
high-demand fields and the potential earning power of
graduates.
(3) Research, including increased research expenditures
or receipt of additional matching federal funds or other funds
for research activities by premier research universities.
(4) Innovation, use of methodologies and practices that
accelerate or remove barriers to students obtaining
certificates or degrees, as approved by the committee.
(b) The bonus amount for each weighted category shall
be calculated by multiplying the percentage for each weight,
as determined by the Outcomes-Based Higher Education Funding
Coordinating Committee in discussion with the individual
institutions, by the amount of available bonus funding for
that institution.
(1) If an institution meets or exceeds the identified
performance goals and objectives for a category, it will
receive all of its available bonus funding related to that
category.
(2) If an institution does not meet its identified
performance goals and objectives for a category, the available
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performance goals and objectives for a category, the available
funding for that category shall remain in the CHEER Fund and
available to be appropriated to other eligible institutions at
a later time.
(c) By September 1 of each year, the commission shall
certify the amount to be distributed from the CHEER Fund to
each institution that meets their performance goals and
objectives pursuant to this section and outlined in the annual
Education Trust Fund appropriations act, not to exceed the
available amounts in the CHEER Fund. The commission shall
distribute the appropriations in the CHEER Fund for that
fiscal year to the institutions in the amounts certified.
(d) It is the intent of the Legislature that eligible
institutions receiving bonus funding from this chapter utilize
the funds solely to serve the needs of their student
population in a manner that directly supports and advances the
performance outcome categories selected by the committee
pursuant to Section 16-5B-5, and that is reasonably calculated
to result in measurable improvements in the student success
factors identified therein. Provided, however, bonus funding
received by premier research universities for increased
research expenditures may be used for enhancing and increasing
research and innovation including equipment, instrumentation,
and infrastructure (e.g., hardware and software); recruiting
principal investigators, graduate research students; capital
projects, including renovation of existing facilities;
associated operating and maintenance costs; and matching funds
for federal grants and contracts.
§16-5B-6
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§16-5B-6
(a) There shall be established the Outcomes-Based
Higher Education Funding Coordinating Committee led by the
Chair of the Senate Finance and Taxation Education Committee
and the Chair of the House Ways and Means Education Committee.
(b) The membership of the committee shall include the
following:
(1) A representative of the Council of Presidents, to
represent the four-year institutions, appointed by the
council.
(2) The Executive Director of the Alabama Commission on
Higher Education (ACHE), or his or her designee.
(3) The Chancellor of the Alabama Community College
System, or his or her designee.
(4) The Chair of the Senate Finance and Taxation
Education Committee.
(5) The ranking minority member of the Senate Finance
and Taxation Education Committee.
(6) The Chair of the House Ways and Means Education
Committee.
(7) The ranking minority member of the House Ways and
Means Education Committee.
(8) The Chair of the House Education Policy Committee.
(9) The Chair of the Senate Education Policy Committee.
(10) The Minority Leader of the House of
Representatives, or his or her designee.
(11) The Minority Leader of the Senate, or his or her
designee.
(c) Within one year of the effective date of this act,
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(c) Within one year of the effective date of this act,
the committee shall establish a process for collecting the
data needed to award bonuses for postgraduation success. The
committee, based on recommendations from the Alabama
Department of Workforce, shall also determine every three
years which occupations qualify as high-demand fields and
high-wage jobs, using labor market data, accounting for both
the statewide and regional workforce demand.
(d) The committee shall assist institutions: (i) in
understanding the data that determines their eligibility for
bonus funding; and (ii) in identifying strategies to improve
eligibility.
(e) On a schedule to be determined by the committee,
the committee may make recommendations to the Legislature to:
(1) Adjust the amount of bonus for each outcome to
improve the degree to which the bonus is incentivizing
significant improvements in the outcome;
(2) Define other categories of students who are not
achieving similar success rates as other students on eligible
outcomes and whose identification is not easily subject to
manipulation to earn bonus funding; and
(3) Define the bonus amount for new categories of
students to be included in the annual Education Trust Fund
appropriations act.
§16-5B-7
(a) Each year, the committee shall publish a report on
the implementation and impact of the program.
(1) The report shall include, for the entire state and
each institution, data that shows:
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each institution, data that shows:
a. The number and percentage of students eligible for
bonus funding for each eligible outcome and for each category
of higher-need student; and
b. The bonus funding earned for each eligible outcome
and each category of higher-need students.
(2) Topics in each report shall include, but are not
limited to:
a. Whether any or all of the bonus percentages need to
be adjusted to achieve the purpose of this program; and
b. Any changes and improvements to data collection to
improve accuracy and timeliness of bonus determinations.
Section 2. The outcomes-based funding program
established in this act shall supersede and replace any
existing outcomes-based funding program for eligible
institutions, including the program for the Alabama Community
College System developed by the Alabama Community College
Advisory Council on Outcomes-Based Funding pursuant to Act
2017-217.
Section 3. This act shall become effective on June 1,
2026.
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2026.
________________________________________________
Speaker of the House of Representatives
________________________________________________
President and Presiding Officer of the Senate
House of Representatives
I hereby certify that the within Act originated in and
was passed by the House 12-Mar-26, as amended.
John Treadwell
Clerk
Senate 02-Apr-26 Passed
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