Aligning State Resources to Better
Promote Student Success
PRESENTATION TO
THE HIGHER EDUCATION TRUSTEES MEETING
STATE OF ARKANSAS
PULASKI TECHNICAL COLLEGE
DECEMBER 10, 2010
RICHARD L. PETRICK
What Is Performance Funding?
2
“ P ERFORMANCE FUNDING IS A METHOD OF FUNDING PUBLIC
INSTITUTIONS BASED NOT ON INPUTS, SUCH AS ENROLLMENTS,
BUT ON OUTCOMES, SUCH AS RETENTION, DEGREE COMPLETION,
AND JOB PLACEMENT….
T HE PRINCIPAL RATIONALE FOR PERFORMANCE FUNDING HAS
BEEN THAT PERFORMANCE FUNDING WILL PROD INSTITUTIONS TO
BE MORE EFFECTIVE AND EFFICIENT, PARTICULARLY IN A TIME
OF INCREASING DEMANDS ON HIGHER EDUCATION AND
INCREASINGLY STRAITENED STATE FINANCES. ”
CCRC WORKING PAPER #22
Arkansas Trustees Meeting
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Performance Funding: Introduction
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 Why are states turning to performance funding?
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What are they doing?
How can we align incentives with desired results?
For institutions, students, faculty, staff?
What have we learned from previous efforts?
What are the pros and cons of performance funding?
What’s happening in Ohio?
Arkansas Trustees Meeting
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Performance Funding – Why?
The Money Matters
FY 2009 Higher Education Revenue Sources
Source
Amount
Note
State + local $
$88.7 billion
Even with ARRA $ -- no
change from FY 2008
Net tuition
$44.5 billion
Up ~ 7% from FY 2008
Total
$133.3 billion
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Performance Funding – Why?
The Money Matters
FY 2009 Higher Education Revenue Sources
Source
Amount
Note
State + local $
$88.7 billion
Even with ARRA $ -- no
change from FY 2008
Net tuition
$44.5 billion
Up ~ 7% from FY 2008
Total
$133.3
billion
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Performance Funding – Why?
The Money Matters
“Mounting State Debts Stoke Fears of a
Looming Crisis”
New York Times
December 5, 2010
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Performance Funding – Why?
The Money Matters
• Projected state budget gaps:
• FY 2011: $121 billion
• FY 2012: $102 billion
• Post-budget state budget cuts
• FY 2008 - $13 billion (13 states)
• FY 2009 - $43 billion (43 states)
• FY 2010 - $39 billion (39 states)
• FY 2011 - $14 billion (14 states)
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Performance Funding – Why?
The Degree Matters
“Graduation Rates Fall at
One-Third of 4-Year Colleges”
The Chronicle of Higher Education
December 6, 2010
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Performance Funding – Why?
The Degree Matters
• The United States is falling behind other
countries in educational attainment.
• America’s 18 - 24 year-olds are less
well-educated than 25-64 year-olds.
• Graduation rates are low for 4-year
institutions and have not improved
over time (58 percent).
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Performance Funding – Why?
The Degree Matters
• More than 75 percent of students who start
at a community college fail to earn a
certificate or degree within three years.
• U. S. adult learners drop out of college at an
alarmingly high rate.
• Experts predict a serious shortage of
workers with post-secondary degrees and
credentials in the near future
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Performance Funding 1.0: 1980 – 2004
Performance Funding 2.0: 2005 – 2010
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Performance Funding 1.0 v. 2.0
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Version 1.0
Version 2.0
 No national support
 National support*
 Individual state
 State efforts are better
experimentation
 Scattershot evaluation
 No national
clearinghouse
connected & focused
 Stronger evaluations
 Information
accumulating
* From multiple Foundations, National Governor’s
Association, and US Department of Education
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Performance Funding 1.0 –
Many States Tried It
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 Florida
 Missouri
 Oklahoma
 New Mexico
 South Carolina
 Illinois
 Pennsylvania
 Washington
 Ohio
 Tennessee
 Arkansas
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Performance Funding, 1.0
Two examples
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Tennessee was the first
– 1980-81
 Piloted in 1974
 2 % of the state $ in ‘80,
then increased to 5.45%
 Transparent, focused on
few metrics
 Embedded in the subsidy
allocations – not a “bolton” that could be cut when
times are bad
 Relatively simple, flexible
 Sustained
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South Carolina’s
experiment – 1990s
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Very ambitious -- sought to
have 100% of funding based
on performance
Very complex – large
number of indicators and
processes
Threatening – some saw it as
a way of shrinking or closing
inefficient or ineffective
campuses
Terminated
12/10/2010
Performance Funding 2.0
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“We need to measure what matters. We need to know
what the students learn, and what jobs they get. We
need to know why students of some community
colleges do better in the job market than others.
Why minority students at some colleges take longer
to earn a degree than similar students elsewhere.
We don’t know the answers. We’re not even asking
the questions.”
Bill Gates, 2009
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Performance Funding 2.0
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“Over a third of America’s college students and over
half of our minority students don’t earn a degree,
even after six years. So we don’t just need to open
the doors of college to more Americans; we need to
make sure they stick with it through graduation.
That is critical. ”
President Obama, 2010
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The ABCs of Performance Funding – What Do
State Policymakers Want?
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Accountability:
- More graduates in high demand fields
- More focus on success of underserved populations
Better Performance:
- Efficient and cost effective instructional delivery
focused on completions
Collaboration:
- Particularly among two and four year institutions
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The ABCs of Performance Funding – What Do
State Policymakers Want?
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More
Cost-efficient
Student
Success,
More Quickly
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Performance Funding 2.0
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Some examples:
 Louisiana (2010 Legislation)
 Tennessee (2010 Legislation)
 Indiana
 Washington Community Technical Colleges
 Ohio
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Performance Funding 2.0
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Louisiana: State funding reductions, more anticipated.
For 2010-11,
 Adopted the GRAD Act that establishes graduation
rate goals for public institutions
 When institutions meet these goals they are granted
more fiscal autonomy
 Tied 25% of state funds to completion/ transfer and
articulation/workforce/research, including
graduates ages 25 and older, racial/ ethnic
minorities, low income, STEM fields
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Performance Funding 2.0
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Tennessee: Complete College Tennessee Act of 2010
Comprehensive legislation
 Outcomes-based funding model, including
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end of term enrollment,
student retention,
timely progress toward degree completion, etc.
 Transfer/articulation – common course numbers
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Performance Funding 2.0
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In 2009-10, Indiana modified its funding to include–
 Degrees (and for low-income students)
 Course completions
 On-time graduation, and
 Transfer
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Performance Funding 2.0
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Washington Community/Technical Colleges –
 The Board established a student success goal
 Recognized students in all mission areas (including adult
basic education and developmental education), reflect
diverse communities served by colleges
 Measures are simple, understandable, and relevant to
institution, the student and policy makers
 Informed by solid research at Columbia University’s
Community College Research Center
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Performance Funding 2.0
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Washington’s four categories of measures:
1. Momentum points that build towards college-level
skills
2. Momentum points that build to “Tipping Point” and
beyond
3. Earning college level credits in math
4. Completions
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Performance Funding – Advantages
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Institutions do respond to financial incentives
Lessons from Performance Funding 1.0
 Florida
 Washington
 Ohio
 Tennessee
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Performance Funding 2.0 – Advantages
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Opportunity to better align incentives with
desired results for:
 Institutions (state subsidy)
 Students (financial aid, tuition, instructional
delivery)
 Faculty (tenure/promotion/financial awards)
 Staff (promotion/financial awards)
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Performance Funding 2.0 -- Pitfalls
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 Can be difficult to design – need to involve technical
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expertise early
Can be difficult to account for differences in mission
Some data are hard to come by
Need to recognize funds needed to support
institutions’ core functions
Could it lead to grade inflation?
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I. Performance Funding in
Ohio, V 1.0
Ohio had a long history of performancebased funding
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 The first of the four “Challenges” began in the
1980s
 Total funding for the Challenges equaled about
10% of total state operating subsidy for campuses
by late 1990s
 The past successful implementation of
performance funding helped set the stage for
significant changes in FY 2010 and FY 2011
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Performance funding foundations:
Policy design
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The Challenges
Goal
Recipient
Research
Increase third-party sponsored
research $
Public university main
campuses; some private
universities
~$10 - $12 million per
year
Access
Lower tuition to increase
enrollments at access
campuses
Public community
colleges and selected 4year access campuses
~ $65 million per year
Success
Decrease time to UG 4 –year
degrees; improve degree
achievement for at risk
students
Public university main
campuses
~$55 million per year
Jobs
Increase job-related training
Mostly at public twoyear campuses
~$10 million per year
Arkansas Trustees Meeting
$ Distributed
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Performance funding foundations:
Outcomes
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The Challenges
Goal
Outcomes
Research
Increase third-party sponsored
research $
Persistent rise in $ volume of third-part sponsored
research and state per-capita share of such
research. (Source: NSF and related sources)
Access
Lower tuition to increase
enrollments at access
campuses
High spike in enrollments at access campuses
representing what is arguably a net increase in UG
enrollments statewide(that is, the access campus
enrollments did not come at the price of lowered
university enrollments) .(Source: HEI data)
Success
Decrease time to UG 4 –year
degrees; improve degree
achievement for at risk
students
Significant decreased time to degree for UG; slight
increase in 6-year degree rates; increase in number
of at-risk degree recipients. (Source :HEI data)
Increase job-related training
Built job training capacity at access institutions;
served 5% of Ohio’s workforce annually; significant
savings and cost reductions reported by
participating businesses and industries. (Source:
OBR staff surveys.)
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Jobs
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II. Funding Formula Changes
in FY 2010 and FY 2011
II. The Chancellor’s ten-year strategic plan:
Some key elements
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 Strategic plan was mandated by the legislature
 Explicit goals for the new public agenda:
 Enroll
and graduate more Ohioans.
 Increase state aid, improve efficiency, and lower
out of pocket expenses for undergraduates.
 Increase participation and success by firstgeneration students.
 Increase participation and success by adult
students.
 Each goal has a specific metric by which
progress toward the plan is assessed annually.
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II. Changes in place for FY 2010 and FY 2011
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 Major shift to success-based formulas
 Creation of three new formulas:
 University
main campuses
 University regional campuses
 Community colleges
 Endorsed by the Governor and approved by
the General Assembly in H.B. 1
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II. University main campuses
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 Shift from enrollment-based to course- and degree-
completion based formula
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Cost-based course and degree allocations
Empirically-based adjustment (extra weighting) for at-risk
students
Degree-completion component to be phased in slowly
 Setasides for doctoral and medical funding
 Doctoral and medical funding to become more dynamic and
performance-based
 Effects phased in over time
 99% stop loss in FY 2010
 98% stop loss in FY 2011
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II. University regional campuses
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 Shift from enrollment-based to course-completion
based formula
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Cost-based course and degree allocations
Empirically-based adjustment (extra weighting) for at-risk
students
 Plan to add degree-completion component in 2 to 4
years
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Time to permit regional campuses to adjust their missions to
focus more on upper-level undergraduate enrollments
 Effects phased in over time
 99% stop loss in FY 2010
 98% stop loss in FY 2011
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II. Community colleges
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 Will continue to have cost-based enrollment formula
as major basis of funding
 Adding State of Washington’s concept of
‘Momentum Points” -- which Ohio calls “Success
Points” -- beginning in FY 2011
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Success Points share of total community college funding is 5%
in FY 2011, and will increase over time
 Effects phased in over time
 99% stop loss in FY 2010
 98% stop loss in FY 2011
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Toward an integrated state policy in support of
student success
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Goal of public
policy
Institutions
Students
Faculty
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Major financial
policy levers
State subsidy
Status in Ohio
Being
implemented, &
refined
Pilot projects done
Student financial aid,
& evaluations
tuition policy
underway
Compensation;
tenure and
promotion policy
Not planned
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What we know about successful programs
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Common threads – staying power
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Commitment of political leaders, institutional leadership,
faculty, staff and students
Mission sensitivity -- not every institution is expected to have
high performance in every area
No funding cliffs -- effects phased in over time
Transparency/accountability with periodic reports on results
One size does not fit all: Each state approach has been unique,
with some sharing of components
Improvement focus
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Institutions should be able to influence the results over a reasonable
timeframe
Institutions should be able to use the information to develop
strategies for improving student achievement
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Performance and Completion:
What can trustees do?
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 Know your campus numbers
 Know your campus trend line
 Know how your campus compares to peers
 Know how your campus compares to top
performing peers
 Know your campus & state context
 Set specific goals for improvement
 Use the “C.A.S.E.” method to move the needle
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Performance and Completion:
What can trustees do?
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 What is the “C.A.S.E.” method?
Copy
And
Steal
Everything
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Some sources
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Books, articles, presentations by:
Access to Success (NASH)
Brenda Albright (National consultant)
Joseph Burke (The Rockefeller Institute)
Community College Research Center (Columbia University)
Complete College America
Bill and Melinda Gates Foundation
The Lumina Foundation
National Center for Higher Education Management Systems
rpetrick@columbus.rr.com
(614) 598-9437
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Thank You/Questions?
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Appendix: What are “success points?”
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 Measures of student success that are sensitive to the
community college’s mission and students
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Derived from Columbia University Teacher’s College study
One point for each, unweighted by student or program or level
 Success Points include number of students who either:
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Complete their first remedial course;
Successfully complete a developmental Math course last year, and subsequently
enroll in a college level Math; and
Successfully complete a developmental English course last year, and subsequently
enroll in a college level English. …and who
Earn their first 15 semester credit hours
Earn their first 30 semester credit hours
Earn at least one associate degree, from that institution, in a given year.
Complete at least 15 semester credit hours at that institution and subsequently
enroll for the first time at a four year college or university, in Ohio.
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