New formula would fund Arkansas colleges based on outcomes, not enrollment

The Arkansas Higher Education Coordinating Board on Friday (July 29) approved the framework for a new funding formula based on outcomes rather than enrollment, and the idea must be approved by the Legislature and then fleshed out by education policymakers in time for the 2018-19 school year.

The potential new funding formula would incentivize colleges and universities to achieve goals set by the state. Among those goals are degree and certificate completion, completions by underserved and at-risk students, and completions in certain areas needed by the state and industry, such as in science and technology fields. The funding model would provide incentives for institutions to work together on student transfers. It would include measures of post-completion success, such as enrollment in higher education or effective transition into the workforce.

The formula would encourage faster time to completion with a minimum number of credits. It also would encourage efficient use of resources, including maximizing spending in areas directly impacting student success. Funding for individual institutions would increase or decrease year by year based in part on a “productivity index.”

The framework would replace the current funding formula, which bases funding on enrollment rather than degree or certificate completion, though it was changed somewhat in 2011 so that up to 10% of funding is based on performance.

The state has set a goal of having 60% of its population with some kind of post-secondary degree by 2025, with the greater emphasis being on technical certificates and associate’s degrees.

The framework is described only broadly in a four-page document. It had to be approved by Oct. 15 so it could be presented to Gov. Asa Hutchinson; House Speaker Jeremy Gillam, R-Judsonia; and Senate President Pro Tempore Jonathan Dismang, R-Searcy. The framework must then be approved by the Legislature when it meets in January. Afterward, a more specific formula would have to be approved by the Coordinating Board before eventually being approved in the 2018 fiscal session of the Legislature.

POSSIBLE NEGATIVE CONSEQUENCES
Because the model bases funding on completion, one possible unintended consequence would be schools raising admission requirements in order to attract students most likely to graduate. Dr. Brett Powell, the outgoing Department of Higher Education director, said the funding formula will attempt to discourage that from happening by giving extra weight for serving certain at-risk groups.

Another potential consequence is that institutions will water down academic requirements so more students complete degrees and certificates. Powell said policymakers in large part will have to rely on academic departments to maintain standards.

The proposed formula received the blessing of Hutchinson, who originally directed the Department of Higher Education to consider changes to emphasize completion.

“My priority continues to be increasing the percentage of Arkansans that are career-ready, equipped with degrees and industry-recognized certificates, and this new revolutionary funding model will help us achieve just that,” he said in a statement released by his office.

Also releasing statements of support were Donald Bobbitt, president of the University of Arkansas System; Joseph Steinmetz, chancellor of the University of Arkansas at Fayetteville; Chris Thomason, chancellor of the University of Arkansas Community College at Hope; Dr. Robin Bowen, president of Arkansas Tech University; and Dr. Paul Beran, chancellor of the University of Arkansas at Fort Smith.

“We are supportive of the ADHE commitment to develop a funding formula based on performance. The very nature of our institution is based on our mission statement, which says that our primary focus is to educate students for an ever-changing global world while advancing economic development and quality of place,” Beran said in his statement. “We look forward to being able to show quantitatively that we are having a positive impact on quality of place and economic development through our educational efforts.”

Four other states – Tennessee, Indiana, Ohio and Oregon – have outcomes-based formulas, the governor’s office said. Powell told the coordinating board that Tennessee recently reported success with its model.

Powell said the model will improve completion rates and make higher education more accountable. Moreover, success hopefully would persuade the Legislature to increase funding for higher education, which has remained virtually unchanged for 10 years without keeping up with inflation. Powell said the state’s institutions receive $400 million less than the current funding model recommends.

FUNDING REQUESTS, NEW DIRECTOR
The department will request $169 million from the Legislature in new funding for operating needs for all entities next year, but that amount is unlikely to be funded. This current fiscal year, the total amount of funding for higher education institutions from all state sources was $829 million. The department also will request $250 million for capital funding needs, which usually is funded through general improvement funds. Last year, the amount funded was $6.5 million.

“The reality is, we don’t have a funding model,” Powell said. “What we have is a political process to try to protect what we have and hope for a small increase.”

The framework was approved on Powell’s last day as director. During the same meeting, the coordinating board hired Dr. Maria Markham, vice chancellor for academic services at Cossatot Community College, as the new director. Markham said she would work to refine the model’s details.

“I want to be empirically creative, make sure it works, and then make it big,” she said. “I don’t want to do big things without some evidence that they’ll work. Otherwise, we are sucking up some scarce state resources to do something that will never be implemented.”