Arkansas House panel OKs new higher ed funding formula 

A new “productivity-based” funding formula for the state’s higher education institutions, a priority of Gov. Asa Hutchinson’s, passed the House Education Committee Tuesday (Jan. 24).

Under House Bill 1209 by Rep. Mark Lowery, R-Maumelle, the new formula would base funding on the institutions’ success in advancing students. The state’s formula is now based on numerical enrollment and infrastructure costs.

The model would award funding based on credentials awarded, student progression toward degrees, time to degree, and other factors. More funding would be awarded for students enrolled in math and science and other high-demand majors, as well as students coming from challenging circumstances. Each student would be worth a certain amount of points. Still to be determined is a metric measuring post-completion success. Adjustments will be made for smaller colleges, which have higher administrative expenses, and research universities.

The model would cap across-the-board higher education funding increases or decreases at 2% per year. An institution could lose no more than 2% a year but could gain more. Funding changes would be based on three-year rolling averages. The bill passed the committee easily on a voice vote. Prior to the session, Gov. Asa Hutchinson listed the funding formula as one of his top legislative priorities.

Arkansas would be the first state to adopt a formula based completely on outcomes, but other states have done so and seen success, said Dr. Maria Markham, the state’s higher education director. Students in Tennessee, for example, completed more degrees in two-year and four-year settings, while more students in Indiana declared for and obtained high-impact degrees.

Graduation rates would not be a factor because enrollment would not be considered and because those rates would disincentivize institutions from enrolling students from challenging circumstances, Markham told reporters afterwards. The formula by default takes graduation rates into account because schools will not be funded for students who aren’t completing.

“If they’re making progress, if they’re moving forward, if they’re moving students from one level to the next, then that’s progress, and that’s something that we want to incentivize,” she said.

The formula was created to help the state reach goals including raising completion and graduation rates by 10%, increasing enrollment of adult students by 50%, raising the attainment rates of underserved student groups by 10%, and improving college affordability.

Markham told reporters that the formula is about 90% complete and will be finished in time for the Arkansas Higher Education Coordinating Board’s meeting in April. The board would approve it before it goes to the governor and then the Arkansas Legislative Council for a required review. The first funding recommendation would come for the 2018-19 academic year.

The formula was crafted over the past two years and has the support of the institutions, Markham said.

“Of course, they haven’t seen their numbers,” she told reporters. “We’ve done some model runs, and if somebody loses money, there’s a good chance that we won’t have 100% support from them, but the system offices, which contain the majority of our schools, as well as the two-year college association have all endorsed it. … No no’s. We’ve got some nervous, but no no’s.”

Bill Stovall, executive director of Arkansas Community Colleges, which represents two-year schools, said afterward that his group supports the formula.

“We are very excited about moving from an equity-based funding formula to something that’s outcomes-based and embraces accountability,” he said. “Obviously, you heard a lot of discussion in there about differences in student populations from institution to institution, and we’re satisfied that the department is pursuing policies within this formula that will address most of that concern.”

Markham said planners tried to anticipate which institutions could be penalized unfairly. Also, a work group of institution representatives spent a couple of days trying to anticipate how institutions might try to game the system. All of the scenarios they considered would cost the institutions more money than they would gain.

Rep. John Walker, D-Little Rock, asked which institutions would win and which would lose.

“I’d like to know, is not this a model really for making the weak weaker and the strong stronger, rather than addressing the needs of the children where you are, taking into account that not everybody can move from Monticello or from Poyen or from other small places to Conway, Fayetteville, or Jonesboro?” he asked.

Markham said that’s why planners added points for students from challenging demographic circumstances.