PRESENTATION TO THE HIGHER EDUCATION TRUSTEES MEETING STATE OF ARKANSAS PULASKI TECHNICAL COLLEGE DECEMBER 10, 2010 RICHARD L. PETRICK Aligning State Resources to Better Promote Student Success

“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 12/10/ What Is Performance Funding?

Performance Funding: Introduction Why are states turning to performance funding? 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? 12/10/2010 Arkansas Trustees Meeting 3

Performance Funding – Why? The Money Matters 12/10/2010 Arkansas Trustees Meeting 4 FY 2009 Higher Education Revenue Sources SourceAmountNote State + local $$88.7 billion Even with ARRA $ -- no change from FY 2008 Net tuition$44.5 billionUp ~ 7% from FY 2008 Total$133.3 billion

Performance Funding – Why? The Money Matters 12/10/2010 Arkansas Trustees Meeting 5 FY 2009 Higher Education Revenue Sources SourceAmountNote State + local $$88.7 billion Even with ARRA $ -- no change from FY 2008 Net tuition$44.5 billionUp ~ 7% from FY 2008 Total $133.3 billion

“Mounting State Debts Stoke Fears of a Looming Crisis” New York Times December 5, 2010 Performance Funding – Why? The Money Matters 12/10/2010 Arkansas Trustees Meeting 6

Projected state budget gaps: FY 2011: $121 billion FY 2012: $102 billion Post-budget state budget cuts FY $13 billion (13 states) FY $43 billion (43 states) FY $39 billion (39 states) FY $14 billion (14 states) Performance Funding – Why? The Money Matters 12/10/2010 Arkansas Trustees Meeting 7

“Graduation Rates Fall at One-Third of 4-Year Colleges” The Chronicle of Higher Education December 6, 2010 Performance Funding – Why? The Degree Matters 12/10/2010 Arkansas Trustees Meeting 8

The United States is falling behind other countries in educational attainment. America’s year-olds are less well-educated than year-olds. Graduation rates are low for 4-year institutions and have not improved over time (58 percent). Performance Funding – Why? The Degree Matters 12/10/2010 Arkansas Trustees Meeting 9

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 Performance Funding – Why? The Degree Matters 12/10/2010 Arkansas Trustees Meeting 10

12/10/2010 Arkansas Trustees Meeting 11 Performance Funding 1.0: 1980 – 2004 Performance Funding 2.0: 2005 – 2010

Version 1.0 Version /10/2010 Arkansas Trustees Meeting No national support Individual state experimentation Scattershot evaluation No national clearinghouse National support* State efforts are better connected & focused Stronger evaluations Information accumulating * From multiple Foundations, National Governor’s Association, and US Department of Education 12 Performance Funding 1.0 v. 2.0

Performance Funding 1.0 – Many States Tried It 12/10/2010 Arkansas Trustees Meeting 13 Florida Oklahoma South Carolina Pennsylvania Ohio Arkansas Missouri New Mexico Illinois Washington Tennessee

Performance Funding, 1.0 Two examples 12/10/2010 Arkansas Trustees Meeting 14 Tennessee was the first –  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 “bolt- on” that could be cut when times are bad  Relatively simple, flexible  Sustained South Carolina’s experiment – 1990s  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

Performance Funding 2.0 “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, /10/2010 Arkansas Trustees Meeting 15

Performance Funding 2.0 “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, /10/2010 Arkansas Trustees Meeting 16

The ABCs of Performance Funding – What Do State Policymakers Want? 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 12/10/2010 Arkansas Trustees Meeting 17

The ABCs of Performance Funding – What Do State Policymakers Want? More Cost-efficient Student Success, More Quickly 12/10/2010 Arkansas Trustees Meeting 18

Performance Funding 2.0 Some examples: Louisiana (2010 Legislation) Tennessee (2010 Legislation) Indiana Washington Community Technical Colleges Ohio 12/10/2010 Arkansas Trustees Meeting 19

Performance Funding 2.0 Louisiana: State funding reductions, more anticipated. For , 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 12/10/2010 Arkansas Trustees Meeting 20

Performance Funding 2.0 Tennessee: Complete College Tennessee Act of 2010 Comprehensive legislation Outcomes-based funding model, including  end of term enrollment,  student retention,  timely progress toward degree completion, etc. Transfer/articulation – common course numbers 12/10/2010 Arkansas Trustees Meeting 21

Performance Funding 2.0 In , Indiana modified its funding to include– Degrees (and for low-income students) Course completions On-time graduation, and Transfer 12/10/2010 Arkansas Trustees Meeting 22

Performance Funding 2.0 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 12/10/2010 Arkansas Trustees Meeting 23

Performance Funding 2.0 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 12/10/2010 Arkansas Trustees Meeting 24

Performance Funding – Advantages Institutions do respond to financial incentives Lessons from Performance Funding 1.0 Florida Washington Ohio Tennessee 12/10/2010 Arkansas Trustees Meeting 25

Performance Funding 2.0 – Advantages 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) 12/10/2010 Arkansas Trustees Meeting 26

Performance Funding Pitfalls Can be difficult to design – need to involve technical 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? 12/10/2010 Arkansas Trustees Meeting 27

I. Performance Funding in Ohio, V 1.0

Ohio had a long history of performance- based funding 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 Arkansas Trustees Meeting 12/10/

Performance funding foundations: Policy design The ChallengesGoalRecipient$ Distributed 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 4- year 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 JobsIncrease job-related training Mostly at public two- year campuses ~$10 million per year Arkansas Trustees Meeting 12/10/

Performance funding foundations: Outcomes The ChallengesGoalOutcomes 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) JobsIncrease 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.) Arkansas Trustees Meeting 12/10/

II. Funding Formula Changes in FY 2010 and FY 2011

II. The Chancellor’s ten-year strategic plan: Some key elements 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 first- generation students.  Increase participation and success by adult students. Each goal has a specific metric by which progress toward the plan is assessed annually. Arkansas Trustees Meeting 12/10/

II. Changes in place for FY 2010 and FY 2011 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 Arkansas Trustees Meeting 12/10/

II. University main campuses Shift from enrollment-based to course- and degree- completion based formula  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 Arkansas Trustees Meeting 12/10/

II. University regional campuses Shift from enrollment-based to course-completion based formula  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  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 Arkansas Trustees Meeting 12/10/

II. Community colleges 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  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 Arkansas Trustees Meeting 12/10/

Toward an integrated state policy in support of student success 12/10/2010 Arkansas Trustees Meeting 38 Goal of public policy Major financial policy levers Status in Ohio InstitutionsState subsidy Being implemented, & refined Students Student financial aid, tuition policy Pilot projects done & evaluations underway Faculty Compensation; tenure and promotion policy Not planned

What we know about successful programs Common threads – staying power  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  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 12/10/2010 Arkansas Trustees Meeting 39

Performance and Completion: What can trustees do? 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 12/10/2010 Arkansas Trustees Meeting 40

Performance and Completion: What can trustees do? What is the “C.A.S.E.” method?  Copy  And  Steal  Everything 12/10/2010 Arkansas Trustees Meeting 41

Some sources 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 (614) /10/2010 Arkansas Trustees Meeting 42

Thank You/Questions? 12/10/2010 Arkansas Trustees Meeting 43

Appendix: What are “success points?” Measures of student success that are sensitive to the community college’s mission and students  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:  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. Arkansas Trustees Meeting 12/10/