Postsecondary Performance Funding Plans Cheyenne, Wyoming February 20, 2014 Matt Gianneschi, Ph.D. Vice President of Policy and Programs Education Commission of the States 1

Patterns of U.S. High School and College Participation and Completion by Age High School Participation Undergraduate College Participation – Peaks at Age 19, Levels off at Age 30 Earn High School Diploma or Equivalent – Levels off at Age 21 Complete Undergraduate College Degree – Peaks and Levels off at Age 31 0% 20% 40% 60% 80% 100% AGE Note: Includes associate and bachelor’s degrees, but not certificates. 2 Source: U.S. Census Bureau, American Community Survey (Public Use Microdata Sample); prepared by the National Center for Higher Education Management Systems

3 Data File Provided by Patrick Kelly (NCHEMS, 2010) Additional Average Annual Degree Production Needed to Achieve Lumina’s Goal (60%)

Sources: U.S. Census Bureau, Decennial Census and American Community Survey; prepared by the National Center for Higher Education Management Systems (2013) 4 Change in College Attainment from 2000 to 2011 by State – 25- to 34-year-olds

Examples of State-level Performance Funding Plans Tennessee Complete College Tennessee Act of % Outcomes-based funding for HIED Performance is built into initial allocation formula Formula is weighted according to pre-determined outcomes priorities Oregon Creation of the Oregon Education Investment Board Alignment of all systems to accomplish the state’s 40/40/20 goal. Funding to institutions is allocated through performance “compacts” Each board—K-12 districts, community colleges, and universities—negotiates a compact with the OEIB. Colorado Performance contracts for each separate governing board, based on role and mission Performance is self-referencing (institutions “compete” against their own current productivity) The state identified priority goals—completion, student support, underserved populations, and fiscal prudence—and the campuses selected their own metrics aligned with the state goals. 5

Suggestions for Measuring and Monitoring Performance 6 1.Focus on Annual, Achievable, Incremental Change Rather than Benchmarks 2. Measure Change Within Institutions (rather than performance against others) 3. To the Extent Possible, Focus on Activities Institutions Can Influence 4. Maintain Short List of High Priority Goals 5. Ensure That Metrics Are Not in Conflict With One Another 6.Use Existing Data Whenever Practicable 7.Consider “Smoothing” the Effect of Year-over-year Changes (i.e., 3-year averaging) Suggestions for Developing Effective Performance Metrics

Productivity (degrees/FTE enrollment) – Instead of “graduation rates” Credit Hour/Threshold Completion (15/30/60) – Instead of retention Gateway Course Completion (English, math, history, biology, etc.) – Instead of passing remedial courses Expenditures (by institution) or Costs (to students) per Degree – Rather than tuition rates Consider Alternative Measures of Completion, Such as Successful “Transfer-out” and Dual Enrollment Course Completions. Credit Hours at Completion – Rather than “time” to degree. 7 Options for Performance Metrics That Are Sensitive to Campus Differences

8 Tennessee Metrics ( )

Example of Productivity Option Statewide Degrees30,55732,91335,431 FTE133, , , Degrees per 100 Students *Excludes Private IHEs 9 Example of Productivity Metric

Does it Work? Evidence of programmatic efficacy is just now emerging, but consider: – Kentucky (fastest growth in degree attainment in SREB) – Tennessee – dramatic innovations in remedial education and course redesign – Colorado – Overhaul of financial aid policy to align with state priorities Probably not useful to look at historical trends, as the conditions were very different. Consider the “criticality” and magnitude of performance funding. Theory of the Firm (foundation of micoeconomics) – Firms employ factors of production (producers) – Operate in markets (and markets are dynamic) – Firms are assumed to make consistent decisions relative to the market and internal operations – Are profit maximizers (always seek to maximize marginal utility) 10 Does it Work?

Theories That Help Explain Higher Education Revenue Theory of Expenditures – Howard Bowen (1980) – Colleges are “prestige maximizers” and will find infinite uses of revenue – Expenditures are determined by revenues, not markets Resource Dependency Theory (J. Pfeffer) – Organizations are dependent on certain sources of revenues. – These “buyers” influence decisions made within organizations, including structure and products. – “He who pays the piper calls the tune” 11 Theories that Help Explain Higher Education

For More Information ECS Postsecondary and Workforce Development Institute: Dr. Matt Gianneschi: 12 Education Commission of the States 700 Broadway, Suite 810 Denver, Colorado (303)