IBHE Presentation 1 Illinois Higher Education Performance Funding Model Steering Committee Meeting July 17, 2013 Dr. Alan Phillips

Purpose The purpose of this presentation is to address the remaining issues associated with the refinement of the performance funding model that will be used to allocate funding based on performance as a part of the FY 2015 IBHE Higher Education budget recommendations. Accomplish this in accordance with the intent of Public Act , the Performance Funding legislation, and the goals of the Illinois Public Agenda. IBHE Presentation 2

Performance Funding Objective To develop performance funding models for public universities and community colleges that are… – Linked directly to the Goals of the Illinois Public Agenda and the principles of Public Act – Equipped to recognize and account for each university’s mission and set of circumstances – Adjustable to account for changes in policy and priorities – Not prescriptive in how to achieve excellence and success 3 IBHE Presentation

The Public Agenda Goals 1.Increase Educational Attainment. 2.Ensure college affordability for students, families, and taxpayers. 3.Increase the number of high-quality post- secondary credentials. 4.Better integrate Illinois’ education, research, and innovation assets to meet economic needs of the state. IBHE Presentation 4

Performance Metrics Shall: – Reward performance of institutions in advancing the success of students who are: Academically or financially at risk. First generation students. Low-income students. Students traditionally underrepresented in higher education. – Recognize and account for the differentiated missions of institutions of higher education. – Focus on the fundamental goal of increasing completion. – Maintain the quality of degrees, certificates, courses, and programs. – Recognize the unique and broad mission of public community colleges. IBHE Presentation 5 Public Act

Performance Funding Refinement Issues IBHE Presentation 6

Refinement Committee Recommendations (No Change from FY14/Issues Resolved for FY15) 1.Are there differences in the cost per completion for different sub-categories of students (i.e. is cost for completion for an adult student different than that of a STEM student)? Should that be integrated in the model? 2.Are less prepared students adequately addressed in the model? 3.What is the best way to address the issue of transfer students and part-time students? 4.Do we change the measures or the sub-categories. 5.Do we change the sources of the data for the model? IBHE Presentation 7

6.Are there other high value degrees and programs, in addition to the STEM programs, that we should add to the model? 7.Are we giving enough priority to measures of efficiency? 8.Are we adequately accounting for institutional improvement from year to year? IBHE Presentation 8 Refinement Committee Recommendations (Deferred Issues)

9.What is the best way to account for the difficulty of getting underrepresented students through to completion throughout the model? 10.What is the best way to account for high cost entities (i.e. Hospitals and Medical, Dental, and Veterinary schools)? IBHE Presentation 9 Refinement Committee Recommendations (Issues Pending Resolution for FY15)

Underrepresented Students What is the best way to account for the difficulty of getting underrepresented students through to completion throughout the model? – Four of the five sub-categories address underrepresented students and these sub-categories are weighted in the Bachelors, Masters, and Doctoral completion measures. – They are, however, not weighted in the Cost per Completion or the Completion per 100 FTE measures. – Do we weight the completions in these two categories, and if so, do we readjust the sub-category weights so as to not overweight these sub- populations in the model? IBHE Presentation 10

Underrepresented Students Existing Model vs. Weighting Throughout the Model Without Changing Sub-Populations Premium (40%) IBHE Presentation 11

Underrepresented Students Existing Model vs. Weighting Throughout the Model With Changing Sub-Populations Premiums to 20% and 10% IBHE Presentation 12

High Cost Entities What is the best way to account for high cost entities (i.e. Hospitals and Medical, Dental, and Veterinary schools)? – Need to be accounted for in the model in some way. – Current methodology - Does not account for all of the costs. – Complete Carve-Out – Some schools benefit in the model from these entities (i.e. Completions & Research and Public Service Expenditures). IBHE Presentation 13

High Cost Entities Current High Cost Entities Adjustment – Divide the amount of the university GRF appropriation allocated to fund the high cost entity by the total university GRF appropriation. – Multiply this factor by the university performance value and add the result back to the performance value. – This results in a total performance value for institutions with these high cost entities. – Example: $20M/$200M = X 3200 (PV) = = 3520 = Total Performance Value IBHE Presentation 14

High Cost Entities Proposed High Cost Entities Adjustment (Carve Out) – Step 1: Allocate performance set-aside funds based on an adjusted state appropriation that removes state funds for high cost entities. – Step 2: Calculate performance funding allocations per funding model using adjusted performance set-aside amount. – Step 3: Add back funds to institutions with high cost entities by applying performance funding set-aside percentage (i.e..5% for FY14) to the high cost entities state appropriation. – Step 4: Total allocated funds equal performance funding without high cost entities plus set-aside for high cost entities. Issues – Adjustment results in all appropriated funds being counted in the performance funding allocation and pro rata set aside. – Performance funding dollars allocated to high cost entities are not truly performance based as these funds are added back after performance funding computation. IBHE Presentation 15

High Cost Entities Adjustment Step 1: Allocate performance set-aside funds based on and adjusted state appropriation that removes state funds for high cost entities. – Example: Total State Appropriation – High Cost Entities = Funds Allocated via Performance $2.0 billion – $250 million = $1.75 billion x 0.5% (performance set-aside for FY 14) = $8.75 million Step 2: Calculate performance funding allocations per funding model using adjusted performance set-aside amount. – Reallocate $8.75 million based on performance to higher education institutions per performance model Step 3: Add back funds to institutions with high cost entities by applying performance funding set-aside percentage (i.e..5% for FY14) to the high cost entities state appropriation. – Example: University A – High Cost Entity Appropriation = $100 million x 0.5% = $0.5 million University B – High Cost Entity Appropriation = $150 million x 0.5% = $0.75 million Step 4: Total allocated funds equal performance funding without high cost entities plus set- aside for high cost entities. – Example: University A - $1.25 M (performance funds) + $0.5 M (high cost add back) = $1.75 M University B - $2.0 M (performance funds) + $.075 M (high cost add back) = $2.75 M University C - $0.75 M (performance funds) IBHE Presentation 16

High Cost Entities Existing Model vs. Carve-Out IBHE Presentation 17

Performance Funding Model Steps (4-Year Public University) Step 1 – Identify the performance measures or metrics that support the achievement of the state goals. Step 2 – Collect the data on the selected performance measures. Step 3 – Award an additional premium for the production of certain desired outcomes such as completions by underserved or underrepresented populations Step 4 – Normalize (scale) the data, if necessary, so it is comparable across variables. Step 5 – Weight each of the Performance Measures to reflect the priority of the Measure to the mission of the institution. Step 6 – Multiply and sum the Scaled Data times the Weight to produce the Weighted results. Step 7 – Use the final Weighted results (or Total Performance Value) - excluding high cost entities - to distribute performance funding. Step 8 – Add an adjustment factor (Carve-out) for high cost entities (i.e. Hospitals, Medical, Dental, and Veterinary Schools). IBHE Presentation 18

FY15 Performance Measures IBHE Presentation 19 MeasureSource Bachelors Degrees (FY10-12) IPEDS Masters Degrees (FY10-12) IPEDS Doctoral and Professional Degrees (FY10-12) IPEDS Undergraduate Degrees per 100 FTE (FY10-12) IPEDS Research and Public Service Expenditures (FY11-13) RAMP Graduation Rate - 150% of Time (Fall Cohort)*Institutional Data Persistence-Completed 24 Semester Hours in One Year (FY08-10)*Institutional Data Cost per Credit Hour (FY10-12) Cost Study Cost per Completion (FY10-12) Cost Study *Incorporate transfers per the CCA transfer category definitions (i.e. 30 or fewer credits, 31 to 59 credits, or 60 or more credits).

FY15 Sub-Categories IBHE Presentation 20 Sub-CategoryWeight Low Income (Pell/Map Eligible) 40% - Institutional Data Adult (Age 25 and Older) 40% Hispanic 40% Black, non-Hispanic 40% STEM & Health Care (by CIP Code) 40% - HLS + CIP 51

Steering Committee Comments The committee should look at what is being done in other states to see if there is a simpler or better way to do this. We should look at providing a premium to other “High Value” programs in addition to the Homeland Security (HLS) and CIP Code 51 (STEM) programs. We should take into account the institutional capacity to produce degrees. Geographical differences – are these the same people that are counted as “low income” We need to increase the dollar amounts allocated to performance. We need to include a measure of quality in the performance funding model. We need to look at each institution to see where they need to improve. We should significantly increase the weighting factor for efficiency measures (as much as 25%-30%) IBHE Presentation 21

Next Steps Incorporate input from the Steering Committee. Continue work to resolve the issues. IBHE Board Meeting – August 6, Recommend changes to the model at the next refinement committee meeting – August 22, Continue work to resolve the issues. Steering Committee Meeting – September 11, 2013 Distribute data collection survey to institutions & begin data collection. IBHE Presentation 22

Questions/Comments? IBHE Presentation 23

Back-Up IBHE Presentation 24

Refinement Issues for FY15 1. Are there differences in the cost per completion for different sub-categories of students (i.e. is cost for completion for an adult student different than that of a STEM student)? Should that be integrated in the model? – There are differences in the costs between sub-categories. – The costs for each sub-category would vary by institution. – There is no data available to determine those costs. – We do not know how we would incorporate these cost differentials into the model. Refinement Committee – No change to the model. Would significantly complicate the model, with marginal benefit. IBHE Presentation 25

Refinement Issues for FY15 2. Are less prepared students adequately addressed in the model? – We do not currently have a good way to track these students. – These students tend to be underrepresented students which are already captured in the sub-category weightings. – One possibility would be to add another subcategory for remedial students (defined as first-time undergraduate students who complete remedial education courses in math, English/reading, or both, and are awarded a bachelors degree – (CCA Definition)) Refinement Committee – No change to the model. These students are adequately accounted for in the existing model. IBHE Presentation 26

Refinement Issues for FY15 3. What is the best way to address the issue of transfer students and part-time students? – By definition, IPEDS data does not include transfer or part-time students in the calculation of graduation rates or retention measures. – Based on survey input provided by the institutions, with few exceptions, part-time students were low density students and did not significantly affect the model outcome. – For transfer students, it might be possible to use CCA transfer categories (i.e. 30 or fewer credits, 31 to 59 credits, or 60 or more credits) Refinement Committee – Part-time student numbers will not be included due to their low density. Transfer student numbers will be incorporate in the Graduation Rate and Persistence Measures. As these numbers are not reflected in IPEDS, transfer student numbers will be provided by the institutions. IBHE Presentation 27

Refinement Issues for FY15 4. Do we change the measures or the sub-categories – Do we change the Graduation Rate Measure(s)? – Do we change the Credit Hour Accumulation Measure(s)? – Do we add to the sub-categories (i.e. a remediation measure)? 5. Do we change the sources of data for the model? – IPEDs – Survey – CCA – Cost Study Refinement Committee – Use the 150% of Time, Graduation Rate Measure, but incorporate transfer students per the CCA definitions. (Survey Data) – Use the 24 Semester Credit Hours Completed in the First Year Measure, to include credits earned at other institutions. (Survey Data) – Do not add any additional sub-categories. – Continue to use the existing data sources. IBHE Presentation 28

Refinement Issues for FY15 6. Are there other high value degrees and programs, in addition to the STEM programs, that we should add to the model? – The current STEM program list consists of the Homeland Security (HLS) STEM program list and the CIP Code 51. – There are other programs that could be added to the list of STEM programs such as behavioral or health/nutrition related fields. – When you begin to move away from clearly defined criteria, the determination of what should or should not be STEM, becomes much less clear and much more subject to interpretation. Refinement Committee – Stay with the current list of STEM programs (i.e. HLS List + CIP 51) for now. IBHE Presentation 29

Refinement Issues for FY15 7. Are we giving enough priority to measures of efficiency? – Current measures of efficiency include: Undergraduate Degrees per 100 FTEs Graduation rates per percentage of time Cost per Credit Hour Cost per Completion – Should these measures be given increased weighting? – Should we add additional efficiency measures? Refinement Committee – No change to the model. Given there are four efficiency measures, the Refinement Committee viewed the existing weighting to be sufficient and expressed concern that the addition of another efficiency measure would only serve to dilute the weighting of the other existing performance measures. IBHE Presentation 30

Refinement Issues for FY15 8. Are we adequately accounting for institutional improvement from year to year? – Every institution improved its performance funding scores from FY13 to FY14. – There has been some discussion that each institution should be measured against itself. Until the performance funding model is stabilized, the scores from the current year are not directly comparable to the scores from the previous year due to changes in the model from year to year. In the future, the performance value for each institution could be compared against the previous performance value for that institution. The scores for each individual measure at each institution can be compared against the previous scores for those measures at each institution where they are consistent from year to year. Refinement Committee – No change to the model at this time. We can relook this issue once we get to a point where the model does not change from year to year. IBHE Presentation 31

Refinement Issues for FY15 9. What is the best way to account for the difficulty of getting underrepresented students through to completion throughout the model? – Four of the five sub-categories address underrepresented students and these sub-categories are weighted in the Bachelors, Masters, and Doctoral completion measures. – They are, however, not weighted in the Cost per Completion or the Completion per 100 FTE measures. – Do we weight the completions in these two categories, and if so, do we readjust the sub-category weights so as to not overweight these two categories in the model? – Are there other ways to account for the challenge of educating these students that we should consider? Refinement Committee: Take a look at the results of the current methodology relative to the results of weighting these students throughout the model to determine which method would produce better results. IBHE Presentation 32

Refinement Issues for FY What is the best way to account for high cost entities (i.e. Hospitals and Medical, Dental, and Veterinary schools)? – Need to be accounted for in the model in some way. – Current methodology - Does not account for all of the costs. – Complete Carve-Out – However, some schools benefit in the model from these entities (i.e. Completions and Public Service Expenditures). – Is there another method that would better account for these non- performance costs in the model? – Are their other high cost entities that should be added to the list? Refinement Committee – A complete carve-out would create additional problems and issues. Therefore, we will work to develop a better methodology to account for these entities. No other high cost entities should be added at this time. IBHE Presentation 33

Other States Performance Funding Initiatives West Virginia – Legislation pushed by the Senate did not make it through the house due to concerns about long term implications. The performance benchmarks would have included: Student success as represented by certificate or degree completion; student progression and persistence; affordability and productivity represented by on-time certificate or degree completion; institution differentiation as represented by a mission focus on research, job placement, workforce training, etc.; educating priority populations of adult and low-income students; and increasing certificates or degrees in high need fields. IBHE Presentation 34

Other States Performance Funding Initiatives Mississippi – From enrollment to completions (i.e. degrees awarded and STEM graduates), cost of individual courses, cost of operating the campus, number of at-risk students served by the university. Missouri – 10% of the funding would go toward performance- based funding. Performance measures would include increased student retention, better graduation rates or improved learning. Stop loss at 98%. Louisiana – Creating a task force to develop a funding mechanism for public universities based on school performance. Model would be based on student retention rates, timely progression toward degree completion, certificate and degree production, alignment with projected workforce needs, potential earning power of graduates. IBHE Presentation 35

Other States Performance Funding Initiatives Montana – Moving from an enrollment based model to a completion model. In 2015, 5% of university funding would be based on how well each campus is doing with graduating students and speeding up the six years it typically takes students to graduate. Details have yet to be worked out. Indiana – Rewards schools for growth in number of overall degrees, on-time graduation rates, student retention, number of degrees in STEM and to those receiving federal PELL grants. Remediation rates and a productivity metric defined by each school also factor into the calculation. Current allocation to performance is 5%, which will increase to 6% in 2014 and 7% in IBHE Presentation 36

IBHE Presentation 37 Performance Funding Model (FY14) 4-Year Public Universities

Performance Funding Model Steps (4-Year Public University) Step 1 – Identify the performance measures or metrics that support the achievement of the state goals. Step 2 – Collect the data on the selected performance measures Step 3 – Award an additional premium (i.e. 40%) for the production of certain desired outcomes such as completions by underserved or underrepresented populations Step 4 – Normalize (scale) the data, if necessary, so it is comparable across variables. Step 5 – Weight each of the Performance Measures to reflect the priority of the Measure to the mission of the institution. Step 6 – Multiply and sum the Scaled Data times the Weight to produce the Weighted results. Step 7 – Add an adjustment factor for high cost entities (i.e. Hospitals, Medical, Dental, and Veterinary Schools). Step 8 – Use the final Weighted results (or Total Performance Value) to distribute performance funding. IBHE Presentation 38

Performance Measures IBHE Presentation 39 MeasureSource Bachelors Degrees (FY09-11) IPEDS Masters Degrees (FY09-11) IPEDS Doctoral and Professional Degrees (FY09-11) IPEDS Undergraduate Degrees per 100 FTE (FY09-11) IPEDS Research and Public Service Expenditures (FY10-12) RAMP Grad Rates 100%/150%/200% of Time (Fall Cohort)Institutional Data Persistence (Completed 24/48/72 Semester Hours) (FY07-09)Institutional Data Cost per Credit Hour (FY09-11)Cost Study Cost per Completion (FY09-11)Cost Study Step 1 – Identify the performance measures or metrics that support the achievement of the state goals. Step 2 – Collect the data on the selected performance measures (3-year averages)

Sub-Categories IBHE Presentation 40 Sub-CategoryWeight Low Income (Pell/Map Eligible) 40% - Institutional Data Adult (Age 25 and Older) 40% Hispanic 40% Black, non-Hispanic 40% STEM & Health Care (by CIP Code) 40% - HLS + CIP 51 Step 3 – Award an additional premium for the production of certain desired outcomes such as completions by underserved or underrepresented populations

Scaling Factors Averaged the measures across all of the institutions. The average number of bachelors degrees will serve as the base value. Determine a scaling factor that will normalize the rest of the averages to the average number of bachelors degrees. Adjust the scaling factors as appropriate (i.e. Masters & Doctorates). Multiply all of the initial data by the scaling factor to normalize the data. IBHE Presentation 41 Step 4 – Normalize (scale) the data, if necessary, so it is comparable across variables.

Scaling Factors IBHE Presentation 42 Step 4 – Normalize (scale) the data, if necessary, so it is comparable across variables. MeasureUniversities 1-12 (Avg) Scaling Factor Adjusted Scaling Factor Bachelors Degrees (FY09-11) Masters Degrees (FY09-11) Doctoral and Professional Degrees (FY09-11) Undergraduate Degrees per 100 FTE (FY09-11) Grad Rates 100% of Time (Fall Cohort) Grad Rates 150% of Time (Fall Cohort) Grad Rates 200% of Time (Fall Cohort) Persistence (Completed 24 Semester Hours) (FY07-09) Persistence (Completed 48 Semester Hours) (FY07-09) Persistence(Completed 72 Semester Hours) (FY07-09) Cost per Credit Hour (FY09-11) (Cost Study) Cost per Completion (FY09-11) (Cost Study) Research and Public Service Expenditures (FY09-11) 2,822 1, ,644 1,453 1, , ,914,

Performance Measure Weights IBHE Presentation 43 Step 5 – Weight each of the Performance Measures to reflect the priority of the Measure to the mission of the institution. Doctoral/ Research-Very High Research-HighResearch Measure Bachelors Degrees Masters Degrees Doctoral and Professional Degrees Undergraduate Degrees per 100 FTE Grad Rates 100% of Time Grad Rates 150% of Time Grad Rates 200% of Time Persistence (Completed 24 Semester Hours) Persistence (Completed 48 Semester Hours) Persistence (Completed 72 Semester Hours) Cost per Credit Hour Cost per Completion Research and Public Service Expenditures UIUCUICNIUSIUCISU 17.0%18.0%28.0% 33.0% 14.0%15.0% 14.0%23.0% 13.0%14.0%10.0%8.0%6.0% 4.0% 11.0%13.0%12.0% 1.5% 2.0% 1.0% 1.5% 0.5% 1.0% 1.5% 2.0% 0.5% 1.0%0.5%1.5% 0.5% 1.0%0.5%1.5% 45.0%42.0%28.0%30.0%15.0% 100.0%

Performance Measure Weights IBHE Presentation 44 Step 5 – Weight each of the Performance Measures to reflect the priority of the Measure to the mission of the institution. Masters Colleges & Universities (Large) Measure Bachelors Degrees Masters Degrees Doctoral and Professional Degrees Undergraduate Degrees per 100 FTE Grad Rates 100% of Time Grad Rates 150% of Time Grad Rates 200% of Time Persistence (Completed 24 Semester Hours) Persistence (Completed 48 Semester Hours) Persistence (Completed 72 Semester Hours) Cost per Credit Hour Cost per Completion Research & Public Svc Expenditures SIUEWIUEIUNEIUCSUGSUUIS 42.0%40.0% 45.0%43.0% 28.0%25.0%26.0% 25.0%27.0% 2.5%1.0%0.0% 1.0% 12.0%13.0% 5.0%8.0% 2.0%2.5% 0.0%2.5% 1.5%2.0% 0.0%2.0% 1.0% 0.0%1.0% 5.0%1.0% 1.5%2.0% 7.0%2.0% 2.5% 0.0%2.5% 1.5%4.0% 1.5%4.0% 3.5%2.0% 100.0%

Performance Value Calculation IBHE Presentation 45 Step 6 – Multiply and Sum the Scaled Data times the Weight to produce the Performance Value for each institution. Measure Bachelors Degrees Masters Degrees Doctoral and Professional Degrees Undergraduate Degrees per 100 FTE Grad Rates 100% of Time Grad Rates 150% of Time Grad Rates 200% of Time Persistence (Completed 24 Semester Hours) Persistence (Completed 48 Semester Hours) Persistence (Completed 72 Semester Hours) Cost per Credit Hour Cost per Completion Research & Public Svc Expenditures 2,822 1, ,644 1,453 1, ,566 $112,914,667 3,522 1, ,644 1,453 1, ,566 $112,914,667 DataData + Premium (Data+Premium) x Scale 3,522 1, ,000 1,350 2,300 2,500 3,288 2,906 2,700 -2,760 -1,828 5, % 25.0% 5.0% 10.0% 1.5% 1.0% 0.5% 1.0% 1.5% 2.0% 1.5% 1.0% 20.0% 100.0% Total Performance Value 1, ,129 3,200 xWeight =Scale

Performance Value Calculation IBHE Presentation 46 Step 7 – Add an adjustment factor for high cost entities (i.e. Hospitals, Medical, Dental, and Veterinary Schools) Divide the amount of the university GRF appropriation allocated to fund the high cost entity by the total university GRF appropriation. Multiply this factor by the university performance value and add the result back to the performance value. This results in a total performance value for institutions with these high cost entities. Example: $20M/$200M = X 3200 (PV) = = 3520 = Total Performance Value

IBHE Presentation 47 Percentages for Distribution Total Performance Value 10,840 4,435 3,200 17,302 Percentage of Total 58.7% 24.0% 17.3% 100% Distribution: Pro Rata$587,000 $240,000 $173,000 $1,000,000 University 1 University 2 University 3 Total Funding Allocation Based on Performance Step 8 – Use the Weighted results (or Total Performance Value) to distribute funding based on a Pro Rata Share of the total amount of funds set aside for performance funding.

Results for FY14 Performance funding values increased for all twelve of the four-year public universities from FY13 to FY14. Assuming a.5% funding set-aside: – Variance in funding allocations due to performance ranged from +.11% to -.11%. – The actual funding amount variance ranged from +$71K to -$105K. IBHE Presentation 48