1. 1 Tennessee Higher Education Commission Outcomes Formula Technical Details TBR May 17, 2011

2. 2 Tennessee Higher Education Commission Tennessee Finance Policy Phase-in of the outcomes model Removal of the Hold Harmless policy If TN adheres to a Hold Harmless policy, then it effectively has no finance policy. It effectively has no funding formula if changes in the need calculation do not produce changes in funding levels.

3. 3 Tennessee Higher Education Commission Tennessee Finance Policy Baseline Data; all three institutions are funded at the same percentage.

4. 4 Tennessee Higher Education Commission Tennessee Finance Policy In Year 2, institutions funding requests change, but the overall level of state funding is unchanged ($360).

5. 5 Tennessee Higher Education Commission Tennessee Finance Policy If a Hold Harmless policy is utilized, institutions maintain funding levels though the percentages diverge.

6. 6 Tennessee Higher Education Commission Tennessee Finance Policy If there is no Hold Harmless policy, actual funding changes to equalize the percent funded levels.

7. 7 Tennessee Higher Education Commission Tennessee Finance Policy If overall funding levels decline, the same principle works – actual funding changes to equalize the percent funded levels.

8. 8 Tennessee Higher Education Commission Tennessee Finance Policy Straight forward calculation: overall formula units funding divided by overall formula units recommendation. Take that percentage and multiply by the institutional recommendation.

9. 9 Tennessee Higher Education Commission Tennessee Finance Policy

10. 10 Tennessee Higher Education Commission Tennessee Finance Policy Multiply overall funding level of 57.1% times JSCC calculation of $22M.

11. 11 Tennessee Higher Education Commission Tennessee Finance Policy How the Phase-In Process Works

12. 12 Tennessee Higher Education Commission Tennessee Finance Policy Back to our example, if we know where institutions start (with a Hold Harmless policy)……

13. 13 Tennessee Higher Education Commission Tennessee Finance Policy And if we know where institutions ought to end up (no Hold Harmless policy)……

14. 14 Tennessee Higher Education Commission Tennessee Finance Policy We go 20% of the distance (or, the first year of a 20/30/50 percent phase in schedule). 20% of the $6 difference is $1.2

15. 15 Tennessee Higher Education Commission Tennessee Finance Policy The percent funded levels begin to converge as the Hold Harmless policy begins to be phased out.

16. 16 Tennessee Higher Education Commission Tennessee Finance Policy How the Formula Phase-In Factors Were Derived

17. 17 Tennessee Higher Education Commission Tennessee Finance Policy During the design process, THEC attempted to have the 2010-11 outcomes model estimates replicate the 2010-11 enrollment model numbers. Generally, the design came within +/- five percent.

18. 18 Tennessee Higher Education Commission Tennessee Finance Policy To make every effort to have the outcomes model “pick up” where the enrollment model left off, an additional, temporary calculation was added.

19. 19 Tennessee Higher Education Commission Tennessee Finance Policy For example, if the 2010-11 design estimates “undershot” an institution’s enrollment model by 3%, then a factor of 1.03 was added to the model. This factor would be used during the three year phase in period.

20. 20 Tennessee Higher Education Commission Tennessee Finance Policy The final outcomes model design in 2010 was largely able to replicate the enrollment model.

21. 21 Tennessee Higher Education Commission Tennessee Finance Policy The inverse of the comparison (1/0.986) established the Phase-In Factor. Theoretically, this ensured that the outcomes model design exactly reproduced the previous enrollment model calculation.

22. 22 Tennessee Higher Education Commission Tennessee Finance Policy Or, 1.014 x $105,876,600 = $107,397,000

23. 23 Tennessee Higher Education Commission Tennessee Finance Policy Over the three-year phase-in period, this factor would drift towards 1.0, where it would have no mathematical impact on the calculation.

24. 24 Tennessee Higher Education Commission Tennessee Finance Policy This is the outcomes model phase-in factor and it is distinct from the removal of the Hold Harmless provision.

25. 25 Tennessee Higher Education Commission Formula Phase-In Factors

26. 26 Tennessee Higher Education Commission Outcomes Formula Technical Details TBR May 17, 2011