1. IBHE Presentation 1 Illinois Higher Education Performance Funding Model Steering Committee Meeting September 15, 2014 Dr. Alan Phillips

2. Topics of Discussion Performance Funding Objectives/Mandate Current Situation Metrics for Four-Year Public Institutions Refinement Issues Steering Committee Comments/Concerns Where Do We Go From Here? Refinement Committee Recommendations Timeline IBHE Presentation 2

3. Performance Funding Objectives/Mandate IBHE Presentation 3

4. Performance Funding Objectives 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 97-320 – 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 4 IBHE Presentation

5. Performance Metrics Shall: – Focus on the fundamental goal of increasing completion. – 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. – Maintain the quality of degrees, certificates, courses, and programs. – Recognize the unique and broad mission of public community colleges. IBHE Presentation 5 Public Act 97-320 (HB 1503)

6. Current Situation IBHE Presentation 6

7. Current Situation A revised Performance Funding Model was developed for FY15. Colleges and universities received essentially level funding for FY15 (-$2.8M)(-.2%). However, the FY15 Performance Funding Model was not actually used to allocate funding for FY15 based on performance. Instead, the FY 15 Appropriations carried over the FY14 Appropriations along with the FY14 Performance Funding allocations. IBHE Presentation 7

8. 8 Preliminary FY15 Performance Funding Allocation

9. IBHE Presentation 9 Actual FY15 Performance Funding Allocation Performance Funding* ($ in thousands) FY2014 FY2015 FY2014 - FY 2015 Appropriation Base Budget Level % ChangeSet Aside Performance FundsNet ChangeAppropriation$ Change % Change Public Universities $ 1,232,192.0 $ 1,229,438.5 (0.22) % $6,161.0$ $0.0 $ 1,229,438.5 $ (2,753.5) (0.22) % Chicago State University 37,262.8 37,209.4 (0.14)186.5143.8-42.8 37,166.6 (96.2) (0.26) Eastern Illinois University 44,078.1 43,927.8 (0.34)220.2257.237.0 43,964.8 (113.3) (0.26) Governors State 24,675.0 24,591.4 (0.34)123.3147.724.5 24,615.9 (59.1) (0.24) Illinois State University 74,089.2 73,882.4 (0.28)370.4377.26.8 73,889.2 (200.0) (0.27) Northeastern Illinois University 37,847.4 37,708.3 (0.37)189.0228.839.8 37,748.1 (99.3) (0.26) Northern Illinois University 93,412.6 93,247.1 (0.18)467.4409.7-57.6 93,189.5 (223.1) (0.24) Western Illinois University 52,755.1 52,622.0 (0.25)263.7271.07.3 52,629.3 (125.8) (0.24) Southern Illinois University 204,584.1 204,261.5 (0.16)1,023.5913.8-109.7204,151.8 (432.3) (0.21) Carbondale 145,219.3 144,990.3 (0.16)726.6621.5-105.0 144,885.3 (334.0) (0.23) Edwardsville 59,364.8 59,271.2 (0.16)296.9292.2-4.7 59,266.5 (98.3) (0.17) University of Illinois 663,487.7 661,988.6 (0.23)3,317.03,411.794.7662,083.4 (1,404.3) (0.21) Chicago 307,296.4 306,602.1 (0.23)1,527.91,553.525.6 306,627.7 (668.7) (0.22) Springfield 23,602.9 23,549.6 (0.23)115.8113.4-2.3 23,547.3 (55.6) (0.24) Urbana/Champaign 332,588.4 331,836.9 (0.23)1,673.31,744.871.4 331,908.4 (680.0) (0.20) * FY2015 Performance Funding is based on results from FY 2014 calculations.

10. IBHE Presentation 10 Performance Funding Metrics 4-Year Public Universities

11. FY14 Performance Measures IBHE Presentation 11 MeasuresSource Bachelor’s Degrees (FY09-11) IPEDS Master’s 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 02-04 CohortInst Data Persistence (Completed 24/48/72 Semester Hrs) (FY07-09)Inst Data Cost per Credit Hour (FY09-11) Cost Study Cost per Completion (FY09-11)Cost Study

12. FY15 Performance Measures IBHE Presentation 12 MeasuresSource Bachelor’s Degrees (FY10-12) IPEDS Master’s 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 05-07 Cohort)*Inst Data Persistence- 24 Credit Hours Completed in 1 Year (FY10-12)Inst 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).

13. FY14/FY15 Sub-Categories IBHE Presentation 13 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** *HLS – Homeland Security **CIP 51 – Health Professions & Related Programs

14. Performance Funding Refinement Issues IBHE Presentation 14

15. What is the best way to account for the difficulty of getting underrepresented students through to completion throughout the model? What is the best way to account for high cost entities (i.e. Hospitals and Medical, Dental, and Veterinary schools)? IBHE Presentation 15 Refinement Issues (Issues That Were Pending Resolution for FY15)

16. 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 16

17. Sub-Categories IBHE Presentation 17 Only weighted Bachelor’s, Master’s, and Doctorate and Professional Degrees Did not weight Undergraduate Degrees per 100 FTE - To avoid overweighting sub-populations throughout the model, the percentage weight given to the subcategories would have to be reduced from the current 40%. Otherwise, schools with high numbers of Master and Doctoral students graduating from the subpopulations would be negatively impacted, as credit given to these populations is reduced. - The change would benefit smaller masters degree schools but would disproportionately harm research institutions and those institutions with higher levels of masters and doctoral students. Did not weight Cost per Completion - It is only possible to weight the completion portion of the ratio, a weighted cost is unavailable. Weighting completions without weighting cost does not provide an accurate measure of differential costs to educate particular sub groups. Step 3 – Award an additional premium for the production of certain desired outcomes such as completions by underserved or underrepresented populations

18. Performance Value Calculation IBHE Presentation 18 Step 8 – Add an adjustment factor for high cost entities (i.e. Hospitals, Medical, Dental, and Veterinary Schools) 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.

19. Steering Committee Comments IBHE Presentation 19

20. 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 reduce the number of measures in the model. 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 20

21. Steering Committee Comments Is the percentage devoted to performance funding high enough to make a difference? Would performance funding hurt admission practices and cause some public universities to be more selective? Increased success should be tied to increased funding. We should identify 3-4 of the greatest shortcomings of each institution and apply performance funding to that. IBHE Presentation 21

22. Where Do We Go From Here? Do we stay with the original FY15 recommendation for FY16? Do we need to further revise the FY15 model, and if so, how? Do we work to address Steering Committee comments/concerns, and if so, which ones? How do we address the potential increase in the performance funding set-aside for FY16? IBHE Presentation 22

23. Refinement Committee Recommendations Do we stay with the original FY15 recommendation for FY16? – Yes. – However, In light of the board's recent progress on the Public Agenda that showed significant gaps of achievement for African-Americans, Hispanics and adult learners, Professor Karnes proposed that we double those premiums. – His view is that we need to send a strong signal to our universities that they need to commit resources to reduce and eliminate the gaps. IBHE Presentation 23

24. Refinement Committee Recommendations Do we need to further revise the FY15 model, and if so, how? – Other than possible minor adjustments to the FY15 performance funding model for FY16, we should start with the performance funding baseline we have established and not make any further changes in the existing model for at least three years. – There is concern that additional changes at this time will only serve to move funding, not based on performance, from one set of institutions to another set of institutions. IBHE Presentation 24

25. Refinement Committee Recommendations Do we work to address Steering Committee comments/concerns, and if so, which ones? – At this point in time we should start work on version 2.0 of the performance funding model for implementation in the future (i.e. after 3 years). This would provide time for ILDS to come on line and for the data to mature. This would give us time to address performance funding issues such as first generation students, the inclusion of other high value programs to the STEM sub-category, quality, institutional capacity, geographical differences, efficiency measures, and assess the effectiveness of performance based funding on the institutions. IBHE Presentation 25

26. Refinement Committee Recommendations How do we address the potential increase in the performance funding set-aside for FY16? – Any increase in the performance funding allocation, assuming that there will be no additional funds allocated for performance funding, should be gradual and on the order of no more than 1% per year. – There is great concern regarding the impact of lower tax rates on higher education funding along with the potential impact of a pension cost transfer. IBHE Presentation 26

27. Timeline IBHE Presentation 27

28. Timeline 21 Aug 14- Refinement Committee Meeting (IBHE) 15 Sep 14- Steering Committee Meeting (ISU) 7 Oct 14- IBHE Board Meeting (Loyola) 15 Oct 14- RAMP/Survey Data Due to IBHE by the End of October. 30 Oct 14- Refinement Committee Meeting (IBHE) 20 Nov 14- Steering Committee Meeting (Heartland Community College) 2 Dec 14- IBHE Board Meeting TBD- Refinement Committee Meeting TBD- Steering Committee Meeting 3 Feb 14 (T)- IBHE Board Meeting (IBHE Higher Education Budget/Performance Funding Recommendations to Board) IBHE Presentation 28

29. Questions/Discussion IBHE Presentation 29