Performance-based funding fails the reality test

Here's a chart:

And here's another chart:

DEGREE	RESEARCH INSTITUTIONS	COMPREHENSIVE INSTITUTIONS
Bachelor’s Degree (Normalized)	1.64425	1
STEM+H	1.56080	1
Under Represented Minority	1.23889	1
Low Income	2.38237	1
Progression (30 Hours)	1.56189	1
Progression (60 Hours)	1.48004	1
Progression (90 Hours)	1.59206	1
Credit Hour (Course Completion)	1.16979	1
Square Feet (M&O)	.80294	1
Direct Cost (Institutional Support)	1.01367	1
FTE Student (Academic Support)	1.40423	1

Comprehensive institutions will receive 1 point per degree in each of the areas. The R1 institutions (UK and UofL) will receive the weightings shown above. This was no easy consensus. Several university presidents expressed serious concerns about combining all four-year universities into one performance funding pool, but ultimately (under some political duress) lost the vote, but agreed to show unity.

The first chart shows the way a steadily decreasing state allocation will be distributed to state universities. The second chart shows a point system designed to allocate funds based on graduation with the decided advantage given to the Research One institutions (UK & UofL). Historically, UK and UofL were placed in separate categories in an effort to level the playing field, like having different classes in state high school football competitions. Under the proposed system, the big schools will compete directly with smaller schools and all of the big boys asserts and advantages will come to bear.  

I say all of this with no animosity toward UK, my alma mater, where I received two degrees and the Sullivan Medallion. But any honest appraisal of this system must acknowledge the potential harm to comprehensives. Graduates and friends of EKU, WKU, NKU, Morehead, and Murray have every right to be concerned. And the perpetual disinvestment in higher education is no gift to UK or Uof L either. 

This is the kind of system where if a comprehensive university does everything perfectly, and reaches every goal, they still stand to lose millions per biennium beginning in 2019. Rest assured that UK and UofL will be OK. The future appears much less certain for the comprehensives. As Tom Harnisch, director of state relations and policy analysis at the American Association of State Colleges and Universities told the Hechinger Report, “There’s an old saying that budget cuts give flagships a cold and regional campuses pneumonia.”

This sort of thing happens whenever funding is inadequate to satisfy the needs of public schools - and these days public universities are no exception. When powerful politicians make choices, they are most heavily influenced by other powerful people. Their solutions and compromises may pay attention to the needy, but they will pay attention to the needs of the powerful. This phenomenon prompted me to postulate before the Kentucky Economics Association, in 2014, that “when funding is inadequate, excellence and equity are forced to compete.”

“We’re creating a caste system in public higher education,” Harnisch said. “The per-student funding is higher for students at public flagships who are often the most prepared and most likely to graduate, but at the community colleges and the regional universities, it’s significantly less.”

The Hechinger Report article does a nice job of outlining how performance-based funding schemes are levying the heaviest toll on colleges that serve the neediest students. It would seem that Kentucky is about to join the list of states where that has been the case. For example...

“When a state budget impasse drained money from public universities and colleges in Illinois beginning in 2015, some were forced to lay off hundreds of employees, shorten their semesters, even warn they might shut down. Enrollment plummeted. Credit ratings fell to junk status.

Chicago State University, for instance, which has a student body that is mainly black and Hispanic and drawn from its neighborhood on the city’s South Side, cut 300 workers from its payroll and — its very future in limbo — managed to attract fewer than 100 new freshmen in the fall.

The flagship University of Illinois, far more of whose students are white and wealthier, was not immune from the predicament. But with cash reserves to tap, and an increase in enrollment that brought in more tuition revenue, it has suffered a far less drastic impact from the still-ongoing budget crisis.”

As the Center on Budget Policy Priorities found, since the last recession, states have cut higher education spending by $8.7 billion a year. That is 18 percent per student. US universities have responded to budget cuts by raising tuition, each time pricing out of the market some percentage of relatively needy students. This is somewhat less impactful at major universities where the students tend to be white and more prosperous. Universities have also cut faculty and staff in order to lower institutional budget obligations.

The 2015 Pell Institute Study of Opportunity in Higher Education found that students from high-income families are eight times more likely to get bachelor’s degrees by the age of 24 than those from low-income families. 

In my opinion, calling the state’s higher education allocation plan “performance-based funding” is really a misnomer. These are dressed up budget cuts. The plan limits higher education funding up front. After years of budget cuts, it virtually guarantees the legislature will not invest any more money in the state’s universities. From there, it places institutions in direct competition for diminishing dollars. But what the plan does very well, is to provide politicians with a performance-based rationale for continuing to underfund Kentucky’s institutions of higher learning. 

Performance-based schemes maybe serve to scratch some political itch, but it is not best for Kentucky or its students.

Despite the compelling logic behind paying for performance in higher education, research comparing states that have and have not adopted the practice has yet to establish a connection between the policy and improved educational outcomes. To date, there are twelve quantitative evaluations of state performance-based funding ...[but] [a]cross this body of research, the weight of evidence suggests states using performance-based funding do not out-perform other states—results are more often than not statistically significant.

This from Linda Blackford at the Herald-Leader:

Overhaul of university funding in Kentucky takes first step toward law

Kentucky legislators took the first step Tuesday in creating a new way of funding higher education that would funnel $1 billion to public universities and colleges based on their graduation rates and other performance measures. 

The Senate Appropriations and Revenue Committee voted 12-1 to pass Senate Bill 153, which has been under construction for months by university presidents, the Council on Postsecondary Education and Sen. David Givens, R-Greensburg. 

The only no vote was from Sen. Robin Webb, D-Grayson, who said she shares the concerns of Morehead State University President Wayne Andrews, who testified Tuesday that the bill’s emphasis on degrees produced could hurt smaller, rural schools.

“We’ve been five years getting here,” Givens said after the vote. “Everyone had to give a little ... but this is best for the commonwealth and best for the institutions long-term.”

In the past, Kentucky’s higher education funding has been based solely on what was provided the year before. That provided little leeway for schools where enrollment grew or shrank. 

The formula would allocate 35 percent of funding based on student success, which would be measured by bachelor degree production, the number of students continuing to progress in credit hours attained, the number of STEM (Science, Technology, Engineering and Math) degrees awarded, and the number of degrees awarded to low-income and under-represented students. 

Another 35 percent would be based on course completion, measured by each university’s share of total student credit hours earned in Kentucky. The number would be weighted to account for cost differences by degree level and academic discipline. 

The last 30 percent of funding is for operations, or what the bill’s authors call “open the door” money, based on each institution’s share of three things: square footage dedicated to student learning, spending on instruction and full-time students.

The Kentucky Community and Technical College System would have a similar formula, but one that is separate from the research and comprehensive universities. It may include an adjustment to account for areas where enrollment is declining, but eventually, the formula would force individual community colleges to compete against each other. 

At least 30 states have some kind of performance-based funding formula, but most of them use such formulas to allocate only a portion of overall state funding. 

Kentucky’s overhaul would start next year by allocating 5 percent of total state funding using the new formula, then move to 100 percent the following year. There are provisions to make sure schools don’t lose money the first two years, but schools would have to compete against each other for funding in the third year. 

Givens said it is important for education to be accessible to all people, but the formula may highlight areas where people are not that interested.

“Taxpayer dollars have to be invested as wisely as possible,” he said.

Andrews said he supports most of the bill’s provisions, but thinks it needs tweaks to help schools that charge lower tuition and serve in-state students. Morehead’s enrollment area, for example, “is in population decline due to the demise of the coal industry,” he said.

The funding formula will be administered by the Council on Postsecondary Education. 

“Everybody had to compromise something,” said council President Robert King. “We think this is as fair a way to distribute the funds we have, recognizing the most important factors to achieve and improve the larger quality of life for the citizens of Kentucky.”

Read more here: http://www.kentucky.com/news/local/education/article134100119.html#storylink=cpy