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Tennessee Higher Education Commission

Tennessee Higher Education Commission. Tennessee’s Outcomes-Based Funding Formula AASCU – December 1, 2011. 1. TN Finance Policy Overview. Tennessee Higher Education Commission.

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Tennessee Higher Education Commission

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  1. Tennessee Higher Education Commission Tennessee’s Outcomes-Based Funding Formula AASCU – December 1, 2011 1

  2. TN Finance Policy Overview Tennessee Higher Education Commission • For decades, TN operated an enrollment-based funding formula for higher education, with a 5% Performance Funding add-on. • Recently, the policy focus has shifted from enrollment to productivity (educational attainment and workforce preparation). • In response, states have altered Performance Funding programs or added productivity incentives to existing models. 2

  3. TN Finance Policy Overview Tennessee Higher Education Commission • However, enrollment is still the basis of these models. The vast majority of funding is still distributed as a function of enrollment. • There is a disconnect between the state policy focus (productivity) and the finance policy instrument (enrollment). 3

  4. TN Finance Policy Overview Tennessee Higher Education Commission • TN completely threw out its enrollment model and started over, building from scratch an outcomes-based model that is unique in higher education policy. • Key features: exclusive use of outcomes, in lieu of enrollments; institution specific weighting structure for the outcomes; end of entitlement approach to funding. 4

  5. Tennessee Finance Policy Genesis Tennessee Higher Education Commission • In 2009, THEC proposed to former Governor Phil Bredesen a new incentive structure – an outcomes-based funding formula that would replace the enrollment based funding formula. • Gov. Bredesen included THEC’s idea of an outcomes-based model in a proposal for higher education reforms that he made to the Legislature. • In January 2010, Tennessee passed the “Complete College Tennessee Act” which called for the creation of an outcomes-based funding formula. 5

  6. Tennessee Higher Education Commission TN Outcomes-Based Formula • This is not a reform to TN’s long-standing Performance Funding program. • The outcomes-based model completely replaces the enrollment-based model. • Enrollment, beginning or end of term, simply no longer factors into TN higher education state funding. • The outcomes model is not for the allocation of any new state funding, but for all state funding. 6

  7. TN Outcomes-Based Formula Tennessee Higher Education Commission Universities 7

  8. TN Outcomes-Based Formula Tennessee Higher Education Commission Community Colleges 8

  9. TN Outcomes-Based Formula Tennessee Higher Education Commission • The outcomes-based model “weights” outcomes differently by institution. • For instance, as graduate degrees and research have a larger role in institutional mission, they are weighted more heavily in the model. • This weighting feature allowed the model to be designed specifically to an institution’s mission. 9

  10. Tennessee Higher Education Commission TN Outcomes-Based Formula Bachelors degrees; little research/doctoral degrees Extensive doctoral degrees and emphasis on research

  11. TN Outcomes-Based Formula Tennessee Higher Education Commission • All state funding is back up for grabs every year. • No institution is entitled to some minimal level of appropriations that is based on prior-year funding. • State appropriations have to be earned anew each year. 11

  12. TN Outcomes-Based Formula Tennessee Higher Education Commission • THEC convened a Formula Review Committee to discuss and debate the new formula design. • The committee included representatives from higher education and state government. • The committee included people with vastly different views on higher education. • Broad consensus on the philosophy and principles of new outcomes-based formula model. 12

  13. TN Outcomes-Based Formula Tennessee Higher Education Commission • Institutions played a key role in the process. • Selected campus presidents, CFOs and provosts were members of the Formula Review Committee. • Presidents/chancellors were queried for their suggestions on what outcomes to include and the priority of the outcome. 13

  14. TN Outcomes-Based Formula Tennessee Higher Education Commission • Multiple Formula Review Committee (FRC) meetings • Explicit institutional feedback and input • Regional town halls • Staff background briefings with governing boards, Constitutional officers and legislative members • Campus visits and consultations 14

  15. Developing a New Formula Model Tennessee Higher Education Commission • THEC staff back-tested model designs by simulating the formula calculations for three prior years. • This provided comfort that the new design was stable and that the new model’s behavior was properly understood. • Once the outcomes model was finalized, THEC staff developed a projection tool, a Dynamic Formula Model, that allowed the user to simulate the effect of future changes in productivity. 15

  16. Outcomes Based Model Advantages Tennessee Higher Education Commission • The outcomes model is linked directly to the educational attainment goals of TN’s Public Agenda. • The outcomes model establishes a framework for government to have an ongoing policy discussion with higher education. • The model is adjustable to account for new outcomes or a different policy focus (changing the weights). 16

  17. Outcomes Based Model Advantages Tennessee Higher Education Commission • Emphasizes unique institutional mission. • More transparent and simpler for state government. • Does not penalize failure to achieve pre-determined goals. 17

  18. Lessons Learned in Tennessee Tennessee Higher Education Commission • Go Big. Even a clever PF program at 5% is swamped by the other 95% that is based on enrollment. • Smooth transition from old to new rules of the game. • Proper engineering/Back testing. • Transparency in intention and design. • Institutions must help shape the finance policy (in TN’s case, the outcomes and the weights). 18

  19. Lessons Learned in Tennessee Tennessee Higher Education Commission • Key philosophical and practical impediments to traditional Performance Funding paradigm: • An institutional reluctance to put state funding at risk; • Attempts at large-scale PF designs have been too volatile and complex (see South Carolina in the 1990s). 19

  20. TN Outcomes Formula Tennessee Higher Education Commission • Extensive information, including the outcomes-based formula, are available on the THEC homepage. • tn.gov/thec 20

  21. Tennessee Higher Education Commission Russ Deaton, Ph.D. Associate Executive Director for Fiscal Policy & Administration Tennessee Higher Education Commission 404 James Robertson Parkway, Suite 1900 Nashville, TN 37243-0830 615-532-3860 Russ.Deaton@tn.gov 21

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