PRESENTATION TO OHIO SSI STUDY GROUP OVERVIEW OF FUNDING PRACTICES AND STATE EXAMPLES

1. PRESENTATION TO OHIO SSI STUDY GROUPOVERVIEW OF FUNDING PRACTICES AND STATE EXAMPLES Brenda N. Albright September 29, 2005

2. Purposes • Overview of funding methods • Methods/formulas in Tennessee, Kentucky, Florida's community colleges and Colorado • Discuss guiding principles

3. Methods • Incremental funding • Initiative, or opportunity, or priority, funding • Formula funding - Texas developed the first formula - Historically address growth and equity - About half of states use formulas - Formulas go in and out of favor with various states • Performance based funding • Most states use a combination of mechanisms. • The most common approaches are formulas,incremental and initiative funding.

4. GOALS • Equity • Adequacy • Fund growth • Stability in funding • Enhance quality • Reward performance

5. TENNESSEE ($1.1 billion to higher education) • A formula system - Recognizes mission - Matches institutional expenditure patterns - Enrollment-driven - Performance-driven research component - Peer institution factors for faculty salaries • Performance Incentive Funding is also a formula component. • Centers of Excellence (Universities) and Centers of Emphasis (Two-Year Colleges). • An Endowed Chairs program with incentive matching requirement was created by the legislature. • A comprehensive Capital Renewal Funding program

6. KENTUCKY – approximately $1 billion) • Research Challenge Trust Fund. U. of Kentucky and U. of Louisville. • Endowment Match Program – $300 million. • Research Challenge Program – $12 million • Enrollment Growth and Retention - $3.3 million • Lung Cancer Research Program – $11.2million in 2000-02 and $11.7million in 2002-4. • Regional University Excellence Trust Fund • Endowment Match Program - $50 million • Programs of Distinction - $12million • Enrollment Growth and Retention –$5.7million • Action Agenda - $20million

7. KENTUCKY • Technology Initiative Trust Fund - $20 million • Science and Technology Trust Fund -$14 million • Physical Facilities Trust Fund - $345 million of projects. • Postsecondary Education Workforce Development Trust Fund - $15 million of recurring funds were appropriated along with $4.0 million in non-recurring funds. • Adult Education and Family Literacy Funding Program - $23 million • Student Financial Aid and Advancement Trust Fund - $63 million.

8. Kentucky • Base Funding. “Simple” formula approach uses benchmark funding level based on per student funding for peer institutions • University of Kentucky peers are: UCLA, University of Michigan, University of North Carolina, University of Minnesota, Ohio State University, University of Washington, University of Virginia, University of Iowa, University of Wisconsin, University of Georgia, University of Maryland, North Carolina State University, University of Arizona, Pennsylvania State University, University of Illinois – Urbana, University of Florida, Purdue University, University of Texas at Austin, and Texas A & M University.

9. FLORIDA Community Colleges (appropriates $1 billion) Formula approach allocates based on mission, categories include: • Instruction • Academic Support • Library • Student Services • Special Projects • Technology • Physical Plant • Institutional Support • District Cost Differential • The revenue categories used include: • Standard Fee Deduction • Projected Maintenance Funding • State Appropriations Other formula characteristics include: • Designed to reflect “what should be,” rather than what is. • Applied to additional funds. • Recognizes higher costs for rural and isolated colleges and for multi-campus operations.

10. COLORADO • Funding Context – Constitutional amendment . • New voucher funding system, The College Opportunity Fund. One component is a stipend - - Undergraduate stipend, which represents an amount for a full-time student taking 30 credit hours. - $2,400, or $80 per credit hour - Pell eligible students may be eligible to receive half of the stipend amount at independent institution • Performance Contracts • Fee-for Service Contracts Examples: TuitionStipendStudent’s Share U. of Colorado, Boulder $5,784 $2,400 $3,384 Community Colleges $4,418 $2,400 $2,018 The allocation of funds to the various institutions is similar to the allocation prior to the new funding system.

11. Principles • Higher Education should retain institutional autonomy and maximum management flexibility in the use of funds and in decision-making. • The formula should provide for the equitable distribution of available resources, e.g., similar support for similar programs. • The formula should provide recognition of differences in institutional role and mission.

12. Principles • The formula should be compatible with the statewide plan and goals, including: access, quality, protection of physical and human assets, rewarding results and performance, continuous improvement, providing services that help citizens, communities, regions, and the state, and business and industry to meet their goals, and continuous high quality learning experiences that help student develop to their fullest potential. • The formula should adequately and reasonably reflect both current and future funding needs. • The formula should be as simple as possible given the complexity of higher education.

13. Principles • The formula should be based on reliable information and data systems that assure comparability among institutions. • Higher education should demonstrate effective and efficient use of resources and be accountable for the use of public funds. • Higher education must make a persuasive case for additional funding and will only be effective if they speak with one voice. • Higher education has significant program needs that are essential for the state’s future. At the same time, the state’s financial realities must be recognized in annual budget requests. The proposals adopted should be long-term and represent consistent policy and long-term financial needs.