Funding Formula (ACT 1203)

1. Funding Formula (ACT 1203) Jackie Holloway Jackie.Holloway@adhe.edu or 501-371-2026

2. The Future of Higher Education In Arkansas “I realize that, without improvement in higher education, our economic development efforts will face enormous barriers.”

3. Why is Change Necessary? “Our woefully low rates of degree completion must changeif we are to truly claim educational success. With thousands more Arkansans now receiving academic scholarships, we have begun addressing the financial barriers that block some students from obtaining their degree. “With this increased enrollment and increased opportunity, I am committed to seeing increased responsibility for results. I want to tie funding for higher-education institutions more closely to coursework completion and graduation rates, not simply to enrollment. “These tax dollars must produce college graduates, not just fill up seats. We can and must double the number of college graduates in Arkansas by 2025if we are to stay competitive. This is a lofty goal aimed at the future, but we must begin implementing it today.” ~ State of the State Address, January 11, 2011

4. Current Needs-Based Funding Model • The initial funding formula was a Needs-Based model and was based on course type, level of enrollment, missions and various other components. • ADHE has incorporated performance (completion) incentives in the model the past few sessions. • 2009-11 funding recommendations were based on 90% census SSCH and 10% end of term SSCH • 2011-13 funding recommendations were based on 80% census SSCH and 20% end of term SSCH

5. Act 1203 Amends Current Model • Amends Arkansas Code 6-61-224 to instruct ADHE, in collaboration with the Presidents & Chancellors, to develop funding formulas with a • Needs-Based component • Outcomes-Centered component (Performance) • The Outcomes-Centered component will be implemented beginning in the 2012-13 school year with funding recommendations affected for the 2013-14 school year.

6. Act 1203 Implementation Funding Allocations

7. Act 1203 Goals • To increase the educational attainment levels of Arkansans by: • Addressing the state’s economic development and workforce needs • Promoting increased certificate and degree production while maintaining a high level of rigor • Acknowledging the unique mission of each institution and allowing for collaboration and minimal redundancy in degree offerings and competitive research • Promoting a seamless and integrated system of postsecondary education designed to meet the needs of all students • And, addressing institutional accountability for the quality of instruction and student learning, including remedial instruction

8. The Needs-Based Component

9. Need-Based Component • Expenditure Functions Need Based Funding Model 4 Year Funding 2 Year Funding 5 SSCH/FTE-based Expenditure functions Teaching Salaries Academic Support Student Services General Institutional Support Workforce Education 6 SSCH/FTE-based Expenditure functions • Teaching Salaries • Instructional Support • Library • General Institutional Support • Public Service • Research

10. Teaching Salaries-Cost Categories Universities All SSCHs are allocated to a cost category

11. Cost Categories and Levels Universities

12. Calculate Teaching Salaries SSCH, Cost Categories & Levels = Faculty FTEs

13. Four Year-Needs Formula Faculty FTEs x SREB Salary

14. All Costs based on SSCHUniversity Model

15. Expenditure Function based on Square footage Facilities M & O for Universities Facilities M & O Universities Calculation of Space Needs: Academic Space The needed square footage is determined using the 5-Factor Academic Space Prediction Model. Space needs are determined in five categories: • Teaching Academic Offices • Library Academic Support • Research

17. Facilities M & O Universities • General Institutional Support - 50% of the Academic Space. • Auxiliary Space is excluded. • Calculation of Funding Needs: • Excess/Shortage Sq. Ft.= Total Sq. Ft. – Model Sq. Ft. • The needed square feet produced by the model will be funded at a set dollar amount per square foot. ($7.30) • Excess/shortage square feet will be funded at a lesser dollar amount per square foot. ($3.20)

18. Expenditure Function for Special Missions Universities UniversitiesSpecial Mission Calculation: • Federal Land Grant Institution = 10% of Teaching Salaries • Traditional Minority Institution = 15% of FTE based Funding

19. Expenditure Function for Diseconomy of Scale Universities UniversitiesDiseconomy of Scale Percent to be added • FTE Enrollment the Formula Need • 0 to 2,000 10% • 2,001 to 2,500 5.0% • 2,501 to 3,000 2.1% • 3,001 to 3,500 1.0%

20. Deduct Tuition and Fees Universities UniversitiesTuition and Mandatory Fee Income • Calculations: = Undergraduate SSCH X $175 = Graduate SSCH X $240 = Doctoral SSCH X $270  Total = Sum of above calculations

21. Needs Based Component Universities Needs-Based Funding Model

22. What Should be Reviewed on the Needs-Based Component? • To ensure the most accurate need is generated, we will need to: • Review the tuition rates • Review the faculty salary rates • Review the census date SSCH (late start programs) • Review that the Distance Education Policy is implemented • Review the Facilities maintenance amount per square foot

23. The Outcomes-Centered Component

24. Where to Start?

25. What should be considered on the Outcomes-centered Component? • Each institution’s unique mission • Flexibility and the ability to accommodate future shifts in mission or productivity emphasis • Performance measures (but not limited to) • Student Retention • Student progression toward credential completion • Number of credentials awarded • High-demand credentials (STEM) • Minority, nontraditional, and economically disadvantaged students • Student transfer activity • Research activity

26. Attributes of Successful Models • Commitment of political leaders, trustees, institutional leadership, faculty, staff and students • Mission sensitivity – not every institution is expected to have high performance in every area • No funding cliffs – effects phased in over time • Transparency/accountability with periodic reports on results • One size does not fit all: Each state approach has been unique, with some sharing of components • Improvement focus • Institutions should be able to influence the results over a reasonable timeframe • Institutions should be able to use the information to develop strategies for improving student achievement

27. Ohio ModelsFour Year • The University Campuses vary depending on their mission: • Main Campuses • Course and degree completions • Contribution to state’s strategic plan • Campuses’ mission • Regional Campuses • Course and degree completion • Participation in low-cost 2 + 2 program (CC and University credits) • Mission-specific contribution to state’s strategic plan

28. Ohio Model2 Year • The community colleges will continue to provide a large portion of funding on enrollment, since they are expected to serve the underprepared, nontraditional. • Student success will be determined by achievements (complete remedial coursework, 15 hours, 30 hours, associates degree)

29. Ohio Models2 Year • The Community and Technical College Funding model consists of 3 components • An enrollment component • A student success component • An institutional specific goals component • With a stop-loss component • Pending adoption “at-risk” component

30. Tennessee Model • Theory that cohort survival determined largely by demographics and academic backgrounds • Data reviewed for past 10 years • The Model: • Generates enrollment & graduation projections for different student groups • Two overall groups: Freshmen and Non-Freshmen

31. Tennessee Model • Freshmen Cohort (6 groups – First time entering) • Dual Enrollment credit • Remedial • Non-resident • Other • 20-24 years of age • 25 years of age and over

32. Tennessee Model • Non-Freshmen Cohort (5 groups) • Returning students • Readmitted students • Non-degree seeking students • Community college transfers • Transfers from other institutions

33. Who Else is Leading the Way • Louisiana • Tied 25% of state funds to completion/ transfer and articulation/workforce outcomes; graduates ages 25 and older, racial/ ethnic minorities, low income groups; STEM fields • Indiana • Degrees awarded; course completions for low-income students; on-time graduation; transfer • Washington • Recognized students in all mission areas (including adult basic education and developmental education); reflects diverse communities served by colleges

34. Websites to Review • http://ccrc.tc.columbia.edu/Publication.asp?UID=693 • http://www.usg.edu/news/release/regents_get_first_look_at_new_performance-based_funding_model/ • http://cpe.ky.gov/policies/budget/fundingmodel.htm • http://www.sbctc.ctc.edu/college/e_studentachievement.aspx

35. Important Points • There will be two separate pools of funding: one for the Needs-Based Component and one for the Outcomes-Centered Component • No institution will lose more than 5% of the previous year’s base. • Only the performance pool will be subject to reallocation based on the institutions’ predetermined measures.

36. Challenges Ahead • It will be important to: • Involve all stakeholders early on • Recognize funds needed to support institutions’ core functions • Determine how to account for differences in missions • Maintain consistency in data among institutions • Know your institution and what is needed to be successful • Ensure grade inflation is avoided

37. Timeline Present Outcomes-Centered Formula to Governor, President Pro Tempore and Speaker Begin working on Funding Recommendations using both Components Present Funding Recommendations for FY2014 to AHECB for approval Present recommended Outcomes-Centered Formula to AHECB for approval Determine Outcomes-Centered components and Distribution methodologies Update AHECB on progress made with Outcomes-Centered measures Spring 2011 July 2011 October 2011 Winter 2011 Spring 2012 July 2012 Present changes to Needs-Based formula if necessary Review changes to Needs-Based formula Present Funding recommendations for FY2013 to AHECB for approval Prepare Budget Manuals for Fiscal Session (February 2012) Prepare Personnel & Capital Recs. Present Personnel & Capital Recs.

38. Committee Timeline Present Outcomes-Centered Formula to Governor, President Pro Tempore and Speaker Presentation on Changes in Funding Meet to determine measures for Outcomes-Centered components and Distribution methodologies Run Scenarios and make adjustments on Performance Measures Update AHECB on progress made with Outcomes-Centered measures Present recommended Outcomes-Centered Formula to AHECB for approval April 2011 May 2011 June 2011 July 2011 October 2011 December 2011 Discuss Changes to Needs-Based Component Create Performance Committee Run Scenarios and make adjustments on Needs component Present changes to Needs-Based formula if necessary Present Funding recommendations for FY2013 to AHECB for approval

39. Recap/Summary • The work other states have done to implement Outcomes-Centered formulas will be helpful in our preparation, but Arkansas and its institutions are unique and this must be kept in mind throughout the process • Many sets of standards may be created because of the differences that exist between institutions • What doesn’t work will be just as important as what does work • The process will start immediately with the Presidents and Chancellors working with ADHE to develop standards

40. Questions??? To review this presentation, click on the link shown below. http://www.adhe.edu/aboutadhe/ahecboard/Pages/board_presentations.aspx