KE NT UCKY’S NE W PE RF ORMANCE F UNDING MODE L : WHAT IT ME ANS F OR YOUR CAMPUS Scott B tt Boelscher Bill P ll Payne HCM St HC Strat ategis ists CPE CPE Mode derator Wendell F l Follo llowell Lee ee Nimo mocks, C CPE KC KCTCS
Outcomes Based Funding September 17, 2019 StrategyLabs.LuminaFoundation.org
Relentlessly Focused on Attainment StrategyLabs.LuminaFoundation.org 3
60% of adults with high quality degrees or credentials by the Year 2025 StrategyLabs.LuminaFoundation.org 4
Lumina’s vehicle for higher education system change Strategy Labs are an open platform for leaders and influencers in all 50 states to share research and data, encourage peer learning and provide opportunities for on-request support from Lumina Foundation and its state policy partners. StrategyLabs.LuminaFoundation.org
Strategy Labs Support • Technical assistance and consulting support is provided to state leaders working to increase higher education attainment in their states. • Four types of support –Non-Partisan, Evidence-Based Policy Expertise –Convening and Facilitation –Advising Policymakers –Research StrategyLabs.LuminaFoundation.org 6
OUTCOMES-BASED FUNDING NATIONAL CONTEXT StrategyLabs.LuminaFoundation.org 7
History of Higher Education Funding Models • Base-plus funding –Linked to historic funding levels –Not tied to state goals and priorities –Lacks transparency • Enrollment-driven models emerged in 1960s –Linked to goal of increasing access –Tied to number of students enrolled –More predictable and transparent –Reduced political competition and lobbying 8 StrategyLabs.LuminaFoundation.org
History of Higher Education Funding Models (cont.) • Tennessee added a performance bonus to their enrollment model in 1978 – Many states followed. Became known as “performance funding”. – Often there were design problems. – Fell in and out of favor over next decades. • In the late 2000s, several states reexamined these older funding methods that no longer aligned with state goals. – Began linking funding to student success, increased attainment, closing equity gaps – Adapted new models from what was learned from earlier models. – This is “performance funding 2.0” or “outcomes-based funding”. 9 StrategyLabs.LuminaFoundation.org
Outcomes-based Funding Theory • Aligns the state’s finance policy with state goals – Attainment, Equity, Workforce, Research, etc • Has the ability to influence institutions through: – Financial incentives – Awareness of state priorities – Awareness of institutional performance • Provides incentives to adopt and scale evidence- based student success practices StrategyLabs.LuminaFoundation.org
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OBF Typology • State funding systems vary significantly in design, focus and sophistication. • HCM Strategists has developed a typology for Outcomes-Based Funding ranging from Type I (Rudimentary) to Type IV (Advanced). Type I Type IV Type III Type II • • • • Not aligned with completion/attainment goals and related priorities Aligned with completion/attainment goals and related priorities Aligned with completion/attainment goals and related priorities Aligned with completion/attainment goals and related priorities • • • • Reliant on new funding only Recurring/Base funding Recurring/Base funding Recurring/Base funding • • • • Low level of state funding (under 5%) High level of state funding (25% or greater) Moderate level of state funding (5 - 24.9%) Low level of state funding (under 5%) • • • • Differentiates by institutional mission Does not differentiate by institutional mission Differentiates by institutional mission, likely Does not differentiate by institutional mission • • • • Total degree/credential completion included Total degree/credential completion not included Total degree/credential completion included Total degree/credential completion included • • • • Outcomes for underrepresented students prioritized Outcomes for underrepresented students not prioritized Outcomes for underrepresented students prioritized Outcomes for underrepresented students may be prioritized • • • • Formula driven/incents continuous improvement Target/recapture approach May not be formula driven Target/recapture approach likely • • • • Sustained for two or more consecutive fiscal years May not have been sustained for two or more consecutive fiscal years Not sustained for two or more consecutive fiscal years May not have been sustained for two or more consecutive fiscal years StrategyLabs.LuminaFoundation.org 12
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OBF as a Share of State Institutional Support: 2-Year Sectors OH (IV) ND (I) AR (IV) NV (IV) TN (IV) KY (IV) LA (IV) WI (IV) CO (III) WY (II) VA (III) TX (III) CA (III) AL (III) MT (III) RI (II) IN (III) FL (I) NM (III) WA (III) KS (I) NC (II) HI (II) NY (II) MI (I) UT (II) IL (II) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Course Completion Progression & Degree Completion Efficiency Other/Mission Non-OBF StrategyLabs.LuminaFoundation.org 15
OBF as a Share of State Institutional Support: 4-Year Sectors ND (I) AR (IV) NV (IV) OH (IV) OR (IV) TN (IV) KY (IV) LA (IV) ME (IV) CO (IV) FL (I) PA (I) RI (I) MT (III) IN (III) NM (III) KS (I) VA (I) WI (II) HI (II) MI (I) UT (II) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Course Completion Progression & Degree Completion Efficiency Other/Mission Non-OBF StrategyLabs.LuminaFoundation.org 16
Continuous Engagement and Support • The model should be a policy tool, not just a budget exercise • Clearly communicate how the model works –Transparent incentives –Interactive projection tools –Report annual effects of model –Funding formula summits StrategyLabs.LuminaFoundation.org
Continuous Engagement and Support • Provide support to institutions –Analysis of institution specific outcome and funding data –Sharing best practices for increasing success –Student success improvement grants • Track and address unintended consequences –Establish formal review process –Monitor academic standards • Student learning outcomes, faculty surveys, grade distributions –Monitor student access –Monitor funding volatility StrategyLabs.LuminaFoundation.org 18
StrategyLabs.LuminaFoundation.org Presented by Scott Boelscher Senior Associate, HCM Strategists Scott_Boelscher@hcmstrategists.com StrategyLabs.LuminaFoundation.org 19
Performance Funding Model for Kentucky’s Public Universities Dr. William Payne, Vice President for Finance and Administration Kentucky Council on Postsecondary Education September 17, 2019
Overview • Impetus for New Approach • Funding Model Goals • Components and Metrics • Key Features • Results Achieved 2 1
I mpetus for New Approach • Accelerate progress toward attainment of state goals for postsecondary education • Address shortcomings of previous funding method • Rectify funding disparities among institutions that had developed over time • Respond to legislative mandate to convene working group and develop model (2016 budget bill, HB 303) 2 2
I mpetus for New Approach (Cont’d) Kent ucky’ y’s B Big Goa oal • Increase educational attainment of working age adults to 60% by 2030 • Currently 45% of KY’s population has 60% in 2030 a postsecondary degree or certificate • Responds to workforce demands for highly trained, educated population • Benefits of increased attainment: − higher income (lower poverty) 45% in 2016 − accelerated job growth − better life choices and health − engaged citizens 2 3
I mpetus for New Approach (Cont’d) Shor ort com om ings of of Previou ous M Met hod od • For more than a decade, state appropriations were distributed based on share of funding received the prior year (across-the-board base + , base -) • This approach failed to recognize changes in: − Enrollment − Program mix − Student outcomes (progression, degree completion) • No financial incentives for achieving desired state goals for postsecondary education 2 4
I mpetus for New Approach (Cont’d) Rect ify F Funding Disparit ies Kentucky Comprehensive Universities (Excluding KSU) Net General Fund Appropriations per FTE Student Fiscal Year 2015-16 $5,709 MoSU $5,427 MuSU $5,029 EKU $4,729 WKU Needed to Reach Median WKU > $ 4.7 M $4,148 NKU > $10.3 M NKU Group $4,918 Average $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2 5 Source: Council on Postsecondary Education, Comprehensive Database.
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