1. Understanding Subsidy Budget Planning Council 10-3-14

2. Subsidy Components Appropriations are fixed amounts – additional subsidy for growth is relative to what all institutions are experiencing – changing the size of slices of a fixed pie Completions = Formula Subsidy Reimbursement for credit hour production Based on the number of FTE students (30 semester hours) that complete the course (I’s, F’s, and withdraws don’t count) Allocation for at risk completions Degrees = reimbursement for the number of degrees granted Subdivided by residency and risk Doctoral = a fixed pool statewide Allocations for FTE production (55%), degrees granted (30%) and NSF/NIH grant funding (15%) Medical = direct allocation to medical schools based on headcount enrollment Access Challenge = Earmarks for Access institutions (Akron, Cincinnati, Cleveland, Central, Shawnee and Youngstown)

3. OU FY15 Subsidy Projection Degrees Non Residents weighted 50% At Risk degrees have four factors with all possible combinations = 16 groups Age > 22 when starting college EFC < $2,190 ACT < 17 or Developmental Courses Minority Race POM Adjustment – set aside for campuses with excessive space costs Budget = 98% of Projection Degree allocations for the Nursing program were changed to remove the Age risk factor given preliminary feedback that other universities were questioning the at risk calculations associated with online-completion programs. This removed $13.6M from the budgeted subsidy Budget Tab Completions – three-year average of FTE credit hour production At Risk Completions are students completing that fit into two categories of risk - financial need (EFC < $2190 and academic risk (ACT <17 and those in developmental courses))

4. Formula Subsidy Taxonomy Subsidy is earned by producing credit hours 22 cost models 13 Undergraduate 9 Masters 2 Doctoral Represents statewide average cost of producing an FTE (30 semester hours) in different discipline groups) AH = Arts & Humanities BES = Business, Education & Social Science STEM = Science, Technology, Engineering & Math Levels 1 & 2 = introductory / general education At Risk earnings apply only to undergraduate activity Shaded = Graduate Doctoral has separate pool and associated calculation Extra weighting for Graduate and STEM Overall reimbursement is 11% of the cost

5. Subsidy Models Allocation is based on discipline Courses are grouped together by discipline Course-Discipline combinations are grouped together under a model Note that a discipline can show up in multiple models – within each model you would find different courses within that discipline (e.g. Communication) The average cost across the model is the amount used to determine the reimbursement rate for all the courses in that model The most accurate reimbursement approach would be to tie the rate to every course individually but that is not practical so this approach is a middle ground where the cost differences across disciplines and courses is recognized using a rough approximation Statewide AH1Cost Communication6122 English6410 Journalism6543 Philosophy and Religion6675 AH2 Communication9115 English9437 Philosophy and Religion9361 Art7040 Foreign Language7194 Liberal Arts7420 Other Visual/Performing8934 Drama8063 Music7465 AH3 Art11162 Foreign Language9968 Journalism10209 Other Visual/Performing11737 AH4 Liberal Arts14381 Drama16128 Music15615 AH5 Art25114 Communication25206 English21614 Foreign Language24307 Journalism25451 AH6 Drama30248 Liberal Arts36128 Music29747 Other Visual/Performing26627 Philosophy and Religion28819 CLWR1810 CLWR2220 COMS1010 COMS1030 ENG 1510 ENG 1610 ENG 2800 ENG 3850 JOUR1050 MDIA1091 PHIL1010 PHIL1200 PHIL1300 All other COMS courses

6. Model Cost Distributions

7. Subsidy Breakdown

8. OU Subsidy Formula Earnings Reimbursement Cost = statewide average cost to produce an FTE Completed FTE – OBR projection of our three-year average At Risk FTE – three year projection of FTEs within total that are At Risk Completion Earnings = FTE times the Reimbursement Rate Total SSI = both combined Completion SSI Earnings per FTE = Completion SSI / Completed FTEs At risk is a very small fraction of total funding <3%

9. At Risk Formula Earnings At Risk FTEs are weighted by the extent to which completions occur in each subsidy model across the state. This calculation creates a ratio between the completion rate for non-risk to that of at-risk students in each model to come up with a weighting factor that will be used to differentially inflate a university’s FTE for each model For example, AH1 completion rates for Non-risk students is 89% statewide while for At- Risk it is 75%. So 89%/75% = 118.44% so AH1 completions will get an 18.44% extra weight. For AH2 the weight is 9.46% and so on. These weights will be used to calculate the additional subsidy provided for At Risk completions Non Risk % Completion At Risk % Completion

10. At Risk Formula Earnings At Risk FTEs are weighted by the extent to which completions occur in each subsidy model across the state. This calculation creates a ratio between the completion rate for non-risk to that of at-risk students in each model to come up with a weighting factor that will be used to differentially inflate a university’s FTE for each model For example, AH1 completion rates for Non-risk students is 89% statewide while for At- Risk it is 75%. So 89%/75% = 118.44% so AH1 completions will get an 18.44% extra weight. For AH2 the weight is 9.46% and so on. These weights will be used to calculate the additional subsidy provided for At Risk completions Non Risk % Completion At Risk % Completion

11. Campus Risk Index An additional weighting is given to universities that attract more At-Risk students compared to others. In this calculation a statewide weight is determined for each of the three risk combinations (Financial, Academic and Both) and each universities activity is weighted Then a ratio of weighted to unweighted activity is computed to create a campus index Universities with small amounts of at risk completions like OU and Miami get a smaller index than universities with more activity like Central, Shawnee and Cleveland

12. OU Subsidy Formula Earnings This is the OBR calculation of our formula subsidy Three year of FTE Completions Two years of At Risk Completions with the third year projected using the rates for OU derived on the At Risk tab Three year averages Statewide weight for at risk for each model Athens Campus Index Note that at risk components are zero for graduate models since risk applies only to undergraduate activity At risk FTE times the two weights produces additional FTE that get added to the main at-risk FTE number when computing reimbursement Total cost of FTE produced using costs on Assumptions tab Subsidy we will receive

13. Degree Earnings As with the cost of producing credit hours, OBR collects data on the cost to produce degrees (Associate, Bachelors, Masters) across the system

14. At Risk Degree Weights From the four risk factors used for degrees, there are sixteen combinations with a student having zero, one, two, three or all four of the factors – Case 00 through 16 OBR collects data from all universities for the number of at risk student that enroll vs those that complete the degree This is rolled up to the state level and statewide completion rates are created (green) that will be used to weight at risk degrees to provide subsidy for producing them

15. OU Subsidy Degree Earnings This shows the OBR calculation of subsidy for each degree level and subject Four parallel calculations are made for resident/non-resident and not at risk/at risk For Resident/Not at risk, they take our three year average, multiplied by the degree cost that is pulled from the Degree Cost tab to get the total cost of those degrees. That total cost is divided into the statewide total cost of all degrees produced to get a proportion which is multiplied by the appropriation for degrees to determine the SSI earned $4,873,556,633 Grand total cost for all degrees in the state Appropriation = $699,562,035 so SSI is 14.35% of cost The three year average degrees are now adjusted to “degree credits” which take into account instances where a degree is completed at more than one university when the student transfers

16. OU Subsidy Degree Earnings OBR Degrees Tab For NonResident/Not at risk, the process is the similar but the total degrees are calculated by taking the three-year average degree credits times 0.5 to weight non- resident degree at 50% and then times an institutional non-resident rate which is the percentage of non-resident students from that university working in Ohio after graduation. This is a different number for each institution (9.51% for OHIO) 2.4 degree credits * 50% * 9.51% = 0.11193 This calculated number of of degrees is then multiplied by the statewide degree cost to get the total cost of those degrees. That total cost is divided into the statewide total cost of all degrees produced to get a proportion which is multiplied by the appropriation for degrees to determine the SSI earned

17. OU Subsidy Degree Earnings OBR Degrees Tab For Resident/At risk, the process is more complicated because the 16 risk cases are used First the total resident at risk degree credit for each subject are broken down into 16 values using the percentage of our degrees falling into each case As with the Resident/NonRisk degrees, this calculated number of of degrees is then multiplied by the degree cost to get the total cost of those degrees. That total cost is divided into the statewide total cost of all degrees produced to get a proportion which is multiplied by the appropriation for degrees to determine the SSI earned The same process is used for NonResident/At Risk with the additional weighting of 50% and the 9.51% Non Res Weight for OU The 16 values are multiplied by the statewide at risk weights and added up to get a total number of degrees Multiply

18. Doctoral Set Aside InstitutionBase FTEBase %85% Base AKRN7616.17%697 BGSU6855.56%599 CINC2,26118.32%1,843 CLEV1721.39%163 KENT1,0038.13%977 MIAM4373.54%445 OHSU5,07641.15%4,612 OHUN8506.89%791 TLDO6044.90%652 WSUN4573.70%405 YNGS310.25%20 12,337100.00%11,204 Doctoral subsidy is a flat percentage of the appropriation with each university getting a set share as long as they are at 85% of the target set when doctoral subsidy was frozen. This limiting of the doctoral subsidy regardless of how much credit activity occurs at the doctoral level is where the concept of doctoral subsidy being “capped” orginates. With the new taxonomy a new calculation for doctoral was created and will be phased in over 10 years – we are now in year 6 Factors will be the number of degrees granted, funded research dollars and a factor related to mission that was never defined and is now lumped in with the FTE portion.

19. Doctoral Subsidy Earnings For Degree Cost, we have a three year average of $6.7M which is 4.52% of the total across all universities so we will get that proportion of the part of the appropriation allocated to degrees (30%) For Research we have 3.03% of the funded research across the state so we will get that proportion of the part of the appropriation allocated to research (15)%

20. Doctoral Subsidy Earnings Each university gets a proportion share of the each of the three appropriation pools Doctoral Set Aside is for FTE production as long as you hit your target. So we get 6.89% of the $88.8M allocated to that component = $6,247,039 For Degree Cost we get 4.52% of the $50.6M allocated to that component = $2,291,319 For Research we get 3.03% of the $25.3M allocated to that component = $767,546 So our total doctoral funding is $9,305,903

21. Subsidy in Transition OBR two-year transition of the model: FY14 Move appropriation from 25% on degrees to 50% Move all components (completions and degrees) to three-year average Change from funding out-of-state degree costs at 100% to 25% FY15 Merge main campus and regional campus funding models into a single system – removes previous restrictions on what regional campuses could offer Start providing subsidy for Associate Degrees as part of the degree component Award degree subsidy on a fractional basis for transfer students (split funding) “At Risk” defined relative to institution rather than statewide

22. Subsidy in Transition Additional Formula Refinements for FY16 – At Risk Degree subsidy removed for students entering with 30+ credit hours – Students entering with an Associate degree will now be partially funding for a Bachelor degree instead of fully funded

23. Change to At Risk Calculation Students entering with 30+ credit hours have the same completion rate as students with no risk factors The At Risk bonus will be eliminated for students entering with 30+ hours This will decrease degree subsidy for universities with large numbers of transfers and/or large bachelor completion programs (RN-BSN) The value of all other degrees in the system (including other OHIO degrees) will increase

24. RN-to-BSN program: This program has a very large number of degrees which brought in $10M in at risk subsidy for those degrees alone Nearly 100% of the students in that program fall into the Age risk category because they already have an associate degree This attracted an enormous amount of subsidy given the additional weighting provided for at risk degrees - $10M on top of the $20M. Other universities are arguing that age is not really a risk for this type of student and it is likely that this will change, we reduced the resident at risk degrees from 721 to 150 and the non-resident at risk degrees from 11 to 1. This brought the at risk subsidy down by around $7M FY15 Budget Adjustment

25. Change to Funding Multiple Degrees Currently if you provide a Bachelor degree to a student with an Associate degree you receive 100% of the funding for the Bachelor degree – essentially double counting the Associate degree Associate degrees from non-IUC schools (e.g. community colleges) were not counted in this reduction creating a “bonus” on Bachelor degrees for those students. This will change to subtracting the value of the Associate degree from the value of the Bachelor degree and funding the difference regardless of the school where the Associate degree was earned. This drastically reduces the $20M subsidy portion for Nursing degrees as well

26. Net Effect The rough impact of the changes using old data from FY14 has been modeled. This is for illustrative purposes only No changes will be made to FY15 subsidy allocations based on these changes. Modeling will be done later this fall to estimate what would have happened in FY15 if these changes had been implemented In FY16 this reduction will be offset by funding shifting to other degree and by our growth in enrollment – the net effect is still to be determined