1. FISCAL ENVIRONMENT 1

2. State Tax Capacity & Effort Indexed to U.S. Average Source: State Higher Education Executive Officers (SHEEO) AL AK AZ AR CA CO CT DE GA HI IL IN IA KS KY LA ME MD MA MS MT NE NV NJ NY NC ND OH OK PA RI SC SD UT VT VA WA FL ID MI MN MO NH NM TN TX WV WI WY 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 0.60.81.01.21.4 State Tax Capacity (Total Taxable Resources Per Capita) State Tax Effort (Effective Tax Rate) US OR slide 2

3. Projected State and Local Budget Surplus (Gap) as a Percent of Revenues, 2016 slide 3 Source: NCHEMS; Don Boyd (Rockefeller Institute of Government), 2009

4. After stimulus wanes, gaps could approximate 4% of spending, or $70 billion, even under the “Low-Gap” Scenario Source: Don Boyd (Rockefeller Institute of Government), 2009 slide 4

5. After stimulus wanes, gaps could approach 7% of spending or $120 billion under the “High-Gap” scenario Source: Don Boyd (Rockefeller Institute of Government), 2009 slide 5

6. FINANCE: ALIGNMENT WITH STRATEGIC PLANNING 6

7. May 10, 2001 7 The Management Cycle in a Public University System System Planning Institution System Assessment Institution System Resource Allocation Institution

8. The Flow of Funds - State 8 Federal Government Tax Policy Appropriations/GrantsStudent Aid Tuition Scholarships & Waivers Available State and Local Govt. Funds Higher Education StudentsInstitutions Economy K-12 Corrections Health Care Other Govt. Stimulus Funds

9. FINANCE POLICY 9

10. The Two Purposes of State Funding Policy Build Core Capacity—General Purpose Funding Promote Capacity Utilization Around State Priorities— Special Purpose Funding

11. Criteria for Effective Higher Education Finance Policy Create and Maintain Necessary Institutional Capacity Reinforce Utilization of Capacity to Achieve State Goals Contributions Required Are Affordable— To Both State and Students Viewed as Being Fair Transparent

12. Finance Policy—The Options Institution Focused Student Focused Core Capacity Capacity Utilization/ Public Agenda Tuition and Aid Policy Focused on Attainment of Specified Outcomes Base-Plus Formulas Investment Funds Performance Funding Tuition and Aid Policy Focused on Revenue Generation

13. Basic Questions at State Level How Much to Allocate To Which Recipients—Students or Institutions Using Which Mechanisms

14. A Key Distinction Investment Funds –Capacity Building –A Priori Incentive Funds –Capacity Utilization –Post Facto

15. Remember—All Funding Mechanisms Provide Incentives for Behavior Central Question: Are the Behaviors Elicited the Ones You Want?

16. Components of a Higher Education Funding Model (the Institutional Piece) Base Institutional Funding –The Largest Portion, by far –The Current Mississippi Funding Formula Fits in this Category Special Purpose Funds—Resources Set Aside Explicitly to Provide Incentives for Certain Outcomes

17. One Set of Trade-Offs UnitTotalTotalRevenues QuantityCharacteristicsUtilizationCostCost $Rev. $Sources Assets Personnel Facilities Equipment Collections Students Finances Program Consumables Services Supplies Utilities Contingency New Initiatives = Tuition Appropriations Govt. Grants Private Gifts Endowment Sales & Services Other Reserves

18. Illustrations of Peer Comparisons from University of Maine System 18