1. WACTC 2014 Allocation and Accountability Recommendations - Briefing SBCTC October 2014

2. Part I Overview of Allocation Concepts Past and Present 2

3. 3 The Allocation Formula – 1985 through 1999 From 1985 to 1999 a multi-stepped formula was used to divide funding among colleges. Formula was provided input based on each college’s expenditure activities (both $ and FTE) from prior years. Allocated all state funds every year Five components, with an approach of cost reimbursement –Instruction –Libraries –Student Services –Administration –Plant Formulas tried to account for: –Economies of scale (small school adjustment) –Variable costs

4. 4 System Expansion –1991 - Technical Colleges join system Maintained a simple K12 formula College Tuition Policy –When formula was adopted in 1985, tuition was collected by colleges and sent to state. Tuition was a “General Fund Revenue” System received a single state appropriation –In 1994 the Legislature changed tuition policy – Tuition stayed local Formula continued to run as built – except now contained after formula adjustments –First adjustment occurred to reflect changing tuition policy –Later allocations were simply adjusted to fit available appropriations. Environment Changes that impacted efficacy of Previous Allocation Formula

5. 5 Complexity of formula made it very difficult to understand. Changes in statewide tuition policy. Formula produced unpredictable funding for CCs from one year to the next. Colleges affected their own and other college’s funding by altering local factors –Salaries, faculty full-time/part-time mix, course coding –Strategies introduced to dampen the impact of these, averaging and time lags, also had effect of slowing formula response to changing circumstances. Internal Issues that Spelled the End of the Old Formula

6. 6 Developed by WACTC in 1999-2000, adopted by State Board. Adjustments made incrementally each year to base budgets rather than starting from zero. State funding only – Tuition not considered Outcomes? –College funding was more predictable from year to year –Local decisions & actions would not impact state allocation Student Achievement has been a recent exception –Base plus method made incremental changes to budget easier to understand. Development of Base Plus Allocation Model (currently in use)

7. 7 Starts with prior year funding and makes incremental changes mirroring legislative budget changes. Allocates new funding on basis consistent with legislative purposes and an agreed upon ‘best fit’ method –Methods are discussed annually with presidents and approved by the State Board. Allocates funding reductions based on each district’s proportionate share of state funding. Used Enrollment Plan to allocate Budgeted General Enrollments –Plan served as the tool for an informed distribution of new funding. –Plan used to distribute new enrollments to each college based various factors (e.g., population growth). –Enrollment plan has lost visibility during era of reductions resulting from the Great Recession. Base Plus Methodology

8. 8 Ease and predictability in setting the annual allocation has left the process lacking in flexibility to react to changing environment –Overenrolled Districts –Years of budget reductions –Changes in Mission Mix Growing level of dissatisfaction with Model –Multiple perceived problems in Base Plus that need fixing Bringing the timeline forward 14 years to the present

9. 9 WACTC Allocation and Accountability Task Force focused on FIVE problems with current allocation method Problem Statement 1. The current system does not put enough money into performance. 2. There is too much of a difference in funding per FTE across the system with no clear reasons for the differences. 3. There is no recognition of different costs for different programs/mission areas. 4. District enrollment targets are not adjusted in any meaningful way – some districts are chronically over- enrolled, some under. 5. There is not enough focus on setting enrollment targets using agreed-to variables that result in a more equitable distribution of funding across the state.

10. 10 1.The current system does not put enough money into performance. Problem Statements – Quick Glance Current 2015-17 Budget Request Level for SAI ($17.9 m) is a 21% increase in SAI funding. Ongoing SAI would be 3.5% of appropriation.

11. State Funding Per Target FTE Enrollment 11 Districts 2. There is too much of a difference in funding per FTE across the system with no clear reasons for the differences.

12. 12 3. There is no recognition of different costs for different programs/mission areas.

13. 13 4. District enrollment targets are not adjusted in any meaningful way - some districts are chronically over-enrolled, some under.

14. 14 5. There is not enough focus on setting enrollment targets using agreed-to variables that result in a more equitable distribution of funding across the state.

15. Part II Allocation Methods: Principles Problems & Solutions 15

16. An allocation system should: 1.Be stable 2.Be predictable 3.Be understandable 4.Treat all colleges consistently and impartially 5.Do as little harm as possible to other colleges 6.Allow for flexibility in local decisions about use of funding 7.Achieve an appropriate balance between access/enrollment and performance/student outcomes Principles 16

17. Problem Statement Addressed by AATF WACTC Recommendations 1. The current system does not put enough money into performance. Increase the amount of funding allocated based on SAI performance to at least 5% of the state appropriation and not more than 10%. Addressing Identified Problems 17

18. Addressing Identified Problems 18 Problem Statement Addressed by AATFWACTC Recommendations 2. There is too much of a difference in funding per FTE across the system with no clear reasons for the differences. A formula funding method is recommend which will recognize specific variables that will drive differences in funding per FTE for individual districts. The first is a flat allocation of $2.85 million per college as a ‘minimum operating allocation’ (MOA) to recognize the fixed, minimum costs needed to run a college. This adjustment, or weight, acts as a small college factor when examining the differences in per FTE funding at the district level.

19. Addressing Identified Problems 19 Problem Statement Addressed by AATF WACTC Recommendations 3. There is no recognition of different costs for different programs/mission areas. The formula will be weighted to emphasis particular types of enrollments. Enrollments in 1) Basic Education for Adults and 2) High cost, priority courses will be weighted to reflect their differential impact on college operating budgets and to reflect system priorities.

20. Addressing Identified Problems 20 Problem Statement Addressed by AATFWACTC Recommendations 4. District enrollment targets are not adjusted in any meaningful way – and when compared to their actuals, some districts are chronically over-enrolled, some under. And, 5. There is not enough focus on setting enrollment targets using agreed-to variables that result in a more equitable distribution of funding across the state. The formula method will allocate with a starting point which recognizes an enrollment target set each year based on the lesser of a district’s three-year average actual enrollments or three-year target enrollments. (Note: This starting point will be weighted by the adjustments discussed in problem statement three).

21. Finalize Formula Criteria 21 WACTC to examine and recommend: –SAI percentage share –Criteria for inclusion as a High Cost, priority course/program –Value of weight to be applied to High Cost, priority courses/programs NEXT STEPS Finalize Implementation Strategies –Designed to graduate the impact of changing methodologies Stop loss and Stop Gain measures Implementation Timing

22. QUESTIONS? 22