SHEEO Leadership Seminar Seattle, WA July 11, 2012 Jeff Stanley Dennis Jones

Disconnect between higher education funding and statewide priorities Link dollars more directly to these priorities: o More graduates o High-needs fields o At-risk students o Meeting needs of state 2

Higher completion levels/graduation rates o Reduced time to degree Institutional changes producing higher performance/greater student success o Improved remediation o Alternative delivery options Increased awareness of state priorities Increased awareness of institutional performance 3

Arkansas* California* Colorado* Connecticut Florida* Idaho Illinois* Kansas Kentucky* Louisiana* Minnesota Mississippi* Missouri* New Jersey New Mexico* North Carolina Ohio* Oklahoma* Oregon Pennsylvania* South Carolina South Dakota Tennessee* Texas* Virginia* Washington* * indicates states pursuing new performance funding models 4

Multiple Priorities: Often times misaligned. No clear overall objective or goal. Complex: Too many metrics. Insufficient data: Metrics were often not measurable or data sources were unreliable. Lack of institutional buy-in: Not consulted in design process. No accounting for differences between institutions. Competed with access agenda: Incentivized “gaming” through increasing admissions standards/did not provide “at-risk” priority. Add-on or insignificant amount of funding: Did not drive institutional priorities. First to go in tight budget times. 5

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1. Get agreement on goals before putting performance funding in place o Goals need to be the driving force for performance funding – not a rhetorical afterthought 2. Don’t construct performance metrics too narrowly o Important that all institutions have an opportunity (not a guarantee) to benefit by excelling at their different missions. 3. Design the funding model to promote mission differentiation – use it to sharpen distinctions, not blur them o Use different metrics for different institutions Or o Create different pools of resources for different types of institutions – and allow institutions to compete for resources in only one pool 8

4. Include provisions that reward success in serving underserved populations Among the possibilities Low income Minority Adult Academically at risk 5. Limit the numbers of outcomes to be rewarded o No more than 4 or 5 o Too many and both institutional focus and the communication value are lost 6. Use metrics that are unambiguous and difficult to game For example: o Numbers of graduates Not o Graduation rates 9

1. Make the performance funding pool large enough to command attention 2. Reward continuous improvement, not attainment of a fixed goal o For each institution, establish most recent year as baseline o Allocate performance funds on the basis of year-over-year improvements 3. Include a phase-in provision 4. Employ stop-loss, not hold-harmless provisions 5. Continue performance funding in both good times and bad 6. Put in place a rigorous (outcomes-based) approach to assessing quality and monitor results on an ongoing basis 11

Students Institutions -Sectors Operating Support Student Aid Tuition & Fees Scholarships & Waivers Pell & Tax Credits Federal Government States Philanthropy & Other Sources Student Aid Graduates 13

1. Doing business as usual, what would it cost to reach attainment goal? 2. Presuming performance funding worked in such a way that all institutions were on the “efficient surface” of productivity? o How much would total cost be reduced? o How much would remain to be financed? 14

Source: NCES, IPEDS Completions Survey 15 Undergraduate Credentials Awarded per 100 FTE Students State, Local, and Tuition and Fee Revenues (2008) AL AK AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI US ,0006,00010,00014,00018,00022,000 The efficient surface

3. What combination of tuition, state-funded student aid, and additional state appropriations to institutions serve to o Provide the necessary resources to fund achieving the achievement goal? o Keep higher education affordable to students? o Keep higher education affordable to taxpayers? 4. What are the options if it is concluded that none of the options work? o A larger role for the privates (for-profit and not-for-profit)? o New public delivery models? 16