1. Outcomes-Based Funding Model Design and Implementation
Presentation to Presidents and Chancellors
June 7, 2016

2. Outline Why is outcomes-based funding important?
What process has been used to get to this point?
What outcomes are proposed to be measured?
How will the model relate to funding?
What are the next steps in the process?

3. Why Outcomes-Based Funding?
Alignment of funding with state priorities
“[Enrollment-based] allocation rewards expanded access to higher education but does not incent program/degree completion—one of today’s most pressing policy challenges.”
Snyder, Martha (2015). Driving Better Outcomes: Typology and Principles to Inform Outcomes- Based Funding Models. HCM Strategists. February 12, 2015.
Stakeholder engagement proceeds from people’s starting point attitudes and works to mend the splits and disconnects among stakeholders enough to make progress on a particular policy issue.”
Kadlec, A. and Shelton, S. (2015). Outcomes-Based Funding and Stakeholder Engagement. Lumina Issue Papers. November, 2015.

4. Context

5. Process
Institutional Funding Work Group

6. Process
Explore
What have other states done? What are the priorities in Arkansas?
Principles
What design principles are important throughout the process?
Measures
What measures are important?
Model
How should the model be constructed?
Implementation
How should we transition from old model to new model?

7. Explore
AASCU (2011). Performance-based Funding: A Re-emerging Strategy in Public Higher Education Financing
Hearn, James C. (2015). Outcomes-based Funding in Historical and Comparative Context. Lumina Foundation. November 2015.
Kadlec, A. and Shelton, S. (2015). Outcomes-Based Funding and Stakeholder Engagement. Lumina Issue Papers. November, 2015.
Snyder, Martha (2015). Driving Better Outcomes: Typology and Principles to Inform Outcomes-Based Funding Models. HCM Strategists. February 12, 2015.
Improving student outcomes through next-generation public higher education finance. Design workshop facilitated by HCM Strategists, Lumina Foundation and Kinetic Seeds. December 2015.

8. Explore

9. Principles

10. Principles

11. Measures

12. Measures

13. Measures

14. Measures

15. Model

16. Model

17. Model

18. Implementation
How will the model be used to make funding recommendations?
How will the model be used to determine recommended funding for each institution?
How will we transition from current model to outcomes-based model?

19. Total Funding Recommendations
Prior Year Funding + Productivity Index + Inflation Index = Recommended Funding
Productivity Index: measured through progress toward the goals in the Closing the Gap 2020 master plan. A combination of increased (or decreased) credentials plus progress toward (or regression from) the specific goals of the plan will determine the change in the index.
Inflation Index: set based on the average change in CPI-U and HEPI for the prior fiscal year.

20. Institutional Funding Recommendations
Prior Year Funding + Pro rata share of overall funding recommendation + Change in outcomes measures = Recommended Funding
Pro rata share of overall funding recommendation: based on the ratio of the institution’s outcomes index to the total of all outcomes indices for all institutions multiplied by the amount of recommended overall funding change.
Change in outcomes measures: based on the change in the institution’s pro rata share from the prior year with stop loss and stop gain limits of 2%

21. Transition Plan

22. Funding Example

23. Total Funding Recommendation
Productivity Index
1,381,050 – 1,370,782 =
10,268
0.7%
Inflation Index

24. Institutional Funding Recommendation – Part I
400,000,000 x %
= 6,000,000

25. Institutional Funding Recommendation – Part II
% of Productivity Increase Contributed
400,000,000 x %
= 2,996,246

26. Institutional Funding Recommendation – Part III
Year 2 of Phase-In

27. Institutional Funding Recommendation – Year 2
Part I
Part II
Part III

28. Institutional Funding Recommendation – Year 3

29. Institutional Funding Recommendation: Years 1 – 3 Impact

30. QUESTIONS/FEEDBACK