For the past few months, Arkansas' higher-education leaders have been toiling away at a complete redesign of the way the state funds its colleges and universities.
Presidents and chancellors, among other campus administrators, got a first look Tuesday at a draft of what's to come: funding based more on completions of certificate or degree programs and less on enrollment.
"This is a pretty significant shift in thinking in the way we fund institutions," said Brett Powell, director of the Arkansas Department of Higher Education. "Throughout this process, what we've tried to do is we've tried to create a transparent and inclusive process from the beginning to where we are today -- in setting what the priorities are, what the plans are, what the goals are, how to achieve those -- and then to make sure the funding model we design carries all that through so that funding follows all those activities."
The proposed funding method -- the result of a committee of education officials led by Glen Jones, the president of Henderson State University -- is aligned with the state's master plan for higher education, which seeks to raise the percentage of adult Arkansans who have technical certificates, associate degrees and bachelor's degrees or higher to 60 percent by 2025, Powell said.
Arkansas has historically ranked in the lower tier compared with other states in regard to the percentage of residents with a certificate or degree. At last count, the state ranked 45th in the nation, with 38.8 percent of its residents having earned certificates or higher, according to the Lumina Foundation, a private foundation working to increase the number of Americans who hold certificates or degrees.
The proposal would also give students, legislators and others a clearer picture of what's going on at Arkansas campuses, Powell said. The federal Integrated Postsecondary Education Data System has graduation and retention rates for each school, but those figures only take into account first-time, full-time students, or those typically coming straight from high school.
"So, there are a number of ways that we're trying to move away from assuming that everybody looks the same, that they come directly out of high school and that they're ready to go when they get on your campus," Powell said. "You all know that is not reality anymore. So, traditional and nontraditional are recognized in this model. At-risk students are recognized in this model because we know that more resources are needed to get those students to completion."
The change would redirect money to help students progress toward graduation and could help curb increases in tuition and fees.
The new method also has its drawbacks, including a five-year implementation period. It may also have some unintended consequences, such as raising admissions standards or reducing academic quality to ensure all students complete, he said.
In part of the proposed formula, leaders are looking at raw numbers and not rates or percentages, and that should help keep in check the unintended consequences, he added.
For years, state funding for higher-education institutions has been based largely on enrollment. In 2011, though, lawmakers introduced a new component of funding for the state's 33 public colleges and universities, in a response to Gov. Mike Beebe's call to double the number of degree holders in Arkansas by 2025.
Since then, 90 percent of a school's funding allocation comes from an enrollment formula, while the remainder is a result of weighted measures known as performance-based funding. Arkansas is among at least 30 states that have some type of performance-based funding in place.
In the state's version, higher-education leaders gauge universities on four main measures, including the number of bachelor's degrees awarded and progression toward graduation. The two-year schools use seven measures, including the number of technical certificates and associate degrees awarded.
Those mandatory measures are weighted against optional ones, which differ for universities and community colleges but can add to the overall score. Each school can earn a maximum of 10 points but needs at least six points to maintain its funding portion based on the performance measures.
If schools fall below the six points, they are at risk of losing up to 10 percent of their state funding.
"We have a needs-based model that is underfunded, is inequitable and basically is broken," Powell said. "We also have a performance-based model that is destined to fail because it was built on the premise that every institution would continue to improve over their history, which clearly is not realistic."
Higher-education leaders have often said the state's way of funding its schools has given colleges and universities less than what they actually need.
Because state funding for higher-education institutions has remained steady for several years, the current funding method penalizes institutions that grow in enrollment. At the same time, the colleges and universities that lose enrollment are held harmless and move closer to full funding.
Now higher-education leaders are looking to scrap the enrollment and performance-based formulas and start anew with what they are calling an outcomes-based funding formula. The measures, said Tara Smith, the department's senior associate director for institutional finance, fall within three broad categories:
• Effectiveness -- doing the right things.
• Efficiency -- doing things right.
• Affordability -- controlling rising student costs.
The new formula would use weighted measures within the following categories:
• Credentials from noncredit industry-recognized certifications and training, certificates of proficiency, technical certificates, associate degrees, bachelor's degrees, master's degrees and doctoral degrees.
• Progression toward graduation.
• The number of transfer students.
• Student success in "gateway courses," or many of the entry-level courses, such as Algebra I or quantitative literacy and Composition II.
• Time to a degree.
• The number of credits completed.
• A core-expense ratio, which measures how much each school spends on its core operations -- including instruction, academic support and student services -- of its total institutional support expenses.
• Faculty-to-administration salary ratio, which measures how much each school spends on instructional salaries of its total institutional support salaries.
The first four measures would be 80 percent of a school's full score, while time to a degree combined with completed credits would total 20 percent. The two ratios -- both of which would be compared with similar schools in the 16-state member Southern Regional Education Board -- would not be worth anything in the formula but could still detract or add to the overall outcomes score.
In total, all the schools' outcomes will generate a "productivity index," measuring progress toward goals in the state's master plan. To figure out what total higher-education funding will be, leaders will take into account the previous year's funding, that productivity measure and inflation.
Inflationary operating costs have generally fallen on the shoulders of students in the form of increased tuition and fees.
To get each school's share, leaders will take into account the last year's funding, its share of the overall "productivity index" and its own outcome scores. They plan to put in a stop-gain or stop-loss measure, so no college or university can earn or lose more than 2 percent of its funding from year to year.
Leaders are planning a five-year transition period, with the first year under the current funding methods and a baseline for the new way of funding.
On Tuesday, many chancellors and presidents had questions about specific measures and what it would mean for their institutions.
For example, Stephen Hilterbran -- president of Southeast Arkansas College in Pine Bluff -- asked why two-year colleges would get credit for students transferring to a university after earning 35 hours. Those transferring to four-year schools after earning associate degrees would also be counted in the community colleges' score.
The general-education core classes total 35 hours, Powell said, adding that it was an ideal time to transfer.
Leaders at South Arkansas Community College in El Dorado wanted to know how part-time students fit into the proposed formula, specifically in the "time to degree" category.
"If you take that one measure out and you consider how does that impact part-time students, it really doesn't at all," Powell said. "However, if you're taking that same part-time student -- if they're only taking six hours a semester and it takes them six-years to get an associate's degree, but they still complete -- there are progression measures along the way, there are gateway measures along the way, the credits at completion would be a factor in that, and the completion itself would be a factor in that."
Joel Anderson, chancellor of the University of Arkansas at Little Rock, said he would like to see what the proposed funding formula would have recommended for the schools over the last three to five years.
"What we all do is we all hear talk about a single variable, and we think, 'Well, that could either help us or that could hurt us,'" Anderson said. "And we tend to focus on that, and I have no idea how all of it will work together until I actually see it through the model."
The Higher Education Department was still working on putting in actual data in the model and will present that data to school chancellors and system presidents at a later date.
The department will continue to tweak the proposal before taking it to its governing body, the Higher Education Coordinating Board, in July. If the 12-member panel approves it, the department will begin drafting legislation for the new funding method.
"We paused at this point to make sure you all have an opportunity to see what's here," Powell said. "There is no intent in any of this for any institution to be harmed by the model. If we end up with a model that does that -- that makes significant changes in where funds get allocated -- then we've done it wrong. We'll make sure that we're not doing this wrong, that we get this correct."
A Section on 06/08/2016