Friday, February 24, 2017

A New Postsecondary Funding Model – A Positive Step for Future Investments, but Details and Transparency Matter

| by Perry Papka, Senior Policy Director |

The Kentucky State Senate this week passed Senate Bill 153, sponsored by Senator David Givens, establishing a new, comprehensive funding model for Kentucky’s public postsecondary education institutions.  The legislation is an outgrowth of recommendations made in December of last year by the Postsecondary Education Working Group and would tie a significant portion of state support for both 2-year and 4-year institutions to performance metrics.

What could this new approach mean for future investment?
Properly structured and adequately funded, a new comprehensive funding model represents an opportunity to move toward a more transparent and accountable system of postsecondary education – better ensuring that Kentuckians have access to affordable, high-quality postsecondary education.

This approach can be a positive step to help close persistent attainment gaps and be a vehicle to support additional investments in postsecondary education – investments that are undoubtedly necessary to reach the state’s educational goals. 

This can also be the first step Kentucky needs to more effectively link decisions and policies on state appropriations, student aid, and tuition to better define the expectations of institutions and students.  Lack of transparency in how postsecondary education is financed, and how the varying financial components interact, ultimately leads to less effective and efficient use of public resources and makes it more challenging for Kentuckians to reach their educational, economic, workforce, and civic potential.

What does Senate Bill 153 actually do?
Calls for renewed accountability for the state’s investment in postsecondary education are not new. Over the last three budget cycles, the Council on Postsecondary Education (CPE) has proposed some level of performance funding for institutions based on either achievement toward targets and goals or shares of degrees produced. All of these proposals applied only to new funding requests, and with budget reductions of 18.2% since 2008 – equivalent to $197 million – none of these proposals were adopted by the General Assembly.

The current state budget initiated the process to create a new, comprehensive funding model that would include performance metrics. As part of that process, the Postsecondary Education Working Group - comprised of institutional presidents, the Governor, and legislative leadership - provided formula recommendations for the new model on December 1, 2016 after meeting five times throughout the latter half of 2016.  The budget included a powerful incentive for this group to reach consensus - in 2018, 5% of funding ($43 million) must be allocated through the new model.  (The Prichard Committee provided feedback to the working group during the development of the funding model.)

Senate Bill 153 essentially codifies the recommendations of the Postsecondary Education Working Group, which all institutional presidents endorsed.  A new, comprehensive funding model would ultimately distribute 100% of allocable resources to postsecondary institutions via three major categories: 30% for campus operations, 35% based on student credit hours earned, and 35% based on student success outcomes represented by a set of performance metrics.  You can download our complete summary of the legislation for easy reference.

Can Senate Bill 153 be improved?
As with any legislation, details and transparency matter.  While Senate Bill 153 overall represents a positive step forward, certain elements would benefit from greater consideration and would provide CPE and postsecondary institutions clearer guiderails to follow during implementation:
  • Weighting for Priority Populations - Additional weight for underrepresented student populations is critical to close the state’s attainment gaps and reach statewide attainment goals.  The working group’s recommendations would weight STEM-H degrees more heavily than priority populations for the 4-year institutions. Given the state’s need to close attainment gaps between diverse population groups, priority populations should be weighted equal to or higher relative to types of degree fields.
  • Fields of Study Definition - STEM-H (science, technology, engineering, math, and health) degrees need appropriate classification and definition to align with the state’s employment and educational needs.  Helpful would be a STEM-H definition establishing the process by which degree fields are classified, and that also includes STEM educators in primary and secondary education to align with high demand for qualified K-12 teachers. 
  • Implementation and Review of Comprehensive Funding Model -The formal review process established in the bill is critical to guard against unintended consequences, foster engagement, and ensure transparency.  To fully achieve these goals, the working group should be inclusive of other stakeholders such as students, business and civic leaders, and other public policy experts - including representation from the Kentucky Higher Education Assistance Authority (KHEAA) and the Kentucky Center for Education and Workforce Statistics (KCEWS).
  • Transparency of Funding Model and Data  - To broaden public understanding and stakeholder engagement, the funding model and its data elements should be made publicly available by a date certain annually on CPE’s web-site – including definition and funding levels of non-formula mandated programs, specific formula adjustments related to cost and level and type of degrees and credentials, STEM-H degree field classifications and justification for inclusion, and data with regard to enrollment and distribution of priority populations.  This same level of public reporting should apply to any report and recommendations made by the working group every three years.
  • Ambitious Statewide Goals - CPE’s target in the 2016-2021 Strategic Agenda of increasing Kentucky’s educational attainment to 58% by 2025 is laudable and inclusion by reference of the attainment goal adopted in the strategic agenda would enhance the funding model’s link to statewide goals.
  • Respect for Institutional Missions – Given the unique missions assigned to institutions by the 1997 Postsecondary Education Improvement Act, concerns remain about unintended consequences related to how the research and comprehensive sectors are treated relative to one another – particularly with regard to affordability to students and families.  Guidance to the permanent working group to evaluate every 3 years should include - at a minimum – the effect of the model on key principles, including:
    • Access – Ensuring educational opportunities remain inclusive of all Kentucky students.
    • Affordability – Affordability is not explicitly addressed in the funding model, yet is a significant barrier for many students.  Understanding the impact of the new model on tuition, as well as state and institutional financial aid is critical to more adequately link the financial components of postsecondary education.
    • Quality – Assessing quality presents significant challenges, but the review process should begin to consider potential measures - such as student learning and engagement – on which a future framework can be built.

(Learn more about performance-based funding in our report from the symposium we hosted in June of 2016 in partnership with the Kentucky Chamber of Commerce - Performance & Outcomes-Based Funding: Lessons for Accountable Investment for Postsecondary Progress in Kentucky.)

1 comment:

  1. (Please understand these comments to be my personal opinion only, and they do not represent the opinion of EKU, the EKU Board of Regents, or anyone else at the institution.)

    Thanks for the summary.

    Thanks, too, for pointing out that the approach needs to be “[p]roperly structured and adequately funded.” At present, it is neither. University presidents were told plainly there would be no new funding for higher ed. Putting the Research Ones and Comprehensives in the same group will prove to be a great disadvantage to the latter.

    Unfortunately, there is little reason for optimism that the model will "better ensur[e] that Kentuckians have access to affordable, high-quality postsecondary education." It hasn't anywhere else. As the Century Foundation reported (

    "Despite the compelling logic behind paying for performance in higher education, research comparing states that have and have not adopted the practice has yet to establish a connection between the policy and improved educational outcomes. To date, there are twelve quantitative evaluations of state performance-based funding. There is remarkable consistency in the findings, all of which were conducted using different research techniques, spanning different periods of time, and examining various policy outcomes. Researchers typically examine how the policy affected graduation rates or the total number of degrees and certificates produced each year. These are the ultimate outcomes of performance-based funding, yet researchers have also examined intermediate outcomes like retention rates, selectivity, and resource allocation."

    Such a wealth of negative data ought to give one pause, particularly those who believe in data-driven decision-making.

    Following several years of disinvestment in Kentucky universities, additional pressure from today's skyrocketing retirement contributions and performance-based budget cuts will only further harm opportunity for families least able to afford it. If the legislature also curtails tuition increases, more teachers will disappear, class sizes will grow even more, quality will suffer, and comprehensives will be effectively hamstrung.

    The sunny tone of your piece is politically conciliatory, but somewhat confusing coming from a group Kentuckians have long admired for its steadfast support for increased opportunity for its students.

    I shudder to think where our P-12 system of schools would be today if it were not for the Prichard Committee. I remain hopeful that the Prichard Committee will become a champion for higher education as well.

    There is little history of inter-institutional cooperation in the area of political advocacy at this level. Perhaps the Committee's unifying capacity could extend to us, and teach those so accustomed to competition the benefits of cooperation for a common goal. Kentucky's big kids need you now.



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