KE NT UCKYS NE W PE RF ORMANCE F UNDING MODE L : WHAT IT - - PowerPoint PPT Presentation

Scott B tt Boelscher HC HCM St Strat ategis ists

KE NT UCKY’S NE W PE RF ORMANCE F UNDING MODE L : WHAT IT ME ANS F OR YOUR CAMPUS

Wendell F l Follo llowell KC KCTCS Bill P ll Payne CPE CPE Mode derator Lee ee Nimo mocks, C CPE

September 17, 2019

Outcomes Based Funding

Relentlessly Focused

• n Attainment

60%

• f adults with high quality

degrees or credentials by the Year 2025

Lumina’s vehicle for higher education system change Strategy Labs are an open platform for leaders and influencers in all 50 states to share research and data, encourage peer learning and provide

• pportunities for on-request support from Lumina

Foundation and its state policy partners.

Strategy Labs Support

• Technical assistance and consulting support is

provided to state leaders working to increase higher education attainment in their states.

• Four types of support

–Non-Partisan, Evidence-Based Policy Expertise –Convening and Facilitation –Advising Policymakers –Research

OUTCOMES-BASED FUNDING NATIONAL CONTEXT

History of Higher Education Funding Models

• Base-plus funding

–Linked to historic funding levels –Not tied to state goals and priorities –Lacks transparency

• Enrollment-driven models emerged in 1960s

–Linked to goal of increasing access –Tied to number of students enrolled –More predictable and transparent –Reduced political competition and lobbying

8

History of Higher Education Funding Models (cont.)

• Tennessee added a performance bonus to their enrollment

model in 1978

– Many states followed. Became known as “performance funding”. – Often there were design problems. – Fell in and out of favor over next decades.

• In the late 2000s, several states reexamined these older

funding methods that no longer aligned with state goals.

– Began linking funding to student success, increased attainment, closing equity gaps – Adapted new models from what was learned from earlier models. – This is “performance funding 2.0” or “outcomes-based funding”.

9

Outcomes-based Funding Theory

• Aligns the state’s finance policy with state goals

– Attainment, Equity, Workforce, Research, etc

• Has the ability to influence institutions through:

– Financial incentives – Awareness of state priorities – Awareness of institutional performance

• Provides incentives to adopt and scale evidence-

based student success practices

OBF Typology

• State funding systems vary significantly in design,

focus and sophistication.

• HCM Strategists has developed a typology for

Outcomes-Based Funding ranging from Type I (Rudimentary) to Type IV (Advanced).

Type I

• Not aligned with completion/attainment goals and related priorities
• Reliant on new funding only
• Low level of state funding (under 5%)
• Does not differentiate by institutional mission
• Total degree/credential completion not included
• Outcomes for underrepresented students not prioritized
• Target/recapture approach
• May not have been sustained for two or more consecutive fiscal years

Type II

• Aligned with completion/attainment goals and related priorities
• Recurring/Base funding
• Low level of state funding (under 5%)
• Does not differentiate by institutional mission
• Total degree/credential completion included
• Outcomes for underrepresented students may be prioritized
• Target/recapture approach likely
• May not have been sustained for two or more consecutive fiscal years

Type III

• Aligned with completion/attainment goals and related priorities
• Recurring/Base funding
• Moderate level of state funding (5 - 24.9%)
• Differentiates by institutional mission, likely
• Total degree/credential completion included
• Outcomes for underrepresented students prioritized
• May not be formula driven
• Not sustained for two or more consecutive fiscal years

Type IV

• Aligned with completion/attainment goals and related priorities
• Recurring/Base funding
• High level of state funding (25% or greater)
• Differentiates by institutional mission
• Total degree/credential completion included
• Outcomes for underrepresented students prioritized
• Formula driven/incents continuous improvement
• Sustained for two or more consecutive fiscal years

OBF as a Share of State Institutional Support: 2-Year Sectors

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Course Completion Progression & Degree Completion Efficiency Other/Mission Non-OBF

OBF as a Share of State Institutional Support: 4-Year Sectors

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% UT (II) MI (I) HI (II) WI (II) VA (I) KS (I) NM (III) IN (III) MT (III) RI (I) PA (I) FL (I) CO (IV) ME (IV) LA (IV) KY (IV) TN (IV) OR (IV) OH (IV) NV (IV) AR (IV) ND (I) Course Completion Progression & Degree Completion Efficiency Other/Mission Non-OBF

Continuous Engagement and Support

• The model should be a policy tool, not just a

budget exercise

• Clearly communicate how the model works

–Transparent incentives –Interactive projection tools –Report annual effects of model –Funding formula summits

Continuous Engagement and Support

• Provide support to institutions

–Analysis of institution specific outcome and funding data –Sharing best practices for increasing success –Student success improvement grants

• Track and address unintended consequences

–Establish formal review process –Monitor academic standards

• Student learning outcomes, faculty surveys, grade distributions

–Monitor student access –Monitor funding volatility

StrategyLabs.LuminaFoundation.org

Presented by Scott Boelscher Senior Associate, HCM Strategists Scott_Boelscher@hcmstrategists.com

Performance Funding Model for Kentucky’s Public Universities

• Dr. William Payne, Vice President for Finance and Administration

Kentucky Council on Postsecondary Education September 17, 2019

Overview

2 1

• Impetus for New Approach
• Funding Model Goals
• Components and Metrics
• Key Features
• Results Achieved

I mpetus for New Approach

2 2

• Accelerate progress toward attainment of state goals

for postsecondary education

• Address shortcomings of previous funding method
• Rectify funding disparities among institutions that

had developed over time

• Respond to legislative mandate to convene working

group and develop model (2016 budget bill, HB 303)

2 3

• Increase educational attainment of

working age adults to 60% by 2030

• Currently 45% of KY’s population has

a postsecondary degree or certificate

• Responds to workforce demands for

highly trained, educated population

• Benefits of increased attainment:

− higher income (lower poverty) − accelerated job growth − better life choices and health − engaged citizens

I mpetus for New Approach (Cont’d)

Kent ucky’ y’s B Big Goa

• al

45%

60%

I mpetus for New Approach (Cont’d)

Shor

• rt com
• m ings of
• f Previou
• us M

Met hod

• d
• For more than a decade, state appropriations were

distributed based on share of funding received the prior year (across-the-board base + , base -)

• This approach failed to recognize changes in:

− Enrollment − Program mix − Student outcomes (progression, degree completion)

• No financial incentives for achieving desired state

goals for postsecondary education

2 4

I mpetus for New Approach (Cont’d)

Rect ify F Funding Disparit ies

2 5

$4,918 $4,148 $4,729 $5,029 $5,427 $5,709 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 Group Average NKU WKU EKU MuSU MoSU

Kentucky Comprehensive Universities (Excluding KSU) Net General Fund Appropriations per FTE Student

Fiscal Year 2015-16

Needed to Reach Median WKU > $ 4.7 M NKU > $10.3 M

26

• The 2016 budget bill (HB 303) directed the Council to

establish a working group that included:

− The Governor − President of Senate (or their representative) − Speaker of the House − President of each public university and KCTCS − Council president

• Charged to develop a model for allocating state funds

that included enrollment, mission, and performance

• Transferred 5% of each institution’s base ($42.9 M,

excluding KSU) to a newly created Performance Fund

I mpetus for New Approach (Cont’d)

Respon

• nd t o
• Le

Legislat ive Mandat e

27

• Increase retention and progression of students

toward timely completion

• Increase numbers of degrees and credentials earned

by all students

• Produce more degrees and credentials in fields that

garner higher wages upon completion (STEM+ H fields,

high demand fields, targeted industries)

• Close achievement gaps by growing degrees and

credentials earned by minority, low income, and underprepared students

Funding Model Goals

28

Kentucky Performance Funding Model Major Components, Allocation Percentages, and Funding Pools Fiscal 2018-19 (Dollars in Millions)

Allocation Component Model Component Percentages Funding Pools Distribution Method Student Success 35% $181.9 Share of student success

• utcomes produced

Course Completion 35% 181.9 Share of weighted student credit hours earned Maintenance and Operations 10% 52.0 Share of facilities square feet dedicated to student learning Institutional Support 10% 52.0 Share of spending on instruction and student services Academic Support 10% 52.0 Share of FTE student enrollment Total Allocable Resources 100% $519.8

Components

Key Features

• Backs out research and public service appropriations

that are not instruction related (mandated programs)

• Weights student credit hours earned to account for

cost differences by degree level and discipline

• Applies 50% weighting for credit hours earned by
• ut-of-state students (100% for in-state students)
• Provides premiums for degrees earned by low income

and minority students (and degrees in STEM+ H fields)

• Uses hold harmless and stop loss provisions to

provide gradual phase in (max 3% loss, over 3 years)

29

Key Features (Cont’d)

Prem ium s s for r Unders rserv rved P Populat lat ions

30

Kentucky Performance Funding Model Premiums for Low Income and Minority Student Degree Production Fiscal Year 2018-19

Allocation Weighted State Funding Funding Component Category Percent Size of Pool Degrees per Degree Multiple → Bachelor's Degrees 9.0% $46,784,400 22,975 $2,036 1.0 Bachelor's Degrees $2,036 → Low Income Bachelor's 3.0% $15,594,800 11,606 1,344 Low Income Total $3,380 1.7 Bachelor's Degrees $2,036 → Minority Bachelor's 3.0% $15,594,800 2,410 6,471 Minority Total $8,507 4.2 Total Allocable Resources: $519,827,100

A B C

Results Achieved

31

• State funding is no longer being distributed based on

historical share, but on outcomes produced

• Funding based on outcomes is providing incentives

for student progression and timely completion

• Institutions are reacting to the model strategically
• Most funding disparities that developed over time

have been rectified (equilibrium at 6 of 8 universities)

• Over the past four years, bachelor’s degrees up 12%,

URM degrees up 27%, and STEM+ H degrees up 29%

32

Kentucky Performance Funding Model Metrics Where Rates of Growth Exceeded Sector Average Between Fiscal Years 2017-18 and 2018-19

Performance Metric UK UofL EKU KSU MoSU MuSU NKU WKU

Student Success Outcomes

Bachelor's Degrees STEM+H Bachelor's Degrees URM Bachelor's Degrees Low Income Bachelor's Degrees Student Progression @ 30 Hours Student Progression @ 60 Hours Student Progression @ 90 Hours Earned Credit Hours

Operational Support Activity

Instructional Square Feet Direct Cost of Instruction FTE Students Metrics Above Sector Average 11 6 5 3 5 4 2 1

Results Achieved (Cont’d)

Bea eat ing t t he e Sec ect or Aver erage

Results Achieved (Cont’d)

Elim inat ing F Funding Disparit ies

33

$2,036 $2,036 $2,036 $2,036 $2,036 $2,036 $2,036 $2,036 $201 $1,922 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500

UK UofL EKU MuSU NKU WKU MoSU KSU Bachelor's Funding per Bachelor's Degree Hold Harmless Allocation per Bachelor's Degree

$2,237 $3,958

Kentucky Performance Funding Model Bachelor's Degree Component Funding per Weighted Bachelor's Degree Fiscal Year 2018-19

State Funding per Bachelor's Degree

2018-19 Distribution Achieves Equilibrium at Six Institutions Pool Size = $46.8 M

34

Results Achieved (Cont’d)

Accel elerat ing D Deg egree P ee Product ion

UK 2,424 MuSU 709 MoSU 495 WKU 406 UofL 304 NKU 294 EKU 280

Cumulative Net Gain in Bachelor's Degrees Produced Academic Years 2013-14 through 2017-18

4,912

• 18%
• 25%
• 20%
• 15%
• 10%
• 5%

Four-Year Change in Bachelor's Degrees Produced Academic Years 2013-14 through 2017-18

Percent Change

• Growth rates above the sector average

increase an institution’s share of funding for a given metric

• Three universities - UK, MuSU, and MoSU -

produced 74% of the cumulative net gain in bachelor’s degrees over the past four years

PE RF ORMANCE F UNDING MODE L OVE RVIE W

WE NDE L L

• A. F

OL L OWE L L , VICE PRE SIDE NT AND T RE ASURE R SE PT E MBE R 17, 2019

KE NT UCKY COMMUNIT Y & T E CHNICAL COL L E GE SYST E M

K CT CS Pe rfo rma nc e F unding Mo de l

RAT I ONAL We ll-a lig ne d with c a mpus missio ns a nd sta te g o a ls fo r hig he r e duc a tio n. COMPRE HE NSI VE Ca pa b le o f distrib uting a ny pro po rtio n

• f b a se funding (up to 100%).

DYNAMI C Re a c ts to c ha ng e s in c a mpus pro duc tivity a nd c ha ng e s in le ve ls o f sta te suppo rt.

F AI R Pro vide s like funding fo r like a c tivitie s.

Co mpo ne nt Me tric s

Stude nt Suc c e ss 35% Course Comple tion 35% Ma inte na nc e & Ope ra tions 10% Ac a de mic Support 10% Institutiona l Support 10%

Stude nt Suc c e ss

3-Ye a r Ave ra g e Cre de ntia ls Pro g re ssio n (15 to <30 ho urs, 30 to <45 ho urs, a nd 45+ ho urs) Unde rre pre se nte d Mino rity Cre de ntia ls L

• w-I

nc o me Cre de ntia ls Unde rpre pa re d Cre de ntia ls ST E M+H Cre de ntia ls T a rg e te d I ndustry Cre de ntia ls Hig h-Wa g e , Hig h-De ma nd Cre de ntia ls T ra nsfe rs

2% 10% 12% 2% 2% 2% 2% 1% 2%

Course Comple tion

We ig hte d Cour se Comple tion

T

• ta l se me ste r c re dit ho urs c o mple te d b y stude nts

a t the c o lle g e in prio r a c a de mic ye a r, we ig hte d to a c c o unt fo r c o st diffe re nc e s in a c a de mic disc ipline s. Co urse c o mple tio n is de fine d a s re c e iving a n A, B, C, D, o r P. We ig hts:

• 1.0 L
• w-Co st Pro g ra m Are a s
• Histo ry
• 1.5 Me dium-Co st Pro g ra m Are a s
• Sc ie nc e / T

e c hno lo g y

• 2.0 Hig h-Co st Pro g ra m Are a s
• Adva nc e d T

e c hno lo g y/ T ra d e s/ He a lthc a re

Ma inte na nc e a nd Ope r a tions/ Ac a de mic Suppor t

Distrib ute d b a se d o n e a c h institutio n’ s sha re o f Ca te g o ry I (Instruc tio na l) a nd Ca te g o ry I I (No n-Instruc tio na l) sq ua re fe e t, ne t o f re se a rc h, no n-c la ss la b o ra to ry a nd

• pe n la b o ra to ry spa c e , to suppo rt

ma inte na nc e a nd o pe ra tio n o f c a mpus fa c ilitie s. Distrib ute d b a se d o n e a c h institutio n’ s sha re

• f to ta l F

ull-T ime E q uiva le nt (F T E ) stude nt e nro llme nt fo r prio r a c a de mic ye a r.

Ma inte na nc e & Ope r a tions Ac a de mic Suppor t

Institutiona l Support

Institutiona l Suppor t

Distrib ute d b a se d o n e a c h institutio n’ s sha re o f to ta l instruc tio n a nd stude nt se rvic e s spe nding , ne t o f ma inte na nc e a nd o pe ra tio ns, to suppo rt a dministra tive func tio ns.

COMPRE HE NSIVE F UNDING GOAL S

I nc re a se re te ntio n a nd pro g re ssio n o f stude nts I nc re a se the numb e r o f de g re e s a nd c re de ntia ls e a rne d b y a ll type s o f stude nts Gro w the numb e r o f de g re e s a nd c re de ntia ls tha t g a rne r hig he r sa la rie s upo n g ra dua tio n: ST E M+H (Sc ie nc e , T e c hno lo g y, E ng ine e ring , Ma the ma tic s, a nd He a lth)fie lds; hig h-wa g e , hig h-de ma nd fie lds Clo se a c hie ve me nt g a ps b y inc re a sing the numb e r o f de g re e s a nd c re de ntia ls e a rne d b y lo w-inc o me , mino rity a nd unde rpre pa re d stude nts

ST AT E BE NE F IT S

An o ve ra ll rise in the numb e r o f g ra dua te s ma ximize s ta xpa ye rs’ re turn o n inve stme nt in hig he r e duc a tio n Mo re c re de ntia ls tra nsla te s to a mo re hig hly-skille d wo rkfo rc e tha t will he lp stre ng the n K e ntuc ky’ s e c o no my Sho rte n pe rio d to c re de ntia l he lps re duc e c o sts to stude nts a nd the ir fa milie s re sulting in o n-time g ra dua tio n A b e tte r e duc a te d c itize nry he lps me e t c urre nt wo rkfo rc e de ma nd, he lps a ttra c t ne w industrie s, pro vide s a b e tte r q ua lity o f life

KCT CS BE NE F IT S

E nc o ura g e s stre a mlining o f pro c e sse s to e na b le stude nts to c o mple te in a time ly fa shio n Alig ns pro g ra ms/ de g re e s with the sta te ’ s ne e ds a nd the c o mmunitie s whe re o ur c o lle g e s a re lo c a te d Re duc e s c o st to o ur stude nts to sho rte n time to c re de ntia l inc re a sing o n-time g ra dua tio n Our stude nts impro ve a nd b e tte r the mse lve s a nd the ir live s with inc re a se d o ppo rtunitie s

HOW DO T HE Y RE L AT E :

2016-2021 CPE Stra te g ic Ag e nda

• Inc re a se the numb e r o f K

• rie nte d c e rtific a te s a nd a sso c ia te

K CT CS Stra te g ic Pla n Go a ls

• Alig n pro g ra ms a nd c urric ula with

Pe rfo rma nc e F unding Go a ls

• Gro w the numb e r o f de g re e s a nd

I nc re a se Ca re e r-Orie nte d De g re e s to I mpro ve Jo b Pla c e me nt a nd Ca re e r De ve lo pme nt fo r K e ntuc kia ns.

HOW DO T HE Y RE L AT E :

2016-2021 CPE Stra te g ic Ag e nda

• Inc re a se pe rsiste nc e a nd time ly

K CT CS Stra te g ic Pla n Go a ls

• Inc re a se a c c e ss a nd suc c e ss fo r a ll

Pe rfo rma nc e F unding Go a ls

• Clo se a c hie ve me nt g a ps b y

I nc re a se the Co mple tio n o f De g re e s fo r Unde rse rve d Stude nts.

HOW DO T HE Y RE L AT E :

2016-2021 CPE Stra te g ic Ag e nda

• Ma in g o a l to ra ise K

K CT CS Stra te g ic Pla n Go a ls

• Ra ise the le ve l o f e duc a tio na l

Pe rfo rma nc e F unding Go a ls

• Inc re a se the numb e r o f de g re e s

• f stude nts.

Ra ise K e ntuc ky’ s E duc a tio n Atta inme nt L e ve l.

QUE ST IONS