HOPE - None of the state’s public colleges and universities will see its coffers immediately affected when a new funding model designed to build accountability among Arkansas’ higher-education institutions goes into effect at the start of the new fiscal year on July 1.
The model, known as performance funding, supplements an existing formula that relies largely on enrollment to determine state contributions to colleges and universities with an approach that relies on factors such as graduation rates, retention and enrollment in high-demand fields to allocate public money.
The policy’s aim is to reward institutions that help meet the state’s goal of increasing residents who have degrees and to penalize institutions that fall short, leaders have said.
Starting July 1, campuses will have to “earn back” 5 percent of the state funds owed to them by meeting the performance-funding measures. In the next fiscal year, performance funding will represent 10 percent of their state funding, and it could eventually control 25 percent.
State funding and student tuition and fees make up a college or university’s educational and general fund, which pays for most of its instructional and operational activities.
“This really establishes the base line by which, from here on out, the institutions will be measured,” Shane Broadway, interim director of the Arkansas Department of Higher Education, told the Higher Education Coordinating Board on Friday as he reviewed initial formula measures in a meeting at the University of Arkansas Community College at Hope.
Arkansas lawmakers mandated the creation of the new funding model in 2011 - following the trend of many other state legislatures. They required the Higher Education Department to work with college and university presidents and chancellors to design the formula and determine how it will be applied.
The goal is to encourage institutions to make smart choices to contribute to Gov. Mike Beebe’s goal of doubling the state’s number of degree holders by 2025, Broadway said.
2010 U.S. Census data ranked Arkansas second from the bottom in degree-holding adults, with only 18.9 percent of residents over age 25 holding bachelor’s degrees. That number was well below the 27.5 percent national average. Only West Virginia had fewer, with 17.1 percent.
Though campus leaders expressed concerns about the new standards, no campus will lose funding under the model in this “base-line year,” said Tara Smith, director of institutional finance for the Higher Education Department. That’s because none scored low enough to be affected.
Using different sets of mandatory and optional measures for the state’s 22 community colleges and 10 eligible universities, the new model rewards a maximum score of 10 points to each institution. If a college or university scores below 6 points, it would lose a portion of its funding determined by the performance-funding model that year.
For example, next year, an institution that scores a 9.5 would “earn back” the full 5 percent of its funding that is controlled by the new formula. If that same institution scored between 3 and 3.99 points, it would retain half of that affected funding and lose the rest.
Universities will receive up to 1 point for each of four mandatory measures: increasing total credentials awarded, increasing bachelor’s degrees awarded, increasing degrees awarded in certain science and math fields, and whether average students are earning credits as they complete semesters.
The schools will select six other measures from a list that includes increasing patents related to research, increasing enrollment in fields related to regional economic needs, increasing external grant funding and increasing degrees and certificates awarded to students who required remedial education.
After that score is calculated, universities with totals below 10 can receive up to 1 “compensatory point,” awarded on the basis of the number of enrolled low-income students. For example, if a university scores a 9, and 50 percent of its students qualify for federal Pell Grants, its final score would be a 9.5.
“When you’re trying to do a blanket policy statewide, it’s a challenge because of the differences between our institutions,” Broadway said, adding that the formula the department designed recognizes the varying strengths and missions of the state’s public institutions.
Under the new formula, community colleges will use a similar set of mandatory and optional measures, with “compensatory points” for Pell Grant enrollment and for the percentage of enrolled students who score below 15 out of a possible 36 on the ACT college admissions test.
In the first year’s scores, two universities fell short of a perfect score on the formula without faring so poorly that they would have had their funding affected: Henderson State University scored a 9.36, and Southern Arkansas University scored a 9.53, according to results distributed Friday.
Ten of 22 community colleges had below-perfect scores, but none scored low enough to lose public funding, the results showed.
Board member Sarah Argue said she was concerned that some schools were scoring too low in some measures despite reaching the threshold needed to maintain their current funding levels.
“There’s a lot of room for growth for some of our schools,” Argue said.
Smith said she expects scores to improve as institutions become more mindful of the formula and its potential effects on their funding.
Presidents and chancellors have cautioned that it may be unfair to expect their campuses to meet new, higher expectations when the state has funded many of them below 75 percent of their need, as determined by state law, for years.
The amount of an institution’s funding affected by the formula was originally scheduled to grow by 5 percent every year until it reached 25 percent in the 2017-18 academic year. To address concerns of educational leaders, lawmakers amended the law in the most recent session to freeze affected funding at 10 percent until all institutions are funded to at least 75 percent of their need.
Front Section, Pages 1 on 04/27/2013