Transcript Tennessee Finance Policy Reform

Tennessee’s Outcomes-Based Funding
Formula
AASCU – December 1, 2011
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Tennessee Higher Education Commission
TN Finance Policy Overview
• For decades, TN operated an enrollment-based
funding formula for higher education, with a 5%
Performance Funding add-on.
• Recently, the policy focus has shifted from
enrollment to productivity (educational
attainment and workforce preparation).
• In response, states have altered Performance
Funding programs or added productivity
incentives to existing models.
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Tennessee Higher Education Commission
TN Finance Policy Overview
• However, enrollment is still the basis of these
models. The vast majority of funding is still
distributed as a function of enrollment.
• There is a disconnect between the state policy
focus (productivity) and the finance policy
instrument (enrollment).
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Tennessee Higher Education Commission
TN Finance Policy Overview
• TN completely threw out its enrollment model
and started over, building from scratch an
outcomes-based model that is unique in higher
education policy.
• Key features: exclusive use of outcomes, in lieu
of enrollments; institution specific weighting
structure for the outcomes; end of entitlement
approach to funding.
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Tennessee Higher Education Commission
Tennessee Finance Policy Genesis
• In 2009, THEC proposed to former Governor Phil
Bredesen a new incentive structure – an outcomesbased funding formula that would replace the
enrollment based funding formula.
• Gov. Bredesen included THEC’s idea of an outcomesbased model in a proposal for higher education reforms
that he made to the Legislature.
• In January 2010, Tennessee passed the “Complete
College Tennessee Act” which called for the creation
of an outcomes-based funding formula.
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
• This is not a reform to TN’s long-standing Performance
Funding program.
• The outcomes-based model completely replaces the
enrollment-based model.
• Enrollment, beginning or end of term, simply no longer
factors into TN higher education state funding.
• The outcomes model is not for the allocation of any
new state funding, but for all state funding.
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
Universities
Outcome
Student Progression: 24 Credit Hours
Student Progression: 48 Credit Hours
Student Progression: 72 Credit Hours
Bachelors Degrees
Masters Degrees
Doctoral/Law Degrees
Research/Grant Funding
Student Transfers
Degrees per 100 FTE
Graduation Rate
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
Community Colleges
Outcome
Students Accumulating 12 hrs
Students Accumulating 24 hrs
Students Accumulating 36 hrs
Dual Enrollment
Associates
Certificates
Job Placements
Remedial & Developmental Success
Student Transfers
Workforce Training (Contact Hours)
Awards per 100 FTE
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
• The outcomes-based model “weights” outcomes
differently by institution.
• For instance, as graduate degrees and research
have a larger role in institutional mission, they
are weighted more heavily in the model.
• This weighting feature allowed the model to be
designed specifically to an institution’s mission.
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
Weights Based on Institutional Mission APSU
Student Progression: 24 Credit Hours
3%
Student Progression: 48 Credit Hours
5%
Student Progression: 72 Credit Hours
7%
Bachelors Degrees
30%
Masters Degrees
15%
Doctoral/Law Degrees
0%
Research/Grant Funding
10%
Student Transfers
10%
Degrees per 100 FTE
15%
Graduation Rate
5%
100%
UTM
3%
5%
7%
30%
15%
0%
10%
10%
15%
5%
100%
TTU
3%
5%
7%
25%
15%
5%
10%
10%
10%
10%
100%
UTC
MTSU ETSU
3%
3%
3%
5%
5%
5%
7%
7%
7%
25%
25%
25%
15%
15%
15%
5%
5%
7.5%
10%
10% 12.5%
10%
10%
5%
10%
10%
10%
10%
10%
10%
100%
100%
100%
Bachelors degrees; little
research/doctoral degrees
Tennessee Higher Education Commission
TSU
3%
5%
7%
25%
15%
7.5%
12.5%
5%
10%
10%
100%
UM
2%
3%
5%
25%
15%
10%
12.5%
5%
10%
12.5%
100%
UTK
2%
3%
5%
15%
15%
10%
15%
5%
10%
20%
100%
Extensive doctoral degrees
and emphasis on research
TN Outcomes-Based Formula
• All state funding is back up for grabs every year.
• No institution is entitled to some minimal level
of appropriations that is based on prior-year
funding.
• State appropriations have to be earned anew
each year.
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
• THEC convened a Formula Review Committee
to discuss and debate the new formula design.
• The committee included representatives from
higher education and state government.
• The committee included people with vastly
different views on higher education.
• Broad consensus on the philosophy and
principles of new outcomes-based formula
model.
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
• Institutions played a key role in the process.
• Selected campus presidents, CFOs and provosts
were members of the Formula Review
Committee.
• Presidents/chancellors were queried for their
suggestions on what outcomes to include and the
priority of the outcome.
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Tennessee Higher Education Commission
TN Outcomes-Based Formula
• Multiple Formula Review Committee (FRC)
meetings
• Explicit institutional feedback and input
• Regional town halls
• Staff background briefings with governing
boards, Constitutional officers and legislative
members
• Campus visits and consultations
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Tennessee Higher Education Commission
Developing a New Formula Model
• THEC staff back-tested model designs by
simulating the formula calculations for three prior
years.
• This provided comfort that the new design was
stable and that the new model’s behavior was
properly understood.
• Once the outcomes model was finalized, THEC
staff developed a projection tool, a Dynamic
Formula Model, that allowed the user to simulate
the effect of future changes in productivity.
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Tennessee Higher Education Commission
Outcomes Based
Model Advantages
• The outcomes model is linked directly to the
educational attainment goals of TN’s Public
Agenda.
• The outcomes model establishes a framework
for government to have an ongoing policy
discussion with higher education.
• The model is adjustable to account for new
outcomes or a different policy focus (changing
the weights).
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Tennessee Higher Education Commission
Outcomes Based
Model Advantages
• Emphasizes unique institutional mission.
• More transparent and simpler for state
government.
• Does not penalize failure to achieve predetermined goals.
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Tennessee Higher Education Commission
Lessons Learned in Tennessee
• Go Big. Even a clever PF program at 5% is
swamped by the other 95% that is based on
enrollment.
• Smooth transition from old to new rules of the
game.
• Proper engineering/Back testing.
• Transparency in intention and design.
• Institutions must help shape the finance policy
(in TN’s case, the outcomes and the weights).
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Tennessee Higher Education Commission
Lessons Learned in Tennessee
• Key philosophical and practical impediments to
traditional Performance Funding paradigm:
• An institutional reluctance to put state
funding at risk;
• Attempts at large-scale PF designs have been
too volatile and complex (see South Carolina
in the 1990s).
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Tennessee Higher Education Commission
TN Outcomes Formula
• Extensive information, including the
outcomes-based formula, are available
on the THEC homepage.
• tn.gov/thec
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Tennessee Higher Education Commission
Russ Deaton, Ph.D.
Associate Executive Director for Fiscal Policy & Administration
Tennessee Higher Education Commission
404 James Robertson Parkway, Suite 1900
Nashville, TN 37243-0830
615-532-3860
[email protected]
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Tennessee Higher Education Commission