Transcript Using Funding Policy to Achieve State Goals: The Response to SJR 88 Illinois Board of Higher Education Oakton Community College October 5, 2010 National Center.

Using Funding Policy to Achieve State Goals:
The Response to SJR 88
Illinois Board of Higher Education
Oakton Community College
October 5, 2010
National Center for Higher Education Management Systems
3035 Center Green Drive, Suite 150
Boulder, Colorado 80301
The Specifics of SJR 88
• History and means of higher ed funding in Illinois
– Comparisons
– Reviewing for adequacy, equity, and reliability
• Compare productivity of Illinois institutions
– State systems
– Peer institutions
• Analyzing best practices for incentivizing certification and degree
completion
– Students
– Institutions
• Review tuition and financial aid policies – assess roles in improving
certification and degree completion
• Consider alternative funding mechanisms that will advance the goals
of the Illinois public agenda
2
The Illinois Public Agenda for College & Career Success
• Goals
1. Increase educational attainment to match best-performing
states
2. Ensure college affordability for students, families, & taxpayers
3. Increase the number of high-quality postsecondary credentials
to meet the demands of the economy and an increasingly global
society
4. Better integrate Illinois’ educational, research, and innovation
assets to meet economic needs of the state and its regions
3
Among the principles established in conjunction with the public
agenda
“2. Priorities, policies, and budgets must
align with state goals.”
4
Policy Leadership
Strategies for
Achieving
Goal
Attainment
Planning and
Leadership
Finance
Regulation
Alignment
Goal 2
Goal 3
slide 5
Consistency
Goal 1
Accountability
Governance
Of the Policy Levers Available to Legislatures, the
Most Powerful is Finance
• Finance Policy
– Sends the strongest signals
– Creates the strongest incentives for institutional behavior
In the absence of alignment between goals and finance
policy, failure to achieve goals will be assured.
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The Flow of Funds
Economy
Federal
Government
Available
State and Local
Govt. Funds
•
•
•
•
Higher
Education
Student Aid
Appropriations/Grants
Tuition
Students
Institutions
Scholarships &
Waivers
Student Aid (Restricted)
Federal
Government
slide 7
K-12
Corrections
Health Care
Other Govt.
Donors
Foundations
Corporations
The Flow of Funds - State
Economy
Federal
Government
Available
State and Local
Govt. Funds
•
•
•
•
Higher
Education
Student Aid
Appropriations/Grants
Public
Tuition
Students
Scholarships &
Waivers
Student
Aid
Federal
Government
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Institutions
Private
K-12
Corrections
Health Care
Other Govt.
The Flow of Funds
Available
State and Local
Govt. Funds
Higher
Education
Student Aid
Appropriations/Grants
Tuition
Students
Institutions
Scholarships &
Waivers
Student Aid
Federal
Government
slide 9
Three Purposes for State Funding
• Sustaining institutions – capacity creation &
maintenance
• Investing in state priorities – capacity utilization
• Ensuring Affordability
slide 10
Finance Policy – The Options
Institution
Focused
Core
Capacity
Capacity
Utilization/
Public Agenda
slide 11
• Base-Plus
• Formulas
• Investment
Funds
Performance
Funding
Student
Focused
Tuition & Aid
Policy Focused on
Revenue
Generation
Tuition & Aid
Policy Focused on
Attainment of
Specified
Outcomes
Remember – all funding mechanisms create
incentives for behavior
•
Institutions
•
Students
Question – are the incentives created
consistent with pursuit of stated goals?
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Incentives in the Current Funding Mechanism
• Keep students enrolled – but not necessarily completing
• Increase tuition to compensate for declines in state
allocations
13
Characteristics of Sound Higher Education Finance Policy
• Comprehensive – encompasses
– Appropriations to institutions
– Tuition
– Student financial aid
• Components all consistently promote pursuit of state goals
• Maintains affordability to
– Students – judged against family income
– States – judged against tax capacity
• Serves to maintain – as well as create – necessary educational
capacity
– Promotes alignment of institutional missions with state priorities
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Some Observations About Results of
Past Practices
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• Funding model has provided sufficient funds to four-year
institutions to maintain capacity
• Community colleges are underfunded
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Illinois/National Comparisons – Public Research
Sector, AY 2008
National
Average
Illinois
Illinois Rank
E&R Spending
per Student
$15,619
$16,282
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State & Local
Subsidy per
Student
$8,055
$7,533
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Source: Delta Cost Project
17
Illinois/National Comparisons – Public Masters’
Sector, AY 2008
National
Average
Illinois
Illinois Rank
E&R Spending
per Student
$12,185
$13,560
13
State & Local
Subsidy per
Student
$6,578
$7,203
17
Source: Delta Cost Project
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Illinois/National Comparisons – Public Community
Colleges, AY 2008
National
Average
Illinois
Illinois Rank
E&R Spending
per Student
$10,396
$7,836
46
State & Local
Subsidy per
Student
$7,404
$5,422
31
Source: Delta Cost Project
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Illinois Institutions are Relatively Efficient
in Producing Degrees
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Completions Per 100 FTE Students
Education & Related Spending per Completion
Source: Delta Cost Project
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Costs are Increasingly Being Shifted to Students
And Student Aid Isn’t Keeping Up
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Illinois Public Research Institutions
State & Family Share of Funding
1988-2008
Source: Delta Project on Postsecondary Education Costs, Productivity,
and Accountability; Delta Cost Project IPEDS Database.
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Illinois Public Masters & Bachelors Institutions
State & Family Share of Funding
1988-2008
Source: Delta Project on Postsecondary Education Costs, Productivity,
and Accountability; Delta Cost Project IPEDS Database.
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Illinois Public Associates Institutions
State & Family Share of Funding
1988-2008
Source: Delta Project on Postsecondary Education Costs, Productivity,
and Accountability; Delta Cost Project IPEDS Database.
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Percent of Family Income Needed to Pay for College
Minus Financial Aid
Public 2-Year
Public 4-Year
Private 4-Year
Not for Profit
Source: Measuring Up 2008
26
State Tax Capacity & Effort
Indexed to U.S. Average
State Tax Capacity (Total Taxable Resources Per Capita)
1.7
DE
1.6
1.5
1.4
CT
NJ
1.3
MA
AK
1.2
NH
1.1
1.0
WY
MD
VA
CO
NV
IL
WA
NY
MN
CA
US
PA NE
SD
0.9
TN
0.8
RI
WI
NC GA
KS
HI
MO
OH
FL IN IA
VT
ORTX
AZ ND
MI
UTKY
SC
ID
NM
LA
AL
OK
WV
MT AR
0.7
ME
MS
0.6
0.6
0.8
1.0
1.2
State Tax Effort (Effective Tax Rate)
Source: State Higher Education Executive Officers (SHEEO)
slide 27
1.4
A Framework for a New Funding Model
• Appropriations to institutions
• Tuition
• Student financial aid
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Appropriations to Institutions
Task Force Recommendation
Performance-based funding is a valuable policy tool to achieve
state goals of improved student outcomes, and Illinois should
move forward with development of financial incentives to
achieve desired outcomes
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Performance Funding Model Should
• Include a performance feature in the base component of
institutional funding
• Be different for different types of institutions
– Research Universities
• Competitiveness for research funds
• Application of research to state issues/opportunities
– Masters Institutions
• Increasing number of graduates
• Application of research to regional priorities/problems
– Community Colleges
• Increasing numbers of completers
• Increasing numbers of transfers
• Completion of momentum points
• Be constructed so as to encourage success of at-risk students
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Tuition Policy
• Now a train on its own track
• Must be more explicitly linked to other elements of
funding policy
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Student Financial Aid
•
Current program is
–
–
–
–
•
Well designed
Underfunded (by 50%)
Unable to ensure that affordability goal can be met
Operated in such a way that allocation (triage) criteria are not aligned with public
agenda
Options
– Alter triage criteria used to allocate map funds
• Add high school preparation, for example
– Add resources to current program
• Human capital bonding program
• Reallocation of state money from institutions to students
– A new model that makes explicit the responsibilities for all partners in student aid
funding
•
•
•
•
•
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Students
Families
Federal Government
State Government
Institutions
Some Pitfalls to Avoid
• Trying to solve the funding problem piecemeal
– It will require a comprehensive solution
– “we can’t tweak our way out of this”
• Creating a model that is too complex and not
transparent
• Not reflecting different contributions of different types of
institutions
• Trying to make a single part of the model carry too
much of the load
• Building it in isolation – involvement of, and consultation
with, key constituents is critical
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