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State ties higher ed funding to results

March 23, 2013
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With fewer state dollars coming with more strings, Indiana’s public universities are altering their strategies in big and small ways to receive as much money as possible from the state.

Even though the Legislature is advancing a 3.5-percent funding increase for state colleges over the next two years, that increase will still leave nearly all schools with less funding overall or less money per student than five years ago.

Lubbers Higher Education Commissioner Teresa Lubbers has pushed universities to boost productivity.

So Indiana’s seven public universities are making changes to align themselves to the performance-funding formula developed by the Indiana Commission for Higher Education, which the Legislature is following.

Because that formula pays more for degrees in science, technology, engineering and math, Ball State University plans to add degrees in computer software engineering and other types of so-called STEM degrees.

“We really want to offer engineering degrees, and we will go forward to the state with a request to offer engineering degrees. Because if that is a priority for the state, then we want to be aligned with the state priorities,” Ball State President Jo Ann Gora told the House Ways and Means Committee during testimony in January.

She noted that the performance funding formula gives Ball State $9,000 for each additional graduate it produces above its past results, but the state will pay nearly $27,000 for each additional STEM graduate.

Ivy Tech Community College plans to restructure itself into four divisions, so it can help more students transfer to four-year institutions and help more technology students earn a credential before leaving.

The idea is to boost Ivy Tech’s woeful completion rates, which account for 70 percent of the performance-based funding formula. And Ivy Tech hopes the restructuring allows it to reignite its enrollment growth, which plateaued last year.

“This restructuring into four divisions will permit us and students to understand which programs can reasonably grow,” said Ivy Tech President Tom Snyder.

Other schools plan more modest changes to align themselves with the Indiana Commission for Higher Education’s big goal of nearly doubling the number of Hoosier adults with a postsecondary degree.

Indiana University has been experimenting with massively open online courses, or MOOCs, as a way to reach more students at lower cost. It has also moved to start academic advising for students as early as their freshman orientation and is trying to beef up its career counseling services.

The goal of those efforts is to boost IU’s productivity and graduation rates.

IU President Michael McRobbie told the House Ways and Means Committee in January that IU’s campuses across the state added 12,000 students and 3,000 graduates over the past five years, even as state funding declined.

“IU is educating significantly more students and producing significantly more degrees with reduced staffing and fewer state funds,” McRobbie said.

Uneven impact

Public universities continue to receive funding based on enrollment. But performance-based funding is gradually becoming a larger portion of their state allocation.

Performance-based funding began modestly, with incentives for research, in the 2003 state budget. It expanded in 2007 with rewards for gains in degrees, on-time graduation rates and successful transfer students.

The formula now rewards growth in these seven factors: overall degrees, degrees granted to students receiving federal PELL grants, STEM degrees, on-time graduation rates, successful remediation rates, percentage of students who remain enrolled after their freshman year, and a productivity metric defined by each school.

The budget lawmakers are writing this year would raise the performance-based calculation from 5 percent of each school’s state funding to 6 percent in 2014 and 7 percent in 2015.

“You are seeing strategies within colleges and universities to respond to these metrics because these metrics are responding to student needs,” said Teresa Lubbers, a former state senator who now leads the Commission of Higher Education.

higher-ed-table.gifLubbers said the commission has worked to adjust the performance-funding formula to account for the different missions of each public university. For example, research-based incentives apply to IU, Purdue and Ball State, but not the others.

For some schools, the state money is significant. Ball State’s annual funding is $140 million, which represents 33 percent of its budget. So the performance funding can swing its overall budget 2 percent.

By contrast, state funding accounts for just 13 percent of the budget for Purdue’s West Lafayette campus, which means the performance funding affects just 0.75 percent of the budget.

“The money is not big enough to drive behavior by itself at West Lafayette,” said Purdue Provost Tim Sands. But, he added, “What it really does is encourage us to have the discussion [with state leaders,] to align our values where we can.”

Ball State’s frustrations

All university leaders publicly declare support for the goals of the performance-funding formula—although most have complained at times about its effects on them individually.

The school complaining the loudest this year is Ball State, which would see no increase in funding over the next two years. Only Indiana State University in Terre Haute, which would suffer a 1.1-percent loss in funding, has done worse under the performance-funding formula.

Gora, in her testimony before the House and Senate budget committees, emphasized that Ball State has worked since her arrival in 2004 to raise admissions standards and the quality of programs, while keeping enrollment around 16,000.

That strategy, combined with Ball State’s focus on non-STEM degrees, has put it at a big disadvantage, Gora said.

“Because our strategy has been to get better, not bigger, this is not a strategy that has been rewarded by the funding formula—although we think this is a good strategy for Hoosiers,” Gora said. “The formula is a one-size-fits-all. And yet the institutions were asked to differentiate.”

Lubbers, the higher education commissioner, challenged some of Gora’s assertions. She noted that Ball State has 27 degree programs that count as STEM degrees.

And she noted that, even though Ball State’s graduation rate has improved 84 percent since 2000, it has not improved much over the past six years—a span when the university’s admissions standards brought it higher-caliber students.

“I do think there is a fair expectation that, if you become more selective and you take more academic honors students, I think it would be fair to expect that your completion rates would go up,” Lubbers said.

The schools that have benefited most under performance funding are Ivy Tech and Vincennes University, which focus on granting two-year degrees.

Under the budget that passed the House, Ivy Tech would receive a 9.8-percent boost over the next two years while Vincennes would see an 8.3-percent bump.

Snyder, the Ivy Tech president, expressed thanks for the increase because “there are a lot of mouths to feed.” But he noted that Ivy Tech’s rapid growth has reduced its per-student funding from the state by about $600 over the past six years.

So Ivy Tech’s restructuring into four units—transfer students, technology, health sciences, and business and public service—is an attempt to serve more students without a corresponding increase in state funding.

The transfer division will be able to streamline the offering of general education courses toward a bachelor’s degree—without having to add expensive new facilities like science labs. And the technology division will solve one of Ivy Tech’s big challenges on its graduation rates: that enrollees in its automotive, welding and computer programs are often unemployed when they enter, then leave early once they land a job.

The technology division will stack Ivy Tech’s certificate programs, one-year degrees and two-year degrees on top of one another, so students can enroll in one program and earn at least a professional certificate quickly. If those students then leave, they at least have a credential that can help them in the job market.

And then those students will also count toward Ivy Tech’s graduation rates.•

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