1 Tennessee Higher Education Commission Higher Education Outcomes Based Formula 2010.

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Tennessee Higher Education Commission

Higher EducationHigher EducationOutcomes Based FormulaOutcomes Based Formula

20102010

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Higher Education RevenuesHigher Education Revenues

Total Revenue per FTE - UniversitiesInflation Adjusted

$0

$1,500

$3,000

$4,500

$6,000

$7,500

$9,000

$10,500

$12,000

$13,500

$15,000

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

StFeesARRA/ MOEStAppr

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Higher Education RevenuesHigher Education Revenues

Total Revenue per FTE - Community CollegesInflation Adjusted

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

StFeesARRA/ MOEStAppr

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Existing Funding Formula• Linked to 2005-10 Tennessee Master Plan• Enhanced focus on student retention• Focus on adult enrollment of students age 25 and up

at community colleges.• Research calculation determined by Carnegie

classification and Doctoral degree production.• Enrollment base calculation using a three-year

moving average of actual fall enrollments.

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Existing Funding Formula

• Existing formula is approximately 60% enrollment driven.

• Incentive structure is heavily focused on inputs.

• Existing Performance Funding program and imbedded performance incentives provide limited leverage for policy change.

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Interpreting the Existing Funding Formula

• Enrollment growth is privileged above all else.

• Little differentiation is made between different types of institutions.

• Limited acknowledgement of institutional mission and uniqueness.

• For the most part, success means bigger.

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Complete College Act• “Develop, after consultation with the board

of regents and the University of Tennessee board of Trustees, policies and formulae or guidelines for fair and equitable distribution and use of public funds … that are consistent with and further the goals of the statewide master plan. The policies and formulae or guidelines shall result in an outcomes-based model.”

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Complete College ActOutcomes-Based Model

• According to the legislation, the model must include:– end of term enrollment– student retention– degree production– timely progress towards a degree

• The model may also include:– student transfer activity– research– student success– compliance with transfer and articulation policy as enumerated

further in the legislation

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Formula Design Concepts• Alter the incentive structure to focus on outputs.

• Find broad agreement on the activities and outcomes higher education ought to pursue.

• Spread the financial incentives to a larger, more appropriate set of variables (not just enrollment).

• Calibrate it specifically to an institution’s mission by utilizing Carnegie Classifications and mission statements.

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Formula Design Concepts

• Strengthen links to Master Plan

• Enhance incentives for student retention, research

• Introduce a focus on productivity, defined as degree production, transfer activity, student access, adult students, etc.

• Tailor the productivity emphasis to each institution’s mission

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Formula Design Concept

• Identify an outcome (degree attainment, transfer activity, student retention, etc.)

• Compile actual data on those outcomes (Fact Book, Statutory Reports).

• Award “points” for those outcomes.

• Weight the outcome based on an institution’s mission.

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University Formula Design Concept

Hypothetical Institution Outcomes

Hypothetical Data

Points per Outcome Weights

Total Points

Bachelors Degrees 2,672 9 35% 617 Graduation Rate 42.0 9 5% 88 Time to Degree 4.8 9 5% 133

Research Expenditures 3,854,000 9 2% 4 First Time Students 2,558 8 6% 89

Students Achieving Soph. Status 2,037 8 8% 114 Students Achieving Jr. Status 2,490 8 10% 174 Students Achieving Sr. Status 1,846 8 12% 155

Doctoral Degree Production 7 8 2% 1 Masters Degree Production 54 8 5% 11

Adult Student Enrollment 3,610 8 5% 65 Transfers In from CC 645 8 5% 193

100 100% 1,644 1. Outcome data is taken from the THEC Fact Book and other readily

available sources.

Data is rescaled to account for large differences between the

numbers (e.g. Research Expenditures and Time to Degree)

2. Points are awarded for each outcome by

multiplying the rescaled data by the Points per

Outcome.

3. Points are multiplied by outcome specific weights to determine the total points.

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University Formula Design ConceptHypothetical Hypothetical

OutcomesInstitution A

WeightsInstitution B

WeightsBachelors Degrees 35% 20%

Research Expenditures 2% 15%Doctoral Degree Production 5% 10%

Weights will vary depending on institutional mission.

For example:

•A Master’s level institution would have a greater weight on bachelor degree production and a lesser weight on graduate degree production and research expenditures.

•Conversely, an institution with a greater research focus would have a lesser weight on bachelor degree production and a greater weight on graduate degree production and research expenditures.

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Outcomes Based Model

• Formula has never been and is not now an institutional budgeting tool.

• Outcomes based model does not have targets or goals; it is not large scale Performance Funding.

• Institutional excellence will no longer be overshadowed by enrollment growth.

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Outcomes Based Model

• Multiple measures of productivity, previously unaccounted for, will now be credited to the institution (transfer activity, R&D success, degree production, etc.)

• Formula is not prescriptive in how to achieve success and excellence.

• Does not penalize failure to achieve pre-determined goals.

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Outcomes Based Model Advantages

• Includes student successes/outcomes that hitherto have not been a factor in formula.

• Emphasizes unique institutional mission.• More flexible and can accommodate future shifts in

mission or desired outcomes.• More transparent and simpler for state government.• Along with new PF, the model will increase leverage

for policy change and reinforce the Master Plan.

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From the Perspective of State Government….

• Enrollment growth is no longer paramount.

• Access for the sake of access is not enough; a successful student outcome (however defined) is the goal.

• Institutions have different missions and that variance must be considered.

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From the Perspective of State Government….

• What is the most effective means of allocating limited state resources among institutions?

• What macro-level information is crucial to making allocation decisions among institutions?

• What type of incentive structure can be created, with minimal operational interference but maximum leverage, to achieve state goals?

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THEC Formula Review Committee

• Jessica Gibson – Comptroller’s staff• Tre Hargett – Secretary of State • Jack Murrah – THEC Chairman• Cathy Pierce – F&A• Paul Robertson – Treasurer’s staff• Gary Rogers – UT• Dale Sims – TBR • David Thurman – Legislative Budget Office• THEC staff

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Higher EducationHigher EducationOutcomes Based FormulaOutcomes Based Formula

20102010

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