Outcomes-Based Funding: Overview of Best Practices, Research & State Examples

StrategyLabs.LuminaFoundation.org

OUTCOMES-BASED FUNDING: OVERVIEW OF BEST PRACTICES, RESEARCH & STATE EXAMPLES

Presented by: Martha J. Snyder, Senior Associate, HCM Strategists, LLC

North Carolina Community College PresidentsJuly 25, 2014


Agenda

• Lumina Strategy Labs Network Overview

• Outcomes-Based Funding Status, Design Principles & Research

• Ohio Community Colleges Formula

• Next Steps for Higher Education Finance

2


LUMINA STRATEGY LABS

3


Strategy Labs

• Learning community• State and system-leaders, university & college

leaders, nonprofit organizations, business leaders

• Connect peers across states to share, identify and pursue solutions to improve education attainment

4

Lumina State Policy Agenda & Goal 2025


State Policy Agenda

5

Create Smarter Pathways

Improve Student Outcomes

Align Investments


OUTCOMES-BASED FUNDING

Rationale, Status, Design Principles & Research

6


Policy Rationale for Performance Funding

7

Align state investment with

state/system priorities

Completion/Attainment

Jobs/Economic

Development

Drive institutional behavior

Support Scaling of Proven Student

Success PracticesProgrammatic evaluation and

change

Alternative delivery models

Polic

y Ra

tiona

le fo

r 2.0

StrategyLabs.LuminaFoundation.org 8

Current Status of Outcomes-Based Funding in States (as of 3/24/14, HCM Strategists)

WA

OR

CA

AK

NV

MT

CO

OK

WI

NE

HI

ID

WY

AZ

KS

ND

IA

AR

UT

NM

TX

MN

MO

LA

SD

MS

KY

IL

MI

NY

GA

SC

VA

AL

TN

INOH

PA

FL

NC

WVDE

NJ

ME

VT NHMACT

MD

RI

Implementing (as of FY 2014)

Developed, not implemented

Interest


Performance Funding 1.0 Flaws

• Multiple, unaligned priorities• Complicated & Burdensome• Lack of institutional consultation• One-size-fits-all• Funding challenges • Competed w/Access Agenda• Original policy supporters left

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Design Principles for Outcomes-Based Funding

Begin with a state goal/clear policy

priorities

Use a simple approach

Account for institution

differences

Incent success of typically

underrepresented students

Make the money meaningful

Seek Stakeholder Input

Phase-in (≠ Hold Harmless)

Include only measurable

metrics

Plan to evaluate

10


Outcomes-Based Funding: Research & Impacts• Focused mostly on 1.0 policies; beginning to track

impact on 2.0 policies

• Research is almost entirely focused on intermediate (institutional change) impacts

• Limited information/ability to understand ultimate impact (scarce research)

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Research and Impacts

⁺ Change in colleges’ awareness of state priorities & own performance

⁺ Reported increase in use of data in institutional planning• identify student barriers• align institution policies/investments

⁺ Academic program improvements• Academic departments: staffing and structure changes• Academic delivery: program structure (remedial education)

12


Research and Impacts

⁺ Student Services• Registration, graduation procedures, financial aid• First-year retention programs• Targeted student advising, tutoring and supplemental services• Job placement services

⁻ Concern over:⁻ Quality⁻ Instability of funding ⁻ Uneven knowledge of performance funding across and within colleges

(not filtering to faculty)

13


Development Steps

Step 1: Establish a framework Goals & PrioritiesTimeline for development & implementationFunding amounts

Step 2: Establish Process for Stakeholder InputStep 3: Review Data and Choose Initial MetricsStep 4: Model various formula optionsStep 5: Implementation/phase-in optionsStep 6: Finalize recommendationsStep 7: Communicate

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OHIO COMMUNITY COLLEGE FORMULA

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BackgroundHigher Education Funding Commission report and House Bill 59 study charges:

At-Risk Factors

• …identify the socio-economic, demographic, academic, personal, and other factors that identify a student as being "at-risk" of academic failure….

• study the most appropriate formula weights to: “reward schools that are successful in educating non-traditional and at- risk student populations”

Success & Completion Measures

• …research the most appropriate success points and completion measures that occur during the academic career of community college students…

• Determine how funding shall be distributed among its success points, completion measures and course completion funding…


Funding Consultation & Process

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Began meeting in March 2013• Majority of institutions represented• Included representatives from the Ohio Board of Regents, the Higher

Education Funding Commission and the Ohio Office of Budget and Management

Facilitated by the OACC and HCM Strategists• Consultation from HCM provided through Lumina Strategy Labs

Working group formed in August 2013• Developed formula framework & technical details• Recommendations presented to full consultation

Engagement of OACC Presidents• Presentation and discussion each month from September to December


Guiding Principles of Consultation

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• Multiple models were reviewed and evaluated based on data, policy implications, and the consultation’s guiding principles:

o Hold true to the mission and priorities of community colleges including access, completion, quality, and workforce development.

o Incentivize institutions to adopt evidence-based practices to help them succeed.

o Align with state priorities and initiativeso Be simple to understand and communicateo Develop a model that is sustainable, consistent, and reliable.


Ohio Community College Formula History, 2009-2015

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FY 2015Elimination of enrollment component

Combination of course completion (50%), success points (25%) & completion metrics (25%)At- risk or access category application

No stop loss

FY 2014 50% enrollment + 25% course completion+ 25% success points

97% stop loss

FY 2009- 2013 Primarily enrollment-based with inclusion of success points(5% to 10%)

Stop Loss (99%-96%)


Ohio CC: FY 2015 Framework Summary

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Cost-Based Course

Comple-tion* 50%

Success Points 25%

Cost-Based Completion Milestones*

25%

*Access Categories Applied

• Adult (age 25 and over at time of enrollment)

• Low-Income, Pell Eligible

• Minority (African American, Hispanic, Native American)

All data averaged over three years


Component 1: Cost-Based Completions

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Cost-Based Calculation• Average statewide cost based on level of course and subject

area (aggregation of CIP codes)• # of FTE who pass course * determined cost

Access category weight:15% for any student with one (or more) risk factors


Component 2: Student Progression

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Developmental Education Success• # of Students completing developmental

education Math and enrolling in first college-level math course (1 point)

• # of Students completing developmental education English & enrolling in first college-level English course (1 point)

12 Credit Hours• # of students earning first 12

college-level credits (1 point)






Component 3: Cost-Based Completions

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Associate Degree

Completions

Certificate Completions

Transfer w/12+ credit

hours

Cost-Based Model

Access Category Weights:25% for one access category

66% for two access categories150% for three access categories


Access Categories for Course Completions

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FY 15 Access Categories: Adult - 25 and older at enrollmentLow-income - Pell-eligible (ever)

Minority: American Indian, Hispanic, African American

Policy: Focus on student background, not enrollment status (e.g. part-time, enrollment in developmental education courses)

Narrow-In: Correlation between factors & policy informed recommended final categories

Significance: How much less likely are students from these groups to complete/graduate compared to students not from group

Data run to determine significance related to graduation and course completion

Aligned with Data or Potential Proxies (9 in total)

Colleges submitted suggested populations (15 distinct categories)


Application of Access Categories

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Hybrid model selected:o Completed FTE

• 15% add-on for students from 1 (or more) access category

o Completion Milestones• 25% add-on for students from 1 access

category• 66% add-on for students from 2 access

categories• 150% add-on for students from 3 access

categories


STATUS & NEXT STEPS FOR OHIO

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Status of Funding Recommendations

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−Mid-Biennium Budget: Reflects OACC Recommendationso Course completionso Success Pointso Completion milestoneso Access Categories

−Stability Fundingo $3.1 million for 96% stop-loss

o If stability funding < amount needed for 96% stop-loss: amounts are proportionally reduced

o If stability funding > amount needed for 96% stop-loss: excess reverts to general fund for all community colleges


Next Steps

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• Recommended for inclusion in FY 2016-17: 1. Short-term certificates and certificates of value

Continue to establish common definitions and data collection processes for short-term certificates (less than 1-year)

• Recommend for inclusion in FY 2016-17 funding model Certificates-of-value need further definition from the Ohio Board of

Regents

2. Academic Preparation Access Category Establish HEI reporting process for placement scores Align to Ohio Remediation Free Standards Develop crosswalks with other measures

3. Discontinue use of projected data


NEXT STEPS FOR HIGHER EDUCATION FINANCE

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1. Investment Needs

• Financial resources necessary to reach attainment needs– Not doing more with less; doing more, differently– Expand capacity of system to serve more students successfully– Combination of state investment and focus on student outcomes– More investment in current model will not allow us to achieve

attainment needs

• Allocation across sectors – programs and degrees to reflect projected attainment and

workforce needs


2. Advance & Support

• Data Systems– Expand capacity to include measures such as job

placement, certificates, etc.– Quality measures

• Institution support – Build capacity to evaluate performance– Share best practices for student support

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3. Evaluate & Refine

• Understand impact innovative delivery– Remedial Education Redesign– Competency-based education/PLA

• Underserved populations– Appropriate “premium” or weight for students– Identifying within context of state attainment needs

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Outcomes-Based Funding: Overview of Best Practices, Research & State Examples

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