Performance-based funding hits colleges, then students
By Roy Ockert Jr.
Aug. 4, 2015
The Arkansas Higher Education Coordinating Board has adopted a new policy that will ease penalties on colleges and universities failing to live up to new performance-based funding guidelines.
This is the first year that an Arkansas university could lose funding for failing to live up to expectations under the guidelines, and the University of Arkansas at Monticello is the first test case. The Legislature ordered development of performance-based funding in 2011 with the support of then-Gov. Mike Beebe, who called for measures to increase the number of bachelor’s degrees obtained in Arkansas.
The legislation required the state Department of Higher Education to establish a new formula to be phased in over five years. When fully implemented, 25 percent of the funding of each 4- and 3-year institution will be based on its graduation rate, among other things.
This year 10 percent of each institution’s funding is subject to the formula, and that will increase by 5 percent annually.
Traditionally, Arkansas has provided state funding to its 33 colleges and universities based largely on enrollment. That on occasion has led to some unproductive practices as some college leaders played numbers games — enrolling as many students as possible without regard to whether they had the ability to complete a degree or whether they made sufficient progress toward graduating.
Arkansas has historically ranked at or near the bottom of all states in the percentage of its citizens with a college degree. U.S. Census figures for 2010 showed Arkansas ahead of only West Virginia in its percentage of citizens 25 and older with a degree. Our state’s number was just 18.9 percent, compared to the national average of 27.5 percent.
Another report showed that only 38 percent of the freshmen who entered Arkansas colleges and universities in 2004 had earned a degree by the end of summer 2010. The record of 2-year colleges was even worse. Just under 20 percent of its students beginning a program of study in 2007 had earned an associate degree by mid-2010.
In his 2011 state-of-the-state address Beebe called for doubling the number of degree holders in Arkansas by 2025. That’s certainly a worthy goal. Increasing the general education level of our state’s population has to be attractive to businesses and industries considering location here.
Other states are also trying to raise their education levels, and performance-based funding has become a favorite legislative strategy. The National Conference of State Legislatures reports that 32 states have adopted a funding formula or policy based on performance indicators such as graduate rates or course completion, and five other states are developing something similar.
In the same NCSL report were a number of tips offered to help legislators design a performance-based funding model. Here’s the first one: “Put enough funding at stake to create an incentive for institutions to improve results, and decide whether the funding will come from new money or base funds. Most states are putting aside 5 percent to 25 percent of higher education dollars for performance funding.”
Oh-oh.
While Arkansas went with a percentage building to 25, that’s not new money but rather base funding. And base funding for higher education in Arkansas and most other states has been declining for quite a few years.
The Arkansas Legislature this year followed Gov. Asa Hutchinson’s proposal and passed a flat higher education budget (ignoring one lawmaker’s outlandish call for a $14.6 million cut). But flat funding is really a loss because expenses don’t stay flat.
That’s why public college and university boards have been shifting the burden of paying for their operating costs to students. So take away some of an institution’s state funding, and what happens? The student is asked to pay a greater share.
That’s why our nation now has a ticking time bomb with more than $1.2 trillion in outstanding student loan balances, which surpasses credit card debt and is second only to mortgage debt. In fact, the Federal Reserve Bank of York reports that since 2004 student loan balances have more than tripled, growing at a rate of 13 percent a year. The average balance per borrower is about $27,000.
Yet we seem determined to make it more expensive and more burdensome for our young people to get a college education. So far, that crisis is largely being ignored by our many political leaders who want to be president. Instead, they’re obsessing over Iran, e-mails and immigration.
Since no new state money is being added for higher education, it makes sense that the Higher Education Coordinating Board would modify its policy for applying the new performance-based funding formula. A 10 percent penalty is bad enough; a 25 percent penalty could be crippling to a college or university already struggling to make ends meet. Its only choice would be to raise tuition and-or fees.
Besides, the formula uses various measures to compile a score from 1 to 10 for each institution. Six is considered to be the magic number. Don’t get a 6, and you lose money.
UAM scored 5.16, thus losing $182,949.48, which now it might be able to get back.
The Legislature should rethink this approach. A formula than provides an incentive for new funding would work much better than a penalty assessed against existing funds.
Roy Ockert is editor emeritus of The Jonesboro Sun. He may be reached by e-mail at royo@suddenlink.net.