Arkansas Colleges See New Funding Formula

Maria Markham is the new chief of the Arkansas Department of Higher Education.
Maria Markham is the new chief of the Arkansas Department of Higher Education. (Karen E. Segrave)
NWACC President Evelyn Jorgenson
NWACC President Evelyn Jorgenson (Beth Hall)

Maria Markham said the metrics for the state’s new funding formula for colleges and universities should be finalized later this month.

Markham, the director of the Arkansas Department of Higher Education, said a work group writing the new formula is about 90 percent finished. The final formula will need to be approved by the Legislature for the plan to begin in 2018.

The formula seeks to change the dynamic from one in which state dollars follow students to one in which dollars follow successful students. In education-speak, it is called an outcome-based or performance-based formula rather than enrollment-based metric.

Critics say that outcome-based plans do little to improve actual performance, but Markham said the new formula will help Arkansas achieve Gov. Asa Hutchinson’s 2025 goal of having 60 percent of Arkansas high school graduates earn some type of postgraduate degree or certificate.

The University of Arkansas System and the Arkansas State University System supported the formula change when it was approved in July.

“It’s the right thing for our state,” said Markham, who was named chief of ADHE in July. “It incentivizes colleges to take the most efficient, effective and affordable means necessary to move students from the point of initial enrollment to progress through their education and graduate with a marketable credential.

“Those institutions that are doing things right and putting their resources in places that really promote student success are going to be rewarded for that. There’s a possibility that institutions who don’t do that could actually lose money if they fall below what’s expected for productivity.”

Arkansas is in need of improvement. Just 29.8 percent of Arkansans between the ages of 25 and 64 have an associate’s degree or better compared with 40.4 percent nationally, according to the U.S. Census Bureau and the Lumina Foundation, a private foundation in Indianapolis whose goal is to improve higher education in the United States. Lumina is advising the ADHE on reworking best practices from other states to fit Arkansas’ needs.

“The goal is not to create winners and losers,” Markham said. “The goal is statewide productivity increase.”

Outcome Questions

Nick Hillman, a professor at the University of Wisconsin at Madison, said expectations that outcome-based funding would help colleges achieve better results haven’t been met. In a report for the Century Foundation, a think tank in New York City, Hillman said 12 studies of such funding initiatives haven’t shown significant results.

“Across this body of research, the weight of evidence suggests states using performance-based funding do not outperform other states,” Hillman wrote. “Despite each state having goals related to improving college completions, their performance-based funding policies have not yet achieved the desired results.”

In one state, Hillman wrote, out-come based funding caused universities to become more selective in the students they admitted, to improve the odds of producing graduates. In another state, community colleges issued more certificates than associate degrees.

But promoters of performance-based funding — like Scott Jenkins, director of state policy for Lumina — believe that the formulas are getting better at creating the desired results.

“Unfortunately, most of the academic research on this topic doesn’t distinguish between the relatively recent, well-designed funding systems and those that were enacted before 2005,” Jenkins said. “It takes a series of years for those state policies to filter down into the practice of those institutions. We’re getting ready to put out some emerging research that actually does show some pretty good success.”

Jenkins said part of Lumina’s role is to work with multiple states to review what works and what doesn’t as the plans are implemented or begin to produce statistics.

‘Devil in the Details’

Evelyn Jorgenson, president of Northwest Arkansas Community College in Bentonville, said she is optimistic the new formula will prove to be both fair and effective.

About a quarter of NWACC’s budget comes from state funding; across Arkansas, higher education funding has remained flat while tuition has increased. Jorgenson is hopeful community colleges won’t be penalized because their students are predominantly nontraditional students, who can be more costly to move through to graduation — something Markham said the new formula will take into account.

“In a total broad sense, I’m very much in favor of a focus on results,” Jorgenson said. “I think it’s very important for legislators and others to understand the missions of the various institutions. At community colleges, we serve students who don’t have the luxury of letting go of life and living on a residential campus and going to school and not having anything else to do. Many of our students are parents themselves — they’re juggling jobs, kids, house payments, car payments, the entire mix of things.

“As always, the devil is in the details. I just hope lawmakers and other involved in this process are cognizant of the differences between community colleges and highly selective institutions.”

Markham said that the formula will take the differences into account by comparing the results of two-year and four-year schools separately.

“We know that two-year schools, they receive a lot more students who are academically underprepared than the four-year institutions,” said Markham, who was chief academic officer at two-year UA-Cossatot before joining the ADHE. “If you’re serving a student who is academically underprepared — like they have a really low ACT or poor grade-point average — you actually get more ‘points’ when that student succeeds than when other students succeed.”

Markham said the state understands that a white, middle-class student with a 25 score on his or her ACT is a less expensive student to educate than, as an example, a 30-year-old Hispanic student for whom English is a second language. Statewide, 21.1 percent of African-Americans and 12.4 percent of Hispanics between the ages of 25 and 64 have an associate degree or better, compared with 31.8 percent of whites.

Nationally, the numbers are 45 percent of whites, 28.7 percent of blacks and 20.9 percent of Hispanics.

“We have to focus on those underserved, or our numbers aren’t going to change as a state,” Markham said. “We’re going to give you more money so you can be successful. Once you’re successful, you’re rewarded for that success. It disincentivizes any type of selection toward groups of students who are just statistically more likely to be successful, but it also incentivizes the practices [to better serve] the underrepresented groups.”

But performance-based models haven’t necessarily resulted in success with a more diverse population. In his report, Hillman said Indiana saw universities become less diverse after the funding change. Jenkins said it was an issue that states have to be vigilant about.

“It’s a really valid concern,” Jenkins said. “You have to make it worth the while of the institution. This isn’t done in a vacuum.”

A Matter of Degrees

Markham said that while the details are still being finalized, the formula will give more weight to degrees earned in STEM fields — science, technology, engineering and mathematics. Although Hillman’s research at the University of Wisconsin looked skeptically on skill-specific certificates rather than associate degrees, Jorgenson wants the new formula to respect certificates as well as classes taken by students who only want to add a specific knowledge for their job.

Jorgenson said NWACC offers certification programs in HVAC, construction and nursing; none of which result in degrees but which do produce people trained for good-paying jobs. And, if someone enrolled to take 10 hours of Spanish to improve his or her job skills, it’s a community benefit and a school success.

“That is why the formula has to be inclusive of those types of educations,” Jorgenson said. “Those people are productive citizens. They earn a living wage and many times a much better wage than someone with a bachelor’s. There has to be consideration in that formula to include all those types of successful completions that may or may not be degrees.

“We are really looking forward to having the opportunity to be measured on our success because we know we are going to measure up well. We know we create a lot of successful outcomes at the college.”