Arkansas college and universities will have an incentive to move students from initial enrollment to graduation in the most efficient, effective and affordable way possible as a new funding formula takes effect in July.
How much state money the schools get for the 2018-19 school year will depend on student performance in 2017-18, according to Maria Markham, director of the state Department of Higher Education. Starting in 2019-20, the schools risk losing funds if their students do not succeed.
Lost funds could total up to 0.5 percent of state funding in 2019-20, up to 1.5 percent in 2020-21, and 2 percent or more in 2021-22 and beyond, she said.
If a school experiences a 5 percent reduction in its budget, the department will review the formula to make sure it was fair to the school.
Also, starting in 2018-19, schools could earn up to a 2 percent more in funding every year. But any gain above 2 percent would be a one-time boost.
Markham’s department recommended the formula in October after two years of work on it. The Legislature then gave the green light and approved a $9.8 million increase in higher education funding for the fiscal year that starts July 1.
“We went from a completely 100 percent needs-based formula — so it was all about student enrollment and what an institution would require to serve that number of students — to a productivity-based formula, where everything is based on outcomes,” Markham said. “So we went from how many students could be enrolled to how many students graduated and progressed.”
Gov. Asa Hutchinson wants 60 percent of high school graduates to earn a postgraduate degree or certificate. Higher education officials hope the new formula will help achieve that by 2025.
About 40 percent of Arkansas’ high school graduates now have a postgraduate degree or certificate, Markham said.
The formula also aims for an increase in STEM degrees and degrees earned by minority and nontraditional students. STEM refers to the fields of science, technology, engineering and math.
Schools will receive productivity scores based on factors like how many years students spend getting a degree or certificate and how many credit hours they have when they earn credentials.
Schools receive more points for turning aiding academically unprepared students and students from underserved populations, as well as producing more STEM graduates.
The formula will favor schools where students earn credentials quickly and take fewer courses that aren’t required to get them. Students who spend less time in school and take fewer courses also spend less on education. That’s how the formula encourages efficiency.
The formula appears to be having the desired effect, Markham said, though numbers haven’t yet confirmed that.
“It’s a little premature to say whether or not it will make any huge impact, only having run it one time,” she said. “We do know, anecdotally, from some of the measures we’ve already started to look at, that we’ve had some improvements” in the number of STEM degrees and degrees earned by underserved students.
Schools have been preparing for the new formula for two years and have acted to improve productivity scores.
They’ve also helped fine-tune the formula, which Markham said is the result of a “very difficult” process by a work group composed of Arkansas college and university presidents, chancellors, CFOs, academic affairs staffers and others.
The process “took a lot of work: two years’ worth of regular meetings and dissecting data, looking at what other states had done, traveling and meeting all over the state with each institution to make sure everyone understood what we were doing,” Markham said.
“It was part of the political process. Everything that we did had to be vetted by our Legislature and had to be supported by the governor’s office. I would not say it was a smooth process, but we made the timeline we established.”
One result of fine-tuning the formula was ensuring that two-year and four-year schools are compared separately, since two-year schools cater to students who face more academic challenges and are more expensive to educate.
The next step for her department is to recommend a second iteration of the formula for the academic year that begins July 1, 2019. But that process should be smoother because no major changes are planned, Markham said.
Arkansas needed to shift from enrollment-based funding to outcome- ad performance-based metrics because the state couldn’t keep doing the same thing and expect different results, she said.
Arkansas has been 49th in higher education, and Markham hopes the formula will change that. “We may not be first, but we certainly don’t have to be 49th. We can do better.”