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College Funding Formula Makes Outcomes Key to MoneyLock Icon

7 min read

The financial impact of the new outcomes-based state funding formula on individual Arkansas universities and colleges has been a mixed bag, but the program is having the desired effect, and overall funding has increased.

That, at least, is the assessment of the Arkansas Department of Higher Education and a number of university leaders interviewed by Arkansas Business.

The goal of the formula is to graduate more students in the most efficient, effective and affordable way possible. Previously, state funding was based on enrollment, which has been declining in recent years at many Arkansas schools.

“The funding formula has gone, I want to say, it’s gone better than expected,” said Maria Markham, director of the state Division of Higher Education. “All of the indicators that we hoped to impact, with the exception of just a couple, we have really started to move the needle.”

“In any given year, any given institution may be dissatisfied with their outcomes, but when we look at what’s happening to our students, it’s very positive,” she said. “And, at the end of the day, that’s what we wanted to see.

“We wanted to see students succeeding at a higher rate, more students getting to the finish line with high-quality credentials that are going to be marketable at a lower cost. And that’s what we have seen. So if the students are winning, then the formula is doing its job.”

The heads of universities in Arkansas say they are working toward the goal of the funding formula, and supporting it.

“The impact, I think, is profound in the sense that it refocuses every institution in the state on the student, which is where [the focus] needs to be,” said University of Arkansas System President Donald Bobbitt.

The formula determines a productivity index for each institution by comparing the institution’s performance for a three-year period to its performance in the previous three years. Each institution can earn up to 2% more in annual state funding if its index rises, or lose up to 2% if its index declines.

The index is based on metrics for which the schools earn points, including:

  • How many credentials — career and technical certificates, associate’s degrees and bachelor’s degrees — were awarded;
  • How many students made progress toward a degree;
  • How many students completed basic courses;
  • How many years it took students to earn a degree;
  • How many credits students had earned by the time they graduated.

How long it takes for a student to earn a degree matters, Markham said, because “an extra year in college, not only does it cost the student more money, it costs the state more money. … The other big thing that we’re looking at with affordability has to do with access for students. So the less affordable a degree is, the less likely that underrepresented populations are to participate in higher education.”

The formula awards more points for degrees earned by those populations — minority students, low-income students, remedial and nontraditional students — and for degrees in science, technology, engineering and math, the STEM fields.

There are also adjustments that recognize the importance of research and to make sure the formula is equitable to four-year and two-year schools.

Markham said her department expects to see 48,260 credentials awarded in 2019-20, which would be a 40% increase from 2013-14, the first year that was used in scoring under the new formula.

Also, the combined productivity index for all public institutions in Arkansas has increased every year for the three years the formula has been in place. That index rose by 1.71% the first year of the formula, then by 1.34% the second year and by 1.52% the third year.

In addition, another $13 million will have been spent on higher education in Arkansas because of the formula, which began affecting state funding in 2018-2019, provided that the Legislature approves a recommended $3.1 million for 2020-2021. That would represent a 2.92% increase in funding over three years.

Buy-in From Legislature

Markham said the Legislature has increased higher education funding as recommended by the department every year since the formula was implemented.

While the department’s funding requests were sometimes ignored or discounted, they haven’t been since the funding formula was instituted because lawmakers appreciate the requests being more reasonable and fact-based, she said.

Markham also said Arkansas has seen most metrics improve, with one exception: Fewer black students are earning degrees. She said the main reason is that college is less affordable.

Her department is looking at launching a FAFSA completion marketing campaign and establishing another needs-based aid program to address that issue. FAFSA is the Free Application for Federal Student Aid, which must be completed to receive any federal grants, work-study offerings or federal student loans. Most scholarships and other forms of aid also require that students complete it.

Another issue is Gov. Asa Hutchinson’s desire to have 60% of high school graduates earn a postgraduate degree or certificate by 2025. That isn’t going to happen because it’s unrealistic, Markham said.

The current rate is about 43%, and reaching 45% would be a “party-throwing situation,” she said. “Moving attainment two percentage points is a monumental achievement. Those are generational changes.”

The 60% mirrors the national goal, Markham explained, and Arkansas’ goal needs to be more tailored to the needs of its workforce. So her department is pushing the 60% goal to 2030 and adjusting its strategic plans as needed to improve attainment in a realistic and targeted way.

Working to Improve Outcomes

There were winners and losers among the state’s universities when it came to funding adjustments under the new formula, but Bobbitt believes those schools need to improve, not that the formula is wrong. “The question is ‘Do we agree with the ultimate goal, which was set by the governor?’ Absolutely. Student success and helping students obtain a credential and walk across the stage is the ultimate goal of all of the UA System schools,” Bobbitt said.

“I would say every single one of our institutions, even the ones that have lost money, have devoted considerable effort, resources and time to solving the issues that their students have that limit their success. And I expect every one of our schools to be able to turn it around and be able to demonstrate productivity under this new funding paradigm.”

Bobbitt stressed that the UA System had been working to improve outcomes years before the formula took effect, an assertion echoed by others who spoke to Arkansas Business.

University of Central Arkansas President Houston Davis said his predecessor, Tom Courtway, had been working on student success initiatives for three or four years before Davis arrived in 2017, meaning that UCA was well-positioned for the change. It has seen more than a 1% increase in funding every year.

Also, UCA’s retention rate is the highest it has been in 30 years, and degrees awarded increased to 2,561 in fiscal year 2018 from 2,141 in fiscal 2015.

Measures the school took include piloting “meta-majors,” he said. The adviser of a student who hasn’t declared a major yet determines the student’s core interests, and the student is assigned a meta-major based on that, Davis said. For example, students who are interested in the sciences can be STEM meta-majors. They’ll take general education courses related to that meta-major and declare a traditional major later.

Davis said the meta-majors get students interested in a subset of possibilities early and increase the likelihood that they will succeed.

Overall, “I do think that the way the formula is designed, if a school is willing to get really serious about student success and is willing to get serious about managing with data, then you can really start moving the needle and you can start realizing gains,” he said.

Speaking of data, that’s been a big deal for the University of Arkansas at Little Rock, according to Cody Decker, interim vice chancellor for student affairs, associate provost and chief data officer.

The school lost funding for two years and gained funding the most recent year. Most of the changes it has made have been related to improving data quality.

The first few years were also bumpy for the University of Arkansas at Monticello, said Chancellor Karla Hughes.

It’s important to note that UAM, a four-year school, and its two-year technical campuses in Crossett and McGehee are lumped together under the formula, and UAM is the state’s only open-access institution, meaning it accepts at least 80% of applicants. Its students are more difficult and expensive to educate because not as many of them are college-ready.

Before the formula took effect, UAM reached out to former students who qualified for an associate’s degree but had not received one, so there was a spike in those degrees. Unfortunately, the school’s performance was compared to its previous performance under the formula, and the one-time boost skewed those results to UAM’s detriment.

However, UAM is set to get a $186,000 increase in funding this year after losing a total of $140,000 before.

UAM has hired advisers who do only that (they don’t teach), enacted an early alert system, launched a “15 to finish” marketing campaign to encourage students to complete 15 hours each semester and more, Hughes said. With the early alert system, advisers are told if students aren’t coming to class or participating normally, so they can intervene to help.

“Philosophically, I have always been in support of the funding formula,” Hughes said. “Is it perfect? No, it’s not perfect, but it probably will never be. But is it better than what we had? I personally think so.”

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