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National Center for Higher Education Management Systems3035 Center Green Drive, Suite 150Boulder, Colorado 80301
Using Funding Policy to Achieve State Goals:The Response to SJR 88
Illinois Board of Higher EducationOakton Community College
October 5, 2010
The Specifics of SJR 88
• History and means of higher ed funding in Illinois– Comparisons– Reviewing for adequacy, equity, and reliability
• Compare productivity of Illinois institutions– State systems– Peer institutions
• Analyzing best practices for incentivizing certification and degree completion– Students– Institutions
• Review tuition and financial aid policies – assess roles in improving certification and degree completion
• Consider alternative funding mechanisms that will advance the goals of the Illinois public agenda
2
The Illinois Public Agenda for College & Career Success
• Goals1. Increase educational attainment to match best-
performing states
2. Ensure college affordability for students, families, & taxpayers
3. Increase the number of high-quality postsecondary credentials to meet the demands of the economy and an increasingly global society
4. Better integrate Illinois’ educational, research, and innovation assets to meet economic needs of the state and its regions
3
“2. Priorities, policies, and budgets must align with state goals.”
Among the principles established in conjunction with the public agenda
4
Policy Leadership
slide 5
Strategies for Achieving Goal Attainment
Planning and Leadership
Finance RegulationAccountabilit
yGovernance
Goal 1
Goal 2
Goal 3
Consi
stency
Alignment
Of the Policy Levers Available to Legislatures, the Most Powerful is Finance
• Finance Policy– Sends the strongest signals– Creates the strongest incentives for institutional
behavior
In the absence of alignment between goals and finance policy, failure to achieve goals will be
assured.
6
The Flow of Funds
slide 7
Federal Government
Tax Policy
Appropriations/GrantsStudent Aid
Tuition
Scholarships &Waivers
Student Aid (Restricted)
Income
Available State and Local
Govt. Funds
FederalGovernment
Higher Education
Students Institutions
Economy
• K-12• Corrections• Health Care• Other Govt.
DonorsFoundationsCorporations
Stimulus
Funds
The Flow of Funds - State
8
Federal Government
Tax Policy
Appropriations/GrantsStudent Aid
Tuition
Scholarships &Waivers
Available State and Local
Govt. Funds
Higher Education
Students
• K-12• Corrections• Health Care• Other Govt.
Stimulus
Funds
Federal Government
Student Aid
Income
Economy
Public
Institutions
Private
The Flow of Funds
slide 9
Appropriations/GrantsStudent Aid
Tuition
Scholarships &Waivers
Available State and Local
Govt. Funds
Higher Education
Students Institutions
Student Aid
FederalGovernment
Three Purposes for State Funding
• Sustaining institutions – capacity creation & maintenance
• Investing in state priorities – capacity utilization
• Ensuring Affordability
slide 10
Finance Policy – The Options
slide 11
• Base-Plus• Formulas• Investment
Funds
Tuition & Aid Policy Focused
on Revenue Generation
Performance Funding
Tuition & Aid Policy Focused on Attainment
of Specified Outcomes
Core Capacity
Capacity Utilization/
Public Agenda
InstitutionFocused
StudentFocused
Question – are the incentives created consistent with pursuit of
stated goals?
Remember – all funding mechanisms create incentives for behavior
• Institutions• Students
12
Incentives in the Current Funding Mechanism
• Keep students enrolled – but not necessarily completing
• Increase tuition to compensate for declines in state allocations
13
Characteristics of Sound Higher Education Finance Policy
• Comprehensive – encompasses– Appropriations to institutions– Tuition– Student financial aid
• Components all consistently promote pursuit of state goals• Maintains affordability to
– Students – judged against family income– States – judged against tax capacity
• Serves to maintain – as well as create – necessary educational capacity– Promotes alignment of institutional missions with state
priorities
14
Some Observations About Results of Past Practices
15
• Funding model has provided sufficient funds to four-year institutions to maintain capacity
• Community colleges are underfunded
16
Illinois/National Comparisons – Public Research Sector, AY 2008
National Average
IllinoisIllinois Rank
E&R Spending per Student
$15,619 $16,282 20
State & Local Subsidy per Student
$8,055 $7,533 28
Source: Delta Cost Project
17
Illinois/National Comparisons – Public Masters’ Sector, AY 2008
National Average
IllinoisIllinois Rank
E&R Spending per Student
$12,185 $13,560 13
State & Local Subsidy per Student
$6,578 $7,203 17
Source: Delta Cost Project
18
Illinois/National Comparisons – Public Community Colleges, AY 2008
National Average
IllinoisIllinois Rank
E&R Spending per Student
$10,396 $7,836 46
State & Local Subsidy per Student
$7,404 $5,422 31
Source: Delta Cost Project
19
Illinois Institutions are Relatively Efficient in Producing Degrees
20
Completions Per 100 FTE Students
Education & Related Spending per Completion
Source: Delta Cost Project21
And Student Aid Isn’t Keeping Up
Costs are Increasingly Being Shifted to Students
22
Illinois Public Research Institutions State & Family Share of Funding
1988-2008
Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.
23
Illinois Public Masters & Bachelors Institutions State & Family Share of Funding
1988-2008
Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.
24
Illinois Public Associates Institutions State & Family Share of Funding
1988-2008
Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.
25
Percent of Family Income Needed to Pay for College
Minus Financial Aid
Public 2-Year Public 4-Year
Source: Measuring Up 2008
Private 4-YearNot for Profit
26
State Tax Capacity & EffortIndexed to U.S. Average
Source: State Higher Education Executive Officers (SHEEO)
AL
AK
AZ
AR
CACO
CT
DE
GA HI
IL
IN IAKS
KYLA
ME
MD
MA
MS
MT
NE
NV
NJ
NY
NC
ND
OH
OK
PA
RI
SC
SD
UT
VT
VA
WA
FL
ID
MI
MN
MO
NH
NM
TNTX
WV
WI
WY
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
0.6 0.8 1.0 1.2 1.4
Sta
te T
ax C
apacity
(Tota
l Taxable
Reso
urce
s Per C
apita
)
State Tax Effort (Effective Tax Rate)
US
OR
slide 27
A Framework for a New Funding Model
• Appropriations to institutions
• Tuition
• Student financial aid
28
Appropriations to Institutions
Task Force RecommendationPerformance-based funding is a valuable policy tool to achieve state goals of improved student outcomes, and Illinois should move forward with development of financial incentives to achieve desired outcomes
29
Performance Funding Model Should
• Include a performance feature in the base component of institutional funding
• Be different for different types of institutions– Research Universities
• Competitiveness for research funds• Application of research to state issues/opportunities
– Masters Institutions• Increasing number of graduates• Application of research to regional priorities/problems
– Community Colleges• Increasing numbers of completers• Increasing numbers of transfers• Completion of momentum points
• Be constructed so as to encourage success of at-risk students
30
Tuition Policy
• Now a train on its own track
• Must be more explicitly linked to other elements of funding policy
31
Student Financial Aid• Current program is
– Well designed– Underfunded (by 50%)– Unable to ensure that affordability goal can be met– Operated in such a way that allocation (triage) criteria are not aligned with public
agenda
• Options– Alter triage criteria used to allocate map funds
• Add high school preparation, for example
– Add resources to current program• Human capital bonding program• Reallocation of state money from institutions to students
– A new model that makes explicit the responsibilities for all partners in student aid funding
• Students• Families• Federal Government• State Government• Institutions
32
Some Pitfalls to Avoid
• Trying to solve the funding problem piecemeal– It will require a comprehensive solution– “we can’t tweak our way out of this”
• Creating a model that is too complex and not transparent
• Not reflecting different contributions of different types of institutions
• Trying to make a single part of the model carry too much of the load
• Building it in isolation – involvement of, and consultation with, key constituents is critical
33