NFA Positions on Work Session Recommendations
NSHE Ad Hoc Committee on Higher Education Funding, Work Session Meeting on 7/25/2024
9:30 am in person at the Las Vegas or Reno system offices. To provide public comment or testimony by telephone, dial 669-900-9128, Meeting ID: 910 0378 4066, Passcode: 777777. To provide written public comment, use the online public comment form (2000-character limit).
At its
work session on Thursday, July 25, the
NSHE Ad Hoc Committee on Higher Education Funding will finalize recommendations for the NSHE funding formula. In response to Chair Hardesty’s request at the May 30th meeting and after reaching out to faculty members at each of the seven colleges and universities for feedback, the Nevada Faculty Alliance submitted
recommendations for the formula funding on June 24th. We tailored those recommendations to be largely consistent with the Committee’s discussion on May 30th, we stand by them, and we encourage committee members to review them.
The work session document for the July 25th agenda provides options for recommendations, but does not address all of the issues discussed by the committee nor the full range of options requested by committee members. Here we provide detailed recommendations for the work session.
Base budgeting. We reiterate our global recommendation that the NSHE budgeting mechanism be changed from a distribution formula where institutions compete against each other for a fixed pot of money to a true funding formula where funding for each institution is based on the costs of instruction and student services based on appropriate inputs such as student credit hours, student headcounts, as well as fixed administrative and operational costs. Stakeholders told the committee that budget competition among institutions impedes budget planning and encourages mission creep.
Suggested language: The Committee recommends that future base budgets for the main instructional budgets each of the seven colleges and universities be calculated based on caseload factors (resident Weighted Student Credit Hours and on Student Enrollment factors enhanced for at-risk student groups) at each institution independently, with dollar amounts per WSCH and per student adjusted for inflation using the Higher Education Price Index, rather than using the caseload factors to distribute a fixed general fund appropriation.
Recommendations contingent upon funding. Nothing in the legislation funding this study nor in the charges from the Interim Chancellor restricts the Committee to recommending only a redistribution of existing funds (“reslicing the pie”). Although only the Legislature can appropriate funds, the Committee is free to state that its recommendations are contingent upon new funding and should do so wherever appropriate including possible inclusion of summer courses in the formula and Outcomes-Based Funding.
Directions to Chancellor. Many of the recommendations in the work session document merely “urge the Chancellor’s Office to…” act or make a decision. Although the Chancellor’s Office will need to follow up on recommendations, this language cedes the Committee’s mandate to make its own judgements and recommendations to later action by the Chancellor alone.
Suggested language: For each applicable recommendation, substitute “Recommend that the Board of Regents direct the Chancellor’s Office to… ” for “Urge the Chancellor’s Office to…”, and make a clear recommendation wherever there are several choices.
Inflation adjustments. The Committee discussed the need for inflation adjustments to formula factors, but the work session document includes an inflation factor only for the Small Institution Factor. Adjustments for inflation should be explicitly included for each component of the funding formula.
Suggested language: The Committee recommends that the dollar amounts per weighted or unweighted student credit hour or student headcount, where used for setting base budgets or caseload maintenance budgets, be adjusted for inflation using the Higher Education Price Index.
Fee waiver funding. The Committee discussed both the value of fee waivers for certain student groups and the negative impact that unfunded fee waivers have on the institutions and on other students. The work session document does not address this important issue.
Suggested language: The Committee recommends to the Legislature and Governor that fee waivers mandated by statute be fully funded through appropriations added outside of the funding formula based on the actual fee waivers awarded during the prior biennium.
Audits. Although it was never agendized for discussion by the Committee, the NFA believes it is essential for transparency and accountability that all numbers reported by the institutions that are used for formula funding be regularly audited.
Suggested language: The Committee recommends that the Board of Regents establish a policy for annual internal audits of the reporting of student credit hours, student headcounts, and other factors used for developing formula-driven budgets.
In the following sections, we address each of the recommendations in the work session document (numbered items in bold quoted):
1a. Funding Adequacy and Equity Study. Urge the Chancellor’s Office to pursue a study of funding adequacy and equity as soon as practical so that the study may be completed no later than June 30, 2025, when the authorization for expending funds appropriated under Assembly Bill 493 expires.
Background: AB493 appropriated up to $2,000,000 for the Committee’s study of higher education funding. This recommendation implies that the consultant’s fee and other expenses for the Ad Hoc Committee will be substantially less, given the estimate of $250,000 to $700,00 for a Funding Adequacy and Equity Study depending on scope. However, other states required between one year and 2.5 years to complete such a study, again depending on scope.
NFA supports adoption of item 1a, with the substitution that “The Committee recommends that the Board of Regents direct the Chancellor to purse a study…” If a full study cannot completed within the existing appropriation and time limit, then do a first phase and request additional funding from the 2025 legislature.
2a. Small Institution Factor (SIF) Inflationary Adjustment. Increase the SIF from $30 to $40 per WSCH and continue to adjust for inflation in future years using the Higher Education Price Index (HEPI).
2b. Increase SIF Cap to 125,000 WSCH. Increase the WSCH cap from 100,000 WSCH to 125,000 WSCH.
[OR]
2c. Increase SIF Cap to 150,000 WSCH. Increase the WSCH cap from 100,000 WSCH to 150,000 WSCH.
Background: The lack of an inflation factor and the fixed WSCH cap penalized GBC and WNC for growth and for the increased weightings for Career & Technical Education student credit hours. NFA proposes an alternative Administrative Allocation as a fixed dollar amount for all institutions of about $700,000 (inflation-adjusted in the future) to cover the minimum administrative staffing of a chief financial officer, chief academic officer, and human resources administrator.
NFA position: If these are the only options, the NFA supports 2a and 2c. However, we ask the Committee to consider a flat-dollar amount of $700K for each institution, inflation-adjusted using future COLAs for professional employees. Detailed analysis is in our June 24th recommendations (part E).
2d. Further Review of SIF. Urge the Chancellor’s Office to review the SIF calculation using headcount, rather than WSCH, and determine if an alternative calculation based on headcount should be utilized.
Background: Neither WSCH nor student headcount is directly correlated with the minimum administrative needs for a small institution. As an alternative NFA has proposed a fixed administrative allocation of about $700,000 based on the minimum administrative staffing of a chief administrative officer, chief academic officer, and human resources administrator, Detailed analysis is in our June 24th recommendations (part E). NFA opposes 2d as written.
Suggested Language: The Committee recommends that the current Small Institution Factor be eliminated and in its place an Administrative Allocation be appropriated prior to operating budget allocations by student headcount and credit-hour caseload factors. The amount of the Administrative Allocation for each institution should be about $700,000, adjusted in the future by Cost-of-Living Adjustments for faculty employees. This recommendation is contingent upon new funding ($4.9 million total); if new funding is not appropriated Administrative Allocations should be provided only for the legacy small institutions (GBC and WNC).
3a. Use Student Attributes as a Component in Funding Allocation Methodology. Allocate a portion of the General Fund appropriation based on the following student characteristics: 1) total student term headcount enrollments and credit hours (including non-resident students), 2) under-represented minority student headcount enrollments and credit hours, and 3) Pell eligible student headcount enrollments and credit hours.
3b. Academic Preparation. Urge the Chancellor’s Office to begin efforts to determine the data elements appropriate to identify students who are not prepared for the rigors of college-level coursework to be used as an attribute in the student-based component of the funding allocation methodology. The determination of such data elements should be done in consultation with campus-level Institutional Research Offices to ensure the consistent availability of data or the consistent collection of such data elements going forward. It is recommended that this effort commence in sufficient time that such data can be available for use in the formula allocation for FY2028 and FY2029 (or the 2027 Session).
3c. Students in Poverty. Urge the Chancellor’s Office to begin efforts to determine the data elements appropriate to identify students who are in poverty to be used as an attribute in the student-based component of the funding allocation methodology. The determination of such data elements should be done in consultation with campus-level Institutional Research Offices to ensure the consistent availability of data or the consistent collection of such data elements going forward. It is recommended that this effort commence in sufficient time that such data can be available for use in the formula allocation for FY2028 and FY2029 (or the 2027 Session).
Background: NFA and several committee members requested that additional categories of at-risk students be included in the enhancement factors for student headcounts. We would also include students requiring disability resource services. NFA recommended that the weightings be based on estimated costs of providing needed student-support services. Furthermore, if this recommendation is intended to incorporate the detailed proposal by HCM Strategists (50% unweighted student credit hours and 50% student headcounts, both multiply counted for under-represented minority students and Pell-eligible students), then the Committee report should explicitly include that recommendation.
The NFA supports 3a, 3b, and 3c with the proviso that the weightings be based on studies of the cost of student support services for the various listed categories of students plus those requiring disability accommodations. Using actual cost estimates is better than arbitrary weightings even if the estimates are imprecise. Also, the motion should refer to the details of the formula in the HCM Strategists proposal.
Suggested additional language: Include in the Committee report the details of the calculator of the student attributes component as proposed by HCM Strategists. For 3b and 3c, replace “Urge the Chancellor’s Office to…” with “Recommend that the Board of Regents direc the Chancellor to…”.
4a. Further Review of Summer School Student Credit Hours. Urge the Chancellor’s Office to review the budgetary and administrative implications of further expansion of state support for summer school course offerings, beyond nursing and teacher education.
Background: Several institutions, committee members, and NFA supported the inclusion of summer school courses in the Weighted Student Credit Hours (and Student Headcounts). However, there are complications and unintended consequences if the summer student fees that are currently in self-supported budgets were to be moved into the state operating budgets.
The NFA supports 4a, with inclusion of summer school courses in the Adequacy and Equity Study.
Suggested additional language: Replace “Urge the Chancellor’s Office to…” with “Recommend that the Board of Regents direct the Chancellor to…” and add “and include summer course offerings in the Funding Adequacy and Equity Study.”
5a. 3-Year Average of WSCH. Base the WSCH count for each year of measure on a 3-year average. Use the same caseload growth process the second year of the biennium, also based on the 3-year average figures.
5b. Greater of 3-Year Average or Prior Year. Base each institution’s WSCH count for each year of measure on a 3-year average or the prior year, whichever is greater. Use the same caseload growth process for the second year of the biennium, also using the same WSCH methodology as the first fiscal year of the biennium.
5c. Weight Most Recent Year in 3-Year Average Calculation. Base the WSCH count for each year of measure using a 3-year average and weight the most recent year higher.
Background: There was much Committee discussion about how to handle count years. NFA recommended against the three-year average because it increases the average lag period (e.g., 2021 through 2024 for the 2025-2027 budget versus the single count year of 2023-2024) and because it still treats even and odd years differently given biennial budgeting. NFA proposes using the higher of the prior two years. Because the second year of the biennium is budgeted in the prior legislative session, within the state budgeting process there is no way to adjust the numbers and budgets for the second year of the biennium
Among these alternatives, NFA prefers 5b but using a two-year average instead of three-year would better match the biennial state budgeting cycle and reduce the lag period.
Suggested Language: Amend 5b by changing “3-year” to “2-year”.
6a. Outcomes-Based Funding Component. Eliminate the current NSHE Performance Pool and replace it with an Outcomes-Based Funding (OBF) component in the funding allocation methodology, allocating the funds based on a relative growth calculation.
Background: There is near-universal opposition to keeping the current Performance Pool, which is a 20% carve-out of base funding that has to be earned back by meeting various target metrics. The relative growth model advocated by HCM strategists may be an improvement; it still is a carve-out although the funding can be calculated at budget-setting time. NFA argued that a 20% allocation is much too high and would be disruptive to budget planning. Several committee members at the May 30th meeting suggested allocations from 0% to 10%. This decision point is about using the relative growth model, not setting the relative percentages (see item 7).
NFA supports item 6a, but contingent on the percentage formula allocation being much lower than 20% (NFA recommends 5%) and contingent upon new initial funding. The Outcomes-Based Funding should be phased in over two biennia and be based on performance metrics that are not correlated with absolute student enrollment numbers, either student credit hours or student headcounts. Performance metrics should be measures of success relative to targeted student populations, relative efficiency measures, or full-time-faculty-to-student and advisor-to-student ratios. NFA recommends that the Committee include this item contingent on new initial funding; a delay of that funding until after new performance metrics can be implemented would be reasonable.
Suggested added language: This recommendation is contingent upon new appropriations for the OBF component of the formula, to be implemented in the first biennium that relative growth using new performance metrics can be determined. Performance metrics may vary by institution type but should not be directly correlated with student credit hours or student headcounts. The Committee report shall include the detailed methodology for calculating relative growth as proposed by HCM Strategists.
7a. 40%-40%-20% Component Mix. After SIF and research O&M are subtracted from the total General Fund appropriation, allocate the remaining General Fund appropriation as follows: 40% based on course weighted enrollments (WSCH); 40% based on student characteristics (described in recommendation 3a.); and 20% based on progression and outcomes (referred to as outcomes-based funding or OBF and described in recommendation 6a.).
7b. 45%-45%-10% Component Mix. After SIF and research O&M are subtracted from the total General Fund appropriation, allocate the remaining General Fund appropriation as follows: 45% based on course weighted enrollments (WSCH); 45% based on student characteristics (described in recommendation 3a.); and 10% based on progression and outcomes (referred to as outcomes-based funding or OBF and described in recommendation 6a.).
7c. 40%-50%-10% Component Mix. After research O&M and SIF are subtracted from the total General Fund appropriation, allocate the remaining General Fund appropriation as follows: 40% based on course weighted enrollments (WSCH); 50% based on student characteristics (described in recommendation 3a.); and 10% based on progression and outcomes (referred to as outcomes-based funding or OBF and described in recommendation 6a.).
7d. 60%-20%-20% Component Mix. After research O&M and SIF are subtracted from the total General Fund appropriation, allocate the remaining General Fund appropriation as follows: 60% based on course weighted enrollments (WSCH); 20% based on student characteristics (described in recommendation 2a.); and 20% based on progression and outcomes (referred to as outcomes-based funding or OBF and described in recommendation 6a.).
Background: The primary driver of redistribution of funding among the institutions is the percentage of the formula reallocated from resident Weighted Student Credit Hours to student attributes (with double or triple counting for underrepresented minority students and Pell-eligible students per item 2a). NFA argued that the 40% allocation to the student attributes factors as recommended by HCM is much too high and does not match the reality that only an average of 8% of institutional budgets are allocated to Student Services. Also included in this decision point is the percentage allocated to Outcomes-Based Funding—committee members recommended 0% to 10% versus HCM’s recommendation of 20%.
Using the enrollment trend data provided in supplemental material for the work session, the following table compares the growth in WSCH, unweighted student credit hours, and student headcounts for the ten-year period from AY2013 to AY2023 (AY2024 was not used because the large one-year increase in concurrent enrollment at UNR skews the comparisons). Note that for every institution except NSU, the growth in headcounts has been slower (or negative) compared with the growth in weighted or unweighted student credit hours. That is probably a good thing because it means that students are completing a larger number of credits. However, this trend should serve as a caution against a large formula allocation to headcount measures especially given that future demographics point to decreasing enrollments.
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10-Year Growth in Enrollment Measures 2013-2023
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UNLV
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UNR
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NSU
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CSN
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GBC
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TMCC
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WNC
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Overall
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WSCH
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26%
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16%
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83%
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0%
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28%
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14%
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26%
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19%
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Unweighted SCH
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23%
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10%
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92%
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-8%
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6%
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-12%
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1%
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9%
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Headcount
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11%
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9%
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98%
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-23%
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4%
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-14%
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-3%
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-3%
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NFA recommends percentages of 75% based on WSCH, 20% on student attributes, and and 5% for Outcomes-Based Funding, with the change form 100% WSCH phased in over two biennia to give institutions time to adjust to the new formula and performance metrics. Of the four alternatives provided, 7d (60%/20%/20%) is better, but the Committee should not be restricted to staff suggestions in setting the percentages.
Suggested language: After research O&M and [SIF or the Administrative Allocation] are subtracted from the total General Fund appropriation, allocate the remaining General Fund appropriation as follows: 75% based on course weighted enrollments (WSCH); 20% based on student characteristics (described in recommendation 3a.); and 5% based on progression and outcomes (referred to as outcomes-based funding or OBF and described in recommendation 6a.), phased in over two biennia. This recommendation is contingent upon a new appropriation equivalent to a 5% expansion of the base General Fund appropriation to fund the new OBF component (also phased in over two biennia). The 20% component for student attributes would be taken from the current formula allocation for WSCHs. Absent a new appropriation for the OBF component, the allocation would be 80% to WSCH and 20% to student attributes.
8a. Implementation Strategy. Urge the Chancellor to consult with the Presidents to determine the phase-in approach that best supports the System and its institutions when implementing the funding formula distribution changes.
Background: HCM Strategists suggested several different options for the phase-in approach: 1) phase-in the new model over a defined period (e.g., fully implemented by the third biennium), 2) utilize a stop-loss provision establishing that no institution will lose more than X% in any given year of implementation, 3) fund a hold harmless provision.
NFA position: The Committee should recommend specific implementation strategies. Leaving this up to the Chancellor and Presidents will just cause unnecessary confusion and political wrangling. NFA recommends the simple approach of phasing in the changes over two biennia AND hold-harmless funding for at least two biennia. The hold-harmless provisions should be relative to actual appropriations for FY2025, including enrollment recovery funds.
Suggested language: The Committee recommends that the changes to the formula allocations percentages as adopted in item 7 be phased in 50% in the first biennium and 50% in the second biennium. The Committee recommends that institutional budgets be held harmless for at least the next two biennia relative to legislative appropriations in FY2025 including one-time enrollment-based appropriations (AB491 and AB494). The recommendations for items 7 and 8 are contingent upon hard-harmless funding and new funding for the allocation to Outcomes-Based Funding.
9a. Review Committee. Urge the Chancellor’s Office to create a formula review committee that convenes every two biennia to evaluate and propose any necessary changes to the funding formula allocation methodology.
The NFA supports item 9a, but changes to methodology should be limited to adjusting weightings in the WSCH formula to reflect instructional costs and the enhancement factors for at-risk student categories in the Student Headcount formula to reflect costs of student support, also taking into account the State’s economic and employment needs. Broader funding formula changes (e.g. the percentage allocations to WSCH, headcounts, and performance factors) should not be changed frequently. However, the details of the implementation of the new formula through the state budget process have not been fully considered by the Committee and will probably need oversight and revision, as well as the performance metrics for OBF. At least at the beginning of the implementation of the new formula, adjustments will be needed more often than every four years. The approval authority should be specified in the motion.
Another implementation concern is determining the proportions of state funding versus student revenue (currently 65%/35% overall but varying by institution), with inflationary factors applied to both. In addition, a minimum of 70% to 80% of student registration fees should go to fund instruction and student services, not be diverted to other functions such as intercollegiate athletics or capital improvements.
Suggested language: Recommend that the Board of Regents direct the Chancellor to create a formula review committee including faculty representatives that convenes every biennium to evaluate and propose any appropriate changes to the funding formula allocation calculations to reflect the cost of instruction based on course level and discipline, the cost of student support considering student attributes, and the economic and employment needs of the State. The formula review committee should also evaluate and make recommendations regarding the implementation of the funding formula in the budgeting process, including the relative proportion of state and student revenue and limits on the use of student registration fees for non-instructional purposes. The formula review committee shall be responsible for recommending performance factors for the Outcomes-Based Funding model. Upon approval by the Board of Regents, the recommendations of the formula review committee shall be reported to the Legislature and Governor.
NFA Series on NSHE Funding Formula
