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NSHE and independent consultant make their final funding formula presentations to committee

01 Jul 2012 11:55 AM | Deleted user

Although many faculty and students are away from campuses for the summer, the important work of the interim legislative Committee on the Funding of Higher Education is entering its most important phase.

the most recent meeting of the full committee, on June 27, the committee heard the Nevada System of Higher Education’s final and apparently complete proposal for an alternative formula, including version 17 of the performance-based funding component developed by the System in conjunction with the National Governors’ Association. At the heart of this proposal remain two principles that have broad support in the System and, it appears, on the committee: student fees should not be a factor in formula calculations of state allocation, and only Nevada residential students should be considered in those calculations.

First, revenues from students, whether residential fees or non-residential tuition, should no longer be considered, as they have been, part of the state allocation to any campus; consequently, the formula should not offset any campus’ state allocation as a function of student fee or tuition revenue. In other words, the new formula should allocate state general fund dollars based upon state priorities, and individual students should allocate their contributions based upon their choices of campus and program. Second, Nevada state funds should be allocated in support of Nevada residential students, not non-residential students, whose enrollment and tuition contributions would not be factors in the new formula at all.

The NSHE proposal represents a significant departure from the old formula, notably in its reduction of the formula largely (though not entirely) to one variable's ability to determine the distribution of funds – completed student credit hours on each campus. Variables which played a significant role in the old formula, such as maintenance costs, faculty costs, library resources, and student services, all would give way to instruction.

(Although a significant portion of the NSHE state allocation would remain outside the formula, including allocations to professional schools, statewide programs, and athletics. Prioritization of requests for capital (i.e., buildings) would remain an entirely separate budget process, not necessarily based on an instructional formula)

In the NSHE proposal, each completed student credit hour would have a uniform value on each campus, calculated as the formula allocation divided by the total number of credit hours earned across the System. Actual allocations to each campus would result from a series of weights for different groups of disciplines, with lower-division, upper division and masters’ level and doctoral level courses having slightly different values within each discipline.

The System’s representatives have been questioned by committee members about why the proposal would include “F” and “I” grades as completed courses. The System has argued that community college students are more likely to receive F grades and may need additional support from the institution, whereas, it has argued, university students are more likely to complete courses with passing grades. This has led to some discussion among committee members as to whether the community colleges should receive an enhanced weight for certain categories of lower-division courses, such as remedial courses. This could be achieved by modifying the System’s proposal into separate scales for lower-division courses at the universities, the state college and community colleges, a common practice in other states

The performance-based portion of the proposed new formula does use separate scales for the colleges and universities, which are divided into distinct “performance pools” based upon the mission of each tier in the System. (Thus, DRI and NSC each constitute a separate pool, based on their respectively separate and distinct missions). Within these pools, each institution would be awarded points based on mission-specific variables, such as degrees or certificates awarded (or in the case of community colleges, students who transfer out with at least one years’ worth of credits). Some graduates or transfers would be weighted more heavily, such as those eligible for federal Pell Grants (an indicator of low-income), degrees in areas that have been designated as central to the state’s economic development strategy, and (for the universities) the amount of sponsored research expenditures. Each variable in each pool in the proposal has been assigned a weight, based upon the perceived significance of that variable to the mission of institutions in that pool. In the end, each institution, based upon the percentage of points it would earn in its respective pool, would claim a proportional share of the funds in that pool.

The System proposal has left up to the governor and the legislature, in the budgeting process, to determine if the performance pool would be funded with a share of the state’s general fund allocation to NSHE (a “carve out”) or from a separate, enhancement allocation (a “set aside.”) Until that decision is made, it is impossible to know how the new formula would allocate a given level of state appropriation. Earlier simulations were run on only the base formula proposal.

Also on the 27th, the Committee heard
the fourth and final part of the report of its consultant, SRI International. This report, as stipulated in the consultant’s contract, describes how other states handle such as issues as student-derived revenues (i.e., tuition and fees), “course completers,” “performance-based funding,”  and allocation of state support. SRI’s report did not propose any specific values for how the formula ought to distribute state money; it instead recommended a vision for what the state ought to try to achieve with its formula for higher education funding.

The written consultant’s report, which remains a draft subject to revision based upon feedback from the committee, was accompanied by an oral presentation. Key points included the following:

1.    An endorsement to the System’s proposal that the formula allocations be kept separate from student tuition and fees, as consistent with national best practices.

2.    A recommendation that Nevada dedicate sources of revenue other than the state general fund allocations to provide a stable and adequate basis of higher education funding in the long term – specifically:

o       local and regional support for community colleges to enhance state support, and

o       dedicated statewide revenue for the Knowledge Fund to support the research universities, DRI and Great Basin College.

3.    A recommendation that state support be allocated entirely based upon instruction and degree completion, with no other variables such as the cost of operating space or sponsored research expenditures being used to determine state general fund allocation. (The consultant noted in the oral presentation that the “research factor” in the NSHE proposal – a 10% weight applied to upper division and graduate credit hours earned at the universities – risked creating confusion about its purpose. SRI suggested instead that upper-division and graduate credits at the universities simply be weighted more heavily, so that the formula proposal would more transparently highlight its focus on instruction.)

4.    A recommendation that the formula be constructed to allocate additional resources to support the high number of students who take remedial courses at community colleges. Moreover, the consultant recommended that local oversight boards could help the community colleges more closely align to regional workforce needs for “mid-level skills.”

5.    A recommendation that two-year colleges, as well as Nevada State College, be more directly focused on fulfilling the System’s access mission and that the formula create an incentive for a larger share of first-year instruction to be at those institutions. Students at two year colleges intending to continue towards a four-year degree would be steered towards honors courses at the college level. The consultant also recommended testing of learning outcomes at the two-year colleges to guide those institutions in better preparing students seeking a four-year degree for upper-division courses at a four-year institution.

6.    A recommendation that the universities become "more selective” and the formula create an incentive to offer only those entry-level courses that could not be offered at an access institution (i.e., a community college or the state college). Accordingly, the consultant recommended, the formula should weight student credit hours in upper division and graduate courses at the universities more heavily to create an incentive for those institutions to focus on that mission.

7.    A recommendation that the formula more closely align all tiers of the System with the state economic development plan; for instance, by enhancing the weights for student credits and degrees earned in disciplines that directly support the 7 designated sectors in the Economic Development plan.

8.    A recommendation that the performance-based or outcome-based portion of the formula be used to allocate no less than 25 percent of state general fund support in the short term, and over a period of several years, that share grow to up to 100 percent. The consultant also recommended against any “hold harmless” funding, so that the incentive to the institutions – and the message to the state -- would be clear and transparent. In the oral presentation, the consultant noted that much of the national literature on performance funding in higher education does not consider student credit hours as outputs but rather inputs, and he suggested that a truly outcome-based formula would be concerned only with completed certificates, degrees and transfers. (This approach has been implemented fully only in Tennessee, which converted its formula to an entirely “outcome-based” approach in 2010.)

In the next few weeks, three subcommittees of the main committee will meet to prepare recommendations for the final committee meeting, scheduled Aug. 29, when a final report will be prepared. The three sub-committees, which have begun to meet and will each meet again at least twice, are charged to consider, respectively: 1. performance pool, economic and workforce development and research; 2. community college funding; and 3. the NSHE proposal and SRI report for a new funding formula.

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