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Calif. governor Jerry Brown during a 2017 news conference

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With powerful faculty organizations and a commitment to unfettered student access to public colleges, California is perhaps the least likely state to tie funding for higher education to degree completion and other metrics of student success.

Yet California’s top lawmakers on Friday reached agreement on a performance-funding formula for the state’s 114 community colleges, which enroll 2.1 million students.

If the plan is enacted as part of the state's budget, as is expected, California would join about 35 other states with some form of performance funding on the books. It gives a substantial boost to supporters of using government funding levels to prod colleges to do better on student outcomes -- a group that included the Obama administration.

“This is a very substantial change,” said Larry Galizio, president and CEO of the Community College League of California. “We’re talking about literally billions of dollars at stake.”

The proposal’s likely passage also is a defeat for the many critics of performance funding around the country who worry about unintended consequences such as grade inflation or gaming by colleges to increase their selectivity, and who often argue that performance formulas can be used by state legislatures as an excuse to cut funding for already cash-strapped public colleges.

Under the current approach, all of the state’s roughly $6.7 billion in general funding for community colleges is based on enrollment numbers. But in an attempt to make good on the system’s goals for increasing degree and certificate production, boosting transfers to the state’s public universities, and curbing achievement gaps among underrepresented students, the funding formula in three years would tie 40 percent -- or almost $2.5 billion -- of state support to measures of student success and enrollment numbers of low-income students. It also would increase overall funding to $7.4 billion.

The debate over the formula, which was included in the state's budget bill, was heated. In addition to the strong opposition of faculty groups and unions, some community college leaders and lawmakers also criticized the proposal.

Yet performance funding is poised to be a reality in California, in part because it has support from a wide range of organizations that focus on the well-being of the state’s large low-income and minority group populations, including the more than 15 million Latinos who comprise roughly 40 percent of its 39 million residents.

For example, the Campaign for College Opportunity is one of 31 organizations, ranging from the Los Angeles Chamber of Commerce to the Hispanic Association of Colleges and Universities, that signed a May letter to state lawmakers in support of the funding formula.

“We’ve been concerned for many, many years about the completion rates in our community colleges,” said Michelle Siqueiros, the Campaign for College Opportunity’s president, who also pointed to problematic gaps between completion rates of white and wealthier students and their lower-income and minority group peers.

“The right time to have done this would have been 10 years ago,” she said. “It’s unfair to ask students to wait any longer.”

Dueling Research

Opponents of the proposal include the Academic Senate for California Community Colleges. In a February letter to the state’s Legislature, the group said the funding formula could hurt students who most need community colleges.

“Performance-based funding as a mechanism for distribution of base funding incentivizes behavior counter to our core beliefs of access and opportunity for all students and our obligation to maintain appropriate rigor to ensure future success,” the letter said. “By basing any portion of base funding on student performance, colleges may apply pressure to faculty, particularly part-time faculty who do not have the protection of tenure, to inflate grades to try to secure funding.”

To some extent, the state Assembly’s budget subcommittee shared those worries.

“There remains little evidence that performance funding has been effective in improving outcomes in other states,” the subcommittee said last month. “It is unclear how punishing colleges with poor performance by reducing funding will lead to better performance.”

Several studies of state performance-funding formulas have found that they led to unintended consequences and failed to move the needle on student success. Other research has found promise in formulas, particularly as they have been tweaked to better incorporate measures of racial and income equity.

“The two groups are often opposed. Some have made up their minds,” Robert Kelchen, an assistant professor of higher education at Seton Hall University, said about dueling research on performance funding.

Several experts said it’s too early to tell if the form of "accountability" funding can work as intended. Part of the problem is the complexity and evolving nature of the formulas themselves. But most agree that the trend to tie funding to performance will continue to spread, with California being the biggest entrant.

“Performance funding isn’t going away any time soon,” Kelchen said.

Avoiding Unintended Consequences

Jerry Brown, the state’s powerful Democratic governor, has made performance funding and his proposal for an online, statewide community college priorities for his last year in office. And controversy over the online college at times appeared to overshadow discussions over the funding formula.

Yet the apparently final version that emerged last week would create what some experts said is a nuanced and sophisticated form of performance funding, one that includes measures of equity to attempt to help underserved student populations.

Amy Li is an assistant professor of higher education at the University of Northern Colorado who has studied state performance funding. She met with staff members from the office of the California system’s chancellor, Eloy Ortiz Oakley, to discuss the research.

“Just the fact that they’re proposing a performance-funding formula is a really huge thing,” she said.

Along with Brown, Oakley, who became chancellor in December 2016, has been a driving force behind the funding formula. His office suggested several changes adopted, including the use of outcomes based on the enrollment and success of low-income students.

Li said she was impressed with how Oakley and his staff drew from the latest research to create their recommendations, particularly on equity issues.

“They’ve gotten a lot of feedback,” said Li. That’s a good thing, she said, given the stakes. “The concern about unintended consequences is really warranted.”

The proposal uses several measures to calculate the 20 percent of funding that would be based on how colleges stack up on student success. Those metrics include points for the number of degrees and certificates granted, for those that are completed within three years, and for graduates who earn a “regional living wage” within a year of completion. Colleges also will get funding for students who earn an associate degree for transfer, for completions of transfer-level math and English courses in the first year, and for completions of nine credits of career and technical education courses.

Weight also would be given to the number of completions of economically disadvantaged students.

The formula would divvy up another 20 percent of state funding based on the portion of low-income students each college enrolls. Those numbers would be determined by how many students in the previous year received federal Pell Grants or students over the age of 25 who received the state’s College Promise Grant fee waiver, and an additional measure of undocumented students who qualified for resident tuition rates.

Oakley’s office also proposed a measure based on colleges' enrollment of first-generation college-going students. But that suggestion does not appear likely to make it into the final legislation.

Brown’s revision to the plan last month decreased the amount of total state funding that would be tied to performance and low-income student enrollments from half to 40 percent.

The proposal also includes a “hold harmless” provision that ensures no community college will receive less in the next three years than in the current one, by allocating money to colleges that would see annual funding increases of less than a 2.7 percent cost-of-living adjustment. In addition, the final version includes $50 million to hire full-time faculty members and another $50 million for part-time instructors to increase their office hours.

“They’ve considered the stability of funding,” said Li. “Colleges are not going to see drastic cuts.”

Growing Schism

Opposition to the performance-funding proposal in California in part revolves around criticism of the process, which some have said was too hasty and did not adequately involve input from faculty members and other stakeholders. But many opponents also dislike the concept of performance funding itself.

The Faculty Association of California Community Colleges, for example, is strongly opposed to the funding formula.

“The body of research does not show that performance funding does what it purports to do,” said Jonathan Lightman, the association's executive director, who said the proposed formula would punish institutions and students.

Lightman said many faculty members are frustrated with Oakley for how his office has handled the debate. For example, the Los Rios College Federation of Teachers recently voted no confidence in the chancellor, in part over the performance formula, saying that “participatory governance has ceased to function at the state level.”

Other California community college faculty union chapters and academic senates are moving toward possible votes of no confidence. And Lightman said the relationship between faculty groups and Oakley’s office may not recover from the schism.

“I’ve been doing this for 20 years and I’ve never seen it this bad,” he said.

The chancellor’s office, however, has argued that it worked with a wide range of groups to help devise recommendations for the funding formula. Discussions began about a year ago, but system leaders and supporters of the formula said the state has been mulling new ways of targeting funding for much longer.

In a message to the system’s governing board in late May, Oakley defended his office’s approach to the funding formula, online college and other budget-related issues.

Some of the faculty union critics are “purposely misinforming local faculty of the consultative process that we have engaged in and are trying to influence the budget negotiations in the Capitol,” Oakley said. “Our agenda and our actions are directly related to improving access to and completion of a quality credential for all Californians and as expected are causing some in our system to question why we need to adopt these changes.”

Lande Ajose, executive director of California Competes, a higher education-focused nonprofit, said the proposal has tremendous support from people and organizations around the state, in part because of concerns about low graduation rates for Latino and black students.

The shift toward performance funding isn’t “moving anywhere near as fast as the shifts in our economy,” Ajose said. “Our students deserve for us to do things differently because so many are languishing.”

Those opposed to the proposal include leaders of several colleges that have projected state funding reductions under the proposed formula.

For example, College of the Canyons projects that it would lose money. Diane Van Hook, the college’s chancellor, wrote in a May opinion piece that the college would be unfairly penalized because 64 percent of its students attend part-time, and part-time students in nursing or STEM programs often take longer than three years to graduate.

“Whiles these consequences are unintentional, they are very real,” she said. “The final formula should benefit all 114 community colleges in California, and the 2.1 million students they serve.”

Leaders of other colleges that have opposed the formula publicly included chief executives at El Camino College and Cabrillo College.

Matthew Wetstein, Cabrillo’s president, wrote last month in the Santa Cruz Sentinel that his college and others in and around Silicon Valley and the San Francisco Bay Area would be penalized for the high cost of living and pay inequality in those areas. He has said students in expensive, coastal parts of the state must work -- often full-time -- while attending college. Some also would not qualify as being low income. As a result, Wetstein said, urban community colleges with diverse student populations could be hurt under the funding formula while small rural districts get big funding gains. Cabrillo estimates that it could see a 7 percent cut by 2020 under the proposed formula.

The system, however, is projecting short-term funding increases for many of the community colleges, some of them substantial. For example, the Los Angeles Community College District would get an estimated $678 million in state support next year under the formula, the system said, up 12 percent from its $606 million in state funding this year. The district, which includes nine colleges, would receive a base allocation of $388 million, $134 million from the student success funding stream and a $155 million equity supplement.

If the formula works as intended, it could shift money toward districts that enroll large portions of low-income students, many of whom are Latino or black. Some supporters said colleges that would be most likely to receive stagnant funding under the formula also are more likely to have relatively strong budgets, due in part to local tax bases, and enroll larger numbers of retirees and other students who are not seeking to earn credentials.

For example, Keith Curry, president of Compton College, and Kathy Hart, president of San Joaquin Delta Community College District, wrote recently in The Sacramento Bee that the performance formula would fix an “outdated funding system” that has not always served students well.

“While the system, which serves 2.1 million students, has made significant strides, most students take too long to earn a certificate or a degree or transfer to a four-year college, or never do so. Achievement gaps for black and Latino students persist at unacceptable rates,” they wrote. “Changes to the way colleges are funded will help more students succeed.”

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