The Texas Higher Education Coordinating Board wants Gov. Rick Perry and the state legislature to adopt an outcomes-based funding formula for its community colleges and public universities next year. Faculty groups in the state, however, are dubious of the proposed changes and worry it could water down quality.
As the completion agenda  takes hold — spurred by President Obama’s goal of the United States having the highest proportion of college graduates in the world by 2020 — a number of states have introduced  or are considering  funding formulas that reward student completion, instead of simply student enrollment. Still, those few states that have adopted performance-based appropriation only let it constitute a small percentage of their higher education funding formula, usually around 5-10 percent. If the Texas plan goes forward, it would represent one of the more dramatic changes in funding formulas to encourage completion.
Last week, the Texas board released a set of recommendations  for such a funding model — one for the state’s universities  and another for its community and technical colleges . The board argues that introducing some outcomes-based funding is one of the important ways it can help Texas reach its Closing the Gaps  goal of graduating 210,000 more students annually at all degree levels by 2015.
The board wants 10 percent of the baseline funding formula for university undergraduates to “be based on measures of the award of bachelor’s degrees at institutions.” The remaining 90 percent of undergraduate funding, in addition to all graduate and professional student funding, would continue to be allocated based on enrollments. Several factors would be used to allocate the 10 percent, including the total number of bachelor’s degrees awarded, the number of bachelor’s degrees awarded in “critical fields” such as STEM and nursing, the number of bachelor’s degrees awarded to “at-risk students” and how an institution’s actual six-year graduation rate compares to the rate predicted for it based on “the makeup of [its] student cohort.”
The proposed formula for community and technical colleges is notably different, since nearly all two-year institutions would likely be punished severely under the allocation methods proposed for four-year institutions. The board wants 10 percent of the baseline funding formula for community colleges to “be allocated based on [students] achieving certain milestones.” The remaining 90 percent, like the four-year funding model, would be based on student enrollments as of the 12th day of class each semester. The board recommends using a number of different “milestones” to judge student success, such as completing a “first-year college-level math or English course,” completing 15 credit hours, completing 30 credit hours, earning some sort of credential and transfer to a four-year institution.
Raymund Paredes, Texas commissioner of higher education, said the board looked at a number of states that have tried some performance-based funding and determined that a 10-percent allocation was well within a range that had an “impact on institutional behavior and priorities” but was not too jarring for institutions. For similar reasons, he added that, if passed in the next legislative session early next year, the rollout of this model would not take effect until 2013, to give institutions time to adjust.
Paredes believes that changing the state’s funding formula in this way will not threaten the “fiscal predictability and stability” of its public institutions. He argued that the proposed funding formula is “no less predictable” than the current one, adding that the board had run “dozens of simulations” and determined that there is “no significant variability” in switching to this performance-based model. A request for a copy of the mock-up of funding for each public institution in Texas under this proposed model was not fulfilled by the time of this writing. Still, Paredes acknowledged that there would be relative financial winners and losers in the process.
Even without specifics about which institutions would win and lose, the Texas Faculty Association is concerned about the plan, arguing that the elite institutions will end up getting more money at the expense of colleges educating students from low-income families.
“I think this is horrible,” said Mary Aldridge Dean, the group’s executive director. “We have students who are very poor, especially if you get into the lower Rio Grande valley. This competitive funding will hurt them and their institutions. They may go to school for a semester and then have to take off to go to work and then come back, in and out multiple times. Whether you talk about students graduating in four years or six years, many of our students don’t do that not because they’re remiss but because they’re poor.”
Not only does Dean believe this funding model would disproportionately hurt state institutions serving low-income students, she also worries it would affect classroom standards all over the state.
“I guarantee you the minute that they start talking about funding being tied to graduation rates, there will be tremendous pressure placed on faculty to pass people,” Dean said. “When they talk about this, they say, ‘Oh, we’ll keep up our standards.’ Well, no they won’t. … I’ve sat in meetings with deans who’ve told me, ‘You will pass 65 percent of your students.’ And the answer is the same regardless of what happens. They weren’t even doing [performance-based funding] then, and that was still happening. If they start trying to fund completion, everyone knows what the outcomes will be. It’ll lower all our standards.”
Dean particularly dislikes the idea that colleges would be rewarded for having more STEM graduates. She argued that this amounts to the system determining the “worth” of a faculty member and his discipline to an institution.
Paredes said that the rationale for using the number of STEM graduates in allocating funding was simply to encourage job and economic growth in Texas, which in his view is the job of all public institutions in the state. Dean had a different take.
“If you view higher education as a business and a moneymaking venture, then that makes sense,” Dean said. “It all depends on how important we feel the humanities are and having well-rounded, well-educated folks. We as faculty don’t see ourselves as running a business.”
Another faculty group, the Texas Community College Teachers Association, also expressed some reservations  with the board’s proposed changes to the funding formula.
“The main concern we have here is with the ‘momentum points,' ” said Richard Moore, the group’s executive director. “For one thing, we’re concerned about the fact that this is coming out of the base funding. It’s as if they’re cutting out of our operational support and making us earn it back. This is a formula for buying grades. … Ten percent is enormous. That’s a lot of money, and we worry about this being done during a devastating budget crisis.”
Moore said he would rather money that rewards completion success be appropriated in addition to base funding. He added that he would like to see the state adopt something akin to an “innovation fund,” a competitive grant funding source that would be given to community colleges that have completion projects that show promise.
“I think it’s a fundamental mistake that faculty at community colleges will be motivated by fiscal rewards and punishments,” Moore said. “They’re using this as an opportunity to cut funding. What I think is more promising is doing something like [the] Lumina [Foundation for Education] or [the Bill and Melinda] Gates [Foundation] are doing. We should see which institutions are getting better results as a part of funding and try to scale them.”
The state legislature will consider the board's recommendation at its upcoming session, which starts in January. Paredes is optimistic about its potential for passage.
“I think there’s support for it,” Paredes said. “The only question is whether the legislature thinks it’s prudent to make a change in funding in this tough budgetary environment.… Otherwise I think these are issues that cross partisan lines. I think most agree the funding model for public education in Texas [and elsewhere around the country] is unsustainable and that we need to get better results with the money we have.”
Dean, however, does not think the matter will have enough time for substantive debate in the upcoming legislative session, as the legislature plans to redistrict the entire state, always a controversial topic. She also cited the state’s dismal budget outlook.
“I believe the day after the election and in January when the legislature gets back, with a budget deficit of $24 billion or so, this isn’t going to happen,” Dean said. “I don’t think it’ll even be introduced.”