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Outcomes Based Performance Funding 2.0

Oregon Higher Education Coordinating Commission

Presentation by: David Longanecker, President (WICHE)

June 12, 2014

Ashland, Oregon

Outcome Based Performance Funding

New Wave

Finally, Evidence Based Funding for Higher Education

Just another Fad

This, too, will pass

Truth: Most Effective Funding Strategy of Last Century – 1.0: Enrolment based funding

Design Principles for Performance Funding

(with thanks to Dennis Jones: Outcomes Based Funding; the Wave of Implementation) http://www.nchems.org/pubs/docs/Outcomes-Based%20Funding%20Paper%20091613.pdf

Begin at the Beginning Measure what you want to get Fund what you measure Understand (and appreciate) the Angst. Recognize performance funding as one piece of

the puzzle

Principle I: Begin at the Beginning

The public agenda should drive postsecondary reform efforts Not reforms in search of an agenda

Goals must drive outcomes funding And these goals must be measurable

Goals/Agenda should recognize uniqueness of State (Jones, 2012)

The Context for Goal Setting In Oregon

Where you stand

Competitiveness

Demographics

Finance

Productivity

The Context for Goal Setting In Oregon

Where you stand

Competitiveness

Demographics

Finance

Productivity

Differences in College Attainment (Associate & Higher) Between Younger & Older Adults - U.S., 2009

Source: U.S. Census Bureau, 2009 American Community Survey (ACS)

20

30

40

50

60

70

DC

Massachusetts

North

Dakota

Min

nesota

New

York

Mary

land

New

Jers

ey

New

Ham

pshire

Illinois

Iow

aC

onnectic

ut

Verm

ont

Nebra

ska

Virg

inia

Pennsylv

ania

Rhode Is

land

Kansas

Haw

aii

Colo

rado

Washin

gto

nW

isconsin

Monta

na

Mis

souri

Unite

d S

tate

sN

orth

Caro

lina

Califo

rnia

Ore

gon

Uta

hO

hio

Dela

ware

South

Dakota

Mic

hig

an

Main

eG

eorg

iaS

outh

Caro

lina

Flo

rida

India

na

Kentu

cky

Tennessee

Ala

ska

Ariz

ona

Ala

bam

aT

exas

Okla

hom

aId

aho

Louis

iana

Wyom

ing

Mis

sis

sip

pi

West V

irgin

iaA

rkansas

New

Mexic

oN

evada

Age 25-34

Age 45-54

slide 7

AL

AK AZ

AR

CA

CO CT

DE

FL GA

HI

ID

IL

IN

IA KS

KY

LA

ME

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH NJ

NM

NY

NC

ND

OH

OK

OR

PA

RI

SC

SD

TN TX

UT

VT VA

WA

WV

WI

WY

US

20

27

34

41

48

55

25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000

The Relationship Between Educational Attainment, Personal Income, and the State New Economy Index (2010)

Perc

ent

of

Ad

ult

s 2

5 t

o 6

4 w

ith

Co

llege

Deg

ree

s (2

00

9)

Personal Income per Capita (2010)

High College Attainment, Low Personal Income High College Attainment, High Personal Income

Low College Attainment, Low Personal Income Low College Attainment, High Personal Income

Source: U.S. Census Bureau, 2010 American Community Survey; Bureau of Economic Analysis; Kauffman Foundation

State New Economy Index 2010

Top Tier

Middle Tier

Bottom Tier

slide 8

The Context for Goal Setting In Oregon

Where you stand

Competitiveness

Demographics

Finance

Productivity

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Oregon Public High School Graduates by Race/Ethnicity, 1996-97 to 2008-09 (Actual), 2009-10 to 2027-28 (Projected)"

American Indian/Alaska Native Asian/Pacific Islander Black, non-Hispanic Hispanic

White, non-Hispanic

Educational Attainment of Whites and Minorities (Black, Hispanics, Native Americans) Aged 25-44, 2008-2010 Oregon

Source: U.S. Census Bureau, 2008-10 American Community Survey (ACS) Public Use Microdata Sample (PUMS) File.

6.3

2

22

.26

29

.09

8.9

7

23

.4

9.9

7 1

3.8

9

25

.69

28

.91

8.4

5

13

.96

9.0

9

43

.52

23

.53

17

.9

4.2

7 7

.94

2.8

3

12

.53

29

.06

39

.58

6.8

1 9.4

9

2.5

3

0

5

10

15

20

25

30

35

40

45

50

Less Than HighSchool

High SchoolGraduate or GED

Some College, NoDegree

Associate's Degree Bachelor's Degree Graduate orProfessional Degree

White African American Hispanic Native American

slide 11

The Context for Goal Setting In Oregon

Where you stand

Competitiveness

Demographics

Finance

Productivity

Oregon Finances – In Comparison

Below Average Wealth; Below Average Taxes (2010)

Per capita income (2011 – Source: NCHEMS):

Oregon: $37,909 (91% of U.S.; rank – 33th)

U.S. Average: $41,663

Effective tax rate—state and local (2010 –Source: SHEEO): Oregon: 6.6% (83% of U.S.; rank – 46th)

U.S. Average: 8%

Total Educational Revenue per FTE State Differences from U.S. Average, Fiscal 2013

Educational Appropriations per FTE State Differences from U.S. Average, Fiscal 2013

Net Tuition as a Percent of Public Higher Education Total Educational Revenue by State, Fiscal 2013

The Context for Goal Setting In Oregon

Where you stand

Competitiveness

Demographics

Finance

Productivity

National Student Clearinghouse Information on Student Completion in Six Years

Completion Not Enrolled or Completed

OR US OR US

Public Universities 62% 61% 22% 23%

Private Universities

77% 72% 32% 15%

Community/2 yr Colleges

26% 36% 51% 44%

Credential & Degrees Awarded Per $100,000 of Education & Related Expenditures – Public Two-Year Institutions

Credential & Degrees Awarded Per $100,000 of Education & Related Expenditures – Public Bachelor’s & Master’s Colleges & Universities

Credential & Degrees Awarded Per $100,000 of Education & Related Expenditures – Public Research Universities

The Context for Goal Setting In Oregon

Where you stand Competitiveness –about average

Demographics – challenge or opportunity

Finance – reality is resources are/will be limited

Productivity – a mixed bag Some quite good

Some not so much

Where you want to stand –40/40/20 How to get there – the various working groups task

Begin at the Beginning

Exemplars

New Mexico – strategic assessment of where they were & where they wanted to go

South Dakota – Particular focus on strategic objectives and unique culture of the state

Wyoming – satisfied with the status quo; no reason to change

Measure What You Want To Get

Explicitly tie Metrics to Goals

Example: If you want greater equity, measure improvement in equity –Numbers & Proportions, not either or.

Anticipate unintended consequences

Keep it simple at the State Level

Target: no more than five goals; no more than ten metrics

Targeting broadly (many measures) is an oxymoron

Measure What You Want To Get

Start with progress toward goal, Finish with performance toward goal

Progress toward more graduates:

–Course Completion

–Momentum Points

Goal

–More graduates

–Higher graduation rate

» For Oregonians

» For at-risk populations

Measure What You Want To Get

Exemplars

New Mexico

–More graduates

» Overall

» In Stem & Other Identified majors

» At-risk populations

Oregon (OUS):

–Early adopter: Course completion

Fund What You Measure

Fund what you want.

If you want the status quo, don’t change

If you need “change”, don’t fund the status quo

Link metrics to funding -- I know, I know: I’ve already said that; I’ll say it over & over

Provide enough funding to drive change

The more the better

Not just new money

Focusing on the Delta (change) can really drive change

Fund What You Measure

Focusing on the Delta (change) can really drive change Example:

– Goal: completion – Current completions: Two institutions, each with 1,000 grads – Performance funding amount available: $1 million dollars – Performance:

» Institution 1 increases graduates 10% » Institution 2 increases graduates 1%

– Strategy A: Spread funding on basis of total grads » Institution 1, with 1,100 grads out of 2,110 total, gets $521,327 » Institution 2, with 1,010 grads gets $478,673

– Strategy B: Spread funding on basis of change in number of grads » Institution1, with 100 additional grads out of 110 total, gets

$909,091 » Institution 2, with 10 additional grads out of 110, gets $90,909

– Which strategy drives change? – Which strategy basically supports the status quo?

Fund What You Measure

Exemplars

Tennessee – 100%

South Dakota – funds the Delta

Indiana – Applies for increases or decreases in funding

Not so much,

Colorado

– 25% sounds good

– But only new money

» Against the high water mark.

Understand (and appreciate) the Angst

Concern about quality Very legitimate – Funding outcomes can drive perverse results Answer isn’t in performance funding, though.

Concern about untenable shifts in funding Create a temporary “stop loss” (outside the formula) Begin with progress measures, move to full performance

measures

Angst about who is responsible for what -- institution (faculty and admin), governing board, state board, legislature and government.

Skeptics who believe it doesn’t work. A little doesn’t A lot does

Understand (and appreciate) the Angst

Exemplars:

Nevada – inclusive process

Oregon – Doing this as well as I’ve seen

Indiana – enforced going up and coming down

Recognize Performance Funding As One Piece of the Puzzle

Nexus to All Sources of Funding

For instruction – always think ATFA: Appropriations, Tuition, and Financial Aid

For research, recognize:

Doesn’t fund undergraduate instruction (or most of graduate instruction)

Appropriations and tuition for instruction do fund research, but not high performance research.

Best metrics remain proxies – Externally funded research

Recognize Performance Funding As One Piece of the Puzzle

Regulatory policies that complement funding policies

Assuring quality

Recognizing & Appreciating Mission Differentiation

Within Oregon public higher education

Considering public value of private higher education

Doubling down on increasing equity – not just a funding allocation issue

Recognize Performance Funding As One Piece of the Puzzle

Exemplar Oregon

With respect to ATFA: – The combined efforts of HECC and OEIB are working to put the

pieces together

– Shared Responsibility: Most sound integration of Appropriations, tuition policy, and financial aid in the West

Aside from Finance A leader in looking for student learning outcomes

» AAC&U LEAP Standards

» Degree Qualifications Profile (DQP) work

» WICHE’s competency based transfer passport

Recognize Performance Funding As One Piece of the Puzzle

Exemplar, Not So Much

Oregon – You also have some ideas in play that ignore ATFA

» Recognizing the value of tuition

• Marginal funding is essential

• Behavioral Economics lesson – paying invests the student in learning

» Exceptional indebtedness, regardless of what you call it, is the enemy of affordability.

Oregon & Outcomes Based Funding

Both ahead and behind

Early adopter of 1.0 version

Slow to learn and follow new developments

Advantages of catching up Improved performance

Improved perception of performance

Enough Already – thanks for the invitation