Texas Higher Education “Formula Funding 101”

Kathryn Funk-BaxterSenior Associate Vice Presidentfor Finance & AdministrationTexas A&M University-Corpus Christi

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Flow of funds to universitiesFunds flow to institutions of higher education in a number of ways:• Direct Appropriations-Formula funds and other direct

appropriations based on identified needs• Special Items

• Indirect Appropriations-not made directly to institution in its portion of bill but used to cover costs related to health insurance, retirement, and social security

• Other Indirect Appropriations• Higher Education Fund • Higher Education Performance Incentive Funds• Dramatic Nursing Shortage

Significance of Funding Formulas

18% of TAMUCC budget is formula funding3

Formula Funded

18%

Debt Service& Capital

11%

State Benefits5%

State Funded-Non-For-

mula11%

Other Operating Income4%

Restricted Income

21%

Tuition & Fees30%

External Funds

Students State Funded

Formula FundingTwo funding formulas and two supplements:

• Instruction and Operations Formula• Teaching Experience Supplement

• Infrastructure Formula• Small Institution Supplement

How does the formula generate Instruction/Operations funds?

Two basic concepts:

• Weighted Semester Credit Hours

• Base Period

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Distribution of I/O Formula Funds toTexas Institutions of Higher Education

UT14%

A&M13%

UH8%

TX Tech7%

UNT6%

Other Aca-

demics53%

Source: LBB 2008-2009 Biennium

The Instruction and Operations Formula

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Instruction & Operations 28,108,802

Teaching Ex-perience

Supplement 1,262,558

E&G Space Support

5,418,403 Small Institution Supplement

128,100

All amounts include General Revenue and Dedicated Appropriated Funds

What functions is it designed to fund? Faculty salaries Departmental operating expense Library Instructional support Research enhancement Student services Institutional support

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The Importance of Credit HoursThe two formulas are driven solely or partly by semester credit hours taught.

The Instruction and Operations formula is driven totally by credit hours.

The Infrastructure Support formula, in addition to credit hours taught, includes academic program mix, staff size, research expenditures, and Library collection size.

The supplements are driven by sch and headcount. The Teaching Experience supplement is driven by the number of

undergraduate credit hours taught by tenured or tenure-track faculty. The Small Institution supplement is given to schools with less than

10,000 students.

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The Financial Importance of Instruction

The important research and service missions of the university bring with them virtually no direct formula funding. Special Items and Research Development Fund appropriations can provide funding for these activities.

From the formula’s perspective, teaching generates semester credit hours and that counts in generating most of our state formula funding.

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The “Base Period” The base period is the 12 month period used to

measure the SCH to be included in the appropriations formulas.

It is the summer and fall of even numbered years and the spring of odd numbered years.

This “base period” provides the most recent year of semester credit hour data available when the legislature meets in the spring of odd numbered years.

Base period SCH determines formula appropriations for the next two years.

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What are weighted credit hours?We are funded by the number of credit hours we teach in the base period, but not all credit hours are funded at the same dollar value.

Conceptually, the formula weighting is supposed to reflect the differences in cost related to teaching courses at different levels and in different academic fields.

Graduate courses, for example, are expected to be taught in smaller class sections than undergraduate classes so graduate credit hours are weighted heavier than undergraduate credit hours.

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Semester Credit Hours X Program/Level Weight X Rate ($62.19)

What are weighted credit hours?Courses in different fields are also weighted relative to each other.

For example, a credit hour in a lower division History course earns less formula funding than that of a lower division course in Art or Engineering.

All these weightings are displayed in a chart called the “Formula Matrix”.

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THECB Weighting Matrix

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Weighting Lower Div.

Upper Div. Masters Doctoral Special

Prof.

Liberal Arts 1.00 1.72 4.18 9.29  Science 1.71 2.97 8.09 20.52  Fine Arts 1.39 2.32 5.43 7.19  Teacher Education 1.42 1.74 2.48 7.64  Agriculture 1.87 2.52 7.07 9.91  Engineering 2.41 3.87 7.63 15.96  Home Economics 1.06 1.70 2.86 6.62  Law         3.86Social Services 1.94 2.05 2.97 13.84  Library Science 1.14 1.09 2.63 6.65  Vocational Training 1.66 1.97      Physical Training 1.29 1.28      Health Services 1.24 1.98 3.21 8.49 8.49Pharmacy 0.71 4.24 19.87 29.55 3.79Business Administration 1.11 1.73 3.42 24.27  Optometry     5.46 19.12 7.00Teacher Ed Practice 1.30 1.78      Technology 1.90 2.38 4.41 3.37  Nursing 1.94 2.45 4.73 10.64  Developmental Ed 1.00        Veterinary Medicine         16.53

Weighted Credit HoursWeighted credit hours are credit hours taught multiplied by the weighting matrixFor example:

A 3 hour lower division history course with 20 students enrolled would generate 60 weighted SCH (20 students x 3 SCH x 1.00 weight).

A 3 hour masters level business course with 20 students enrolled would generate 205 weighted SCH (20 students x 3 SCH x 3.42 weight).

A 3 hour doctoral education course with 20 students enrolled would generate 458 weighted SCH (20 students x 3 SCH x 7.64 weight).

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Getting from weighted SCH to Instruction & Operations incomeEach biennium, the appropriations act specifies the dollar value of each weighted semester credit hour.

For FY 2010, the value is $62.19 per weighted SCH .

So, looking at our examples again: The lower division History course earned $3,731

(60 wsch x $62.19). The Masters Business course earned $12,749

(205 wsch x $62.19). The Doctoral Education course earned $28,483

(458 wsch x $62.19).16

Teaching Experience Supplement

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Instruction & Operations 28,108,802

Teaching Ex-perience

Supplement 1,262,558

E&G Space Support

5,418,403 Small Institution Supplement

128,100

All amounts include General Revenue and Dedicated Appropriated Funds

Teaching Experience This is a simple add-on to the Instruction and

Operations formula.

It provides an extra 10% formula income bonus for undergraduate credit hours that are taught by tenured and tenure track faculty.

The intent is to reward institutions for NOT using TA’s and Adjuncts to teach undergraduates

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Distribution of Infrastructure Formula Fundsto Texas institutions of Higher Education

UT17%

A&M14%

UH7%

TX Tech6%

UNT6%

Other Academics

51%

Source: LBB 2008-2009 Biennium

Infrastructure Support Formula

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Instruction & Operations 28,108,802

Teaching Ex-perience

Supplement 1,262,558

E&G Space Support

5,418,403 Small Institution Supplement

128,100

All amounts include General Revenue and Dedicated Appropriated Funds

Infrastructure SupportFunded on a space-need projection model

developed by the Coordinating Board

Not on the space you actually have

The model has various dimensions: Teaching Space Library Space Research Space Office Space Support Space Utilities

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Small Institution Supplement

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Instruction & Operations 28,108,802

Teaching Ex-perience

Supplement 1,262,558

E&G Space Support

5,418,403 Small Institution Supplement

128,100

All amounts include General Revenue and Dedicated Appropriated Funds

Small Institutions This is a simple add-on to the Infrastructure formula.

It provides extra funds to institutions with fewer than 10,000 students.

The intent is to provide space support equity to the smaller institutions.

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