Using funding policy to achieve state goals the response to sjr 88
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Using Funding Policy to Achieve State Goals: The Response to SJR 88. Illinois Board of Higher Education Oakton Community College October 5, 2010. The Specifics of SJR 88. History and means of higher ed funding in Illinois Comparisons Reviewing for adequacy, equity, and reliability

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Using Funding Policy to Achieve State Goals: The Response to SJR 88

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Using funding policy to achieve state goals the response to sjr 88

Using Funding Policy to Achieve State Goals:The Response to SJR 88

Illinois Board of Higher Education

Oakton Community College

October 5, 2010


The specifics of sjr 88

The Specifics of SJR 88

  • History and means of higher ed funding in Illinois

    • Comparisons

    • Reviewing for adequacy, equity, and reliability

  • Compare productivity of Illinois institutions

    • State systems

    • Peer institutions

  • Analyzing best practices for incentivizing certification and degree completion

    • Students

    • Institutions

  • Review tuition and financial aid policies – assess roles in improving certification and degree completion

  • Consider alternative funding mechanisms that will advance the goals of the Illinois public agenda


The illinois public agenda for college career success

The Illinois Public Agenda for College & Career Success

  • Goals

    • Increase educational attainment to match best-performing states

    • Ensure college affordability for students, families, & taxpayers

    • Increase the number of high-quality postsecondary credentials to meet the demands of the economy and an increasingly global society

    • Better integrate Illinois’ educational, research, and innovation assets to meet economic needs of the state and its regions


2 priorities policies and budgets must align with state goals

Among the principles established in conjunction with the public agenda

“2. Priorities, policies, and budgets must align with state goals.”


Policy leadership

Policy Leadership

Alignment

Consistency


Of the policy levers available to legislatures the most powerful is finance

Of the Policy Levers Available to Legislatures, the Most Powerful is Finance

  • Finance Policy

    • Sends the strongest signals

    • Creates the strongest incentives for institutional behavior

In the absence of alignment between goals and finance policy, failure to achieve goals will be assured.


The flow of funds

Federal Government

Economy

Available State and Local Govt. Funds

Higher Education

FederalGovernment

The Flow of Funds

Tax Policy

Stimulus Funds

  • K-12

  • Corrections

  • Health Care

  • Other Govt.

Income

Student Aid

Appropriations/Grants

Tuition

Donors

Foundations

Corporations

Students

Institutions

Scholarships &Waivers

Student Aid (Restricted)


The flow of funds state

Federal Government

Available State and Local Govt. Funds

Higher Education

The Flow of Funds - State

Economy

Stimulus Funds

Tax Policy

  • K-12

  • Corrections

  • Health Care

  • Other Govt.

Income

Student Aid

Appropriations/Grants

PublicInstitutionsPrivate

Tuition

Students

Scholarships &Waivers

Student Aid

Federal Government


The flow of funds1

Available State and Local Govt. Funds

Higher Education

The Flow of Funds

Student Aid

Appropriations/Grants

Tuition

Students

Institutions

Scholarships &Waivers

Student Aid

FederalGovernment


Three purposes for state funding

Three Purposes for State Funding

  • Sustaining institutions – capacity creation & maintenance

  • Investing in state priorities – capacity utilization

  • Ensuring Affordability


Finance policy the options

Finance Policy – The Options

InstitutionFocused

StudentFocused

Core Capacity

Capacity Utilization/Public Agenda


Question are the incentives created consistent with pursuit of stated goals

Remember – all funding mechanisms create incentives for behavior

Institutions

Students

Question – are the incentives created consistent with pursuit of stated goals?


Incentives in the current funding mechanism

Incentives in the Current Funding Mechanism

  • Keep students enrolled – but not necessarily completing

  • Increase tuition to compensate for declines in state allocations


Characteristics of sound higher education finance policy

Characteristics of Sound Higher Education Finance Policy

  • Comprehensive – encompasses

    • Appropriations to institutions

    • Tuition

    • Student financial aid

  • Components all consistently promote pursuit of state goals

  • Maintains affordability to

    • Students – judged against family income

    • States – judged against tax capacity

  • Serves to maintain – as well as create – necessary educational capacity

    • Promotes alignment of institutional missions with state priorities


Some observations about results of past practices

Some Observations About Results of Past Practices


Using funding policy to achieve state goals the response to sjr 88

  • Funding model has provided sufficient funds to four-year institutions to maintain capacity

  • Community colleges are underfunded


Illinois national comparisons public research sector ay 2008

Illinois/National Comparisons – Public Research Sector, AY 2008

Source: Delta Cost Project


Illinois national comparisons public masters sector ay 2008

Illinois/National Comparisons – Public Masters’ Sector, AY 2008

Source: Delta Cost Project


Illinois national comparisons public community colleges ay 2008

Illinois/National Comparisons – Public Community Colleges, AY 2008

Source: Delta Cost Project


Illinois institutions are relatively efficient in producing degrees

Illinois Institutions are Relatively Efficient in Producing Degrees


Using funding policy to achieve state goals the response to sjr 88

Completions Per 100 FTE Students

Education & Related Spending per Completion

Source: Delta Cost Project


And student aid isn t keeping up

Costs are Increasingly Being Shifted to Students

And Student Aid Isn’t Keeping Up


Illinois public research institutions state family share of funding 1988 2008

Illinois Public Research Institutions State & Family Share of Funding1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.


Illinois public masters bachelors institutions state family share of funding 1988 2008

Illinois Public Masters & Bachelors Institutions State & Family Share of Funding1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.


Illinois public associates institutions state family share of funding 1988 2008

Illinois Public Associates Institutions State & Family Share of Funding1988-2008

Source: Delta Project on Postsecondary Education Costs, Productivity, and Accountability; Delta Cost Project IPEDS Database.


Percent of family income needed to pay for college minus financial aid

Percent of Family Income Needed to Pay for CollegeMinus Financial Aid

Public 2-Year

Public 4-Year

Private 4-YearNot for Profit

Source: Measuring Up 2008


State tax capacity effort indexed to u s average

State Tax Capacity & EffortIndexed to U.S. Average

1.7

DE

1.6

1.5

1.4

CT

NJ

1.3

MA

AK

1.2

WY

State Tax Capacity (Total Taxable Resources Per Capita)

MD

NY

VA

NH

1.1

MN

CO

IL

NV

WA

CA

RI

1.0

US

PA

NE

WI

NC

GA

KS

HI

MO

SD

IA

OH

FL

IN

VT

TX

OR

0.9

TN

AZ

ND

ME

MI

UT

SC

KY

0.8

ID

NM

LA

AL

OK

WV

MT

AR

0.7

MS

0.6

0.6

0.8

1.0

1.2

1.4

State Tax Effort (Effective Tax Rate)

Source: State Higher Education Executive Officers (SHEEO)


A framework for a new funding model

A Framework for a New Funding Model

  • Appropriations to institutions

  • Tuition

  • Student financial aid


Appropriations to institutions

Appropriations to Institutions

Task Force Recommendation

Performance-based funding is a valuable policy tool to achieve state goals of improved student outcomes, and Illinois should move forward with development of financial incentives to achieve desired outcomes


Performance funding model should

Performance Funding Model Should

  • Include a performance feature in the base component of institutional funding

  • Be different for different types of institutions

    • Research Universities

      • Competitiveness for research funds

      • Application of research to state issues/opportunities

    • Masters Institutions

      • Increasing number of graduates

      • Application of research to regional priorities/problems

    • Community Colleges

      • Increasing numbers of completers

      • Increasing numbers of transfers

      • Completion of momentum points

  • Be constructed so as to encourage success of at-risk students


Tuition policy

Tuition Policy

  • Now a train on its own track

  • Must be more explicitly linked to other elements of funding policy


Student financial aid

Student Financial Aid

  • Current program is

    • Well designed

    • Underfunded (by 50%)

    • Unable to ensure that affordability goal can be met

    • Operated in such a way that allocation (triage) criteria are not aligned with public agenda

  • Options

    • Alter triage criteria used to allocate map funds

      • Add high school preparation, for example

    • Add resources to current program

      • Human capital bonding program

      • Reallocation of state money from institutions to students

    • A new model that makes explicit the responsibilities for all partners in student aid funding

      • Students

      • Families

      • Federal Government

      • State Government

      • Institutions


Some pitfalls to avoid

Some Pitfalls to Avoid

  • Trying to solve the funding problem piecemeal

    • It will require a comprehensive solution

    • “we can’t tweak our way out of this”

  • Creating a model that is too complex and not transparent

  • Not reflecting different contributions of different types of institutions

  • Trying to make a single part of the model carry too much of the load

  • Building it in isolation – involvement of, and consultation with, key constituents is critical


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