published Monday, May 19th, 2014

Higher education splits smaller pot for funding

STATE APPROPRIATIONS

A comparison of state appropriations requests for the 2013-14 and 2014-15 fiscal years:

University Request 2013-14 Request 2014-15 change

Austin Peay $32,995,000 $34,036,100 3.16

East Tennessee $48,685,000 $47,627,800 -2.17

Middle Tennessee $81,024,600 $82,276,600 1.55

Tennessee State $32,610,800 $31,869,400 -2.27

Tennessee Tech $39,559,500 $38,140,100 -3.59

Memphis $89,106,400 $88,762,900 -0.39

Chattanooga CC $26,624,800 $25,884,700 -2.78

Cleveland CC $8,997,100 $8,801,900 -2.17

Columbia CC $12,339,500 $12,291,600 -0.39

Dyersburg CC $7,238,900 $7,283,800 0.62

Jackson CC $11,510,200 $11,042,700 -4.06

Motlow CC $11,017,200 $10,605,900 -3.73

Nashville CC $15,983,500 $15,786,500 -1.23

Northeast CC $13,648,200 $13,161,100 -3.57

Pellissippi CC $22,913,400 $23,321,100 1.78

Roane CC $16,619,800 $17,319,700 4.21

Southwest CC $25,739,300 $24,558,700 -4.59

Volunteer CC $16,075,400 $16,140,300 0.40

Walters CC $19,866,900 $20,255,900 1.96

UT Knoxville $171,335,300 $175,093,700 2.19

UT Martin $25,043,000 $25,858,100 3.25

UT Chattanooga $36,128,500 $37,246,000 3.09

Source: Tennessee Higher Education Commission

Austin Peay University came up with a system to pair students with courses the same way Netflix recommends new movies and Pandora suggests new music.

The school also worked to improve faculty morale and changed the way it helped students who arrive at college unprepared.

The 10,000-student university just outside a military base in Middle Tennessee banked on these strategies.

And it worked.

The university graduated a third more students in 2013 than it did in 2010.

"For a long time, our reputation was that we weren't a strong academic school and that maybe we were a regional school, a good place for people in Clarksville to go to school," said Jaime Taylor, interim provost and vice president for academic affairs. "But in the last seven or eight years, we've focused on student success and focused on completions, and we became a more rigorous school."

As Austin Peay's graduation rates improved, money followed.

That's because in 2010 Tennessee started funding its colleges and universities based on outcomes like graduation rates and credit completions instead of enrollment.

No one has benefited more than Austin Peay, which started seeing the fruits of its new strategies around the same time the new model went into effect.

But while some schools have seen big gains in funding, others have seen their money dwindle.

The state, facing a $260 million revenue shortfall, opted not to add any new funding to higher education for the next budget cycle -- just the second since the new funding model has been fully implemented.

Schools had to compete against each other for the same pot of money as last year.

That left some institutions that made academic progress without any new money to show for it.

In fact, some schools that made progress will lose money next year.

"If this budget isn't an anomaly and becomes practice, it creates an environment where one school's success may come at another school's expense," said Tennessee Board of Regents Chancellor John Morgan, who added that the state created an "implied contract" of financially rewarding achievement when it created the new funding model.

"But that's not the budget that passed this year," Morgan said.

While campus and system leaders may be rightly concerned about the lack of funding for higher education, it's a problem that exists no matter what kind of funding model is in place, said Russ Deaton, associate executive director for finance and administration at the Tennessee Higher Education Commission.

Actually, he said, the model is working exactly as it's supposed to.

"Money is following where productive gains are being made," Deaton said. "It's successful because campuses have reacted the way we all hoped they would, which is to find creative ways to help students and get them to graduate."

Groundbreaking policy

When the state passed the Complete College Tennessee Act in 2010, it was hailed around the country as groundbreaking higher education policy.

Over the last four years, other states have regularly called and visited Tennessee to find out how the funding formula worked, said Richard Rhoda, executive director of THEC. Tennessee policymakers have presented at conferences and hosted workshops.

And in the last four years, other states have moved toward similar models, particularly in Ohio.

"In terms of where are states looking for best practices, Tennessee is certainly one of the leading -- if not the leading -- state in terms of garnering their experience, their expertise, their process in how they've gotten there and results from the funding formula," said Martha Snyder, a senior associate with HCM Strategists, a public policy consulting firm that works with states interested in implementing outcomes-based funding models.

Tennessee's formula was phased in, making the current budget cycle the first one to be fully dependent on academic performance. In the 2013-14 budget Gov. Bill Haslam opted to fully fund THEC's budget recommendation, infusing an extra $35.5 million into campuses across the state.

For the 2014-15 budget, the higher education commission recommended an increase of $29.6 million based on the formula, and Haslam proposed a compromise of $9.3 million in his original budget. But when state revenues came in under projections, he instead pulled all new money for higher education.

Though Morgan said he supports the funding formula, he said not making the annual investment into the model could lead to unintended consequences, like schools being less likely to collaborate on successful strategies.

"If it's just a zero-sum game, that's not an environment where you're going to have a lot of experience sharing," he said. "If I help you and you do better and my numbers don't go up as fast, then I have to give up money that will go to you. If that is the world we're going to be in, it suggests there needs to be a serious reconsideration of how we fund colleges."

In all, the Tennessee Board of Regents system will lose nearly $5.7 million in the final version of the budget. That money will instead go to the University of Tennessee's three campuses, which collectively performed better under the formula.

"I don't think it's a time to gloat," said UT President Joe DiPietro. "I think it's time to say that it's important in the future for you to fund this thing."

DiPietro turned to an analogy he's deployed before: the state declining to fund the outcomes model after campuses make improvements is like a sales team being promised a commission bonuses only to have the employer come up short.

Still, he said, he doesn't want to go back to the old formula where campuses are rewarded only for high enrollments.

"I think we have to make a very powerful argument for funding of public higher education being a top priority for the state," DiPietro said late last week.

Disappointment

Kevin Dougherty, a professor at Columbia University's Teachers College who studies outcomes-based funding, said it's too soon to know whether outcomes-based funding will work in the long run. Tennessee and Ohio, the two states with the largest-scale programs, are only now starting to fully implement the model, leaving researchers without much data.

But, he said, the both Board of Regents and the Tennessee Higher Education Commission have valid points. There is both a broad lack of funding for higher education and potential for an increase in competition among schools to lead to less collaboration.

"This issue is one of those different issues you have to look at when you are trying to design a performance funding that works," he said.

Still, Dougherty said, Tennessee is a leader among states both in terms of how much money it's tied to the outcomes model and how carefully and meticulously it went about crafting the formula.

For his part, Gov. Bill Haslam said Thursday that he believes this budget year to be an anomaly and when state revenues return, he will once again direct money to higher education.

"That's been what our priorities have been since we've been in office and when the money comes back that will continue to be our priority," Haslam said.

Contact Megan Boehnke at boehnkem@knoxnews.com or 865-342-6432.

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