NASHVILLE - State universities and colleges no longer will be rewarded for just getting students in the door and will be forced to improve student outcomes if they want state support, according to a new higher education funding model.

The formula, passed unanimously by the Tennessee Higher Education Commission on Thursday, allows the commission to enforce the dramatic and long-debated reform passed by the Legislature earlier this year. The change will affect both four-year schools and community colleges.

"This is the most important development in higher education in a generation," said Jack Murrah, a Chattanooga resident and chairman of the commission. "(Colleges) will have to rethink the way they fundamentally do business."

An outcome-based funding formula, which will be phased in over the next three or four years, will base funding levels on how well schools perform on 10 measures at universities and 11 measures at community colleges.

Each school will earn points and the total will be multiplied by $58,366, the average salary for faculty and staff among southeastern schools, documents show.

In the current model, 60 percent of funding is enrollment driven, and differences between institutions aren't taken into account, officials said.

"Going forward, it's a whole new set of rules," said Russ Deaton, the commission's director of fiscal policy who helped develop the formula. "The policy agenda has turned toward being more productive and efficient."

Chattanooga State

Students with 12 credit hours: 6 percent

Students with 24 credit hours: 7 percent

Students with 36 credit hours: 7 percent

Dual enrollment: 5 percent

Associate's degrees: 5 percent

Certificates: 10 percent

Job placement: 20 percent

Remedial success: 10 percent

Transfers out: 15 percent

Workforce training: 10 percent

Certificates per 100 students: 5 percent

Cleveland State

Students with 12 credit hours: 6 percent

Students with 24 credit hours: 7 percent

Students with 36 credit hours: 7 percent

Dual enrollment: 10 percent

Associate's degrees: 15 percent

Certificates: 10 percent

Job placement: 5 percent

Remedial success: 20 percent

Transfers out: 10 percent

Work force training: 5 percent

Certificates per 100 students: 5 percent

Source: Tennessee Higher Education Commission

Parts of four-year schools' funding will be linked to the number of students with specific levels of credit hours, the number of degrees produced, the amount of research conducted, the number of transfer students accepted and the graduation rate.

Community colleges will have different measures: the number of certificates and associate degrees produced, the number of dual enrollment students, job placement rates, the number of students who transfer out and work force training efforts.

Two-year schools will not, however, see their funding tied to graduation rates, which have been blasted by Gov. Phil Bredesen and lawmakers this year for being some of the lowest in the country.

The average graduation rate among state community colleges is 12 percent. Chattanooga State Community College's rate is 9 percent, and Cleveland State Community College is 13 percent.

Still, community college presidents like Jim Catanzaro at Chattanooga State and Carl Hite at Cleveland State have argued that graduation rates aren't the right measure for their success.

In the end, commission officials agreed and put the most weight - 20 percent - on job placement at Chattanooga State and remedial student success at Cleveland State.

"(The graduation rate measure) is not meaningful for community colleges," said Rich Rhoda, executive director of the Tennessee Higher Education Commission. "A lot of students transfer out to four-year schools."

State universities, on the other hand, will see their funding closely tied to degree production.

Twenty-five percent of the University of Tennessee at Chattanooga's future funding will be linked to the number of bachelor degrees produced. Another 10 percent will be tied to both the six-year graduation rate and the number of degrees per 100 full-time students, according to commission documents.

"I don't think we are uncomfortable with any of it," said Dr. Richard Brown, vice chancellor of finance and business operations at UTC. "It's change. But this change is needed."

The University of Tennessee in Knoxville will have 20 percent of its funding linked to improvements to its graduation rates. Production of doctoral degrees will account for 10 percent and research will account for 15 percent, documents show.

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