Editor's note: This is the first of a two-part story on performance-based funding, a new mechanism expected to be incorporated in the state of Illinois' 2013 education budget. This week's story is on the mechanics of performance funding and why it is being considered. The second story, to appear in the Feb. 16 edition of Inside Illinois, focuses on Tennessee's experience with performance-based funding and whether Illinois will be able to emulate it. (Part 2 is now online.)
Robert Rich, the director of the UI's Institute of Government and Public Affairs, wrote a "white paper" on performance-based funding commissioned by UI President Michael J. Hogan. According to Rich's work, Tennessee is the only state that has successfully implemented a long-term performance-based system that supports legislative goals for the state's higher-education system.
Photo by L. Brian Stauffer
An Illinois Board of Higher Education steering committee is expected to deliver final recommendations Feb. 7 for a performance-based funding system likely to be implemented with the state's 2013 budget.
Formed by Illinois General Assembly mandate, the committee was charged with finding ways to reach goals outlined in the Illinois Public Agenda for College and Career Success, a study commissioned by legislators in 2008 and completed by the Illinois Higher Education Finance Study Commission in 2010.
Components of the Illinois Public Agenda include goals of greater and less-expensive higher-education access in an effort to better prepare the state's workforce for the future, and retool the struggling Illinois economy.
The 10-year plan also calls for looking at new approaches for the issues of student financial aid and inclusion, a rollback of a long list of unfunded legislative mandates, ways to better integrate statewide innovation into economical solutions, a statewide articulation initiative meant to align curriculum from high school through college, as well as better metrics to track the achievement of these goals.
The overreaching goal is to have 60 percent of the Illinois workforce earn a college degree or certificate by 2025. But to do that, the state's higher-learning institutions would have to produce 600,000 more graduates - a rate increase of 3.2 percent compounded annually.
"Illinois is not ready to face its future," says the first line of the Illinois Public Agenda report. "Today's workforce has a massive skills deficit that threatens the economic well-being of the state and its citizens."
While performance funding traditionally has carried a negative connotation among educators, a number of factors have led to the consideration and embrace of new approaches.
Those factors include ongoing reductions in public funding (down overall by an estimated 26 percent between 2002 and 2010), rising tuition and fees for students (up 84 percent at public universities in those eight years), and declining student assistance (the state's student-assistance program, the Monetary Award Program, dropped by 12 percent over the same period).
Performance-based funding alone will not solve the state's higher-education funding crisis, but according to Abbas Aminmansour, a UI professor of architecture and chairman of the IBHE's Faculty Advisory Council, it's a first step in changing the state's funding mechanisms and meeting the goals of the Illinois Public Agenda.
Aminmansour, also a member of the IBHE Finance Study Commission and its performance-funding steering committee, said officials are approaching the performance concept seriously, but cautiously.
"We really want to have a good handle on this because there may be unintended consequences," he said. "There are a lot of intricacies we have to be very careful about. We have to use the metrics that we know we have a handle on and we have to make sure there's no damage done."
The committee originally proposed tying performance metrics to only new funding. But in a state where new funding is unlikely, the committee this January settled on proposing a formula for four-year institutions calling for a half-percent of the overall budget to be set aside as performance funds - but only if funding remains at 2012 levels. If overall funding were to return to higher 2011 levels, a little more than 1 percent of the budget would be set aside to reward performance factors.
The committee also is recommending that the percentage of funds eligible for performance should increase if the state's education budget increases, though specific percentages have not been worked out. Under the proposed formula, about 60 percent of earmarked performance funding would go toward general institutional goals such as graduation rate, while the remaining 40 percent would reward specific Illinois Public Agenda goals - such as increasing minority, low-income and first-in-family college students. In the first year, higher-education institutions would receive evaluation results only, based on the specified metrics. Actual performance funding wouldn't be allocated until year two.
Aminmansour said the key to the process is that Illinois' universities will be competing against their own past performances based on a three-year average, not against one another, and that funding for specific strengths - like the Urbana campus's well-known research mission - are weighted under a standardized funding model that takes into account the varied missions of each four-year university and community college.
"It's been a very difficult thing to do," he said. "There's been a general agreement that we should not treat all institutions equally. We've had to develop metrics and criteria that target individual institutional performance and types of degrees offered, and then tie them to the institution's strategic goals. The institutions will be able to adjust those goals to compete for that additional funding."
Aminmansour is confident the UI would fare well under any measure of comparison and maximize any potential funding linked to performance.
"It's actually a chance to show the U. of I.'s strengths," he said.
It is still unclear how performance funding will fare in Illinois, or if it will become a catalyst for exploring other new methods for achieving the state's educational goals.
The state's ongoing fiscal problem is one barrier proponents must face, as legislators grapple with seemingly unending priorities and billions of dollars in red ink. Gov. Pat Quinn said recently that higher-education funding likely will remain level for at least the next three years.
"It is up to (institutions) to make the case that the higher-education system should be funded at a higher rate," Aminmansour said. "We have to show it is a very good investment that will actually help the state to get out of some of the financial trouble. The numbers show the state benefits significantly from higher education. It's our responsibility to keep making that point. If we don't, who will?"
And the second barrier is that, across the country, the actual performance of performance funding has been less than glowing.
Robert Rich, the director of the UI's Institute of Government and Public Affairs and author of a white paper on performance funding commissioned by President Michael J. Hogan, said about half of the 25 states attempting to implement a performance system since 1979 had abandoned their funding models altogether.
According to Rich's report, five state systems dropped performance funding immediately following establishment, four others abandoned models after the policy was mandated, and three scrapped their models after performance indicators were added. Even Illinois in 1998 tried to tie its community colleges to a performance model, but abandoned the idea four years later.
Rich credits Tennessee for being the first to adopt a performance-funding model, which became an official program in 1979 after a five-year pilot effort. The state's program has changed over the years, but it is still considered the best working model. Other states regularly copy the complicated formula that Tennessee has developed and used to accurately compare its varying institutions, and measure their success in meeting state priorities.
"Tennessee has lasted longer than any other state," he said.
Rich said adopting a performance-based system is difficult because so many factors become involved in any formula designed to encompass a multi-missioned state education system.
"Funding traditionally has been based on enrollment and there was no competition between institutions," he said. "Simply put, large institutions got a lot more money."
And while the state's colleges and universities already have access to a great amount of institutional data, according to Rich, "How you track that data becomes crucial, and when you interpret those numbers you must take into account very different places with sometimes divergent missions."
He said the effort becomes more difficult by the fact that, outside Tennessee, there are no other "best practices" procedures from which to learn.
"No state besides Tennessee that has tried performance funding has kept it, other than in fits and starts," he said. "It's a very difficult task."
ON THE WEB
Performance-based Funding Model Steps
(Four-year public university)
Identify the performance measures or metrics that support the achievement of the state goals.
Collect the data on the selected performance measures
Award an additional premium (for example, 40 percent) for the production of certain desired outcomes such as completions by underserved or underrepresented populations.
Normalize (scale) the data, if necessary, so it is comparable across variables.
Weight each of the Performance Measures that reflects the priority of the measure and the mission of the institution.
Multiply and sum the Scaled Data times the Weight to produce the Weighted Results.
Use the Weighted results (or Total Performance Value) to distribute performance funding.
Source: IBHE Steering Committee Report