This article first appeared in the St. Louis Beacon, Jan. 5, 2012 - With state support down and demand for accountability in education up, Missouri's public colleges and universities may soon see dollars from Jefferson City parceled out in a new way: performance funding.
A task force convened last year to study the plan has made recommendations to the Coordinating Board for Higher Education, which is expected to vote next month. Paul Wagner, the state's deputy commissioner for higher education, said the changes would mean a whole new way of funding Missouri's public campuses.
"A lot of people assume that the distribution among schools has something to do with how many students they have or what programs they have," Wagner said. "But that's not really the case. There are no policy considerations at all."
Instead, Wagner said, allocations of state money pretty much depend on what a school has received in previous years.
Under performance funding, he added, there would be "an incentive for improvement. Schools would not be compared to one another. They would only be compared to themselves. It's about improvement, not just staying the same."
Funding for public higher education in Missouri has been steadily declining in recent years, and the outlook for improvement any time soon is uncertain. So the task force that studied the issue noted clearly that its proposed model is based on the assumption that the state would provide a stable, adequate financial base.
It added that to start the discussion, "its recommendations first acknowledge that the current base funding levels for Missouri public institutions are universally inadequate and, in some members' opinion, inequitable, and new investments in base funding should continue to be the top priority of the Coordinating Board in advocating for increased appropriations for higher education."
State Rep. Chris Kelly, a Democrat from Columbia who is serving his second tour of duty in the Missouri House, doesn't disagree with that goal. But, he says, because current levels of state support are far from adequate, shifting the emphasis to performance funding is a somewhat disingenuous attempt to change the subject.
Besides, he adds, institutions are already being funded based at least in part on how well they are doing.
"The theory that this is not happening now is nonsense," he said. "We are constantly re-evaluating their performance.
"We haven't adequately funded them in 20 years. We have made tons and tons and tons of cuts. The subject is that we are underfunding these places. It's not that they are underdelivering."
Declining Dollars
Reviewing the recent history of state support for Missouri's public colleges and universities, Wagner said the high point came in 2002, when the appropriation was starting to approach $1 billion. Then the tech bubble burst and the first recession of the past decade started driving that figure down.
Now, he said, the level of support is about $800 million, and for the last couple of years, a chunk of that money has come from the federal stimulus program. The money from Washington -- close to $200 million -- let the state divert some of its support for public campuses to other needs, but now, that source is about to disappear.
As Gov. Jay Nixon's administration was putting together its budget for the fiscal year that begins this July, it floated an idea that could have further weakened support for higher education. It talked of plugging the state's budget hole in part by borrowing $107 million from the University of Missouri and other schools, then repaying the money over time.
The idea was met with almost universal opposition, and this week the governor said it is off the table. Kelly said he was skeptical about the plan from the first.
"I don't see why any university president or board would trade millions of dollars for some vague promise from this governor or this legislature," he said. "I also believe it would probably be unconstitutional because it requires that the money be paid back by future legislatures, and this legislature cannot pass things that are binding on future legislatures."
The real answer, he said, is not moving money around but raising new revenue, specifically the state's tobacco tax, which at 17 cents a pack is the lowest among the 50 states.
"There is not going to be money to fund higher education as long as we decide year after year to take care of the cigarette lobby and not raise cigarette taxes," Kelly said. "We should not be proud of having the lowest tax in the nation. I would be much prouder of funding things like the nursing school at UMSL than having a cigarette tax that is less than one-fifth of what Oklahoma has."
Wagner agrees that performance funding has to start with dollars that are adequate.
"No performance funding is going to be successful if it's not funded," he said. "At this point, it's hard to be optimistic for the state being able to come up with new resources in the next few years. In some ways, that makes this the best time to set up the plan, so it will be in place when new money is available."
Five Measures of Success
The task force on performance funding noted that its strategy has been proposed in Missouri before, but follow-through has been weak. "With national trends in higher education moving toward a greater emphasis on performance driving the allocation of state dollars," it added, "the time was right for Missouri to revisit performance funding and develop a new model."
The panel said performance measures should apply only to new appropriations, then be built into an institution's base appropriation for future years. It said that the funding allocated on the basis of performance should not exceed 2-3 percent of any school's state funding in any given years.
The task force said Missouri's public four-year colleges and universities should be judged on five factors to determine whether any one of them receives the extra money based on performance, with each factor earning 20 percent of the total available:
- Student success and progress, with schools judged either on how many freshmen return for their sophomore year or how many first-time, full-time freshmen successfully complete 24 credit hours in their first academic year.
- Increased numbers of degrees granted, based either on total degrees or how many students earn their degrees in six years or less.
- Quality of student learning, judged by improvements made in general, made by students in their major field or scored on tests required to gain a professional or occupational license.
- Financial responsibility or efficiency, judged on the percent of expenditures spent on an institution's core mission or an increase in revenue per student that falls at or below the increase in the consumer price index.
- A fifth measure would be specific to each college or university.
Greater accountability
Wagner said that at a time of tight money, coupled with calls for more accountability on how those dollars are spent, performance funding can help schools that are already doing well do even better.
States across the country are using such measures, he added, and Missouri should join them.
"A lot of states' higher education budgets are built on input," he said, "but now they are looking more at output, not enrollment or programs but graduates and successful completion of things. Missouri is jumping on that same train."
Doing so, Wagner said, can lead to fundamental shifts at colleges and universities about how education is carried out and how students can benefit.
"In my view," he said, "this is not necessarily about the money as much as it is about getting everyone on campus start thinking with a different mindset. Let's take a closer look at why students leave. Are there things we could do to keep them in the mix?
"It's not necessarily driven solely by money, but because funding is so tight, you can really galvanize a campus around simple, straightforward goals that may not have been in the forefront of everyone's minds."
Nikki Krawitz, the vice president for finance and administration at the University of Missouri system, said the school's four campuses not only have those goals in mind, but they are already moving forward in those areas.
"The performance funding measures are all related to efforts that the University of Missouri has had under way for years," she said in an email, "including increasing retention rates, graduation rates, professional licensure of its graduates, and research funding and efficient use of resources for the core missions.
"Being rewarded for what we are already doing, and agree is important, is great."
Whether performance funding dollars would be extra, and whether they would even be available, remains unclear. But Krawitz said the concept works for the four-campus system.
"Any increase in funding would be welcomed," she said. "We are confident of our ability to deliver performance in the areas that performance funding is focused on and be rewarded for our performance.
New money for higher ed
Wagner said lawmakers often are incredulous when they hear that there is really no clear explanation about why one school gets one amount and another gets more or less than that.
"Lots of legislators do want there to be some sort of policy rationale about how we distribute money among the colleges," Wagner said. "At least with the distribution of new money, institutions that perform well will get a little bit more than the institution that doesn't perform well."
For his part, Kelly would like to see more dollars coming in altogether, to help Missouri students and the state as a whole. For example, he notes that 1,000 nurses from other countries are hired every year in Missouri because the state doesn't have the capacity to train its own. UMSL, he said, which has done a good job managing its money, could use more to beef up its nursing program.
"Why shouldn't Missouri kids get those jobs," he said. "Because we don't want to raise the cigarette tax? The university is literally eating itself from within. It's cutting and cutting and cutting and cutting and cutting."
In the end, Wagner says, it is Kelly and his colleagues in the General Assembly who will decide whether performance funding is put into place -- and whether it gets the financial support it needs to work.
"The determination is finally made by legislators," he said. "We hope if they buy into the performance funding model, actual performance funding would follow. But they don't have to follow it. They really have carte blanche about what their options are.
"I think you would see at the campus level a lot more focus on the issues that are reflected in the performance funding measures. You would see more concerted effort to increase graduation and retention rates, to support students in key fields like science, technology, engineering and math. You would probably see more cooperation among institutions in terms of best practices and success stories in how they have addressed issues. Everyone already understands these issues are important. This would put quite a bit more focus on it."