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Paying for Performance

The UNC system has developed a new model for funding growth in enrollment.

By Jenna Ashley Robinson

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February 17, 2013

Many campuses in the UNC system have a hunger for additional students. Administrators want their schools to grow, and, historically, specific state appropriations geared to growth have helped them do it. The legislature typically adds a line item in the budget called “enrollment funding,” based on a standard formula. That formula is likely to change soon.

Campuses used to predict future growth based on the number of applications received, and the General Assembly routinely accommodated that growth. Little attention was paid to whether the admitted students graduated or how much each one was costing the state by lingering too long.

Now, North Carolina administrators are looking to create a different model. Campuses must meet certain performance standards in order to grow—potentially an important step toward accountability. A switch to performance funding was first proposed in 2010, but significant changes have been made to the plan since then.

The first challenge in implementing such a model is defining standards for performance. Choosing the right metrics to justify adding students matters. They must be objective, meaningful, and not vulnerable to manipulation.

The UNC General Administration has released a draft plan of how it would like the model to work. It proposes ten measures of performance, all weighted equally, with the idea that meeting seven of those would allow campuses to grow as much as they want. Meeting fewer than seven would lead to restricted or even no growth.

Seven of the measures would be standard from campus to campus:

  1. Freshman to sophomore retention rate
  2. Six-year graduation rate
  3. Degree efficiency (the number of bachelor’s degrees awarded per 100 full-time equivalent students)
  4. Degree efficiency of Pell grant recipients (the number of bachelor’s degrees awarded per 100 full-time equivalent students who receive Pell grants)
  5. Space utilization (weekly room hours of instruction as a percent of the UNC standard)
  6. Financial integrity (UNC FIT standards for efficiencies in payroll, human resources, and other administrative services)
  7. Energy efficiency

Three other measures would vary by campus. They could include: the number of transfers from community college, the graduation rate of those transfers, federal research expenditures, graduate degree efficiency, enrollment of adult learners, degrees produced in STEM disciplines, degrees produced in nursing, distance education, or the four-year graduation rate. Investment per degree, defined as state appropriations plus tuition and fees per degree, also appears on the list.

Points would be awarded based on how well universities met each standard. Schools would have to score seven out of ten points in order to grow without limits. Scoring fewer than three points would mean that a school would not be allowed to grow at all.

So far, although the administration has laid out the measurements, it hasn’t put numbers on them. For example, what six-year graduation rate would be acceptable (presumably it would be different for each school)? How many STEM degrees would be sufficient to meet the standard?

Other states—including Indiana, Tennessee, and Ohio—have already begun to use performance-funding models similar to the one proposed by UNC. This year, five percent of Indiana’s $1.2 billion higher education budget will be distributed based on performance metrics, especially college completion. That figure will increase to six percent in 2014 and seven percent by 2015—shifting the focus from system growth to college completion. In the last biennium, the UNC system received under two percent of its total state appropriations for additional enrollment.

Meanwhile, Governor McCrory seems to have his own idea of performance funding—putting the emphasis on graduates’ career success rather than any internal metrics.

“I think some of the educational elite have taken over our education where we are offering courses that have no chance of getting people jobs,” McCrory told former education secretary Bill Bennett during a radio interview in late January.

According to McCrory in that interview, his staff has begun drafting a proposal that would change how much state money universities and community colleges receive based on how many graduates get jobs rather than on university enrollment. However, McCrory’s office was unable to give specifics when contacted by the Pope Center.

The proposed flood of measures may have some merit, but there are better ones. Some of the metrics—four-year and six-year graduation rates, retention rates, and degree efficiency—overlap significantly. They’re also vulnerable to university manipulation. In a presentation last May, UNC-Chapel Hill executive vice chancellor and provost Bruce Carney warned against relying too much on graduation or retention rates, saying, “Schools may weaken educational requirements to artificially achieve the goals.”

Some better metrics were mentioned at a Strategic Directions meeting in December. Peter T. Ewell, of the National Center for Higher Education Management Systems, presented several measures, such as standardized assessments, as alternatives to graduation rates.

Some of those alternative measures were included as part of the university’s new Strategic Plan, adopted on February 8 (but not included as part of the performance funding proposal.) Starting next year, the university system will use the Collegiate Learning Assessment to measure student achievement. The system will also begin to collect survey data from alumni and employers. Already, the university collects data on the acceptance rate of recent graduates into professional and graduate degree programs and those students’ GRE scores.

That’s a start, but investment per degree, relegated in the current performance funding recommendation to a second-place position as an optional measure, deserves a more prominent place.

Supposing that the “right” metrics are chosen, the second challenge is to balance university performance with costs to the state. The UNC system budget recommendation shows new expenditures of $9.5 million in 2013-2014 to $48 million in 2017-2018 to create incentives for the staff and faculty to achieve performance measures. These new expenditures should be offset by reductions in enrollment funding. However, if the metrics are wrong or the standards too low, these incentive payments will be wasted.

Until we know where the UNC system would set the bar for different metrics, it’s hard to determine whether the plan will slow down growth because the metrics aren’t met or increase it because the campuses achieve higher graduation rates, greater efficiency, etc. The system should carefully select and test metrics over the next few years before a performance model receives substantial funding.

The introduction of performance funding marks a significant change of thinking in higher education, away from growth towards achievement. With the right measurements, it will help transform North Carolina’s universities.

 


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