Arkansas Proposes Big Change to Higher Education Funding

Two weeks ago, Gov. Asa Hutchinson of Arkansas unveiled a new performance-based funding model for higher education. The proposal will go before the Legislature in 2017. Most states have some element of performance incorporated in to funding formulas. If the proposal is passed, Arkansas would become the fifth state to have a funding formula based exclusively on outcomes. Universities and community colleges would receive their funding not based on enrollment, but rather on measures of their productivity, such as degree completion.

 In his statement about the proposal, Hutchinson said the new formula would “emphasize accountability, student success, and degree completion.” 

“My priority continues to be increasing the percentage of Arkansans that are career-ready, equipped with degrees and industry-recognized certificates, and this new revolutionary funding model will help us achieve just that, ” said Hutchinson. 

As Tara Smith, the senior associate director for institutional finance at the Arkansas Department of Higher Education, described it, this change in higher education funding is just one piece of the vision the department has in its master plan, “Closing the Gap 2020,” which seeks to increase post-secondary attainment to 60 percent by 2025. Currently, that figure sits at 43.4 percent. 

Arkansas’ current funding uses two types of models—needs-based, which looks at enrollment and student mix, and a version of performance-based. If certain thresholds for performance aren’t met at the end of the year, universities are subject to losing some of their base funding. The new productivity-based funding metrics will fall in to three categories—effectiveness, affordability and efficiency --which align with the overall master plan goals of increasing attainment, especially among underserved groups and adults. 

“This model specifically will change behavior, and the shift will be toward student support to meet the student where they are ,” Smith said .

The president of the University of Arkansas System, Donald Bobbitt, supports this proposed change. Citing Arkansas’ history of producing entrepreneurs like Sam Walton and J.B. Hunt, Bobbitt said “There’s no reason that a state that’s produced that type of innovative thinking should be 48th or 49th” in post-secondary educational attainment. 

The hope with this paradigm shift is to change the way universities think about their resources and how to focus them. “In an output model, knowing what would be the impediments to success for an individual student now becomes critical,” Bobbitt said . Universities that have spent more resources on recruitment, for example, can now make the case for more robust predictive analytics that identify students who may need help and offer those students needed interventions. 

Success will require time . “How quickly it’s implemented could affect its success,” said Bobbitt. He said a phased approach would give schools that need it the most the resources to make necessary investments .

However, Nick Hillman, a professor of educational leadership and policy analysis at the University of Wisconsin- Madison, offered words of caution. Hillman gets at the heart of performance- based funding initiatives in higher education  through his research that looks at whether states that have adopted these models have increased the number of college graduates at higher rates than states without such incentives.

Hillman has found that states that implemented similar performance-based funding models didn’t see significant results in total number of degree completions. However, he said he’s seen an interesting related effect. 

“In Washington state, community colleges produced a whole lot more short-term certificates in response to the policy, ” he said. The challenge, he noted, is that no one person has complete responsibility for a student’s success from start to finish at a university, and so it is difficult to control the outcomes. There has to be a commitment at a university for incentives to diffuse across the institution and saturate the culture.

If lawmakers are committed to pursuing this type of funding model to impact outcomes, Hillman said, “ they ( also ) want to make sure they don’t give credit for bad behavior,” such as creating ways for colleges to get credit for results that don’t add value, like increasing the number of short-term certificates in lieu of associate or bachelor degrees. “Finding your regional open-access schools and helping them build their capacity… to help them identify students that are likely to dropout” through analytics is an important step, according to Hillman .

“We’re taking a risk,” acknowledged Smith of the Arkansas Department of Higher Education , but for good reason. “At some point in time, we’ve got to make a shift where we provide more support for higher ed so, in turn, it can make the economy stronger.”