Starting the Performance Funding Conversation

(Originally published by the Michigan League for Human Services.)

Peter Ruark

The governor’s office has released its Executive Budget for Higher Education. This budget is for four-year universities and does not include community colleges. This year it contains something new: performance funding.

There is an infusion of $36.2 million in new money (equal to 3 percent of the university operations budget) for funding based on four performance metrics:

  • Degree completion (three-year average growth FY 09-11)
  • Number of critical skills area degree completions (three-year average number FY 09-11)
  • Pell Grant students (three-year average number FY 08-10)
  • Tuition restraint (increase FY 12-13).

The League is primarily interested in the third and fourth metric, which address educational accessibility for low-income individuals. Too often, college costs are prohibitive for low-wage and underemployed workers needing to acquire skills to succeed in the job market.

A business group, Business Leaders for Michigan, which is composed of CEOs of 80 companies in Michigan, has responded with its own recommendations for performance metrics.  It recommends doing the following, in addition to the governor’s recommendations:

  • Benchmark Michigan’s universities against national peers
  • Measure and reward a university’s absolute level of achievement as well as progress
  • Add metrics that further encourage quality outcomes, such as graduation rate and retention rate
  • Weight the degrees and completions metric for advanced degrees
  • Add a metric that incentivizes increasing economic impact (i.e. total research and development expenditures)
  • Address affordability and tuition in a manner that does not risk driving down quality and outcomes, for example by:
    -Adding a metric that motivates universities to control administrative overhead
    -Changing the metric from an absolute tuition increase benchmark to one that compares Michigan universities to their most affordable peer institutions in other states

Many of the recommendations from the governor and business leaders point in a positive direction in regard to low-income students. Keeping tuition costs down is, of course, a very important component of accessibility; the Pell Grant metric is a good way to ensure that low-income students are recruited and helped to succeed; and the retention rate metric encourages intervention with students who are having difficulty with coursework.

The proposed measures, however, do not specifically address one group of students that is becoming more prominent: low-skill individuals already in the workforce, many of whom are supporting families. Encouraging postsecondary institutions to help such workers get marketable credentials makes good economic sense. When they become economically self-sufficient, they spend more of their money at local businesses, pay more in Michigan taxes and are less likely to need public assistance.

These performance metrics have been recommended for the four-year universities; none of them except the critical skills degree completion metric have been recommended in the community college budget. This is odd, since community colleges tend to have a higher percentage of both low-income students and older low-skill workers.

Overall, performance funding proposals are a good start to the conversation. Now the conversation needs to expand to include metrics for both four-year and community colleges that help low-income workers and students.

 – Peter Ruark