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College performance funding plan approved

Updated Dec. 5 – The initial structure of how Colorado colleges and universities would be financially rewarded for increasing graduation rates and achieving other key goals were unanimously approved Thursday by the Colorado Commission on Higher Education.

Montage of Colorado colleges
From left, Colorado State University in Fort Collins, the University of Colorado-Boulder and the Auraria Higher Education Center.

The plan, under development for several months by Department of Higher Education staff and outside consultants, was discussed and voting on during a commission meeting in Colorado Springs.

The discussion takes place at the same time as the financial health of state colleges and universities may be coming under closer scrutiny at the Capitol.

In a presentation to the legislative Joint Budget Committee Tuesday, a staff analyst warned about increasing debt loads at state colleges, particularly at Adams State University in Alamosa and Western State Colorado University in Gunnison. The issue is expected to be a key topic when the committee holds a daylong hearing with CCHE and institution leaders on Dec. 12. (See details at the bottom of this article.)

A 2011 law created – but didn’t implement – a performance funding system for state colleges and universities. Like so many aspirational legislative proposals, lack of funds required the authors to delay implementation until direct state support for higher education returns to $706 million a year and no earlier than 2016-17. College funding was slashed during the recession and currently is below $660 million. Under the terms of the law 25 percent of funds above $650 million are to be allocated based on institutional performance, with the bulk still distributed by traditional enrollment-based formulas.

In the meantime, the law assigned the CCHE to come up with a new higher education master plan and to develop a proposal for how to divvy up any future performance funding.

The master plan, completed a year ago, has four main goals – increased production of degrees and credentials, improved student success, reduction of completion gaps between demographic groups and restoring the system’s financial health.

After that document was finished, DHE and individual colleges and systems negotiated performance contracts outlining how individual campuses would work toward those goals. Those contracts currently carry no financial rewards or punishments because the performance funding part of the law hasn’t kicked in.

But the allocation plan presented to the commission would build on those contracts and broadly work like this:

  • Data would be collected and points assigned for each metric associated with the four goals in a college’s contract.
  • Points would be weighted according to the weights used by colleges in their contracts. (Colleges have a wide variety of different strategies in metrics in their contracts, so one college might emphasize a certain completion strategy that’s not emphasized as strongly by another institution.)
  • Weighted points then would be scaled to account for the relative sizes of institutions and systems.
  • Shares of performance funding would be allocated from the funds available.

Institutions could receive reduced credit for goals that were partially achieved. An institution meeting a higher percentage of its goals would receive a higher percentage of the total performance funding pool compared to the other colleges and universities that met a lower percentage of their metrics.

The DHE staff proposal identified several challenges to the new system, including:

  • The relatively low amount of performance funding might not be enough to change institutional behavior.
  • The need to balance varying individual college plans with statewide goals makes for complicated allocation tool that may not be transparent to the public.
  • Making consistent measurements may be hard, given the large number and variety of metrics used by colleges in their contracts.
  • The variation in colleges’ goals and metrics may lead to perceptions that performance contracts are weak.
  • And last but not least, “Funding levels adequate to trigger performance funding may not be realistic for several years.”

Under the plan, the first reporting of institutional performance will come in December 2014, and the system and the contracts will be reviewed in the fall of 2015.

Both DHE staff and commissioners agreed that additional details of the plan need to be worked out over the next two years.

Other key business for CCHE

The agenda for the CCHE meeting at Colorado College included two other key decision items, changes to the state’s college admissions policy and a new policy for remedial education. Both were approved.

The admissions policy would give institutions more flexibility in admissions standards, although those would have to be approved by the commission. Factors in those policies would have to include test scores such as SAT and ACT, student grade point averages and the rigor of high school classes taken by students.

The new policy eliminates the old admissions index, a numerical combination of test scores, GPA and class ranking that has been used to indicate to applicants which colleges might admit them. The policy is intended to better align college admissions policies with the state’s new high school graduation guidelines (get background in this EdNews story.)

The new policy would go into effect for students entering college in the fall of 2019.

State colleges currently determine whether a student needs remedial work in English or math based on cut scores on college entrance exams. Such students have to take remedial classes before they can enroll in credit courses. The new policy would maintain existing cut scores but broaden the number of exams used and give colleges flexibility in allowing students to take credit courses while receiving supplemental tutoring or other instruction in areas where they need help.

The commission also was briefed on what’s expected to be the hottest higher education issue of the 2014 legislative session – allowing community colleges to offer a limited number of four-year degrees in applied sciences fields. Some commissioners indicated general support, but the CCHE didn’t take formal action. Read a staff memo here, and get more background in this EdNews story.

Sober warning for JBC

Members of the JBC got an eye opening warning this week when they received their annual pre-session briefing on proposed higher education spending in 2014-15.

Staff analyst Amanda Bickel’s briefing paper noted that as of budget year 2011-12, “six out of 10 of Colorado’s governing boards were in relatively weak financial health, based on Composite Financial Index scores commonly used to assess financial health in this sector. Two small institutions—Adams State University and Western State Colorado University—had scores below 0, indicating a need to ‘assess institutional viability to survive.’ Both institutions are highly leveraged.”

The document continued that analysis of Adams and Western from 2008-09 to 2012-13 “indicates that both institutions are highly leveraged and financially at risk.”

Bickel recommended that the legislature and the executive branch keep a close eye on the financial health of those colleges, the state system’s smallest, and that the committee should more carefully monitor colleges’ requests to issue bonds under a state guarantee called the Higher Education Revenue Bond Intercept program.

She also made the provocative suggestion that “the General Assembly should explore whether any of the state’s larger higher education systems are interested in merging with the smaller institutions highlighted in this issue, given the larger systems’ economies of scale and resources for implementing changes in a challenging financial environment.”

In the recent years of shrinking state financial support many state colleges have built or renovated new facilities with bonds that are to be repaid by revenues from such sources as student fees. There’s been something of an “arms race” among colleges to improve facilities in order to attract students.

Bickel’s analysis, which she repeated in comments during the meeting, naturally got the committee’s attention.

“I think this struck terror in a lot of hearts, but it’s a good thing,” said panel member Rep. Cheri Gerou, R-Evergreen. “I’m not going to sit here and pick on Adams State and Western State. … The state hasn’t carried its load in supporting higher education.”

Bickel also had some other interesting suggestions for the committee, including that it ask for written commitments from colleges to limit 2014-15 tuition increases to no more than 6 percent, something they have promised Gov. John Hickenlooper. She also recommended that the legislature consider revisiting a law that allows colleges to raise tuition by 9 percent a year – or higher with CCHE approval.

And she suggested that the JBC consider putting into need-based scholarships the $5 million that Hickenlooper wants to earmark for merit awards, and that the legislature put pressure on colleges to devote more of their own money to need-based scholarships.

Some JBC analysts are know for the thought-provoking proposals they include in the December briefing papers, ideas that spark a lot of committee discussion but don’t necessarily make it into the state budget approved every April.

The committee has its normal pre-session hearing with college leaders next week and also may schedule additional meetings on the debt issue raised by Bickel.

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