In January 2015, the Board of Regents adopted and advanced a Performance Funding proposal for legislative review. In working closely with the co-chairs of the Higher Education Appropriations Subcommittee of the Legislature Senator Stephen Urquhart and Representative Keith Grover, the Board of Regents established performance metrics for a portion of the new funds appropriated to the Utah System of Higher Education by the 2015 Legislature. As required by new legislation, SB232, Higher Education Performance Funding, the Board of Regents is required to establish performance metrics in specific areas defined in the legislation:

1. Degrees and certificates granted – total certificates and degrees as reported to the Integrated Postsecondary Education Data System (IPEDS), with weightings reviewed by the Higher Education Appropriations Committee.
2. Services provided to traditionally underserved populations – total number of students receiving Pell grant assistance according to the IPEDS Financial Aid Survey. USHE is exploring additional data to be collected from institutions to improve this definition by focusing on first-generation students served.
3. Responsiveness to workforce needs – correlate classification of instructional program (CIP) codes to the corresponding top 10 “5-star” occupations requiring a college degree or certificate (as defined by the Utah Department of Workforce Services) & STEM degrees.
4. Graduation efficiency – the number of first-time, full-time students graduating within 150% of time to degree or certificate (six years for a bachelor’s, three years for an associate). The amount of funding earned is based on the institution’s percentile rank of its graduation rate in relation to its national peers as defined by the Carnegie Classification of Institutions of Higher Education, using five years of historical IPEDS graduation rate cohort data and computing a weighted five-year average. The top-third (>=66%) percentile rank among institution peers is the highest funding benchmark (100%). For example, if an institution’s graduation rate is 40% and the peer 66th percentile benchmark is a 50% graduation rate, the institution’s graduation rate is at 80% of the benchmark, thereby being awarded 80% of its available funding for this metric.
5. Graduate research (University of Utah and Utah State University only) – data compiled by the Center for Measuring University Performance (MUP) provides the total federal research dollars (x1000) for each of the research colleges and universities in the United States.

Additional descriptions of the metrics, methodology, funding and implementation are available in the meeting materials of the Board of Regents.

Performance Funding Background

Over half of the states have adopted some kind of outcomes-based model of funding higher education in recent years, many touting their higher education budgets are “100%” funded on performance outcomes, or all “new funds” are tied to performance outcomes. In reality, of all state performance models currently in place, performance based funds – actual funds tied to the success or failure of meeting specific goals – make up no more than 5% of higher education base budgets. Utah’s performance based funding is 20% of the new education funds received in 2015. While few studies have been done on the effectiveness of this type of funding, early indications demonstrate that funding tied to performance, if implemented correctly, can drive improved performance in key areas in higher education.

In 2013 the Utah Legislature provided $1 million in one-time funds to incent Utah System of Higher Education (USHE) institutions to meet specific performance metrics that aid college completion.  These metrics were subsequently adopted by the Board of Regents, and funding was awarded to institutions based on their performance on the metrics.  Similarly, in 2014, the Legislature provided $1.5 million in one-time money for performance funding.

Going forward

FY16 is considered the baseline by which the first three metrics will be measured year-to-year (Degrees and certificates granted, Services provided to traditionally underserved populations, and Responsiveness to workforce needs). Each year beginning in 2015-16, a new five-year historical average for each metric will be used and then measured against the previous year’s five-year historical average to determine outcomes in each metric. This rolling average (adding the most recent year’s data and dropping the oldest year) is the output measure that determines the earned award for each metric.

Increases and decreases will be calculated using the percentage decrease from the previous year’s earned units. To encourage year-to-year progress beyond current efforts, an institution must increase its five-year rolling average by one percent (1%) or more annually. If the most recent year’s average is less than the previous year, the award for a specific metric will be reduced by 5%.