The Board of Regents approved a performance funding model as part of its 2015-16 legislative budget request. The USHE budget request includes support for employee compensation, student participation, distinctive mission, and performance funding, all of which serve to further the strategic directions of the Board of Regents—affordable participation, timely completion, and innovative discovery.

Performance Funding models in state-funded higher education have existed for some time, some states for more than 30 years. Thirty-nine states have either adopted a performance funding model or are transitioning. However, most states have developed this type of funding in the past decade. Performance funding is a primary component to the Board’s completion agenda, and is a proven best-practice.

For the past two years, the Utah Legislature has provided USHE with one-time funding to pilot performance-based funding in Utah. The Board of Regents is currently requesting $5 million (6.37% of request) in ongoing funds for performance funding.  Performance Funding also supports the top two budget priorities of employee compensation and Mission Based funding, which includes funding for growth.

Some other states claim 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. No known performance models have metrics or outcomes tied to areas such as capital facilities, operation and maintenance, compensation, financial aid, or debt service. Lest one think this reality weakens the impact of performance funding in higher education: Funding tied to performance, even a comparatively small amount, is proven to drive performance.

Objective

The overall objective of Performance Funding is for each USHE institution to rank in the top third (67% or better) – defined as “best-in-class – as compared to its peer benchmark. The USHE model of performance funding is to be rigorous, real, and transparent.

Metrics

Each institution will have four or five metrics – three system-wide metrics and an additional one or two institution-specific metrics selected by the institution.

System-wide Metrics

• Completion as measured by percent 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).
• Affordability as measured by the published in-state tuition and fees for undergraduate students; and
• Access as measured by the percent of degree-seeking undergraduate students with financial need defined by those receiving Pell grant support.

Institution-specific Metrics

Presidents shall select one or two institution-specific metrics from the following list:

• First to second year student retention for full-time students
• First to second year student retention for part-time students
• Degrees/certificates awarded per FTE student
• With the approval of the Commissioner, Presidents may select as one of their institution-specific metrics something not listed previously, which is of equivalent rigor, has national data available for comparisons, and furthers the strategic directions of the Board of Regents.

Transparent data, comparable with national peer groups.

Performance Funding benchmarks for USHE institutions are based on the nationally recognized Carnegie Classification of Institutions of Higher Education, a “leading framework for recognizing and describing institutional diversity in U.S. higher education for the past four decades.”

The metrics associated with Performance Funding primarily rely on the Integrated Postsecondary Education Data System (IPEDS). Using nationally-comparable data ensures transparency and credibility.

Peer benchmarks will be determined and locked-in for three years. At the end of three years, these benchmarks will be evaluated and either continued or updated. Affordability benchmarks will be adjusted annually.

Allocation of Funds

Under this model, funding will be allocated to institutions based 50% on their share of USHE graduates, and 50% on their share of USHE state tax funding. This provides a further incentive for increasing each institution’s share of graduates in the system, while also taking into account higher cost programs. At each institution, Performance Funding will be divided equally among the four or five metrics, and funds awarded will be based on the percentage of each goal met. Funds not distributed will be redistributed to institutions based on their success in meeting identified metrics

View the agenda item for more information on the action taken by the Board of Regents