Funding x Graduation Rates = ?

by Watson Scott Swail, President & CEO, Educational Policy Institute

More states are revising their funding formulas to include graduation rates as an accountability measure. On the surface, this seems like a logical and prudent idea. However, the devil is always in the details.

This past week, Ohio Governor John Kasich ushered in a new era of postsecondary funding in that great mid-western state. Effective immediately, the states public two- and four-year institutions will receive 50 percent of their state funding based on graduation rates. According to the recommendations from the Ohio Higher Education Funding Commission, which provided the basis for these changes, “a majority of state funding at Ohio’s universities should only be awarded based on their ability to successfully graduate students.” Of special interest is the following recommendation:

All university students on all campuses (main or regional) should be treated equally in the funding formula and in any relevant state laws.

Equal is a scary word because little is equal in the education arena. The “devil,” in these regards, is how equity is accomplished, from fiscal to social, across a higher education system that is uniquely unequal. This is not an indictment of the state of Ohio and the Ohio Board of Regents. Rather, it is an acknowledgement that geography, socio-economics, and other factors across state (and provincial) systems cause certain inequities, and, of course, complexities. For example, the Educational Policy Institute (EPI) just completed a consulting project for the Ohio Board of Regents with Shawnee State University in Portsmouth, OH (Shawnee’s president, Rita Morris, was one of the Commission’s members). Shawnee is a small, open-admissions four-year institution that also provides associates degrees. Also on the commission is Gordon Gee, the esteemed president of Ohio State University. As readers may understand, the two institutions are not quite the same. One serves 5,000 students; the other 64,000 students. One has an open admissions policies; the other moderately selective. One has students with very high EFCs (google it); the other not so much. One has a graduation rate of about 21 percent; the other 80 percent (six-year calc). And one has a state budget of $13 million; the other $342 million; and finally, one has a total revenue of $50 million; the other, $5.22 billion (yes, that’s a “B”).

They aren’t the same place: geographically; fiscally; educationally; socially.

But out of the new funding formula, Ohio state will receive a $10 million increase in 2014-15 (3.1 percent increase) while SSU will receive a $324,000 decrease (-2.4 percent).

I’m not here to make any statement about whether OSU deserves the increase or whether SSU deserves differently. That is not my point. The point is that the diversity of institutions makes these formulas very difficult and complex. The students attending institutions like SSU have a very difficult time graduating. A high percentage of these students are first generation and low-income (both). By comparison, Ohio State University students are more similar to those attending Oberlin, Denison, and Case Western.

The formula used by the Ohio Board of Regents does, evidently, use a weight for at-risk students, and community colleges are being slowly ramped into the system to allow for their variances. This makes sense. But we do not know what that “weight” looks like.

On one level, I commend Ohio for trying to provide an outcome, value-added measure to funding. Most of us agree in principal. On another, I remain skeptical, partially because of my ignorance of how it works in the real world and about how well this will work as an “incentive.” The only way I have ever seen incentives in higher education work with regard to enrollment and graduation is that doors are closed rather than open; opportunities are lost rather than created; lives are limited rather than fulfilled.

More states will follow. This is the new era of higher education finance. But I would like to see more accountability—read as cost reductions—on the part of colleges and universities at the same time we are talking about restructuring funding arrangements based on outcomes.

Interested in your thoughts.

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About Educational Policy Institute

The Educational Policy Institute is a Washington, DC-based research think tank on education and the social sciences. EPI conducts evaluation and policy studies on various educational issues from Pre-K to workforce outcomes in the United States, Canada, and beyond. Visit us at educationalpolicy.org.
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