CHAPEL HILL — Each year, public universities get taxpayer money for each student they enroll -- the state's investment in the young minds of tomorrow.

But many students drop out. Now, UNC system leaders want to link that public money to academic performance so campuses have more incentive to make sure students graduate.

The idea is this: Rather than automatically receiving funding for every new student enrolled, campuses must first meet retention and graduation goals. If they don't meet those goals, they can't enroll more students.

"Rewarding performance, rather than growth, will better serve the students and better serve the state," UNC system President Erskine Bowles said Friday.

About 58 percent of the UNC system students who enrolled as freshmen in 2002 had graduated after six years. That's right at the national average.

For much of the last decade, the state's public universities threw their doors open at the prompting of UNC system leaders eager to serve a growing college-age population. The student population spiked, but many were ill-prepared for college-level work.

At N.C. Central University in Durham, for example, enrollment swelled 50 percent over about seven years, but one in four students dropped out after one year, and only about half graduated. The same scenario played out at N.C. A&T State University and other campuses as well, Bowles said Friday.

"They got a lot of kudos for really growing the enrollment," he said. "But a significant number of students dropped out, flunked out after one year, with a lot of debt. They got a bad deal, and the state got a bad deal."

The details of the new UNC system plan must still be worked out. NCCU Chancellor Charlie Nelms likes the emphasis on accountability but hopes each campus isn't judged the same. NCCU, he said, traditionally enrolls students who show potential but may not be ready for college work.

"Some of them may take longer, some of them may need more support services," he said. "We need to factor that in."

And students drop out for other reasons as well, like finances or family trouble, he added.

At NCCU, graduation and retention rates have been under scrutiny for years, prompting new programs aimed at helping new students adjust to college.

Two years ago, NCCU's retention rate -- the percentage of freshmen who returned for the sophomore year -- was 68 percent. That was below NCCU's 76 percent target. But last year, that number rose to 77.6 percent.

"That tells me that the measures we're putting into place are working," Nelms said.

Graduation rates vary widely across the public university system. The low: 33.4 percent of UNC-Pembroke students who enrolled in 2002 graduated after six years. The high: UNC-Chapel Hill, where 85.6 percent of students graduated in that time period.

At N.C. State, 71.5 percent of students graduated in that six-year span.

Enrollment growth funding is determined by a formula that factors in projected student credit hours and the cost of teaching the various courses offered at each institution. This year, the UNC system received $44 million to expand enrollment growth. Each year, university officials lobby vigorously for it.

"That money is critical for us," said UNC-Chapel Hill Chancellor Holden Thorp. "That's where a lot of our ability to grow the faculty comes from."

State Rep. Rick Glazier, a House education budget writer, said the new initiative would likely be well-received by legislators.

"It seems like a very good idea," said Glazier, a Fayetteville Democrat. "It really does make a university address the effectiveness of its teaching."

eric.ferreri@newsobserver.com or 919-932-2008