UNC leaders look at funding campuses based on their performance

As UNC system leaders get to work on new strategic goals for North Carolina’s public universities, they may be looking to other states that reward campuses – or punish them – based on performance.

On Wednesday, the UNC Board of Governors began to look at how other states dole out state dollars to their universities. Traditionally, the UNC system has determined funding according to a complicated formula primarily driven by enrollment – how many students come in the door.

In the future, the funding approach could look different.

More and more public universities receive money based on their performance on a variety of measures such as graduation rates or other student success factors. Before 2010, four states had performance-based funding systems in place – Pennsylvania, Indiana, Tennessee and Ohio. Since then, 29 other states are implementing or considering new funding formulas.

Performance funding had been tried by some schools in the 1990s but generally fizzled out after a few years, said Matthew Pellish, senior director of strategic research and education at the Washington-based Education Advisory Board. Pellish, who was brought to Chapel Hill to give the UNC board the latest data on performance funding, said the models sometimes achieve good results and sometimes don’t. It’s a long-term strategy that can take about seven years to bear fruit, he added.

“No matter what you’re doing in performance-based funding, there is no quick fix,” Pellish said.

The UNC system outperforms the nation as a whole when it comes to graduating students within six years – 63 percent systemwide compared to 59 percent, according to data presented Wednesday. And UNC system graduates leave school with less debt, because of North Carolina’s comparatively low tuition.

Still, there is plenty of room for campuses to improve, said Andrew Kelly, UNC’s senior vice president for strategy and policy. There are gaps in levels of enrollment and completion when it comes to low-income, minority and rural students. North Carolina ranks 39th in per capita income, and college enrollment, while growing, is not keeping pace with increased students moving through the K-12 public schools.

Students who enroll in UNC campuses but don’t leave with a degree have significant problems repaying any loans, Kelly said. But students consider other outcomes besides financial returns. Purdue University surveys its graduates on how engaged they are in their communities and whether they have a sense of purpose.

Pellish said states handle performance funding differently. Some award bonuses, while others tie significant portions of campus budgets to performance measures. Then there’s the question of what defines good performance – is it graduation rates, academic progress or career outcomes? And how can states possibly apply standards to schools with diverse populations and missions?

All those questions have to be considered, Pellish said, as well as the impact of basically pitting campuses against each other for funding. He pointed out that in Tennessee, some campuses were big winners, with one gaining 8 percent in funding increases, while others lost funding. There can be negative consequences with universities trying to game the system by admitting fewer low-income students who graduate at lower rates.

UNC President Margaret Spellings said she hopes to have new strategic ideas identified by December, in time for the next legislative session, which starts in January. She has outlined five overarching goals – access, student success, affordability and efficiency, economic impact and diverse institutions.

Board of Governors Chairman Lou Bissette said the schedule for the plan is aggressive.

“Over the next several months, we want to build a final plan that succinctly defines the themes and identifies clear, measurable goals and specific metrics with timelines and targets that will hold us all accountable as we go forward,” Bissette said. “We need a plan that this board can fully own and support, a plan that involves input and guidance from all of our constituencies and specifically from our chancellors and faculty who are on the front lines doing the work to educate our students every day.”

This story was originally published September 8, 2016 at 6:42 PM with the headline "UNC leaders look at funding campuses based on their performance."