Economic Development in Higher Ed Funding Proposals

April 17, 2012

Investigative Reports

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USC and ClemsonAt face value it sounds like it might be a good idea to a lot of people, and an eminently fair proposal at that: Allocate public funding to state colleges and universities based on how well they do their jobs.

But performance-based funding, or accountability-based funding as it’s also known, raises a key question:

What is – or, more precisely – what is not the job of a public college? More specifically, does the assignment include economic development?

Yes, according to Gov. Nikki Haley and a bipartisan group of state senators who have launched an effort to transition South Carolina to accountability-based funding for higher education.

Haley put her plan for doing so on page 21 of her executive budget for the 2012-13 fiscal year, which begins July 1.

In the General Assembly, meanwhile, Republican Sen. Greg Gregory of Lancaster County is sponsoring a joint resolution to put the Palmetto State on a path toward performance-based funding.

Haley’s plan and Gregory’s proposal share much in common. Both are based on a belief that politics influences higher education funding in South Carolina and an understanding that the appropriations system is not based on objective criteria.

Funding is “driven largely by inertia or by the ability of each school’s executives and other representatives to convince the General Assembly of the need for more money,” Haley’s budget says.

Says Gregory: “The funding is political.”

Haley calls for a new model that would allocate tax dollars to public higher eds based on the size of their in-state student populations and the schools’ performance in four areas, weighted accordingly:

  • Completion (30 percent);
  • Affordability and access (30 percent);
  • Educational quality (25 percent); and
  • Economic development and institutional mission (15 percent)

Indicators would determine each category.

“For instance, ‘Completion’ would consider the percentage of enrollees who graduate from a college or university within six years (worth 20%) along with the percentage of students who complete their first undergraduate year and return for their second (worth 10%),” Haley’s proposal says.

It recommends that 5 percent of state funding in 2013-14 be distributed according to that model, with the amount increasing each year until it reaches 100 percent in 2017-18.

Likewise, Gregory’s resolution would have the state phase in performance-based funding over five years beginning in 2013-14 based on the same four categories Haley identifies. But it does not assign a weighted value to each of them.

The resolution instructs the coordinating body of state schools, the Commission on Higher Education (CHE), to work with the presidents of the major institutions to develop a plan to implement performance-based funding.

Haley’s plan and Gregory’s resolution also both advocate using the Carnegie Classification of Institutions of Higher Education as a basis for a new funding model. The Carnegie Classification is a widely accepted framework for grouping colleges based on the degree programs they offer, how large they are and other factors.

Gregory says there’s more wrong with how the state allocates money now than just politics. A bigger problem, he says, is that it’s not tied to student population size. “So the money from the state essentially does not follow the student,” the senator says.

“It’s completely out of kilter, and the current system is a disincentive to educate more kids,” he adds.

But should any new funding system be based even partly on economic development? Is that really a proper role for a state-supported college or university?

“Well, I think it’s a complex matter,” Gregory responds. “I think there are some schools that need to be confined to just an educational mission.”

But it’s different with research universities because they are intertwined with economic development, he says. “And they need to be on the cutting edge of the sciences and business developments,” Gregory says, adding that research schools can play a valuable role as incubators.

Critics of state-supported colleges becoming involved in economic development, which they deride as mission creep, might find Haley’s proposal troubling for more than just that evaluation category.

Her plan says that, because many schools have a unique mission, each one should negotiate its own performance measures for economic development and institutional mission with the Commission on Higher Education “based upon the individual institutions’ proposals.”

That’s like a student hashing out with a professor what constitutes a passing grade on a test.

Julie Carullo, acting executive director of the CHE, says the commission has been working with the Governor’s Office and university presidents and board chairs since early 2011 to develop recommendations for a new funding system.

“The resolution that has been introduced in the Senate largely reflects conversations with the Governor to date,” Carullo said in an email. “To develop such a model as described will be no small undertaking.”

Gregory introduced his resolution, S. 1397, on March 29. It awaits action by the Senate Education Committee. As a joint resolution it has the force of law and is reviewable by the governor.

A 50-50 mix of 12 Republican and Democratic senators are co-sponsoring Gregory’s resolution.

A former University of South Carolina board member, Gregory says Haley’s office asked him to introduce the measure. “They did ask me to introduce it mainly because it’s an issue I’ve had an interest in,” he says.

Reach Ward at (803) 254-4411 or eric@thenerve.org.