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Financial - Issue Briefs - Publication Number: IB13-2 (July 17, 2013)

Performance Funding

In August of 2011, Governor Nixon held a “Summit on Higher Education” that made performance funding a major theme. At the Summit, the Governor focused on five key areas for performance funding:

1) Improve student success,
2) Increase degree attainment,
3) Increase quality of learning,
4) Monitor affordability and cost efficiencies,
5) Support institutionally-specific missions.

In early Fall 2011, the Council on Public Higher Education in Missouri (COPHE) assigned a work group to develop and propose performance funding measures for four-year public institutions in Missouri.

In reviewing these five key areas as well as what other states had successfully accomplished, the COPHE work group created a list of principles and/or characteristics of good performance funding measures. Those characteristics included:

Performance Funding Measures Guiding Principles: 
  • Each institution will have its own baseline and will have its performance measured against its own goals and/or peers over time; institutions are not to be put in competition with each other for funding.  
  • Each measure needs to have a definition of success or “sustained excellence” to indicate improvement beyond current levels isn’t feasible, realistic, or is needed.
  • Use measures where we already have agreed upon definitions and we are already collecting data, to the extent possible e.g., IPEDS, DHE, Complete College America
  • Use measures with external validity (comparable nationally)
  • Measures should not conflict – increase selectivity vs. increased participation.
  • Institutions need to have some leeway to select specific measures that would better fit their specific institutional goals and roles.
  • Where appropriate, use 3-year running means, rather than single points in time.
  • Performance funding will apply to a portion of new appropriations from the state; funding earned through performance one year should be added to an institution’s base the following year.
  • Total performance based funding should not exceed 2-3 percent of an institution’s total state funding in any given year.
  • Each institution will use five measures; an institution can earn 1/5th of its available increase in funding by demonstrating success on one of its five performance measures. Success with two measures would let the institution earn 2/5th; three successful measures would earn the institution 3/5th, and so on with each of the five measures.
Performance Funding Measures:

Within each of the four mandatory key areas, two or three specific measures were proposed.  The categories, and proposed measures, were:

1) Student Success and Progress (institutions will select one):
       a. Freshman to sophomore retention, or
       b. First-time, full-time freshmen successfully completing 24 hours in their first academic year.
2) Increased Degree Attainment (institutions will select one):
       a. Total degrees awarded, or
       b. Six-year cohort graduation rates.
3) Quality of Student Learning (institutions will select one):
       a. Improvements in assessments of general education,
       b. Improvements in assessments in the major field, or
       c. Improvements on professional/occupational licensure tests.
4) Financial Responsibility and Efficiency
       a. Percent of total education and general expenditures expended on the core mission (instruction,
           research, and public service), or
       b. Increase in educational revenue (state appropriations plus net tuition revenue) per full-time
           equivalent student at or below the increase in the consumer price index.
5) Mission-specific measurement related to each institution (subject to CBHE approval).

University of Missouri Measures, as approved: 

The University of Missouri selected the following measures:

1) Student Success and Progress
       a. Freshman to sophomore retention
2) Increased Degree Attainment (institutions will select one):
       a. Six-year cohort graduation rates
3) Quality of Student Learning (institutions will select one):
       a. Improvements on professional/occupational licensure tests.
4) Financial Responsibility and Efficiency
       a. Percent of total education and general expenditures expended on the core mission (instruction,
           research, and public service),
5) Mission-specific measurement related to each institution (subject to CBHE approval).
       a. NSF Federal Expenditures for Research and Development – improvement in any one of the
           following three areas:
                i. Rank (Public institutions) in Federally financed R&D expenditures
               ii. Percentage share of public Federally financed R&D expenditures
              iii. Increase in total Federally financed R&D expenditures

Definition of Success:

To be successful on any one measure, each institution must have demonstrated improvement over previous years or score at or above the top one-third of peer institutions to show “sustained excellence.”

For each measure, data definitions were agreed to with the MDHE. The data sources and definitions focused on nationally available data, primarily data collected by the National Center for Education Statistics (NCES) as part of their Integrated Postsecondary Education Data System (IPEDS) surveys.

Peers and Sustained Excellence:

Working with MDHE, each institution identified their set of peers and were able to define the threshold for “sustained excellence.” For the University of Missouri, data from the four campuses will be aggregated and reported as one institution. The measures and their respective peer groups identified for the University of Missouri were:

1) Student Retention – US Public Doctoral institutions; sustained excellence is to score at or above top
    one-third of institutions.
2) Six-year Graduation Rate – US Public Doctoral institutions; sustained excellence is to score at or above
    top one-third of institutions.
3) Professional/occupational licensure tests – no peer groups; sustained excellence defined as scoring at
    or above 90% success rate.
4) Percent of Expenditures on Core – US Public Doctoral institutions; sustained excellence is to score at
    or above top one-third of institutions.
5) Federal R&D expenditures – US Public institutions; no sustained excellence. 

Performance Funding Update:

In July 2012, a mock simulation of the data collection, submission, and evaluation was completed. This simulation proved worthwhile; the University succeeded with each of the five measures. Final data for the FY2014 budget cycle were submitted in November of 2012. Again, the University of Missouri was successful on all five measures. State-wide, five of the public four-year institutions were successful on all five of their measures, four were successful on four measures and one successful on three measures.

While an institution is required to use their selected measures for a minimum of three years, it is possible that better defined and/or corrected data and peers groups may be submitted with the appropriate justification and MDHE approval. At the end of the three-year period, an institution, with CBHE approval, can change their measures, but again they will have to select four measures from the existing list of pre-approved measures. The fifth institutionally specific measure would also need MDHE approval to be changed.

Reviewed 2013-07-18.