Higher Ed Commission recommends performance-based funding

Those charged with evaluating higher education budgeting practices in Illinois say the state is endangering the quality, reach and effectiveness of its colleges and universities and therefore endangering its citizens.

A report submitted this week to Gov. Pat Quinn and the General Assembly makes recommendations on how to get the state back on the path to success.

It's the result of a six-month study by the Higher Education Finance Study Commission, made up of more than 20 business, education and political leaders convened by the Illinois Board of Higher Education.

One controversial, yet key reform is a funding shift based on performance instead of enrollment. Performance-based funding creates incentives for institutions to boost performance because the more success they exhibit in meeting state goals, the more funding they receive, the commission states.

“The fact is we have state colleges that have been historically performing at very poor levels in terms of graduation and retention rates,” said state Rep. Fred Crespo, a Hoffman Estates Democrat serving as the commission's House speaker appointee. “That to me is not acceptable when you consider every college is being funded by state dollars.”

While not intended to be punitive, there's no avoiding the fact some institutions would see drastic cuts under the new model.

Though hesitant to single any one out, Crespo said it doesn't make sense to have four-year colleges with “quasi-open enrollment,” calling them glorified community colleges.

“A lot of students who might not meet the threshold to enter a four-year institution go there, get a loan, get a MAP (Monetary Award Program) grant, and then don't finish their degree,” Crespo said. “It's a disservice to the student and a disservice to the taxpayer.”

Crespo said it then becomes vital to support at-risk students by creating funding incentives for institutions that foster success.

The report highlights research showing colleges are starving for state dollars while the burden of financing education has increasingly fallen on students and families as the state's financial aid system has eroded.

Though the concept is generally in its infancy, transitioning toward performance-based funding wouldn't be unique to Illinois.

The Ohio Board of Regents' chancellor spoke to the commission about the state's decision to base subsidies at four-year universities on course completions, with more funds for completion by poorer students. Schools are receiving at least 99 percent of their previous year's funding during the first year, allowing time for improvement.

However, changing the funding model for community colleges has proved more challenging since students enroll for a number of reasons. As a result, Ohio adopted “success points” based on student progress toward certain benchmarks. Five percent of funding is based on success points, with the allocation expected to grow.

Indiana, Tennessee and Texas are among states that also use some sort of performance-based funding, according to the report.

The Illinois commission made several other recommendations including investing more in postsecondary education and developing a financial aid policy that expands access to success.

It also urges the state to reduce the burden of unfunded state mandates. One example is the Illinois Veterans Grant for tuition waivers, which Crespo says means well but creates additional budget hardships for colleges.

Crespo said the next step is to hold hearings through the higher education committee, develop a performance-based funding formula and introduce legislation.

“We understand this will be a battle, but we need to start somewhere,” Crespo said.