Getting to Graduation: The Completion Agenda in Higher Education

11. The Ohio Experience with Outcomes-Based Funding

chapter eleven The Ohio Experience with Outcomes-Based Funding richard petrick National, state, and institutional leaders are setting goals for higher education to improve productivity, promote student success, and ensure accountability.1 These recurring and now consistent calls for change tend to direct attention to the sources and consequences of successful policy innovation at the state level. Ohio is generally perceived as a somewhat conservative, middle-of-the-road midwestern state. Despite this general reputation, Ohio is increasingly known as a state that has had numerous creative and relatively successful policy innovations in higher education, especially in the area of outcomes-based, or performancebased , funding. Why? After providing a brief review of Ohio’s history of state funding and recent policy innovations, I argue that Ohio’s successful implementation of performance funding is a function of five factors: 1. participation, authorization, or direction by state executive or legislative policymakers, which both legitimized and authorized initiatives; 2. an institutionalized practice of bringing stakeholders together to craft and evaluate new funding policies, a practice that increased participation, communication, mutual respect and trust, and buy-in among affected parties, and built an explicit sensitivity to diverse campus missions and campus financial circumstances; 3. a robust data system capable of quickly modeling funding ideas and scenarios and producing trustworthy funding allocations; 4. commitment to systematic evaluation of programs and policies; and 5. additional money. 269 270 the lessons from three states From the Outset: A Data-Based Foundation The Ohio Board of Regents was created in the mid-1960s to coordinate higher education policy for the state. Shortly after its creation, the board’s first chancellor, John Millett, developed a methodology for allocating state support through a cost and student enrollment–based formula. Chancellor Millett was already an expert in higher education finance and had been the president of Miami University of Ohio.2 His appointment as chancellor gave him an opportunity to put his financial expertise into practice at the state level. The subsidy allocation methodology that Millett developed for Ohio’s public institutions, based on a single formula for all campuses, required the routine collection by the Regents of detailed student, faculty, finance, facilities, and course data from all campuses; this data system came to be known as the Uniform Information System.3 While the original purpose of the Uniform Information System was to determine state subsidy shares on the basis of enrollments and cost allocations, over time the data in the system came to be used for other purposes, including the development of alternative funding approaches, many of which could be classified as performance based. The use of data in this manner this early in the history of the Board of Regents established a number of important precedents, including the rejection of a simple “base-plus” funding system and of a politicized approach to allocating resources. Most importantly, the data-driven funding model was premised on a recognition of the need for, and acceptance of the consequences of, an empirically based funding system that would produce variable allocations from year to year, tied to results valued by the state—namely, student enrollments categorized by level and costs. As one former senior vice chancellor of the Board of Regents observed, the state’s enrollment-based subsidy system was in fact a performancebased funding system: it valued and funded the campus performance known as enrolling students, and it did so with great precision. The subsidy allocation proposals were not made unilaterally by the Regents or its staff. At least biennially, the Regents would convene a series of consultations of campus financial and academic leaders and representatives of selected state agencies to revisit the funding system’s data and methodology. These consultations were used to update the data in the Uniform Information System, to revise the formula to correct for unintended or perverse effects or to reflect new priorities and realities, and ultimately to recommend to the Regents changes in the formula, the level Ohio Experience with Outcomes-Based Funding 271 of funding that should be requested of the state, and when appropriate, tuition levels as well.4 This process of consultation became institutionalized in Ohio; technical issues would be handled by mid-level campus and Board staff, while major changes in policies and potential conflicts would trigger the collective attention of the chancellor, vice chancellors, institutional presidents, legislators, leaders of other state agencies, and members of the Regents...