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Performance-based funding spurs progress in graduation rates, alumni wages

Five years after adopting performance-based funding criteria, across-the-board improvements in graduation rates and in other metrics may force the Florida State University System Board of Governors’ (BOG) to reconfigure its allocation formula.

During Wednesday’s BOG Budget and Finance Committee meeting in Orlando, Chairman Syd Kitson said the board should re-evaluate a scoring system that only allocates money to the top nine of the state’s 12 universities.

Kitson said “with the improvements we are seeing,” BOG will consider “redoing the scoring criteria” when it meets in October to ensure performance-based funding is not denied to a university when its performance has improved.

Kitson’s comments followed BOG’s formal allocation of $265 million in performance-based funding to nine of the state’s 12 universities, ranging from $9.2 million to Florida Gulf Coast University to $57.6 million to the University of Florida.

With $295 million in matching funds contributed by universities, the total performance-based allocation for fiscal year 2019 is $560 million, up from $200 million during its inaugural implementation in fiscal year 2015.

In 2012, the state Legislature required that BOG adopt a performance-based funding model. It was approved by lawmakers in 2014. BOG approved the 10 metrics that provide the performance measures in 2016.

BOG’S scoring system rates performances in graduation rates, retention rates, grade point averages, how affordable schools are and what average wage graduates earn when they enter the workforce, among other measures.

Each university must reach a benchmark number and score above the bottom three of all state universities to retain “base” funding and be eligible for performance-based money. The universities at the top of the rankings get a larger share of the money, while the bottom three do not receive any of the state performance funding.

The “base” funding is provided by the universities from their budget appropriations from the state Legislature. An institution that finishes in the bottom three is left only with its own “base” funding.

BOG Vice Chancellor for Finance and Administration Tim Jones said significant improvements in the last year include graduation rates, number of students with Pell grants, and in wages alumni earn within a year of graduation.

Jones said graduation rates increased by 3.5 percent over the system with Florida State University (FSU) recording the highest rate at 68.4 percent four-year graduation rate.

Kitson noted eight of the 12 universities still have a four-year graduation rates under 50 percent. The overall improvement demonstrates that “we are well ahead” of BOG’s goal for all universities to produce four-year graduation rates above 50 percent.

Jones said median wages of bachelor’s graduates employed full-time within a year of graduation increased by 9.8 percent to $38,100, and the percent of Bachelor’s degrees awarded without “excess hours” increased by 9.9 percent from 66.8 percent from 2009-13 to 76.7 percent from 2013-17.

The lowest overall institutional score, 68, was accorded to the University of Northern Florida (UNF). Jones said last year, the lowest score, also by UNF, was 58.

He said the average score was 81 points, an increase of 10 points in the past three years.

Providing students with an opportunity to secure good-paying jobs “and keeping costs down, we are moving in the right direction,” Kitson said. “This is the fifth year in implementing the model and we are truly seeing improvement. When you tie financial incentives into the venture, it is pretty amazing what can happen.”

With more than a quarter-million dollars in performance-based money available, Jones said he knows university boards are embracing the concept because of the increasing number of queries he receives.

“The first time all the universities are paying attention to what this committee does,” he said.

The 10 metrics and their subsets were developed by legislators, the BOG and university boards of trustees. They are:

  • Metric 1 – Percent of Bachelor’s graduates employed one year after graduation.
  • Metric 2 – Median average wages of undergraduates employed one year.
  • Metric 3 – Net tuition & fees for 120 credit hours … $9,000 lowest, $18,000 highest
  • Metric 4 – Four-year graduation rates
  • Metric 5 – Academic progress rate
  • Metric 6 – Bachelor’s degrees awarded in STEM
  • Metric 7 – University access rate; percent of undergraduates with a Pell grant
  • Metric 8a – Graduate degrees awarded in STEM
  • Metric 8b – Freshman in top 10 percent of graduating high school class
  • Metric 9 – Percentage of Bachelor’s degrees awarded without excess hours
  • Metric 10a – Percent of R&D expenditures funded from external sources
  • Metric 10b – Bachelor’s Degrees awarded to minorities
  • Metric 10c – National rank higher than predicted by the Financial Resources Ranking Based on U.S. and World News Report
  • Metric 10d – Percent of undergraduate seniors participating in a research course
  • Metric 10e – Number of Bachelor degrees awarded annually

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