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Performance funding: Good idea in theory, but so far not in practice

Arizona’s universities are asking for $39 million in new money to help reach performance goals even though the Legislature and governor aren’t proposing any money for the plan.

Arizona Board of Regents President Eileen Klein cautioned lawmakers in the House Appropriations Committee on Feb. 5 that withholding money for performance-based funding could lead to higher tuition rates and fewer graduates, which she said would inevitably harm the state.

Performance-based funding rewards universities for increases in the number of degrees students earn, increases in credit hours they complete and increases in outside funding for research. Funding had previously been based on enrollment growth.

Overall, the universities are asking for $107 million in new appropriations for fiscal-year 2015.

The universities have received a total of $10 million in fiscal years 2013 and 2014 for the new performance funding model, half of it in new dollars. Neither the Legislature nor Gov. Jan Brewer is proposing any performance money this year, prompting Arizona State University President Michael Crow make light of the situation in front of the Appropriations Committee.

“It must be therefore extremely popular,” Crow said.

Brewer, who has championed the concept of performance funding for higher education and K-12, indicated in her budget proposal that she wants to work with the Board of Regents and Legislature to create a new performance-based model that would go into effect in fiscal year 2016.

Brewer wants a model that pays for a proportion of the performance growth, not 100 percent of it.

In her fiscal year 2015 budget proposal, Brewer says, “Performance-based funding was never intended to be used as a mechanism to fully fund degree and credit-hour growth, curb tuition increases, or change external revenue streams; rather, it is meant to change the way universities focus resources internally.”

The Legislature in 2012 directed the Board of Regents to make recommendations for implementing performance-based funding.

The regents came up with the current model and were surprised when the Legislature funded it a year earlier than expected.

Klein said it has worked to some degree, but the difficulty has been making it work for all three universities, which have different missions.

University of Arizona President Ann Hart Weaver said it hasn’t worked out so far for her university because of the relatively small amount of money allocated.  Also, she said much of the emphasis is placed on student credit hours, or volume, which the UofA cannot take advantage of because it is designed to grow slowly.

The current model leaves out rewards for cooperative extension and medical degrees, the most expensive of the degrees for a university to deliver. Cooperative extension is a UofA program in which the university provides communities a network of faculty members from the Colleges of Agriculture and Life Sciences.

Klein said the Board of Regents and universities need to know whether the Legislature’s distaste for performance funding is related to the amount of money required for it or the model itself, but they don’t want the legislative session to end without some clear direction on funding.

“We need to get a better sense from them on their support of performance funding,” Klein said. “If not, we need to devise a way for how all three universities are going to get the level of support they need to be successful.”

Arizona universities request

$107 million in new money:
• Performance funding: $39 million
• Parity close: $32 million
• Innovation and discovery initiatives (UofA): $15 million
• Cooperative extension: $3.8 million
• Veterinary medicine: $4.2 million
• Student financial assistance: $13.4 million

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