ALC-Higher Education Subcommittee
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- October 8, 2026
Senator Breanne Davis
Unverified
0:30
and call this meeting to order. Thank you all and thank you members for being here today and we today are going to talk a little bit about our funding formula where we've asked higher ed to kind of give us a journey of how we got here and and the reason we want to look back a little bit initially on the funding formula as it used to be needs-based is because that really determines
what the productivity funding formula looks like today because that's built on top of the old funding, base funding that institutions had. So we want to have an understanding of, you know, what it used to look like for institutions to be funded and we'll let, you know, Nick Fuller get into that a little bit and then talk about the productivity funding formula today. I think it's important for us to have an understanding when institutions are getting almost a billion dollars a year. I think it's good for us to understand where that money is going and why when we talk
about outcomes and you know people graduating with degrees and certificates. So next month we'd like to get into how that's actually impacted institutions and what it looks like, how the funding is allocated um and hopefully just give us a better picture of you know what that looks like for institutions in our communities and in our districts um so i'll do you have any i'm good okay okay we'll go ahead and jump in um mr nick fuller if you'll come up and start let you introduce yourself
Nick Fuller
Unverified
2:22
Good afternoon, I'm Nick Fuller, I'm the Deputy Director at the Division of
Beth Stewart
Unverified
2:35
Higher Education. My name is Beth Stewart, I'm the Senior Research Specialist at the Division of
Nick Fuller
Unverified
2:43
Higher Education. So I guess the first thing we want to go over with you is try to kind of explain the old funding model and how it became and what we used it for. I did put two slides on this
PowerPoint presentation. They aren't the most up-to-date from the last year we had performance funding. I just wanted to kind of use it as a model of what the numbers look like with the spreadsheets. So there were two more bienniums of this model. So the percentages of needs shown on here may not be the most up-to-date for the institutions. I just wanted to use it kind of as a template of what this looked like. So in the old funding model, a lot of the measures that were used were more enrollment-based on how many students are coming
into the school. We also had square footage of facilities and different items that were factored into the calculations of these models. And what we did in computing all of this, it came up with a total dollar need that each institution would need to operate at 100% of the school's request. What we would then do is compare that to what their actual funding was in the prior year, and that would get their current percentage of need met, which is in about the sixth column on those spreadsheets.
I know it's really small on the screen. It's really hard to see. But if you can see, in the fifth column is the total need that each institution would have, which would be either their current funding or what the model produced. If their current funding was higher than the model, then their total funding is what shows, or their current funding is what showed in the total need. And you see some institutions do have 100% of their need. What happened in the way this model was set up,
trying to bring schools up to 75%, 80% of their need each year would generate such a large ask on the state general revenue side, there wasn't the ability to fund that improvement. So rather than trying to determine some percentage of that to pull it up, really there wasn't any new funding added to this
model for multiple years. So schools either stayed stagnant at the funding level they were at eight years prior, or if they were somehow able to get someone to add a chunk of money for their school
for different programs. There were ways for the schools to get money, but it wasn't part of funding this full funding model. And again, these percentages were from the 11-13 biennium. Since that time, the next two recommendations also included higher enrollment growth, more facility needs. So the percentages required could have changed drastically in those two bienniums. And it did for a lot of schools. what ended up happening in looking at this we need to determine a better way to focus
the goals of the state to what our strategic plan would be which included our closing the gap 2020 that we the master plan for higher education and also trying to find a way to encourage some additional general revenue being added into the model showing that we want to focus our efforts on closing those plans. So this was the old model, but starting in 2017, we began meeting with presidents and chancellors
on developing the new metrics, new weightings for the productivity funding model, trying to switch from an enrollment-driven model to outcomes-based and trying to create those credentials for students in the state, trying to focus more on students and getting them to have a higher education credential. In May of that year, we provided the Governor's Office with a copy of the funding model policy. In May, later in May, the two-year college and university models were presented to our coordinating board.
in 2018 or I'm sorry in late 17 we presented the final model to our board for approval and beginning in that year we generated the first recommendation for productivity that would start in fiscal year 2019 and so with that the governor
had committed $10 million of new funding to be added to the productivity model and he had also agreed that as long
as we showed commitment to this model and showed improvement
that he would continue to recommend new funding for the for the model and we are about to make the third year recommendation and we have seen
funding recommended for it each year so far so that was
Senator Breanne Davis
Unverified
7:42
the old model and how we got
Representative David Fielding
Unverified
7:53
questions? Yes, Representative. Thank you, Madam Chair. You said the 2017 model was based on students?
Nick Fuller
Unverified
8:02
Yes, it was more based on the amount of students you had enrolled for
Representative David Fielding
Unverified
8:10
both. So in a new model that is on the two-year schools, is that going to be student-only based on the two-year schools? Not because in a two-year school we have more, I guess, trade certificates that students coming in and getting. so with if that's going to be based on the funding model for the two-year
school as well to be compatible to the four-year schools no sir
Nick Fuller
Unverified
8:40
that aren't our current model the productivity fundamental is not based on the the number of students in the classes it's based on the number of credentials that are or there's so the exercise metrics and so that
Representative David Fielding
Unverified
8:53
would include certificates two yes sir okay all right I'm good
Senator Breanne Davis
Unverified
8:59
thank you there any other questions can you tell us what that gap was and it was like a hundred and seventeen million
dollars or something if you would have said everyone got a 75% threshold or something like
Nick Fuller
Unverified
9:13
that I don't know off the top of my head what that gap is but it's at least it yeah it
was over a hundred million dollars for sure all right now what we'll move on to now is describing what our current funding model looks like in productivity formula i'm going to begin let beth explain how
we derive the actual model to get the productivity points and then i will talk a little bit about the
Beth Stewart
Unverified
9:39
distribution afterwards thank you so the new
productivity funding formula is a measurement of outcomes and productivity of students through higher education that can be measured and we look at that as a measurement of change over time so the model uses rolling three-year averages so the first year of the model we compared academic years 13, 14, and 15 to academic years 14, 15, and 16. There's two years in the middle that allows
some smoothing. It prevents anomalies from creating extreme spikes or shortfalls, but it does have years on either end that are not included to allow for that measurement of change. So, and the institutions are compared to themselves for the majority of the model. They're not compared to other institutions and so it's a comparison of how does this institution compare to itself has it increased in productivity or has it decreased in productivity and you can see the the slide is
just a basic comparison of change that we call the the most recent three years the comparative years and the first three years
Speaker 37
10:57
the baseline years so it's quite simply the comparative minus the baseline divided by the baseline
Beth Stewart
Unverified
11:06
to get the percentage of change. The model itself is made up of six metrics with adjustments to those total numbers. So the largest set we call the effectiveness metrics and it's measuring how well students are actually getting through their higher education
goals. The first metric is a measure of credentials and this we're counting not students but the number of credentials awarded. So if one student gets multiple credentials, each one of those credentials is counted. Certificates of proficiency, technical certificates, advanced certificates, associate degrees, bachelor's degrees, master's degrees, specialist doctorates. It's the whole spectrum of that. For the two-year colleges, the lower level degrees that they award, the certificates,
technical certificates, and associate degrees are awarded at more points than those same credentials are at a four-year level just to acknowledge the mission of the institutions. We want to make sure that we are recognizing the institutional mission throughout each of these metrics and it does also include any high school students who through concurrent or dual enrollment credit are receiving credentials as well. The credentials metric is the highest percentage of the model. Each one of these
carries a slightly different weight but the credentials is the highest percentage within the model. The next metric that we run is progression and this is measuring students as they progress through their learning goals and we measure this by them achieving 15 hour increments of credit hours. So they will get a point if they hit 15 hours, they get a point if they hit 30 hours, 45 hours. For the two-year colleges, we don't count at 60 because at 60 they should have an
associate degree and be getting a credentials award for that. For the four-year universities, we also count 60 and 90 hours. And this is because research really backs up the fact that the further a student progresses into their learning, the more likely they are to get to that success point of a credential and finish out their goals. The third one is transfer success. We actually run three different measurements within this one metric. For the four-year
universities, we are measuring how many students enter the university as a transfer student and finish a bachelor's degree. So for them, their transfer metric is a measure of how successful they are at getting those students to that completion. For the two-year institutions, we have two different measurements. One is how many of their students are completing an associate degree in transferring, and the other one is how many students are completing 30 hours of ACTS,
ACTS, Arkansas Course Transfer System, Gen Ed, core courses, and transferring, because we know some students do not go to a community college with the intention of completing the associate degree, but with the intention of getting that Gen Ed core so that they can then proceed on to a four-year university. And again, we're wanting to meet those institutions where their mission actually lies. And then the final metric within effectiveness is gateway course success. So gateway courses are college-level math, reading, reading-intensive, and English courses.
So it's your college algebra, your quantitative literacy, trig, calculus for math. It's your comp one and comp two for English. And your reading-intensive courses are typically your world lits, world civs, histories, sociology, psychology, those very heavy reading courses. Within all of these measures, we have additional weighting that goes for students who have certain characteristics. Students who are non-traditional students, meaning they're between ages 25 and 54, receive additional weighting.
Students who start out requiring remediation receive additional weighting. Students who are financially have need by demonstration of receiving a Pell Grant receive additional weighting. And students who are Hispanic, Latino, Black, African American receive additional weighting. And this is acknowledgement to the institutions that certain student populations require additional assistance to get through their goals. And so we're supporting that through
this measure also in the credentials metric credentials receive additional weighting if they are high demand credentials or stem credentials and we are doing that to support the state goal of having a highly qualified workforce prepared through higher education the second
Senator Breanne Davis
Unverified
16:11
affordability yes ma'am sorry may I ask a question while we're on the first column So
it's my understanding that on transfer success, that for students who receive a direct degree so that they are weighted, it's 32% of the funding formula.
But for transfer success, students who transfer and then complete a degree, that they're given an additional 12% on weighting. So are we rewarding an additional 12% to
institutions who accept transfer students and graduate them? Sure. So transfer is in
Beth Stewart
Unverified
16:47
addition to the credential. So we count the credential and the credentials metric. The transfer, we are awarding a different set of points for that. All students are going to be counted in multiple measures. So a student who completes a credential
should also have gateway points. They should also have progression points. They may or may not have transfer points so there is multiple points being awarded for a student throughout their higher education time
Senator Breanne Davis
Unverified
17:21
yes so so institutions who take in a high number of transfer students that's advantageous to them because they're taking in
a high number so if they're completing graduating students say they're getting an additional 12 percent weighting well it's
Beth Stewart
Unverified
17:39
important to remember that it's a comparison to yourself right so if you do zero and you compare it to zero you're not going up or down if you're doing a thousand compared to 1200 it's the same as 100 compared to 120 so it's really that comparison to yourself if you're going up or down not as compared to say one of the larger institutions in the state that may have a slightly different mission
Speaker 37
18:06
or may have a larger student population okay thank you are there any other
questions sorry I interrupted her okay okay so the affordability metrics there's two
Beth Stewart
Unverified
18:23
of those and those are really a measure of us getting students through to their degrees in a manner that is affordable to the students and the most the best way we can do that is to get students through on time and with the credits that they need and not a large number of extra credits or extra time. So the first one is credits at completion and for associate degrees and bachelor's
degrees we measure our students completing with 60 hours and 120 hours. There is some flexibility range within that so if a student completes with 122 they may not get full points they get reduced points but they're not totally dropped out of that measurement but the goal is to incentivize institutions to get students through with the credits they need without a lot of extra this does not include remediation so it's not disincentivizing institutions who serve a large
number of remedial students the calculation of credits at completion is only the college level credit hours. The second of those affordability metrics is time to degree and this is quite literally a measurement of months between the time when the student entered as a first time entering student to the time they completed their associate degree and bachelor's degree. Now we do not measure time to degree or credits at completion for certificates nor do we do that for graduate degrees. The reason being is that the length of time it takes to get those varies
from school to school but as I'm sure you're aware we actually do have legislation that says an associate degree is 60 hours a bachelor's degree is 120 hours so we have that standard set time to measure credentials time period against now the the exception to this is if there's an outside accrediting body that says a credential has to be longer for example we find
Speaker 37
20:27
this with our associate degree are in. It cannot be finished in 60 hours. It's typically 66 hours
Beth Stewart
Unverified
20:34
to complete that. We're not going to punish an institution for that when they have an outside accrediting body that says that has to be so. Are there any questions on affordability? Okay. Once we have that total score, we then do some adjustments to it. So the effectiveness and affordability equal 100% of the score for the model before we do these adjustments. For four-year universities, we have a research adjustment, and this is acknowledging that the research mission
of our four-year universities is very important to the state of Arkansas, and it is based upon the percent expenditure that they use or that they spend actual spending on research. So once we have that total score, we can provide a positive adjustment up to recognize that research mission. For the two-year colleges, we have an adjustment for dis-economies of scale. Dis-economies of scale is the acknowledgement that we do have several very small two-year
colleges in our state, and regardless of if you have 500 students or 5,000 students, you still need a librarian. You still need a director of financial aid. There's certain things that you have to have in order to function as an institution. So the diseconomies of scale is a positive adjustment for institutions that are significantly below average in size in the state. Once we have that, we come to our efficiency adjustments. And these are looking at how
efficiently the institution itself is operating. The first one is a core expense ratio, and the easiest way to explain this is it's a measure of how much money the institution is spending on students versus how much money they're spending on institutional support. And the way we measure this is we use op-eds, the federal database for higher education data, and we compare these institutions in that ratio to other institutions that have
their same Carnegie classification in our SREB states, so the 14 other states, to see if they are spending more on students or less on students in that ratio as compared to the others in that group. Faculty to administrative ratio works the same way, except we are doing the ratio based upon faculty salaries
Speaker 37
23:17
compared to administrative salaries. And then again, we compare it to institutions not in Arkansas that are SREB Carnegie classification the same.
Beth Stewart
Unverified
23:28
So once we do all that, we run it twice, essentially. We run it for the baseline years, and then we run all of that for the comparative years. and then we go back to that first slide I showed you where we said okay these total scores comparative minus baseline divided by baseline is the institution positive or negative so it's it's lots of data it's lots of points that we're calculating but it's it's all based upon our students being successful that's the driver of the entire model is student success in the
Senator Breanne Davis
Unverified
24:01
state of Arkansas okay so on your adjustments for four years and
when you talk about research is that a new change for this year wasn't it wasn't research originally included in the
Beth Stewart
Unverified
24:19
productivity funding formula sure and if we can go so we do have four changes that are currently in rules I believe for finalization for this year. Research has always been a part of the model
however we have changed how the research is calculated. Previously we added it to both the baseline and the comparative years in which case it could have unintended negative consequences mathematically in which something like a National Science Foundation grant could be unfunded by the federal government and in turn cause an institution in the state to lose not only the grant but also
funding in our model and we wanted to take away that possibility for an unintended negative consequence so the research metric is still there however we only apply it to the comparative years now and the percent adjustment is significantly smaller than it was before. Was there an institution that that happened specifically to that
Senator Breanne Davis
Unverified
25:27
caused you guys to pull that out of the formula? It had not happened yet but we did
Beth Stewart
Unverified
25:32
have one institution that was right on the line and we were only applying the adjustment if they spent five percent or more of their budget on research.
We had one institution that was just right at five percent and we did not want that negative consequence to happen when we could proactively prevent that so it helped
Senator Breanne Davis
Unverified
25:54
me understand if this is an accurate thing to say that and now that it's pulled out it's essentially like bonus points so you can you know meet the productivity formula and however you do and say that you are decreasing in productivity so maybe you would lose money lose some funding but you get to apply research
points on top as bonus points essentially bringing your grade up so even if you have reduced your productivity you could still gain money simply simply because you're getting research dollars not because of anything else would that
be could that be an accurate scenario No. It can. I mean, mathematically it can. The percent adjustment is very small. The maximum adjustment for research is
Speaker 37
26:46
3%, but it is mathematically possible that that could occur.
Nick Fuller
Unverified
26:51
And it is basing on prior years, so that school can't realize they're trending down and all of a sudden
put more money to research to kind of game the system. There's not the ability to do that. So they're all based off of
Senator Breanne Davis
Unverified
27:05
the prior year expenses. Yes, but if they're reducing their productivity numbers went down and where before their research would have counted within it, within the formula, and now it's taken out and you see that their productivity is going down, but they get to add bonus points to it just simply because they're receiving research money
and even less than maybe the year before, it still is totally positive for them. There's no negative impact, and they get to look like they're more productive than they actually were. even if they were less productive and they get to gain money under the funding formula right I mean based on that change I mean that seems to me like yes it's a way to protect maybe institutions that could be losing funding and research I said that part of that is just
Nick Fuller
Unverified
27:47
focusing on that part of the mission of the institutions to be able to research where it's
not applied in any other part of the model and we we have the same issue on the two-year colleges with the diseconomies of scale. There were instances in testing where it looked like where a school could decrease in size, but not decrease as much as other schools. So that could be negatively impacted. So we applied the same thing to the diseconomies of scale for the two years, where it's only going to be added on the comparative years rather
Senator Breanne Davis
Unverified
28:17
than both. Okay. Yeah, that was my next question on the two years. Is
that basically to protect, like where we see some of these institutions are losing enrollment just because growth
is declining you know different is that basically to protect from falling enrollment or can you help
Beth Stewart
Unverified
28:33
just explain that a little better to me sure so the scenario that we did actually run into was that when we calculate these economies of scale we're calculating the institution's annual unduplicated enrollment compared to all other two-year colleges average annual unduplicated enrollment. So we did have the scenario where the state total declined, but this institution
didn't decline as much as the state did. So they actually did better than the rest of the state, but because of how that ratio or that comparison is calculated, it hurt them to have done better. and we did not want that to be the case where having less decline than other schools or having positive increase would hurt you and then the same with the research is you know yes it can
counterbalance other negativity but or other decreases but the school producing high quality research for our state is also a very positive output of that school that's recognizing that we don't want to see there be an unintended negative
Speaker 50
29:48
consequence from that all right one more question why would why was that included
Senator Breanne Davis
Unverified
29:57
originally in the first place and i'll let
senator johnson but i mean research in the first place if it's it seems to me the the motivation there is to them already to their advantage to get research dollars so what would be the point in including it in the productivity funding formula initially I know that's a few years back but do you know do you remember recall that conversation I do
Nick Fuller
Unverified
30:21
not recall but like I said it would be you know just to incentivize that that additional mission of the four-year universities Senator Johnson.
Senator Mark Johnson
Unverified
30:31
Thank you, Madam Chair. And this brought to mind something. I know how hard our chair has worked on this issue, and I'm a little concerned because in K-12, one of the things we talk about is transportation dollars, which really don't have a lot. I mean, it's just depending on the geography of your district, you need more money than if you're very compact. And I'm wondering if perhaps that same analogy would apply to this formula because, yes, we don't discount the importance of the state of the research functions, but are we putting a thumb on the scale by adding that to basically get the outcome that we're looking at or not to negatively affect someone?
I'm not against the outcome you seem to be heading toward, but perhaps we need to phase this in so it doesn't literally look like, well, yeah, I know it caught the outside corner, but it looked like a ball to me. and I don't want us to get in that situation. We need to, whatever data you're using to reach this, if there's a justification and a rule that could be brought forth that allowed some rounding down or rounding up, if it's something really close.
But I'm really concerned if we're going to take a data-driven model, and that's what we're asking you to do, and then come in and say, well, yeah, but it wasn't working out like we hoped it would, so we're going to tweak it a little bit. And I'm just saying, I hope you have a strong justification for such a thumb on the scale, so to
Nick Fuller
Unverified
32:08
speak. Do you have a response? I will say that these metrics were determined by a funding work group of the two-year and four-year institutions. It wasn't our staff that developed these metrics and came up with the idea.
So they were the ones that determined this was a need. and after putting it on the baseline in comparative years is what we determined that the way we were doing all of the other metrics. And in the reviews that we have yearly on the different, what has happened with the model, that's what came up with we realized the unintended consequence of
someone could be negatively impacted by this. So this was the new recommendation from that same group was to apply it only to
Senator Mark Johnson
Unverified
32:47
the comparative year. Madam Chair, I would, this may be a better consideration for the rules subcommittee,
But I did want to bring that forth because, you know, let's all be working under the same criteria and data, regardless of the decision that the committee makes on that rule. I just don't want it to be something that was kind of falsely represented because somebody wanted to tweak the outcome. I mean, if it hits the outside corner, to me it's a strike, and it needs to always be a strike to the extent that we're capable of doing that. Thank you very much. Thank
Senator Breanne Davis
Unverified
33:18
you. Do you know which institutions get research money, the ones that would meet the threshold that you have now?
Beth Stewart
Unverified
33:27
Under the current recommendation, we no longer have the 5% threshold. So the adjustment occurs to every four-year institution that is expending research funds. In this case, it would be all of the institutions with the exception of one institution. Okay.
Senator Breanne Davis
Unverified
33:48
Thank you. Thank you. And
to Senator Johnson's point, can you walk us through who, so all the two years and four years sit on vote on the productivity funding formula each year, you know, considering
you make adjustments to it. Do you bring it to any legislative committee? You guys, the institutions decide for themselves what their productivity metric should be and then vote on it themselves? Or is it approved?
Nick Fuller
Unverified
34:16
It will be a change to the rules and it will come through the rules subcommittee for
Senator Breanne Davis
Unverified
34:23
the legislature to review for its final as
Representative David Fielding
Unverified
34:27
well. Okay, thank you. Representative Fielding, you had a question? Thank you, Madam Chair. When you talked about below size scales in two-year schools,
what is the metric that determine if that
low number to be if it's below size, and would that get down to a number where that school would not be funded
Beth Stewart
Unverified
34:52
at all? What does it classify as below size? So for diseconomies of scale, we're looking at are they greater than 30% below the state average? But that is only an adjustment within
Representative David Fielding
Unverified
35:04
the model. So if they fall below 30%, then that
Beth Stewart
Unverified
35:09
is? They receive a positive adjustment to their score to assist with that small size.
Now, we do not have, if an institution is enrolling fewer and fewer students, they're going to have a decline in all of these other metrics. We're going to see it go down in their credentials. We'll see it go down in progression, gateway, the number of students they can transfer. So their overall score will be going down significantly, and a positive adjustment to it won't prevent that from happening. But what we're trying to impact are the institutions that they're not declining in productivity.
They're just small. So they're still producing the same number or an increased number of outcomes, but because they're in a very rural location, their size is just small.
Representative David Fielding
Unverified
36:02
So when would the exam be affected that school? Will it be
on the next year or will it be affected that same year of the funding
Speaker 37
36:15
of the school? So our calculations are always one year behind. So we just
Beth Stewart
Unverified
36:21
ran the funding formula this year,
and it's based upon data from academic year ending in 2018.
Representative David Fielding
Unverified
36:27
So you have two years to pick back up to where you dropped
Beth Stewart
Unverified
36:33
off at then? Yes. So institutions have roughly two years between when the data measured and when that funding recommendation impacts them. Thank you. Thank you, Madam Chair. are there
Senator Breanne Davis
Unverified
36:52
any other questions a few more um okay can you um would you mind
uh walking us through a little bit so you know you all say the new productivity funding formula is now based on 100 of funding i guess from general revenue you would say because there's quite a bit of money that comes from eetf and workforce 2000 money um but and while that's true i feel like it's also a little misleading because it's also capped at what i understand to be two percent you cannot gain more than two percent of your base funding in productivity and you can't
Nick Fuller
Unverified
37:33
lose more than one one point five okay i heard it's one point five this coming year
Senator Breanne Davis
Unverified
37:41
will be one five and then the next year will be two and
it will stop at two going okay so we'll just call it 2% in both ways. While the money, you could say, is 100% productivity, it's also capped on both sides. I understand that that is to protect institutions. You didn't want anyone to lose $30 million in one year. I understand that, but I think there's a flip side to it
as well and I think that that really is protecting the status quo and it's also protecting the inequitable funding issue that we've had. And I know most institutions would argue that their funding is too low and I think there's a fair case for that. But what we know is that there are several institutions that were funded at a much more inequitable rate than others from the old funding formula, the needs-based funding formula. And we know that higher ed funding was frozen, you know, around a decade ago.
And so some schools have grown substantially. Some schools have declined in enrollment substantially. But the productivity funding formula, which I think is great, I think we should be measuring outcomes for ourselves and taking a look and keeping track of data and, you know, what we're doing. But we're reallocating that money, that 2% up or down, which you're really just talking about you know maybe a couple hundred thousand dollars to all the different you know the different institutions so i i feel like it's misleading when we say
our productivity funding formula is based on 100 of higher ed funding but the truth is we're capping it so schools can't really do that bad even if they're underperforming at substantial levels and if they're doing really well um then they can't really gain that much either and you You know, so I think that's something important for us to understand, to understand that. And I think it impacts, like, I know there are situations where if a school is, you know,
10% more productive this year than they were last year, they can't get that 10%. They can only get the 2%. They're capped. Next year, if they're 9%, you know, they're 1% less more productive next year than they were this year. while that's a net gain of nine percent you know they're they've done well in their productivity they're actually losing money because they were capped at that two percent like do you understand what I'm saying so I just want yes representative flowers I'm I'm I guess want to get a little
Representative Vivian Flowers
Unverified
40:18
clarity too when I hear that perspective and maybe question about how that works I'm listening knowing that there are finite resources just across the board for all of the universities. And at the same time, my understanding was that over time, if there are substantial, if there's substantial underperformance, over time, you could continue to lose the 2%.
Is that the case, or is it capped in an aggregate sense? There is a
Nick Fuller
Unverified
40:54
stipulation within the law and the rules, that if a school loses for, I think it's three years in a row, that their funding will be frozen at that level until they submit a plan on how they're going to become more productive. They're not going to continually lose year after year after year. There is a bar that's set that once they lose consecutive years in a row that they will not continue to lose. And they would have to submit a plan
how they're going to correct those actions of continually losing productivity. Okay, thank you. Are there
Senator Breanne Davis
Unverified
41:33
other questions? Have you guys started counting those three years yet? I know you've been doing the funding formula for a couple of years, but it's not fully. This next recommendation for
Nick Fuller
Unverified
41:40
21 will be the third year. So we'll have to start looking to see if there is any school that has lost all three years in a
Senator Breanne Davis
Unverified
41:50
row. Do you see that there are schools that that may happen to based on the first two years?
I'm not going to ask you to name them, but
Nick Fuller
Unverified
41:58
I didn't know if you just knew if there were some. I have not looked into that yet. We are making recommendations. Our board recommendation is next week, and then the funding recommendations will come before, in the spring hearings, before
Senator Breanne Davis
Unverified
42:10
the fiscal session. How many institutions are within, how many of the 32 institutions are within a system? Do you know? Do you know how many are
in a system? 18 or 19, I just wanted to
Beth Stewart
Unverified
42:24
I was curious if you knew And by within a system you're referring to ASU or U of A, not
Speaker 50
42:38
some of our small schools that also have partner institutions, correct? Yes We have
Beth Stewart
Unverified
42:59
6 out of 10 of our 4 year Okay and currently 11 out of 22 of our two-year however it's my understanding that there may be
an addition to that soon
Senator Breanne Davis
Unverified
43:11
okay so a majority of our institutions fall within a system And I'm wondering how does the committee work to ensure that the metrics they come up with for the productivity funding formula is fair for institutions across the board and not just, you know, the systems maybe being able to throw their weight around because they have a majority of institutions.
how do you ensure that that's fair so all institutions you know it's fair metrics that we're grading these institutions on and
Beth Stewart
Unverified
43:47
not advantageous just to some of the system schools so our funding work group of institution representatives is made up of both two-year and four-year institutions and it's a fairly even cross cut between the asu system the u of a system and non-system schools and so we do have representatives from
Senator Breanne Davis
Unverified
44:06
each sector within the state. Okay, so then you would say maybe, you know,
approximately 66 percent of people on the board
are from a system, and 33 percent are not, if they're divided up equally between independents, ASU, and UA system? It would probably be fairly close.
Nick Fuller
Unverified
44:27
I'd have to look at the actual makeup of the work group to make sure, but we try to make sure
Senator Breanne Davis
Unverified
44:33
each group is represented. Okay, I'm just curious. Thank you. Are there any other questions, members?
Senator Lance Eads
Unverified
44:39
Yes, Senator Eads. Thank you, Madam Chair. I have a question about, I know we have other allocations of funding like Workforce 2000
and educational excellence and those kinds of things and the non-formulary institutions. How do those fit into, because I know they're not the same formulas used, do we have like a different formula that we use to allocate those different funds as well?
Nick Fuller
Unverified
45:01
Yes, sir, and I think with the Educational Excellence Trust Fund, what it was was when it was established, there was a baseline of dollar amounts for each of the institutions that received that, and so that became a percentage based on that initial allocation, and every time the fund grows,
each school receives that same percentage allocation of the new funding. Okay. And then the workforce is set out in law as well, and it's actually currently the formula for workforces for the higher ed institutions is capped on what the levels were in 2014, I believe, with
all the new revenues going to the Office of Skills Development. Okay, okay. So on the, like,
Senator Lance Eads
Unverified
45:38
the educational excellence ones, there's no, depending on the changes in all those institutions over that period of time, there's not been any change in the way it's allocated? Okay. All right. Thank you, Madam Chair.
Senator Breanne Davis
Unverified
45:51
Are there any other questions? the eetf and workforce funds are something that um i do want to you know hopefully visit at some point because that is a large chunk of money i think it'd be great for us to hear about more about it yes any questions
Nick Fuller
Unverified
46:10
on this side okay thank you if you want to go to the next do you want me to go through the distribution oh yeah sorry yes okay so after all of the the models calculated and the percentage of productivity is has been determined it's sent to my office where we calculate the distribution for the year and going back to the the first
year of the productivity funding we start with the RSA base level funding which is what this would be for all of the schools within the formula so institutions do have non formula entities as well that receive state general revenue but that general revenue that's allocated to the non formula is backed out of this so it is not included at all and these numbers were based off of the funding for the institutions from FY 2018, whatever level that was, that was what started in the formula. Then we take the productivity recommendation, whatever the overall state
percentage of growth is, that is what we request in new general revenue. So for the first year, I think it was a little over 1.7 percent overall productivity growth. So that's multiplying that by
the total, I think it was around $550 million, is where we
got the $9.4 million that was initially added in new dollars. So that $9.4 million is distributed based off of the percentage breakdown between four-year and two-year institutions. It's roughly a 74-26% split.
And then between that, any school that had an increase, their total points that contributed to the increase becomes a percentage allocation for how much of the new money they receive. And that, again, is split between the four years and two years to differentiate between the missions of those types of institutions. That is how the new money is allocated. So we do the same thing each year. Coming to the second year, we calculated there was an overall 1.34 percent increase. It equated to about $7 million, $8 million of new money
that would again be funded through this productivity funding of new dollars that gets distributed to the schools with positive growth. For the first year, no school that went down in productivity funding lost any money. We had a hold harmless year the first year. For the second year and forward, schools that lost money or that lost productivity would begin to have a reallocation and lose the second year, they lost 1% of their
funding. This coming recommendation, they could lose up to 1.5%,
and then ongoing after that, they can lose up to 2% of funding. Of that money that they get pulled back for being less productive, those dollars then get redistributed to the schools that had increases based off the same allocation that the new money was awarded. so so we add they're going
through the steps we add all those together and that comes up with a new revenue stabilization funding level what happens with that the the law states that are
the the rules state that no school can increase their base level by more than
two percent of funding so we get the new number which will be the new recommendation for that upcoming year Any school whose recommendation goes over 2% of the prior year's number, that portion they get to have one time, and it's called incentive funding. So they get to keep the money, but they can only spend it that one year, and the next year it goes back into our pot of new dollars to fund. And so, like I said, the first year the increase cap was 1%,
the second year was 1.5%, this year it's going to
be 2%. What happens with that one-time incentive funding when we come back to calculate the base for the next year, that incentive funding gets pulled out of the base, goes into the productivity pot, so that lowers
the new general revenue ask that we come back for the governor and legislature for new dollars. So during the last session, our total ask for new dollars was around $850,000 rather than the $9 million because we had incentive funds from all the schools to reuse.
So that's where the one-time pot of money cycles back through the whole formula to kind of help lower the request so it's not as large. Any questions? Thank you. Thank you.
Senator Breanne Davis
Unverified
51:01
some members were interested in. We talk a lot about career pathways and certifications, and we know four-year degrees are important, but we don't often take the time to talk about what that economic impact looks like for
our state. so we're going to get an update on that.
Speaker 114
51:47
Thank you. I am Associate Director for Research and Analytics at ADHE and I was asked by
Director Markham to do a kind of a short overview of the economic security report. I did not print out the entire report as it's 118 pages long so we only have a little bit of it here for you but I did print out the first 10 pages as I kind of just wanted to walk through some of the beginning stuff it has some really good
information for parents and students and the general public regarding Arkansas average of first-year earnings how long does it take to complete college and certain degrees. It also gives you some pretty good charts on how many graduates we had for each degree level and this is just overall for the entire for the entire higher ed public institutions that is. Now what I want to tell you is on
page nine, the limitations of the economic security report. There's several, and I just want to make sure that everybody's aware of these limitations. And when we actually, ADHE, we send data to the Department of Workforce Services and the Arkansas Research Center is the one that actually compiled the report. So as far as higher education, our involvement is strictly providing the degrees
and certificates awarded information. So beyond that, the methodology is all worked out through the Department of Workforce Services and their wage data, which the Division of Higher Ed, we don't have access to directly. So all of the data related to salaries is coming from Department of Workforce Services. But some of the limitations that we have
dealt with, and it's just the nature of this type of report, is that this report does not include employment outside of Arkansas, federal or military jobs, because DWS does not have wage data for any of these, or any employed Arkansans who are not reported
Speaker 113
55:04
to Arkansas unemployment insurance there's also too we have regulations for FERPA for higher education data and because a number less
Speaker 114
55:18
than 11 cannot be distributed publicly the decision was made several years ago go when this was first initiated to combine two years of graduate data together in order to get those numbers up. So you'll see that the total number of graduates are identified with each report are reflected or reflecting two years of degrees or certificates awarded in that area. And the same thing is that wage data kind of has a restriction to on the number of records that
they can, and they're at numbers three. So if that student did not have enough wage, or if that category didn't have enough wage records, they had to eliminate those as well. Also, too, it's difficult to tell in wage data if the person was a part-time employee. There's not an indicator that all they basically have is an amount, and so there was some criteria that was decided upon,
in the beginning that there had to be four quarters consecutive quarters reported where a wage was reported for that student in order for that student that student's wage to be counted in this report so we had some some I guess you could say hurdles to get over out of the gate in the in the response to Act date 52 and the this is the 2018 report that you have here the 2019 report has
not been released yet last time I checked they were not quite sure of a release date yet for the 2019 report but the exciting news that we have coming is that through several productivity work funding work groups the decision on the discussion started that we have a state higher education information system that goes back 25 years and they have wage data that goes back almost that long so
in conversations that it's important that we find out more information on outcomes for our students and our graduates we've decided that we're going to add in addition the response to the act is just first-year earnings but we've decided that we're going to go ahead and we're going to provide the data through a data sharing agreement with DWS since they have the wage data, and we're going to do some looks beyond the first year earnings. So you'll see the very last page of the handout I gave you
is actually what we're going to look at in the future. And we did just have a meeting on this about a month ago where it was decided that we are going to take it out to 20th year wages since we have the data. So we're going to, the 852 report is first year earnings. We're going to do a picture at fifth year after graduation, 10th year after graduation, 15th
and 20th year after graduation and as you can imagine if one year resulted in 118 pages that by adding this the date is going to get a little out of hand but what we're going to go with at the beginning is that Arkansas Research Center is going to produce summary executive summary reports and at that point higher ed leaders and workforce leaders will decide exactly where to take
the next step based on those executive summaries is there anything I'm not promising I can answer
Speaker 117
59:19
the questions about methodology but is there any general questions you have you hesitated there I'm
Senator Will Bond
Unverified
59:34
still senator for a little just a little long so I have and I don't know if it's an appropriate question for
you but I still think that sort of sometimes we get lost you know in these things and that the the we forget the big issues for arkansas are that we just don't have enough people who have enough education and we consistently rank at the very low end in a battle with west virginia typically for the least educated state in the nation maybe alabama's down there mississippi i can't remember we're 47th to 50th typically and so what is these numbers are great they're
important but Tennessee has a big goal of the drive to 65 they're advertising and everybody knows about it what's that's what I think we should be doing here all these things are important but what's our big goal goal and how close are we to reaching it on the percentage of our population that has a two-year or four-year degree or some type of job certificate as we sit here today do we even know what
Speaker 114
1:00:47
that goal is it's 60 right in our current strategic plan yeah the
current strategic plan is 60 and that one's been around about five years i believe weren't we supposed
Senator Will Bond
Unverified
1:00:57
to get there by 2020 was that 2020
Speaker 114
1:01:00
well we're we have just started the uh we've had one initial meeting to redo it because we need a new and effective this coming summer so those discussions
Speaker 113
1:01:09
will happen pretty soon so if you have any input we'd be glad to hear it so well I've been preaching that
Speaker 127
1:01:15
I think that's something for the legislature to define and force the state to do
Senator Will Bond
Unverified
1:01:20
is to set this big goal and to make sure the public knows about it where we're headed
because we're never going to be any different economically unless we increase our level of education substantially and we just haven't set it out and our people haven't bought into it and I think it's because we're afraid we're not going to reach that goal, whereas Tennessee has laid it out there. And if I'm wrong about that, tell me. I mean, they have a marketing program. Everybody's aware of the drive to 65. They're putting a lot of their money towards two-year college education. And so I think that's a job for the legislature and should be a job for this committee to make sure that goal gets set and advertised and pursued as a top priority for the state.
Senator Mark Johnson
Unverified
1:02:05
Thank you. senator Johnson thank you madam chair and my question will be much easier this is a great report but obviously you didn't provide us a hard copy of all of it right could you provide that to staff and let them get it to us electronically sure can we can peruse it on our own time thank you very much thank you problem and
Senator Breanne Davis
Unverified
1:02:32
I would be interested to know following up with the
2020 closed the gap I mean
I think Tennessee set their timeline in like a 15 year time span and you know and that was aggressive itself um to reach their attainment goal which I think was 60 or 65 percent or 55 percent somewhere in there um in Arkansas set out we were even lower in percentage and set out just as aggressive goal in a five-year time span um which you know is hard to attain and I'm wondering do you know where we are at
you know we haven't reached the 60% but what does it look like for 2019 and
that closing the gap if someone else
Speaker 137
1:03:16
knows the answer feel free we've made some gains but other states are making gains too so when we show the list of how we compare to other states we haven't gained much we haven't improved our rankings much We have made some significant gains, but other states are making this a priority, too. Okay.
Senator Breanne Davis
Unverified
1:03:36
Are there any other questions? All right. Well, thank you, committee. This has been a, I think,
productive meeting. And Mr. Fuller, please let Dr. Markham know we've missed her the last few months and would love to see her here next
Speaker 141
1:03:59
month. Thank you. Meetings adjourned. Thank you.
Agenda
A. Call to Order
B. Opening Remarks
C. How We Got Here-- Funding Formula Breakdown Prior to the Productivity Funding Formula --Mr. Nick Fuller, Deputy Director, Division of Higher Education
D. Weighting and Metrics of the Current Productivity Funding Formula [EXHIBIT C] --Ms. Beth Stewart, Senior Research Specialist, Division of Higher Education
E. The Value of Post-Secondary Education Using the Economic Securities Report --Ms. Sonia Hazelwood, Associate Director for Research Analytics, Division of Higher Education
F. Other Business
G. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — ALC - HIGHER EDUCATION SUBCOMMITTEE, Oct 17, 2019 | Agenda | 1 | Official source ↗ |
| Exhibit C · How We Got Here-- Funding Formula Breakdown Prior to the Productivity Funding Formula | Exhibit | 8 | Official source ↗ |
| Handout 1 | Exhibit | 26 needs OCR | Official source ↗ |
Speakers
Senator Breanne Davis
Unverified
Nick Fuller
Unverified
Beth Stewart
Unverified
Speaker 22
Representative David Fielding
Unverified
Speaker 37
Speaker 50
Senator Mark Johnson
Unverified
Representative Vivian Flowers
Unverified
Senator Lance Eads
Unverified
Speaker 103
Speaker 114
Speaker 113
Speaker 117
Senator Will Bond
Unverified
Speaker 127
Speaker 137
Speaker 141