Virginia Switches Funding Systems

Black Issues in Higher Education, June 24, 1999 by Scott W. Wright, Hank Jr. Kurz

Change to performance-based formula is posing questions for public HBCUs, and two-year colleges

Richmond, Va. -- The State Council of Higher Education last month unanimously adopted a performance-based system for funding colleges and universities that rewards schools based on student achievement.

The plan deregulates colleges and universities on the front end -- letting administrators spend the $1.3 billion provided by the state each year as they see fit -- while holding them accountable on the back end.

The state and schools will set goals specific to each institution based on past performance, and the schools will be measured against how they improve. Council members stress that schools will only be measured against then own past performance and not compared to other institutions.

"It's a carrot and stick approach," Council Chairman John Padgett says. "The carrot is that if they accomplish the objectives that they set, there will be more money that they can take back to their institutions."

In switching to performance-based funding, Virginia joins a growing clique of states that have turned to that method since Tennessee became the first state to do so in the late 1980s, says Katherine Boswell, who studies community colleges for the Education Commission of the States in Denver.

"It's part of the whole reinventing government move," Boswell says. " Accountability in government has long been a theme. It started out in other parts of state government but has finally moved to higher education."

Ten states had adopted performance-based funding and another 17 states and the District of Columbia were considering it, according to a 1997 analysis by the Rockefeller Institute, the most recent available.

Eight states have performance budgeting, a variation under which colleges agree to report certain key indicators, which lawmakers can consider as part of the overall budgeting process for higher education in their state, the institute's report shows. Another 17 states were considering such a plan.

"It is certainly a growing movement," Boswell says. "There are many in higher education who would like to see it go away, but it's here to stay. It will continue to evolve though as states make adjustments to their plans."

HBCUs Express Cautious Optimism

Administrators of Virginia's two historically Black public universities -- Norfolk State and Virginia State universities -- express a cautious optimism that the new performance-based funding system will help then institutions. Although state officials say there will be no competition between schools for funding because the baselines for the measurements of improvement will come from each individual institution, some HBCU administrators want to reserve judgment on the plan until they are satisfied about its equity.

At Virginia State, Dr. Eddie N. Moore, the university's president, and his staff are going over the plan with a fine-toothed comb.

"We are still in the review process, studying the details of the proposal," says Tracey G. Jeter, Virginia State's director of university relations. "We need a better analysis of the proposal before we decide which way we're going to go on k. There are specific performance-based criteria in the proposal and we just want to make sure that it's fair across the board."

Administrators at Norfolk State seem more optimistic -- if only a little. Edward Jolley, vice president for finance and business at Norfolk State, was one of the business officers from institutions around the state who worked on developing the performance-based funding system that the State Council on Higher Education adopted.

"Many of the institutions will see some benefit from the model proposed," Jolley says. "The autonomy and additional authority to achieve the goals of the institution are liked by many around the commonwealth and here at Norfolk State."

But while he is encouraged by the proposed elimination of much of the bureaucratic red tape involved with state funding and the benefits he sees in having institutions receive block-grant funding, he also sees potential areas of concern. One concern deals with how the base funding level will be achieved. The base funding level is the minimum amount of money an institution will receive from year to year.

"We [at Norfolk State] concur that the development of that initial funding level, the initial base-budget adequacy evaluation, is crucial. That is key, "Jolley says, "especially for Black institutions where the evidence indicates that has been a historic funding disparity. How [the funding formula] addresses that [disparity] concerns us."

Then, there is a worry about the comparison to peer institutions nationwide. According to Jolley, the base funding formula will rely heavily on how much money other institutions of similar pedigree get with which to operate.

"We also have some concern with the combination of ways of looking at the institution," he says. "To the degree that we have concerns with the schools identified as looking like us, we need to be able to express that concern about that peer group."