Performance-based funding is a ‘historic step forward’

The Regents' June 4th approval of a new performance-based funding model for allocating state appropriations among Iowa's public universities was a historic step forward that will benefit all Iowans for decades to come.

Gone is the old 'base-plus” system that successive boards relied on over many decades. It has been replaced with a carefully crafted performance-based methodology that incents the University of Iowa, Iowa State University and University of Northern Iowa to educate more resident students and to achieve the strategic priorities of the board.

As the task force detailed in its 20-page report, the base-plus methodology was deeply flawed.

Because the base was set many decades ago, the static allocations it perpetuated had fallen woefully out of touch with changing enrollments and educational priorities on our campuses. In practice, the old model actually penalized enrolling additional resident Iowa students - the very students these universities were created to serve.

Because resident tuition doesn't cover the full cost of instruction, and state dollars were not reallocated to close the gap for increased resident enrollments, the best financial decision for each university was to look past Iowa residents to focus recruiting on non-residents.

The result has been chronic underfunding of UNI over many years and, more recently, growing shortfalls at ISU as more residents have enrolled there.

Finally, under the base-plus methodology there was no direct financial link between achievement of the board's priorities and state funding; a serious weakness in governance.

The performance-based budgeting model adopted by the board last week effectively addresses all of these shortcomings.

Because it allocates 60 percent of state funding on the basis of resident enrollments, the new model provides needed dollars to close the gap between resident tuition and the cost of instruction.

Since it adjusts to changing enrollment levels, it automatically stays in sync with changing financial realities. And, it does so in a way that recognizes the higher cost of instruction per student for graduate and professional programs.

The new model also provides direct incentives for the achievement of board-determined priorities as articulated in the strategic plan. These priorities include progress toward degree, degree attainment, access, and other board-identified priorities. Finally, it provides the first ever direct financial support for the critical research missions at the UI and ISU.

The value of linking funding directly to desired outcomes is significant. It communicates clearly to university presidents what is expected and what rewards come with meeting the board's objectives. It also helps make transparent the connection between general education funding from the state and the results being delivered by our universities.

An overlooked aspect of our report is our strong recommendation that implementation of the new model be paid for through restoration of state funding to Iowa's public universities, which - despite recent progress by the governor and the legislature - remains nearly $100 million below fiscal 2008 levels. We believe that the new model will help the regents to articulate their appropriations requests in a much more compelling way, leading to greater funding.

We recognize that should the Legislature fail to provide the full funding needed, this new model will pose some near-term challenges for the University of Iowa, which is why we recommended - and the board adopted - limiting any reallocations to 2 percent a year. But we concur with UI President Sally Mason who commented on UI's response to the new model as follows, 'We will adapt. We will innovate, just as we have done with every change that has come our way. I think this revenue model provides a great opportunity for the University of Iowa to show how dynamic and nimble we can be while maintaining the world-class institution we have become.”

We applaud Mason's leadership and echo her confidence that under this new funding approach the UI - and we would add ISU and UNI as well - will evolve to better serve the state and all students.

' David Miles of Dallas Center is a former president of the Iowa Board of Regents. He headed a five-member task force appointed by the board to make recommendations for allocating state funding for Iowa's three state universities. Comments: dmiles@miles-capital.com