AABE--New way to fund colleges urged

If some lawmakers have their way, Arizona's universities will need to do a better job to receive a chunk of their yearly allowance.

That could mean raising the number of minorities and total graduates, admitting more community-college transfers, and increasing majors in science, math and technology.

The concept, which could come before the Arizona Board of Regents in December, is one of the first signs that a national push to hold universities more accountable

"Performance funding," as it is called, would mark a dramatic shift in the way Arizona's three state universities are financed. They now receive state money based on enrollment and special line-item requests, regardless of performance.

Details of the new approach are far from complete, and approval would be needed from the regents, the Legislature and the governor.

For students, it could mean more services and grants to help them get four-year degrees and more aggressive recruitment in rural and minority communities.

Producing more degrees is of particular concern in Arizona because the state is below the national average when it comes to adults having four-year degrees. About 24 percent have bachelor's degrees compared with 28 percent nationally, according to the U.S. Census Bureau. About 18,000 students earned bachelor's degrees in 2006 at the three state universities.

The state would have to produce 78,000 degrees a year "if we want to close the gap," said Sandra Woodley, the regents' chief financial officer.

Performance funding has been floated before in Arizona but has never taken off. For the past four years, Arizona universities have requested additional money for increasing the number of college degrees, but the state Legislature didn't fund the request. Mainly, lawmakers didn't want to pay extra for something they felt the universities should do anyway. Last year's request was $1 million.

More lawmakers support the approach now, partly because its newest version wouldn't automatically lead to more funding.

Also, lawmakers leading the effort say they would rather the state implement reform in higher education than leave it to the federal government.

Rep. Jennifer Burns, R-Tucson, chairwoman of the House Higher Education Committee, confirmed that lawmakers are working with the Governor's Office and regents staff on new funding models. It's too soon to say what the performance measures will be.

"What we're looking at doing is making sure we put the money where we want the actions to be happening," she said.

Burns was unsure whether the approach would lead to more funding. The state's budget is expected to be tight next year because tax revenues are down. Any change might not begin until 2009-10 and might need to be phased in.

A main focus is to get more students to graduate. Minnesota, Tennessee and South Carolina are among an estimated one-third of states that pay universities based on performance. Performance pay accounts for a maximum 3 to 5 percent of a school's overall state funding, Woodley said.

Pennsylvania started performance funding in 2000 with $2 million and this year gave out $37.4 million. The 14 universities in the system are judged on eight measures, including graduation rates, percentage of students who return for a second year and number of degrees awarded.

The concept has been controversial because universities can become more susceptible to budget swings, and the measures often don't apply to graduate programs.

Some Arizona officials also have concerns.

Regent Ernie Calderon said he has no problem requiring universities to produce results. But he questions whether extra money should be attached to certain majors, such as math and technology.

"What if you are an institution that graduates great social workers but not enough math majors? Then you are penalized," he said.

University of Arizona President Robert Shelton said he would like to see state incentives for universities that pull in large federal research grants.

"Why not set aside a pot of money? If we aren't successful, you don't pay," he said.

Another concern is that some incentives, such as more graduates, will favor fast-growing universities like Arizona State University.

"I don't think anybody is ready to say we're all in favor of 'X,' because I don't think we have examined all available options," said Fred Boice, president of the regents.

Reach the reporter at anne .ryman@arizonarepublic.com.

State money may be tied to grad rates, minority enrollment