DRAFT for discussion purposes only Massachusetts Department of

DRAFT for discussion purposes only Massachusetts Department of Higher Education: Community College Performance-Based Funding Model Sean P. Nelson Deputy Commissioner for Administration and Finance Jonathan Keller Senior Associate Commissioner for Research, Planning and Information Systems

Presentation Topics I. Background § § The Charge The Principles The Process The Funding II. Formula § The Basics of the Formula § The Dashboard Detail § The FY 15 Budget and Next Steps

Background

Community College Funding Formula: Legislative Charge Section 171 of the FY 13 General Appropriations Act (GAA) states: “The commissioner of higher education, in consultation with the presidents of the community colleges and representatives of the Massachusetts Teachers Association, shall develop a funding formula for the community colleges which incorporates the allocation of appropriations to the individual community colleges based, in part, on performance. “ v Additionally, MGL, Chapter 15 A, Section 15 B stipulates that: “ Boards of trustees in each segment of the higher education system shall prepare their budget request in accordance with funding formulas. The board of higher education shall develop the formulas for the institutions within the state university and community college segments in consultation with the boards and trustees and the secretary. ”

Community College Funding Formula: Why? The funding formula was implemented to address three essential issues: § The large inequities in per student funding that have developed among the colleges over time as their annual appropriations have risen by identical percentages while their growth rates have varied significantly § Lack of a mechanism for allocating funds in relation to aspects of institutional performance that reflect statewide higher education goals § Governor/Legislature emphasis on the role of Community Colleges in preparing students for jobs in the state’s rapidly evolving economy

Community College Funding Formula: Establishing a Task Force § Immediately following the passage of the FY 13 budget, Commissioner Freeland established a Task Force on the Community College Funding Formula § To aid in the analysis and development of the formula, the Department of Higher Education retained the National Center for Higher Education Management Systems (NCHEMS) to assist the Taskforce in the design and development of the funding formula. § Task Force held four meetings between July and December 2012 to confer on the elements of the Formula including: v Base and Performance funding metrics v Proportion/Share allocated to Base vs Funding v Weights to be applied to each individual metric v Limits regarding annual institutional funding losses or gains § After the Task Force reached a general consensus on a formula, DHE drafted the Task Force Report and submitted it to each campus president for comment. The Task Force Report was also shared with other key stakeholders including: EOE, Governor’s Office, Labor and Workforce Development, Housing and Economic Development, the chairs of Senate and House Committees on Ways and Means, and the co-chairs of the Joint Committee on Higher Education.

Community College Funding Formula: Source of Funding § The formula reallocated the total amount appropriated to the campuses through the individual line-items in the FY 13 state budget Ø A total of $208. 2 M Ø The FY 14 collective bargaining costs that were added to the campus lineitems were not subject to the formula § In FY 14, an additional $20 M of funding was appropriated in a new line-item for the community colleges Ø This funding was in addition to the individual campus line-item appropriation Ø All amounts were determined by the formula and communicated to the legislature by the DHE. All Funds were earmarked, by campus, in the appropriation and transferred to the institutions In FY 14, a total of $228. 2 M was reallocated using the formula methodology

FY 14 Funding Mechanics Line-item Institution Berkshire Community College Bristol Community 7503 -0100 College Bunker Hill 7518 -0100 Community College Cape Cod 7504 -0100 Community College 7502 -0100 7100 -4000 Massachusetts Community Colleges Base Appropriation $20 M Allocated through 7100 -4000 Total FY 14 Allocation $ 8, 569, 374 $ 1, 094, 424 $ 9, 663, 798 $ 15, 224, 011 $ 2, 940, 286 $ 18, 164, 297 $ 19, 194, 201 $ 2, 282, 913 $ 21, 477, 114 $ 10, 536, 601 $ 343, 833 $ 10, 880, 434 $ 20, 000 7100 -4000 Massachusetts Community Colleges For funding to community college campuses in the Commonwealth; provided, that funds shall be expended for the continued implementation of community college reform, for continued initiatives to strengthen the connections between the colleges, local businesses and regional workforce investment boards and to improve workforce training at the colleges; provided further, that funding shall be allocated among the campuses using the formula developed by the commissioner of higher education in consultation with the secretaries of education, labor and workforce development and housing and economic development; provided further, that the allocation of funds shall be approved by the board of higher education; provided further, that in developing the allocation among campuses, the commissioner shall ensure that no campus receives less in fiscal year 2014 than in fiscal year 2013; and provided further, not less than the following amounts shall be made available to the respective institutions named herein: (a) $1, 091, 424 to Berkshire Community College; (b) $2, 940, 286 to Bristol Community College; (c) $2, 282, 913 to Bunker Hill Community College; (d) $343, 833 to Cape Cod Community College; (e) $1, 150, 565 to Greenfield Community College; (f) $1, 086, 747 to Holyoke Community College; (g) $1, 937, 548 to Massachusetts Bay Community College; (h) $608, 165 to Massasoit Community College; (i) $1, 862, 410 to Middlesex Community College; (j) $1, 076, 995 to Mount Wachusett Community College; (k) $617, 047 to North Shore Community College; (l) $570, 697 to Northern Essex Community College; (m) $3, 353, 379 to Quinsigamond Community College; (n) $340, 527 to Roxbury Community College; and (o) $737, 464 to Springfield Technical Community College

Formula

Funding Formula Dashboard Stage One: Set Funding Allocations New Funding Allocations FY 14 No Allocate new money directly to Performance? New Funding Level - No Stop Loss New Funding Level - With Stop Loss Past Amounts $208, 154, 311 Total State and Local Appropriations Massachusetts Public Community Colleges Base Allocation ($) Base Funding Allocation Performance Funding Allocation Cost of Operation Subsidy ($) Total Allocation % Difference in Funding 2013 Total Allocation After Stop Loss Adjustment Difference $ (+/-) between Stop Loss and FY 13 GAA Percentage Difference in Funding from FY 13 $80, 327, 156 50% Amount Allocated: $80, 327, 156 Berkshire Community College $7, 988, 207 $ 2, 112, 318 $ 3, 330, 594 $ 4, 500, 000 $ 9, 942, 912 24. 5% $ 9, 207, 281 $ 1, 219, 074 15. 3% Amount Allocated: $20, 000 Bristol Community College $13, 885, 391 $ 6, 820, 622 $ 7, 076, 763 $ 4, 500, 000 $ 18, 397, 385 32. 5% $ 16, 699, 347 $ 2, 813, 956 20. 3% Bunker Hill Community College $17, 496, 631 $ 8, 912, 763 $ 7, 603, 525 $ 4, 500, 000 $ 21, 016, 288 20. 1% $ 19, 691, 704 $ 2, 195, 073 12. 5% Cape Cod Community College $9, 823, 796 $ 3, 224, 452 $ 2, 444, 272 $ 4, 500, 000 $ 10, 168, 724 3. 5% $ 10, 167, 629 $ Ancillary Budget Amount Stage Two: Define Weight and Multiplier Values for Performance Allocations College Enrollment Variables Performance Allocation ($) FY 13 Funding Amount 50% Amount Allocated: College Completion Variables Alignment Variables 343, 833 3. 5% $ 1, 242, 322 15. 9% Liberal Arts 1. 0 Certificate Completion Weight 10% Greenfield Community College $7, 805, 889 $ 2, 151, 049 $ 3, 146, 823 $ 4, 500, 000 $ 9, 797, 872 25. 5% $ 9, 048, 211 Physical, Bio, Social Science 1. 5 Associate Completion Weight 15% At-Risk Multiplier: Pell 1. 50 Holyoke Community College $16, 074, 594 $ 5, 969, 313 $ 7, 197, 649 $ 4, 500, 000 $ 17, 666, 962 9. 9% $ 17, 067, 692 $ 993, 098 6. 2% Math and Computer Science 2. 0 Transfers Above 24 SCH Weight 5% Priority Certificate Multiplier 1. 30 Massachusetts Bay Community College $11, 859, 106 $ 4, 470, 668 $ 6, 223, 780 $ 4, 500, 000 $ 15, 194, 448 28. 1% $ 13, 939, 229 $ 2, 080, 123 17. 5% Visual & Performing Arts 1. 5 30 Credits Hours Weight 5% Priority Associate Multiplier 1. 30 Pre-Education 1. 5 Completions: English Weight 7% Engineering / Architecture 2. 0 Completions: Math Weight 8% 3. 5% Developmental Education 1. 5 Awards per 100 FTE 5% Define Stop-Gain / Alt. Maximum Trades 2. 5 ATD Success Rate (3 Year Average) 45% 100. 0% All weight percentages must equal 100% Technologies 2. 0 Health/Allied Health 2. 0 Business 1. 0 Services 1. 5 Define Stop-Loss / Alt. Minimum Optional: Cost of Operation Subsidy 2. 7 $4, 500, 000 Massasoit Community College $17, 376, 154 $ 6, 702, 109 $ 5, 341, 321 $ 4, 500, 000 $ 16, 543, 430 -4. 8% $ 17, 984, 319 $ 608, 165 3. 5% Middlesex Community College $17, 121, 183 $ 8, 213, 614 $ 7, 471, 748 $ 4, 500, 000 $ 20, 185, 362 17. 9% $ 19, 032, 193 $ 1, 911, 010 11. 2% Mount Wachusett Community College $11, 007, 508 $ 4, 743, 484 $ 3, 445, 542 $ 4, 500, 000 $ 12, 689, 027 15. 3% $ 12, 056, 206 $ 1, 048, 698 9. 5% North Shore Community College $17, 629, 906 $ 6, 369, 881 $ 6, 444, 258 $ 4, 500, 000 $ 17, 314, 139 -1. 8% $ 18, 246, 953 $ 617, 047 3. 5% Northern Essex Community College $16, 305, 635 $ 5, 380, 009 $ 6, 239, 967 $ 4, 500, 000 $ 16, 119, 976 -1. 1% $ 16, 876, 332 $ 570, 697 3. 5% Quinsigamond Community College $12, 980, 557 $ 7, 331, 544 $ 6, 406, 535 $ 4, 500, 000 $ 18, 238, 079 40. 5% $ 16, 259, 469 $ 3, 278, 912 25. 3% Roxbury Community College $9, 729, 356 $ 2, 178, 260 $ 1, 079, 715 $ 4, 500, 000 $ 7, 757, 974 -20. 3% $ 10, 069, 883 $ 340, 527 3. 5% $21, 070, 398 $ 5, 747, 069 $ 6, 874, 664 $ 4, 500, 000 $ 17, 121, 733 -18. 7% $ 21, 807, 862 $ 737, 464 3. 5% 67, 500, 000 $ 228, 154, 311 9. 6% $ 20, 000 9. 6% Springfield Community College SYSTEM TOTAL $208, 154, 311 $ 80, 327, 156 $ $ 228, 154, 311 Designed by NCHEMS, 2013 Non-Credit Workforce Development 1. 0 The right side of the dashboard (“output side”) reflects the funding outcomes The left side of the dashboard (“input side”) can be changed, enabling a dynamic scenario-building assessment and development tool.

The Funding Formula Visualization Tool : The “input” side of the dashboard Stage One: Set Funding Allocations Allocate new money directly to Performance? No Total State and Local Appropriations $208, 154, 311 Base Funding Allocation 50% Amount Allocated: $70, 327, 156 Performance Funding Allocation 50% Amount Allocated: $70, 327, 156 Amount Allocated: $20, 000 Ancillary Budget Amount Stage Two: Define Weight and Multiplier Values for Performance Allocations § The “Input” side of the funding formula includes all of the component variables, weights, and multipliers College Enrollment Variables Liberal Arts Physical, Bio, Social Science Math and Computer Science Visual & Performing Arts Pre-Education Engineering / Architecture Developmental Education 1. 0 1. 5 2. 0 1. 5 Trades 2. 5 Technologies 2. 0 Health/Allied Health 2. 0 Business 1. 0 Services 1. 5 Non-Credit Workforce Development 1. 0 College Completion Variables Certificate Completion Weight Associate Completion Weight Transfers Above 24 SCH Weight 30 Credits Hours Weight Completions: English Weight Completions: Math Weight Awards per 100 FTE ATD Success Rate (3 Year Average) All weight percentages must equal 100% Alignment Variables 10% 15% 5% 5% At-Risk Multiplier: Pell Priority Certificate Multiplier Priority Associate Multiplier 1. 50 1. 30 7% Define Stop-Loss / Alt. Minimum 8% 3. 5% 5% Define Stop-Gain / Alt. Maximum 45% 100. 0% 100% Optional: Cost of Operation Subsidy 2. 7 $4, 500, 000 Designed by NCHEMS, 2013

The Funding Formula Visualization Tool : The “input” side of the dashboard for funding amounts Stage One: Set Funding Allocations § FY 14 total available to be allocated through the funding formula: $228, 154, 311* Allocate new money directly to Performance? Total State Appropriations for Community Colleges No $208, 154, 311 Base Funding Allocation 50% Performance Funding Allocation 50% Ancillary Budget Amount Allocated: $70, 327, 156 $20, 000 Cost of Operation Subsidy: $67, 500, 000 * In FY 14 collective bargaining costs for all community college campuses were added to the campus base appropriations directly and were not subject to reallocation by the formula

Community College Funding Formula Basics of the Formula: Cost of Operation Subsidy § The Task Force recommended that every institution receive a “cost of operation subsidy” reflective of the minimal requirement for operating a community college without regard to scale Ø $4. 5 M was recommended as the per-institution subsidy, based an analyses conducted by NCHEMS § The amount allocated to the Cost of Operation subsidy in FY 14: $67. 5 M, or approximately 30% of the total available funding. This amount was deducted from the total available to be allocated through the Base and Performance funding metrics. Ø Amount available to reallocate after cost of operation subsidy: $160. 7 M v The Cost of Operation subsidy is recognized as one of the key areas of investigation for further refinement of the funding formula

Community College Funding Formula Components of the Formula: Base Funding § Base and Performance Funding allocations are split 50/50 ØThe amount allocated to base funding in FY 14: $80, 327, 155 Ø Base Funding is 35. 4% of total amount allocated ($228 M) § Base Funding dollars are to be distributed based on student credit hours completed in the most recent academic year for which data are available (for the FY 14 distribution, data from FY 11 was used) v By using Student Credit Hours the formula acknowledges institutional scale. The formula allocates the total base funding pool to the community colleges based on their percentage of total credit hours completed. § The various credit hours are assigned individual weights based on the cost of instruction for the associated course or program. These weights reflect research and analyses conducted by NCHEMS

Community College Funding Formula Components of the Formula: Base Funding, Student Credit Hours Completed Student credit hours completed College Enrollment Variables Liberal Arts 1. 0 Physical, Bio, Social Science 1. 5 Math and Computer Science 2. 0 Visual & Performing Arts 1. 5 Pre-Education 1. 5 Engineering / Architecture 2. 0 Developmental Education 1. 5 Trades 2. 5 Technologies 2. 0 Health/Allied Health 2. 0 Business 1. 0 Services 1. 5 Non-Credit Workforce Development 1. 0 The added emphasis on “noncredit workforce” training was recommended by Labor and Workforce Development and Housing and Economic Development

Community College Funding Formula Components of the Formula: Base Funding, Application of Weights How are the assigned individual weights applied? Ø The credits completed in the various discipline clusters are designated to have specific multipliers that range from 1. 0 (no increased value) to 2. 5 (two and a half times the raw value). The sum of the institutional credits (weighted by the discipline cluster multipliers) are divided by the sum of weighted credits for the entire segment to determine the share of base funds that will be allocated to each institution.

Community College Funding Formula Basics of the Formula: Performance Funding, College Completion v College Completion Metrics include several measures of institutional effectiveness in encouraging students to achieve successful outcomes. College Completion Variables Certificate Completion Weight 10% # of completed certificates Associate Completion Weight 15% # of associates degrees Transfers Above 24 SCH Weight 5% # who transfer having completed 24 credits 30 Credits Hours Weight 5% # complete 30 credits in any given year Completions: English Weight 7% # completing a credit-bearing course in English Completions: Math Weight 8% # completing a credit-bearing course in Math Awards per 100 FTE 5% Degrees and certificates per (FTE) students ATD Success Rate (3 Year Average) 45% Achieving The Dream “Success Rate” All weight percentages must equal 100%

Community College Funding Formula Basics of the Formula: Performance Funding, Alignment Weights v The Alignment Metrics focus on areas of performance with specific relevance to The Vision Project – the Board of Higher Education's strategic plan – and the Governor’s educational goals. The weights are only applied to completions § The first metric addresses the goal of closing achievement gaps. [Weight applied Alignment Variables to degree and certificates earned by students who were Pell Eligible] At-Risk Multiplier: Pell 2. 00 Priority Certificate Multiplier 1. 30 Priority Associate Multiplier 1. 30 § The last two metrics address the Governor’s goals of adding credentials in fields of high employer demand. [Weights applied to certificates and associates in STEM fields, health care, life sciences, and IT]

Community College Funding Formula Basics of the Formula: Stop-Loss/Alternative Minimum Increase v The Task Force determined that full implementation of the formula in year one would likely result in overly burdensome financial disruptions for many of the colleges. (For example, Springfield Tech would have experienced an 18. 7% decrease in funds in year one) § The Task Force initially agreed to include a 5% “stop-loss” provision that would prevent any one institution from losing more than 5% of their previous year’s budget. It was ultimately decided that the formula would instead include a 3. 5% alternative minimum provision, which ensures that each campus receives no less than a 3. 5% increase. § It was also decided that in subsequent years of funding there would be a transitional step taken annually with the goal of full implementation over 4 years (FY 14 – FY 17). For FY 15, the discussion has focused on reducing the “alternative minimum increase. ”

The Funding Formula Visualization Tool : The “output” side of the dashboard New Funding Allocations FY 14 New Funding Level - No Stop Loss Past Amounts Massachusetts Public Community Colleges FY 13 Funding Amount Base Allocation ($) Performance Allocation ($) Cost of Operation Subsidy ($) New Funding Level - With Stop Loss % Total Allocation Difference in Funding 2013 Difference $ Total Allocation (+/-) between After Stop Loss and Adjustment FY 13 GAA Percentag Difference in Funding from FY 13 Berkshire Community College $7, 988, 207 $ 2, 112, 318 $ 3, 330, 594 $ 4, 500, 000 $ 9, 942, 912 24. 5% $ 9, 207, 281 $ 1, 219, 074 15. 3% Bristol Community College $13, 885, 391 $ 6, 820, 622 $ 7, 076, 763 $ 4, 500, 000 $ 18, 397, 385 32. 5% $ 16, 699, 347 $ 2, 813, 956 20. 3% Bunker Hill Community College $17, 496, 631 $ 8, 912, 763 $ 7, 603, 525 $ 4, 500, 000 $ 21, 016, 288 20. 1% $ 19, 691, 704 $ 2, 195, 073 12. 5% Cape Cod Community College $9, 823, 796 $ 3, 224, 452 $ 2, 444, 272 $ 4, 500, 000 $ 10, 168, 724 3. 5% $ 10, 167, 629 $ Greenfield Community College $7, 805, 889 $ 2, 151, 049 $ 3, 146, 823 $ 4, 500, 000 $ 9, 797, 872 25. 5% $ 9, 048, 211 Holyoke Community College $16, 074, 594 $ 5, 969, 313 $ 7, 197, 649 $ 4, 500, 000 $ 17, 666, 962 9. 9% $ 17, 067, 692 $ 993, 098 6. 2% Massachusetts Bay Community College $11, 859, 106 $ 4, 470, 668 $ 6, 223, 780 $ 4, 500, 000 $ 15, 194, 448 28. 1% $ 13, 939, 229 $ 2, 080, 123 17. 5% Massasoit Community College $17, 376, 154 $ 6, 702, 109 $ 5, 341, 321 $ 4, 500, 000 $ 16, 543, 430 -4. 8% $ 17, 984, 319 $ 608, 165 3. 5% Middlesex Community College $17, 121, 183 $ 8, 213, 614 $ 7, 471, 748 $ 4, 500, 000 $ 20, 185, 362 17. 9% $ 19, 032, 193 $ 1, 911, 010 11. 2% Mount Wachusett Community College $11, 007, 508 $ 4, 743, 484 $ 3, 445, 542 $ 4, 500, 000 $ 12, 689, 027 15. 3% $ 12, 056, 206 $ 1, 048, 698 9. 5% North Shore Community College $17, 629, 906 $ 6, 369, 881 $ 6, 444, 258 $ 4, 500, 000 $ 17, 314, 139 -1. 8% $ 18, 246, 953 $ 617, 047 3. 5% Northern Essex Community College $16, 305, 635 $ 5, 380, 009 $ 6, 239, 967 $ 4, 500, 000 $ 16, 119, 976 -1. 1% $ 16, 876, 332 $ 570, 697 3. 5% Quinsigamond Community College $12, 980, 557 $ 7, 331, 544 $ 6, 406, 535 $ 4, 500, 000 $ 18, 238, 079 40. 5% $ 16, 259, 469 $ 3, 278, 912 25. 3% Roxbury Community College $9, 729, 356 $ 2, 178, 260 $ 1, 079, 715 $ 4, 500, 000 $ 7, 757, 974 -20. 3% $ 10, 069, 883 $ 340, 527 3. 5% Springfield Community College $21, 070, 398 $ 5, 747, 069 $ 6, 874, 664 $ 4, 500, 000 $ 17, 121, 733 -18. 7% $ 21, 807, 862 $ 737, 464 3. 5% $208, 154, 311 $ 80, 327, 156 $ 67, 500, 000 $ 228, 154, 311 SYSTEM TOTAL 9. 6% $ 228, 154, 311 FY 14 GAA allocated the additional $20 M via earmarks in line-item 7100 -4000 343, 833 3. 5% $ 1, 242, 322 15. 9% $ 20, 000 9. 6%

FY 15 Budget Recommendation and Next Steps § Roll $20 M of FY 14 earmarked funds into base appropriations of campus § Recommend an additional $20 M to be allocated using the same metrics in FY 14 § Hire a Data Auditor to test integrity and quality of data; ensuring uniform standards and definitions § Discussion now underway to review minimum gain in FY 15 with a goal of reaching a “no fee” consensus amongst all campuses § Reconvene Formula Task Force to review and possibly refine elements of formula for FY 16

Keys to Implementation in FY 14 § § § § Strategic plan at the system level that outlined specific long-term measurable goals, including meeting projected workforce demand. Appealed to legislative interest in linking academic performance to funding. To that end, the Department of Higher Education was granted the statutory authority in FY 12 to “develop a funding formula for the community colleges which incorporates the allocation of appropriations based, in part, on performance. ” Established task force of community college presidents to determine overall approach and methodology. Critical to build consensus amongst campuses. Third-party formula development and validation. Clear communication of data standards, definitions, and measures. Incorporated a “hold harmless” feature that prevented any campus from receiving less than a 3. 5% increase in year one. Pledge to not increase fees if funding formula is implemented with an additional $20 M allocated over FY 13. Commitment by Commissioner Freeland to both the Task Force and the Council of Presidents that the individual metrics, weights, multipliers, allocation balances, subsidy, etc were still open to review and enhancement in future funding cycles. A plan to establish an enhanced audit function to provide a greater assurance that formula is based on solid, reliable and appropriate representations of institutional accomplishments.

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