The way Tennessee funds its higher education institutions may be shifting soon, and one public-university president is highlighting what is at stake for access-focused universities.¶
Eastern Tennessee State University (ETSU) President Dr. Brian Noland sat down with the On The Fly podcast to talk about the state’s Outcome-Based Funding Formula (OBF), how it affects universities like his, and what changes might be made to it soon.¶
What is the Outcomes-Based Formula?
The OBF allocates funding to public colleges and universities based on student success metrics, rather than student enrollment. Tennessee was the first state in the country to adopt a model that does this, with the intent to prioritize higher education institutions that provide results for students, not those that can get students in the door.¶
Next month, the Tennessee Higher Education Commission is expected to approve changes to the funding policy for institutions of higher learning that create the Outcomes-Based Funding (OBF) formula.¶
The formula relies on three core components:¶
- Weighted outcomes: This accounts for the majority of the points. Schools earn outcomes points for specific student accomplishments, which are scaled and weighted according to the school's mission.
- Fixed costs: The baseline expenses of operating a campus, such as maintenance and utilities.
- Quality assurance: Points earned for meeting quality standards like institutional accreditations and student engagement.
For universities, the key performance metrics focus heavily on credit accumulation, bachelor’s degree production, job placement, and sponsored research, while community colleges measure short-term progress milestones, long-term certificates, associate degrees, transfers, and dual enrollment.¶
Dr. Noland’s Thoughts
Noland talked about ETSU’s role in the state as an “access university,” a term referring to higher education institutions with highly inclusive admissions policies intended to reduce barriers to higher education for students.¶
“Our goal is to give students a chance,” Noland said. “We were founded more than 100 years ago, in 1911, as a university to raise educational attainment levels by essentially creating a generation of teachers to go out to the rural communities and pass along the gift of education.”¶
However, Noland said it can be a “heavier lift” for institutions like ETSU to make progress on retention and graduation rates than it is for private colleges and universities, for example, who have high academic standards for admission.¶
“If the average ACT (score) of your freshman class is a 31, those students are coming in ready for college,” Noland said. “Your retention rates should be 90 percent. Your graduation rate should be 85 percent, because your students are in the top 3 percent of all high school seniors in America, when they're coming in as freshmen.”¶
Similarly, a potential change to the OBF formula that has been discussed is rewarding institutions that graduate more students into career fields that meet a certain earnings level. This would improve alignment between post-secondary education options and industry needs and ensure that more students earn a livable income upon graduation.¶
With that in mind, Noland said he would support a premium for certain programs, but he thinks there would need to be recognition that many of the degree programs with the highest earnings potentials are expensive to run, such as nursing and engineering.¶
This year, state lawmakers approved roughly $39 million in funding for OBF growth and other higher education expenses, significantly lower than the Tennessee Higher Education Commission’s (THEC) request of $73 million. Dr. Noland explained the redistribution of base appropriations through the OBF formula and its impact on institutions with varying growth rates.¶
“THEC runs the formula irrespective of new investments, and what that means in the end is that those institutions that have had the largest outcome growth are the biggest beneficiaries,” Noland said.¶
In other words, if an institution had increased graduation rates, retention rates, and research productivity but had only minimal year-over-year growth, its base budget would still be reduced, and funds would be allocated to another institution with greater growth.¶
“That has happened year over year,” Noland said.¶
OBF rules are expected to become finalized later this summer, and The Firefly will continue coverage of the changes and impact on institutions of higher education across Tennessee.¶
