From a broader state policy approach, Martha J. Snyder, a senior associate at a public policy advocacy and consulting firm, believes that only when states restructure their funding models to leverage state appropriations toward innovation and support outcomes-based funding will colleges and universities have the ability to successfully implement innovative strategies toward student success:

Financing locks in how we deliver, and who delivers, education with no financial rationale for acceleration or collaboration.

Below I focus primarily on state general operating support to institutions, but there are other finance policies that can be examined and better aligned to support adoption of innovative academic models. These include changing institutional tuition and state financial aid policies to support students to take competency-based programs. For example, differential and flat-rate tuition policies can charge students in more flexible ways than purely by credit hours completed.

1. Leveraging state appropriations to advance innovation

This single source of revenue for public institutions generally makes up a greater proportion of revenue for comprehensive or regional four-year institutions and community colleges than that of high-level research universities.

The relatively decreased proportion of revenue from state dollars makes the imperative greater for the state to direct its investment more significantly in a way that will support state priorities and advance objectives not already covered by other revenue sources institutions receive. In simple terms, this would mean states more directly invest in completion of programs and degrees and not solely on FTE or a constant base-plus approach (generally disconnected from any state policy objectives).

2. Outcomes-based funding to support innovation

In an effort to address some of these underlying challenges, several states are turning to a concept called outcomes-based funding. The concept is an evolved and refined form of performance-based funding models, inherently meant to provide incentives for institutions to support completion of degree programs, as well as other priorities, such as enrollment and completion of underserved student populations (for example, adult, low-income, minority).

Outcomes-based funding that results in a significant portion of the state’s investment allocated based on degree or program completion, as well as the success of underserved students, can more directly support the adoption of innovative academic delivery models. Directing a significant source of revenue based on degree completion can change the underlying business model for institutions and create a financial incentive that does not otherwise exist:

  • Support advancement and timely completion of students. These models can help to decouple an institution’s revenue from a purely enrollment incentive. As a result, there is an underlying financial incentive for institutions to restructure academic programs, or adopt more expansive innovative models that help students advance more quickly through programs. Articulation of transfer credit would have a greater financial return for institutions in an outcomes-driven environment so long as the “lost cost” from tuition revenue is offset by returns in state dollars. Similarly, competency-based models would be less costly (and have greater return) for institutions as they would support the advancement and more timely completion of degree programs.

Read more of Snyder’s piece on this month’s Symposium.

We also welcome your thoughts on these two essays on Symposium in the comment section. Let readers know how you feel about funding innovation in higher education.

About the Author:

Meris Stansbury

Meris Stansbury is the Editorial Director for both eSchool News and eCampus News, and was formerly the Managing Editor of eCampus News. Before working at eSchool Media, Meris worked as an assistant editor for The World and I, an online curriculum publication. She graduated from Kenyon College in 2006 with a BA in English, and enjoys spending way too much time either reading or cooking.

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