New Recommendations for Performance-Based Funding in Wisconsin

Performance-based funding for Wisconsin’s technical colleges is at the forefront of Governor Walker’s higher education budget for the next biennium. In previous blog posts (here, here, and here), I have briefly discussed some of the pros and cons of moving to a performance-based funding model for a diverse group of postsecondary institutions.

This week, Nick Hillman, Sara Goldrick-Rab, and I released a policy brief with recommendations for performance-based funding in Wisconsin through WISCAPE. In the brief, we discuss how performance-based funding has operated in other states, as well as recommendations for how to operate PBF in Wisconsin. Our key points are the following:

(1) Performance-based funding seeks to switch the focus from enrollment to completion.

(2) Successful performance-based funding starts small and is developed via collaboration.

(3) Colleges with different missions should have different performance metrics.

(4) Multiple measures of success are necessary to reduce the possibility of perverse incentives.

Wisconsin’s proposal appears to meet some of these key points, but some concerns do remain. My primary concern is the speed with which funding will shift to performance—from 10% in 2014-15 to 100% by 2019-20. This may not be enough time for colleges to adjust their actions, so this timeline should be adjusted as needed.

More on Wisconsin’s Workforce Development Proposal

Today, Wisconsin Governor Scott Walker released more information about his proposal to improve the state’s workforce development system through an additional $100 million in state appropriations. These proposals have the potential to affect the priorities of Wisconsin institutions of higher education, particularly the Wisconsin Technical College System. While most of the key points of the proposal are directly from his special workforce development commission’s report last August (see my analyses here and here), the additional details provided in this press release provide more concrete information about the Governor’s soon-to-be-released budget proposal.

Three items in Gov. Walker’s proposal are in legislation separate from the state budget: workforce training grants to a mix of colleges, businesses and economic development organizations, a new Office of Skills Development to administer the grants, and a labor market information system designed to help link students and workers to available jobs and track labor market trends. The labor market information system has the potential to provide high school and college students with information that can help them decide their course of study, but getting the information to students in a timely manner may be difficult. It can be a useful tool for high school juniors who want to figure out a possible career, but it may be four or five years before the student is ready to go into the workforce. A lot can happen in that period of time. In any case, these records should be linked to K-12 and higher education datasets so the effectiveness of the new system can be evaluated.

The big change in higher education policy comes from the proposed shift to performance-based funding (PBF) in the Wisconsin Technical College System. Under PBF, colleges are funded based on outcomes (such as graduation and job placement rates) instead of based on enrollment or other historical factors. This plan starts with 10% of base funding being used for PBF in 2014-15, rising to 100% by 2020. Although other states have similar plans to completely shift to PBF, I am skeptical that a majority of funding will ever be tied to performance for political reasons. (Note that if Gov. Walker serves a second term and declines to run for a third, he would leave office in January of 2019—before this takes effect.)

Few details are currently available about the proposed funding formula for WTCS, as it will be developed by WTCS and the state Department of Administration. But the press release does note that the formula will prioritize job placement and enrollment in high-demand programs, something which is likely to be opposed by WTCS campuses with strong university transfer programs (such as Madison Area Technical College). These concerns will likely be kept in mind as a PBF system is developed.

Finally, the press release calls for the development of a common core of 30 credits (approximately ten courses) that will be fully transferrable across the UW System, WTCS, and participating Wisconsin private colleges. This will likely be opposed by a number of UW System universities as a loss of autonomy and a perceived lowering of academic standards. I would expect the common core to be mandated, but some colleges will attempt to deny full transferability of certain courses; for example, a college algebra class at a technical college might be classified as an elective math credit at a UW System university instead of as a college algebra class.

Governor Walker’s budget address will take place on February 20, and I will have a complete analysis of his higher education programs later this week. More details may be released before that time, such as in this unusual Sunday press release.

Wisconsin Higher Education Policy Issues for 2013

2013 marks a potential benchmark year for state higher education policy debates. More tends to happen in odd-numbered years because politicians are farther away from elections and more willing to make difficult budget decisions—and the influx of federal stimulus dollars is rapidly drying up. In Wisconsin, 2013 is a particularly important year as discussions begin on the state’s biennial budget. The American Association of State Colleges and Universities, an association representing primarily non-flagship public four-year schools, has released its list of the top ten state policy issues for 2013. They are the following:

(1)    Increasing college performance

(2)    Funding for public colleges and universities

(3)    Tuition prices and policy

(4)    State grant aid programs

(5)    Academic preparation for college

(6)    Immigration policy

(7)    Competency-based education

(8)    Concealed carry on campus

(9)    Workforce/economic development

(10) For-profit college regulation

Not all of these issues are a major concern in Wisconsin (such as whether to grant in-state concern to illegal immigrants who graduated from a Wisconsin public high school), are particularly relevant to student success (such as concealed carry regulations), or are likely to change much (tuition policy). My take on the five most important issues facing the Wisconsin Legislature in 2013 are the following:

Priority #1: Workforce and economic development

Although many in the academic community might disagree with how I have these key issues ordered, the Legislature is clearly focused on workforce and economic development. I expect a focus on vocational and technical education in 2013, as outlined in an August 2012 report by Tim Sullivan, special consultant on economic, workforce, and education development. I’ve written about this report in a previous blog post; overall, the key points in the proposal are reasonable, as long as the Legislature doesn’t go off on a tangent regarding immigration policy or setting unreasonable expectations.

Priority #2: Increasing college performance

Legislation was passed in the previous session that required colleges to make certain accountability information public. (I analyzed UW-Madison’s 2012 report in a post last August.) This legislation didn’t really have any teeth in terms of changing a university’s funding level. This looks very likely to change in 2013, as performance-based funding is going to be a key point of discussion. As Gov. Walker outlined in a speech last fall, he is pushing for some of the higher education funding to be based on a college’s performance in key areas, such as graduation rates and possibly enrolling Pell Grant recipients. I’ll have much more to say about performance-based funding in future blog posts, but for now I will emphasize the importance of using some sort of value-added measure as part of the performance score. (I’ve written quite a bit on this in the past, as well.)

Priority #3: Competency-based education

Wisconsin has become a leader in competency-based education in specialized degree programs, allowing students to earn credit for prior knowledge in certain areas. Unlike some states, which are contracting with the not-for-profit Western Governors University, Wisconsin is doing their effort in-house through the University of Wisconsin System. This experiment will be watched closely around the nation to see whether students take up the program in meaningful numbers as well as whether it will be cost-effective.

Priority #4: State grant aid programs

In 2012, the Legislature tasked the Higher Education Aids Board, the state’s agency administering need-based and merit-based grant programs, with exploring ways to consolidate and modernize the state’s financial aid system. The report, released in December, failed to suggest any meaningful changes that would help ensure a more reasonable distribution of financial aid to students. I hope that the Legislature will reconsider ways to reduce the number of separate need-based grants in order to have a more streamlined and student-friendly aid system, but I am not terribly optimistic.

Priority #5: Funding for public colleges and universities

After several rough budget cycles, Wisconsin looks to be in reasonable fiscal health entering the 2013-15 biennium. As such, Wisconsin higher education is requesting a funding increase over the 2011-13 cycle. The University of Wisconsin System is requesting a $224 million increase (1.9%), while the Wisconsin Technical College System is requesting an additional $92 million (a 31.6% increase). Most of the requested increases for the UW System are designated for meeting the accountability goals, while most of WTCS’s requested increases are designated for meeting workforce shortages in high-demand occupations. These requested increases show the importance of the top two priorities on my list to Wisconsin legislators.

 

I expect 2013 to be a much calmer year in Wisconsin politics than the past several years, but no less important to the higher education community. Hopefully, the state will continue to make progress in meeting key performance goals and fostering student success.

Analyzing Wisconsin’s Workforce Development Report

Some people in Wisconsin, particularly in the business community, feel that the state’s secondary and postsecondary education systems do not efficiently prepare students for the types of jobs available in the local labor market. To address these concerns, Tim Sullivan, special consultant to Governor Walker on Economic, Workforce, and Education Development, compiled a report suggesting changes to the state’s educational systems and policies with the goal of improving Wisconsin’s workforce development programs.

I am pleased to see a clear plan on how the Walker administration may wish to move forward with economic development and education policy. Many of the suggestions are reasonable and can be implemented in a tough fiscal climate, but I do encourage careful evaluation of the policies and the consideration of unintended consequences. As an economist of education, I am focusing on the pieces of the report directly pertaining to Wisconsin’s postsecondary education systems instead of the recommendations regarding tax policy, unemployment insurance, and immigration reform. While these policies may tangentially affect higher education, they are not my area of expertise. They are also much less likely to be adopted than the core educational recommendations.

The first policy recommendation that I was expecting to see was that Wisconsin’s data from K-12 and postsecondary education should be linked with unemployment insurance data to examine the labor market outcomes of students by secondary and postsecondary institutions and programs. This has been done in other states, most notably Florida, with at least a modest amount of success. However, this long-overdue policy change was not a part of the report. The call for increased usage of the Labor Market Information software does provide useful information to students and institutions, but is less effective from a policy perspective.

The report is right on to note that Wisconsin has a large number of entities offering workforce development services. To the extent that it is feasible, this should be consolidated into one office. (I would also suggest that the Council for Workforce Readiness and a College and Workforce Readiness Council, both chaired by Mr. Sullivan, be consolidated.)The recommendation that there be a common core of transferrable courses across WTCS and UW System should also be implemented, as it has the potential to give students peace of mind and potentially reduce costs.

I am optimistic about the recommendations regarding evidence-based budgeting and performance-based funding. Both of these proposals have the potential to use the Wisconsin Idea, drawing upon the expertise of the higher education community to provide digestible data to decision makers in the state. These also can drive a cost-effectiveness agenda, which is essential to keeping public support for higher education funding. As someone who does research on cost-adjusted performance measures in higher education, I am glad to see the attention paid to some of the drawbacks of performance-based funding; however, I urge policymakers to consider ways in which colleges can “game the system” to increase graduation and job placement rates by accepting only the best students. Funding colleges in part based on outcomes fits in well with the call for stackable credentials, which provide good measurement points.

There are several recommendations in the report that are of concern to me, as they have the potential to reallocate state resources in less than optimal ways. The first area of concern is the call for UW System to guarantee that students can graduate in four years if certain conditions are met by the student (such as taking a sufficient number of classes per semester). This type of program can work well in certain situations; for example, many students at UW-Madison cannot get into intermediate microeconomics—a prerequisite for courses in several majors—due to not enough faculty members being assigned to teach the course. If this recommendation is to become policy, I strongly encourage the creation of a set of clear administrative rules so students and colleges can operate with a degree of certainty. The University of Minnesota’s four-year graduation agreement is a good starting point.

The focus on four-year graduation rates is not appropriate for all students or institutions. If a student comes to college without any prior credits, enrolls full-time (12 credits per semester), and works during the summer without taking any classes, he or she will take five years to accumulate 120 credits. However, if students enter with prior credits, graduating in four years while maintaining a good GPA is much more feasible. Policymakers should focus on making sure students who begin the semester enrolled full-time complete at least 12 credits per semester and make satisfactory progress toward a degree.

I am skeptical that making students with a bachelor’s degree pay a higher tuition rate to attend a WTCS institution will be cost-effective in the long run. Although there are currently no available data to examine this question, I would expect the majority of these individuals to have been in the workforce for at least a decade and have lost their job prior to returning to college. It is likely the case that paying a higher tuition rate would induce some of these students not to enroll and earn a substantially lower income. It may be a better investment for the state to foot more of the bill if the additional tax revenue exceeds the tuition subsidy. I would encourage a thorough analysis of these students and their circumstances before making a decision.

The recommendation that the WHEG be made available to part-time students in WTCS will at best do little to help increase the skill sets of Wisconsin workers. The WHEG currently has two separate pots of money—one for UW System students and one for WTCS students. The WTCS pool of money is consistently exhausted well before the start of the semester, which is when part-time students are more likely to enroll. This means that no money will be available to fund the program expansion unless it is taken from full-time WTCS or UW System students. These students do still receive Pell Grants, which are often sufficient to cover the cost of tuition for the neediest individuals. For these reasons, extending the WHEG to part-time students, many of whom are working adults, is unlikely to increase enrollment and completion rates.

In order to provide the WHEG to more students in WTCS, whether part-time of full-time, I would suggest scaling back or ending the Wisconsin Postsecondary Education Credit. This nonrefundable tax credit to the employer is less likely to be as effective as a voucher directly given to the student because not all businesses are willing to heavily invest in an employee who may not stay with the company for long enough to recoup the investment. Additionally, the nonrefundable nature of the credit means that only certain businesses are willing to make the investment—those which are highly profitable and/or have relatively small amounts of depreciation or other deductible expenses. I would also recommend dropping the distinction between UW System and WTCS students in the WHEG funding pool; this also streamlines the administrative process.

The report highlights the sizable minority of students with less than a bachelor’s degree who make more money than those with a bachelor’s degree. However, it is unclear whether we can identify these students and guide them toward the path which is more likely to have a higher expected salary. The Academic and Career Plan may be able to help with this somewhat, but this also requires K-12 teachers and guidance counselors to understand a student’s strengths and weaknesses. We do not have any empirical research as to the effectiveness of the ACP program, but it could certainly work well under the right circumstances.

I am not concerned that certain WTCS campuses spend money on GED preparation and liberal arts/transfer courses. Someone has to spend the money on GED preparation, and although the argument could certainly be made that high schools should pay for the coursework, it is easier from the viewpoints of technical expertise and administrative burden to offer the courses through the technical colleges. While the UW Colleges offer the majority of liberal arts/transfer courses at the two-year level, the three WTCS campuses which have liberal arts articulation agreements (Madison, Milwaukee, and Nicolet) are not near a UW College which offers the same services. This means that services are not being duplicated to as great of an extent as feared.

This report is far from perfect, but it does raise important questions about Wisconsin’s workforce development programs and proposes some feasible, implementable policies to address the concerns. I hope that the K-12 and higher education communities and the Walker administration can work together to improve the plan and find at least some common ground.