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Gaming the Systems

Should we base the funding of state universities on course completion rather than enrollment? The commissioner of higher education says yes. Some state lawmakers say no — not until we attack the manipulation of the financing formula by the higher ed lobby.

Rep. Mike Villarreal during New Day Rising.

After much legislative hand-wringing last week over the low graduation rates of Texas colleges and universities — and how tweaking state financing formulas might crack the whip on schools to improve — state Rep. Mike Villarreal, D-San Antonio, could stomach the discussion no longer.

“This is a useless conversation,” Villarreal said at the joint session of the House Higher Education Committee and the Appropriations Subcommittee on Education.

The conversation centered on a recent proposal from Higher Education Commissioner Raymund Paredes to change the way the state funds public universities — by paying them only when students complete a class rather than when they first show up. In Villarreal’s view, that might be a fine idea, but it won’t make a bit of difference unless legislators etch a financing formula into state statute. Otherwise, he said, the powerful university lobby will simply find legislators to help them make up the money elsewhere in the formula, rendering the incentive moot.

Currently embedded into each session’s state budget, the formulas are subject to constant change with each new appropriations committee — making it more of a political bargaining process, largely driven by lobbyists, than one governed by formula structure or university performance, Villarreal said. He described it this way: “What are the outcomes we want, and how can we manipulate the formulas to get those outcomes?”

From the witnesses to the legislators, everyone at the joint session agreed that universities must boost graduation rates. Currently, only five Texas universities have six-year graduation rates above 50 percent, with some languishing in the low teens. Community college graduation rates are even lower. But the correct path to take to improve those statistics, and even how to start down it, remains a clear source of division and consternation. Paredes remained committed to urgently pushing the financing change, which he unsuccessfully proposed in 2009. He dismissed the notion that codifying financing formulas in state law would transform the politics. “I frankly don’t know that that changes anything,” he said. “You can change legislation, you can change the rules at the Coordinating Board, you can change policy. I don’t think where it’s embedded is really the most important determinate.”

Paredes said policymakers need to work together to “mitigate political involvement as much as possible and develop policy on the basis of sound educational decisions and data.” Yet legislators — even those sympathetic to the idea of using financing incentives — questioned whether data supported the concept he put forward. “I’ve been on those boards,” said state Rep. Jimmie Don Aycock, R-Killeen, a past treasurer of the Central Texas College Board of Trustees. “And I know [that] how you fund them matters. But I’m not seeing the correlation between [course] completion and graduation.”

Bill Nance, the vice president for finance and support services at Texas State University and a former Higher Education Coordinating Board employee, also opposed the Paredes plan. Testifying before the committees, he told legislators that the universities with the 27th-, 30th- and 31st-highest graduation rates would benefit from such a change in funding, while universities with the fifth-, seventh- and ninth-highest rates would lose out.

Paredes counters that legislators were not presented with data on other significant factors necessary for understanding the correlation — chief among them the number of courses taken by each student. That's because students who take fewer credit hours per semester may complete most courses but won't be counted in six-year graduation rates if they take longer. Examining course-completion rates between similar students taking a full load of classes would reveal a clear correlation, he suggested. To support his conviction that the proposed change is the right move, Paredes cites a 2006 U.S. Department of Education study, The Toolbox Revisited. It found that “withdrawing from or repeating 20 percent or more of courses decreases the probability of earning a bachelor’s degree by nearly half. … Remaining continuously enrolled increases the probability of degree completion by 43.4 percent.”

Whatever national studies might say, Villarreal believes legislators must consider the context of state politics. “If we do this program, the universities can come and say, ‘Okay, we’ll take a hit there, but we’ll lobby the conference committee for more money somewhere else,'" Villarreal said. "So what are we incentivizing?”

To provide the funding stability that would permit incentives to work, Villarreal plans to push a more fundamental change: putting the formula in law, to spare it from the whims of legislators and lobbyists. While he says it’s too early to forecast exactly what legislation he will file in the next session, he will be “part of a discussion” to do just that. Until then, he said, he sees little point in the current formula process.

Nance agreed that the current process is a cause of concern. He was particularly troubled in the most recent session when he noticed that guaranteed “hold harmless” money — intended to prevent schools from losing funding — was used to ensure every institution a 4-percent funding increase. “That’s a different concept of hold harmless than I’ve ever seen in all my years of doing this,” he said.

State Rep. Scott Hochberg, D-Houston, the chair of the House Appropriations Subcommttee on Education — who opted not to push Paredes’ financing plan last session — suspects there might be a more powerful way to send a message to institutions than a minor, across-the-board financing tweak that he senses might not address institution-specific issues. “How about, until you at least meet national peers, no new majors, no new programs, no new degrees?” Hochberg asked.

Villarreal agrees that the big change needs to happen on campuses. Though his proposed legislative action is smaller in scope, it could prevent the kind of questionable but politically enticing new ventures that have caused much of the higher education budget shortage in the first place. He put it this way to the committee: “If the stars align and we get a governor from Del Rio, a speaker from Del Rio, a lieutenant governor from Del Rio, guess what — we’re getting a university in Del Rio. A big one.”

“So let’s bring some stability here,” he said, “because I don’t want to hang out in this committee room all my life.”

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