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Performance funding of higher education

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Performance funding of higher education a critical analysis of performance funding in the State of Colorado
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Bridges, Gary Lane
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English
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xvii, 191 leaves : illustrations ; 28 cm

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Education, Higher -- Finance -- Colorado ( lcsh )
Government aid to higher education -- Colorado ( lcsh )
Program budgeting -- Colorado ( lcsh )
Education, Higher -- Finance ( fast )
Government aid to higher education ( fast )
Program budgeting ( fast )
Colorado ( fast )
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bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

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Bibliography:
Includes bibliographical references (leaves 185-191).
General Note:
School of Education and Human Development
Statement of Responsibility:
by Gary Lane Bridges.

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University of Colorado Denver
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Auraria Library
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ocm42618391
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Full Text
PERFORMANCE FUNDING OF HIGHER EDUCATION:
A CRITICAL ANALYSIS OF PERFORMANCE FUNDING
IN THE STATE OF COLORADO
by
Gary Lane Bridges
B.A., Baylor University, 1968
M.B.A., University of Texas at San Antonio, 1976
A thesis submitted to the
University of Colorado at Denver
in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
Educational Leadership and Innovation
1999
I
i


This thesis for the Doctor of Philosophy
degree by
Gary Lane Bridges
has been approved
by
&&UL L /-Tf f
Date
Robert C. Shirley


Bridges. Gary Lane (Ph.D.. Educational Leadership and Innovation)
Performance Funding of Higher Education: A Critical Analysis of Performance
Funding in the State of Colorado
Thesis directed by Associate Professor Daphne Greenwood
ABSTRACT
On June 5. 1996. the governor of Colorado. Roy Romer. signed into law House
Bill (HB) 96-1219. the Higher Education Quality Assurance Act". House Bill 94-
1110 preceded the 1996 legislation and linked a portion of the state's higher
education funding to institutions' performance during the fiscal vears 1994-95 to
1996-97.
The purpose of my dissertation is to answer the question. "Did performance
funding have an effect on the desired performance indicators of higher education in
the state of Colorado?" I analyzed institutions' performance data and compared the
amount of performance funding provided by the Colorado's legislature to that
provided by other states. Other states' performance funding policies and other
researchers' performance funding studies helped to provide benchmarks by which to
evaluate the efficacy of Colorado's policy.
My research indicated that 1) Colorado's performance funding policy had no effect
on the state's higher education performance measures. 2) the state provided less
performance funding as a percentage of higher education funding than other states,
and 3) CCHE allocated the performance funding based more on enrollment than on
performance indicators.
This abstract accurately represents the content of the candidate's thesis. I recommend
its publication.
in


DEDICATION
I dedicate this thesis to my wife, Shawn, for her enduring enthusiasm, tireless faith,
and unfaltering good humor while I wrote.


ACKNOWLEDGEMENT
My heartfelt thanks to Dr. Nadyne Guzman and to Dr. Rod Muth for their
irrepressible good humor, steadfast professionalism, and timely nudges throughout
my Ph.D. studies. My unqualified gratitude to Dr. Daphne Greenwood, who chaired
my committee, for her constant and cheerful encouragement and her constructive
comments, and to Dr. A1 Ramirez. Dr. Robert Shirley, and Dr. Michael Murphy for
their timely and discerning participation.


CONTENTS
Figures............................................................ xi
Tables...............................................................xv
CHAPTER
1. BACKGROUND AND CONTEXT
OF THE PROBLEM.....................................................1
General Problem..................................................2
The Specific Problem as Defined by
Performance Funding..............................................2
Institutional Performance......................................3
Student Satisfaction and Success...............................3
Employer Satisfaction..........................................3
The Performance of Colorado's
System of Higher Education.....................................4
Background of the Problem........................................5
Quality in Higher Education....................................5
The Budget Dilemma for
Higher Education............................................. 6
Higher Education Funding in Colorado...........................9
History of Performance Indicators and Funding.................12
Integrated Analysis of the Research
16


Accountability
16
State Involvement in Higher Education
Funding Formulas in Higher Education
Summary..............................
Theoretical Framework................
Accountability....................
Policy Framework...................
Structure of the Dissertation........
Summary..............................
.17
.18
.21
.21
21
.23
.24
.25
2. REVIEW OF THE LITERATURE
29
The History of Accountability in Higher Education................31
The Nature of Accountability...................................34
State Governments and Higher Education...........................35
The Use of Funding Formulas in Higher Education................38
Cost Analysis..................................................39
Advantages and Disadvantages
Of Funding Formulas............................................42
Governing Boards of Higher Education...........................43
State Funding of Higher Education..............................44
State Budgets..................................................45
The Taxpayers Bill of Rights (TABOR)...........................46


State Funding as a Policy Issue............................47
Policy Framework...........................................54
Accountability Redefined For Quality.........................60
The Current State of Performance Funding
Nation Wide..................................................71
Higher Education in the State of Colorado....................83
Summary......................................................87
3. THEORETICAL FRAMEWORK.............................................89
Discussion of Policy Areas and
Performance Indicators.......................................90
A Theory of Student Learning.................................94
4. METHODOLOGY. ANALYSIS
AND RESULTS........................................................98
An Overview of Colorado's Economy
and Higher Education.........................................98
Sources of Data.............................................101
Limitations of the Data.....................................102
Procedures..................................................104
Analysis....................................................105
Explanation of Regression Analysis..........................107
Results.....................................................110
5. CONCLUSIONS AND RECOMMENDATIONS...................................119


Misdirected Performance Funding...........................119
Recommendation.........................................120
Insufficient Performance Funding Amounts..................121
Recommendation.........................................122
Enrollment Funding Masquerading
As Performance Funding....................................123
Recommendation.........................................124
Discontinuity of the Performance Funding..................125
Recommendation.........................................125
Discontinuity of the Performance Measures.................126
Recommendation.........................................126
Research Institutions Attract Different
Students and Behave Differently...........................127
Recommendation............................................129
Summary of Recommendations................................130
Summary...................................................131
APPENDIX
A. COLORADO COMMISSION ON HIGHER
EDUCATION POLICY AREAS AND
RELATED PERFORMANCE AREAS...................................136
B. REGRESSION EQUATIONS
AND DATA PLOTS..............................................141


C. STATE OF COLORADO HIGHER EDUCATION
PERFORMANCE DATA AND FUNDING BY
GOVERNING BOARD......................................151
D. HOUSE BILL 94-1110...................................155
E. HOUSE BILL 96-1219...................................163
REFERENCES..............................................185
x


FIGURES
Figure
1.1 States with Performance Funding or Budgeting. 1997
and States Expecting Adoption of Performance
Funding Within 1996................................................27
1.2 Colorado Higher Education Appropriations Process 1997-98..........28
5.1 Percentage of Total Average Funding and
the Percentage of Total Average Student FTE
by Institution 1995-95 to 1996-97.................................135
B. 1 Examples of Linear XY Relationships...............................141
B.2a Ratio of Teaching to Non-Teaching Faculty and Staff
And Related Performance Funding for Institutions..................142
B.2b Ratio of Teaching to Non-Teaching Faculty and Staff
And Related Performance Funding for Systems.......................142
B.2c Ratio of Teaching to Non-Teaching Faculty and Staff
And Related Performance Funding for Systems
Excluding Research................................................142
B.2d Ratio of Teaching to Non-Teaching Faculty and Staff
And Related Performance Funding for Research Institutions.........142
B.3a Institutional Support Expenditures per SFTE
And Related Performance Funding for Institutions..................143
B.3b Institutional Support Expenditures per SFTE
And Related Performance Funding for Systems.......................143


B.3c Institutional Support Expenditures per SFTE
And Related Performance Funding for Systems
Excluding Research Institutions.....................................143
B.3d Institutional Support Expenditures per SFTE
And Related Performance Funding for Research Institutions...........143
B.4a Credit Hours to Graduation and Related Performance
Funding for Institutions............................................144
B.4b Credit Hours to Graduation and Related Performance
Funding for Systems.................................................144
B.4c Credit Hours to Graduation and Related Performance
Funding for Systems Excluding Research Institutions.................144
B.4d Credit Hours to Graduation and Related Performance
Funding for Research Institutions...................................144
B.5a Weekly Undergraduate Contact Hours by Full-Time
Faculty and Related Performance Funding
For Institutions....................................................145
B.5b Weekly Undergraduate Contact Hours by Full-Time
Faculty and Related Performance Funding for Systems.................145
B.5c Weekly Undergraduate Contact Hours by Full-Time
Faculty and Related Performance Funding for
Systems Excluding Research Institutions.............................145
B.5d Weekly Undergraduate Contact Hours by Full-Time
Faculty and Related Performance Funding
For Research Institutions...........................................145
B.6a Relationship of GRE Scores to ACT Scores
For Institutions....................................................146
B.6b Relationship of GRE Scores to ACT Scores
For Systems.........................................................146
xu


B.6c Relationship of GRE Scores to ACT Scores
For Systems Excluding Research Institutions.........................146
B.6d Relationship of GRE Scores to ACT Scores
For Research Institutions...........................................146
B.7a Relationship of GRE Scores to Ratio of
Teaching Faculty to Non-Teaching Faculty and
Staff for Institutions..............................................147
B.7b Relationship of GRE Scores to Ratio of
Teaching Faculty to Non-Teaching Faculty and
Staff for Systems...................................................147
B.7c Relationship of GRE Scores to Ratio of
Teaching Faculty to Non-Teaching Faculty and
Staff for Systems Excluding Research Institutions...................147
B.7d Relationship of GRE Scores to Ratio of
Teaching Faculty to Non-Teaching Faculty and
Staff for Research Institutions.....................................147
B.8a Relationship of GRE Scores to Institutional Support
Expenditures per SFTE for Institutions..............................148
B.8b Relationship of GRE Scores to Institutional Support
Expenditures per SFTE for Systems...................................148
B.8c Relationship of GRE Scores to Institutional Support
Expenditures per SFTE for Systems
Excluding Research Institutions.....................................148
B.8d Relationship of GRE Scores to Institutional Support
Expenditures per SFTE for Research Institutions.....................148
B.9a Relationship of GRE Scores to Credit Hours
To Graduation for Institutions......................................149
B.9b Relationship of GRE Scores to Credit Hours
To Graduation for Systems...........................................149


B.9c Relationship of GRE Scores to Credit Hours
To Graduation for Systems
Excluding Research Institutions.....................................149
B.9d Relationship of GRE Scores to Credit Hours
To Graduation for Research Institutions............................149
B.lOa Relationship of GRE Scores to Weekly
Undergraduate Contact Hours for Institutions.......................ISO
B. 1 Ob Relationship of GRE Scores to Weekly
Undergraduate Contact Hours for Systems.............................150
B. 10c Relationship of GRE Scores to Weekly
Undergraduate Contact Hours for Systems
Excluding Research Institutions.....................................150
B. 1 Od Relationship of GRE Scores to Weekly
Undergraduate Contact Hours for Research Institutions...............150


TABLES
Table
3.1 Policy Areas. Performance Measures.
And Performance Funding Amounts................................90
4.1 Comparative Statistics: Higher Education
in Colorado and the U.S. 1998.................................100
4.2 Ratio of Teaching to Non-Teaching Faculty and
Staff and Related Performance Funding
Regression Analysis Results...................................110
4.3 Institutional Support Expenditures per SFTE
And Related Performance Funding
Regression Analysis Results...................................Ill
4.4 Credit Hours to Graduation and Related
Performance Funding
Regression Analysis Results...................................112
4.5 Weekly Undergraduate Contact Hours by
Full-Time Faculty and Related
Performance Funding
Regression Analysis Results....................................113
4.6 Relationship of GRE Scores to ACT Scores
Regression Analysis Results....................................114
4.7 Relationship of GRE Scores to Ratio
Of Teaching to Non-Teaching Faculty and Staff
Regression Analysis Results....................................115
xv


4.8 Relationship of GRE Scores and Institutional
Support Expenditures per SFTE
Regression Analysis Results.......................................116
4.9 Relationship of GRE Scores and Credit Hours
To Graduation
Regression Analysis Results.......................................117
4.10 Relationship of GRE Scores and Weekly
Undergraduate Contact Hours
Regression Analysis Results.......................................118
5.1 Comparisons Selected Characteristics of
Research Institutions to Other Institutions and Systems...........128
5.2 Average Performance Funding Amounts and
Percentages Compared to Average Student FTE
Percentages by Institution 1994-95 to 1996-97.....................133
C.l Weighted Average Institutional Support Expenditures
Per SFTE and Related Performance Funding
1988- 89 to 1995-96...........................................151
C.2 Weighted Average Ratio of Teaching Faculty to
Non-Teaching Faculty and Staff and Related
Performance Funding 1989-90 to 1996-97........................152
C.3 Weighted Average Credit Hours to Graduation
And Related Performance Funding 1994-95 to 1996-97............152
C.4 Weighted Average Weekly Undergraduate Contact Hours
By Full Time Faculty and Related Performance
Funding 1992-93 to 1996-97............................................153
C.5 Weighted Average Faculty Salaries by System
1989- 90 to 1996-97...........................................153
C.6 Student FTE by System 1988-89 to 1997-98...........................154
xvi


Weighted Average ACT and GRE Scores 1989 to 1995


CHAPTER 1
BACKGROUND AND CONTEXT
OF THE PROBLEM
The higher education profession of Colorado is at a tantalizing crossroads.
The easiest (and most tempting) road to travel is paved with rich traditions and
comfortable ways of doing things (and not doing some things). Progress along this
road will continue to be measured by mile markers that gauge how much the state
pours into the educational system (i.e.. number of students enrolled, dollars
appropriated, or quantity of Ph.Ds. hired) rather than how much our educational
system returns to society (i.e.. new learning, citizenship, values, or other intellectual
enhancements). The constituencies of higher education are calling for a new direction
of travela direction that leads to more and better output measurement from
institutions of higher education and some type of incentive system that rewards
institutional performance. Some such systems are currently operating in the United
States and some even link institutional performance with institutional budgets.
I describe the ways that 1994 and 1996 Colorado legislation embraced quality
assurance, review the issue of defining quality in higher education, present the budget
dilemma for higher education in the United States and in Colorado, review the history
of performance funding in higher education, discuss the issue and history of
accountability, discuss the genesis and use of funding formulas in higher education.
I


review the role of states'governing boards, and review the current state of
performance funding in the United States and in Colorado. My goal is to help answer
the question, "Has performance funding improved higher education performance in
Colorado?"
General Problem
The academic community has largely ignored a private industry concept of
Total Quality Management (TQM). Although eminent professors teach others how to
incorporate TQM principles in the work place, most scholars consider TQM
inappropriate for their own profession. Inappropriate or not. quality awareness and
improvement are literally becoming the law of the land. Performance funding is an
attempt to superimpose TQM-like principles onto the higher education community.
The Specific Problem as Defined bv Performance Funding
Performance funding links some portion of higher education funding to
achievement of pre-specified performance or productivity goals. Did its use improve
higher education performance or productivity in Colorado? Is the funding formula
the appropriate vehicle to carry the quality improvement and accountability banners?
On June 5, 1996. the governor of Colorado, Roy Romer, signed into law House Bill
(HB) 96-1219. the "Higher Education Quality Assurance Act. Section
I


23-13-104 of the Act articulates the state of Colorado's expectations and goals for
higher education. Section 23-13-105 (1 )(a) directs the Colorado Commission on
Higher Education (CCHE) and the states higher education governing boards to
develop a quality indicator system to measure the overall performance of the
statewide system of higher education and each governing boards and each
institutions performance in achieving the statewide expectations and goals. The Act
defines the achievement areas the system will measure as follows:
Institutional Performance
(a) The efficiency and productivity of each institution, (b) each institution's
stewardship of the assets held by it. and (c) whether the institution implements
specific practices designed to enhance future institutional performance.
Student Satisfaction and Success
(a) Anticipated student outcomes (as measured by standardized test scores). (b)
valued experiences provided by the institution, (c) student access to valued resources
and services, and (d) the affordability of the institution in terms of the cost to the
students.
Employer Satisfaction
(a) Employers satisfaction with the attitudes and skills of new employees.


(b) employers' access to and satisfaction with the provision of continuing
professional education opportunities by institutions, and (c) employers* access to and
satisfaction with the provision of relevant technical assistance and applied research by
institutions.
The Performance of Colorado's System of Higher Education
(a) Student access to higher education, (b) the overall affordability of higher
education both to students and to the state, (c) the educational development of the
citizenry of the state, and (d) the institution's contributions to identified state needs
and priorities.
This legislation represents the second, albeit tentative, step toward a quality
enhancing budgeting formula for higher education in Colorado. Previously. Colorado
higher education grappled with performance funding under HB 94-1110. This
legislation was in effect during the period 1994-95 to 1997-98. although the
legislature funded only the first three years. CCHE collected extensive data from the
institutions and their governing boards during this time and used that data to make
handing allocation decisions. My project analyzed the performance data, tried to
relate them to the performance funding allocated, and generally tried to make sense
out of Colorado's performance funding policy and its implementation.
i
i
4


Background of the Problem
\
I
i
i
Quality in Higher Education
Colorado's legislation propels the state into the forefront of the performance
funding movement in the United States. An array of forces across the country is
nudging this issue to the top of state legislative agendas. Former Governor Roy
Romer has been one of those forces, so it is not surprising that Colorado has taken up
this reform banner.
As the outgoing chairman (1994-95) of the Education Commission of the
States (ECS), then Governor Romer expressed his views and frustrations regarding
higher education very succinctly. In the foreword to his report. Making Quality
Count in Undergraduate Education. Governor Romer said:
I chose to focus on quality in higher education because of my
curiosity and uneasiness about how people inside and outside colleges
and universities think about quality and accountability. Because
higher education is so important to our future well being, our
investments in colleges and universities must pay high returns for both
individuals and society as a whole. It seems clear to me that as state
leaders and parents, we have the responsibility to take steps to ensure
our institutions of higher learning meet our needs and expectations.
Yet. I continue to be amazed at the resistance I encounter to
examining whether we can measure and report on effective learning at
individual institutions and provide good information to inform
consumers about their choices. I also continue to be amazed at the
inability of policy makers and public leaders to create meaningful and
useful accountability systems for higher education. Finally, I am
amazed at how many people are content to rest on the laurels of the
past and insist that our higher education institutions need not change
because they are the best in the world.
I
5


Increasingly, however, both the public and state leaders are
expressing concerns about the quality and effectiveness of their higher
education institutions. These concerns reflect a wide range of issues,
including: increasing costs, declining access, large class sizes. lack of
course offerings, and reduced productivity and faculty workload.
My ECS agenda focused on quality because it is the heart of
addressing all these issues. Agreeing on what we mean by quality and
measuring this quality in various institutions is essential to how we
address issues of cost, access, and the effectiveness of teaching and
learning. Decisions about which institutions grow and receive more
dollars in a state higher education system should be made on the basis
of which ones offer the best programs. Where students choose to
attend and how much they are willing to pay for that experience should
be based on the value they expect to receive. How institutions
organize undergraduate degree programs and faculty work should be
decided on the basis on what provides a high-quality learning
experience. We need to be clear about what we value in higher
education so we can act on those values, (p.v)
The Budget Dilemma for Higher Education
Governors and state legislators nationwide are echoing this refrain. It is
fueled by more than just concern about the efficacy of higher education. Higher
education is facing a declining share of state appropriations as competition for
funding grows rapidly. In the state of Colorado, for example, higher education's
share of total appropriations fell from just over 20 percent in 1986-87 to slightly less
than 15 percent in 1997-98 (CCHE. 1997). Prisons and Medicaid have become
voracious consumers of taxpayer dollars. K-12 has had trouble holding its ground
and higher education has been losing ground since the early 1980s. In 1992.
Medicaid spending consumed a greater portion of Colorado's state spending than did
6


higher education. This pattern occurred in many states. In 1994. Medicaid spending
grew 8.7 % nationally compared to 4.9 % growth in total state budgets and a 4.4 %
increase in higher education spending for the same period (Sweeney. 1995). Prisons
have also been consuming a larger share of state spending. The American
Association of State Colleges and Universities (AASCU) in their 1995 Report of the
States reported that 86% of state representatives surveyed from 48 states responded
by stating that corrections spending competed with higher education: 83 % listed K-
12 spending: and 60.4% listed Medicaid and welfare spending as major competitors.
One dramatic example of prison spending crowding out higher education came in the
early 1990's with the state of California increasing its spending on prisons by 25 %
while cutting higher education spending by 25 % during the same period (Ruppert.
1996). Ruppert also reported that many legislators view higher education as a budget
balancer. In other words, they know that higher education can increase tuition and
fees to help solve their fiscal woes. In this same survey. 55 % of responding
legislators stated that they believed higher education's share of their states' total
budget would stay the same during the next three to five years while 16 % believed
that its share would decrease during the same period.
The state funding picture in Colorado is even bleaker, as reported by the
CCHE in their Master Plan 1993-1998. Since 1988. state general funding per student
(adjusted for inflation) has declined by 8.2 %. During 1992-93, Colorado ranked 47th
among states in the level of state appropriations per student, and 40th among states in
7


state appropriations plus tuition revenue per student (CCHE. 1993). Paradoxically,
for this same period. Colorado ranked sixth among the states in the percentage of
residents who completed four or more years of college (CCHE. 1993). The heavy in-
migration of population from other states into Colorado accounted for much of
Colorado's favorable standing as a highly educated state. Colorado has enjoyed
(along with other western states) higher than normal economic and population growth
during most of the 1990s. Colorado's funding environment is further complicated by
the fact that it is one of three states (Colorado. Missouri, and Washington) that have
directly invested the taxpayers with the sole authority to initiate new taxes or increase
existing taxes (American Association of State Colleges and Universities. 1998).
Colorado is also one of twenty-one states to adopt term limits between 1990 and
1995. These limits and greater legislative turnover in general, pose an additional
challenge for higher education because they make higher education leadership work
much more diligently to build new working relationships between higher education
leadership and state legislators. In a 1995 survey. The National Education Association
(NEA) reported that 54 % of education committee chairs in state legislatures were
serving a first term, and that 25 % had served in the legislature five years or less. It
appears to me that turnover at the state level could upset traditional relationships and
alliances between state government and higher education.
8


Higher Education Funding in Colorado
The State of Colorado funds its 25 public colleges and universities from the
General Fund (consisting primarily of income and tax revenues), student tuition and
fee revenues, capital construction funds, and research grants. The state higher
education budget consists of separate funds for capital construction projects and for
annual operating expenditures.
Performance funding got its start in Colorado in FY 1994-95 when the
General Assembly appropriated General Fund dollars to reward performance and to
provide incentives for higher education institutions showing improvement in selected
priorities labeled as policy areas selected by the legislature. The legislature repealed
the policy area funding during the 1997 session, but provided $4.6 million (0.4 % of
total higher education funding) for FY 1997-98 to phase out two of the policy areas
technology and K-12 linkagesthat had been supported under the policy area
initiative.
House Bill 96-1219. enacted in 1996. redirected the approach the state was
taking on accountability and performance funding for higher education. This
legislation charged CCHE with developing a quality indicator system to measure
progress of institutions in achieving statewide expectations and goals. The statewide
goals in HB 96-1219 reflect the previously reported policy areas: undergraduate
9


education, workforce training, technology. K.-12 linkages, and productivity. Funding
of HB 96-1219 will begin in FY 1999-2000.
The Colorado General Assembly uses the Denver-Boulder Consumer Price
Index (CPI) (the only one available for Colorado) to set the level of increase for much
of the higher education appropriation. In recent years, the legislature has limited
tuition increases to the CPI or lower, and has even subsidized resident tuition from
the General Fund. For example, for FY 1997-98. based upon the 1996 Denver-
Boulder CPI of 3.5 %. they limited the non-resident tuition increase to 3.5 % and
increased resident tuition by only l .5 %. Student enrollments also affect higher
education appropriations. For instance, when projected enrollments for FY 1996-97
fell short. CCHE reduced base funding by $1.4 million. In FY 1997-98. although
enrollment was within 0.2% of projections. CCHE shifted funding from governing
boards with below projected enrollment to those with enrollment growth.
The Colorado legislature appropriates a lump sum for the Colorado
Commission on Higher Education (CCHE) which makes system-wide funding
recommendations to the Governor and the legislature. CCHE allocates the overall
General Fund and tuition revenue appropriations among the governing boards using
funding formulas developed by CCHE and the governing boards. The six governing
boards are: Trustees of the State Colleges in Colorado. State Board of Agriculture
(CSU System). Regents of the University of Colorado, Trustees of the Colorado
10


School of Mines, Trustees for the University of Northern Colorado, and the State
Board for Community Colleges and Occupational Education. The governing boards
then manage all expenditures. CCHE also consults with the Governor's Office of
State Planning and Budgeting that reviews CCHE's recommendation and forwards
the recommendation (after consulting with the Governor) to the legislature. At that
stage the legislative Joint Budget Committee (JBC) reviews and modifies the
recommendation before including it in the annual appropriations bill (see Figure 1.2).
Two separate spending limits constrain lawmakers in Colorado. A statutory
limit approved in 1977 restricts the overall General Fund appropriations to 6 % above
the prior year's level (regardless of inflation or population growth) and requires that
the state keep a 4 % General Fund reserve. In 1992. voters approved the Taxpayer
Bill of Rights" (TABOR), which created a new limit on revenues and expenditures.
The constitutional amendment limits the state's fiscal year spending growth each year
to the sum of inflation and state population growth for the previous calendar year. It
applies to all funds, including cash funds such as tuition. Revenues collected in
excess of the limit must be refunded to taxpayers unless voters approve spending the
excess. Voters also must approve any tax rate increases. State revenues exceeded
the TABOR limit for the first time in FY 1996-97 by $ 139 million, which was
refunded to taxpayers. Prior to TABOR, tuition and fees were determined by the
governing boards subject to CCHE policy. Now. TABOR requires that the legislature
limit tuition and fee increases (CCHE. 1997) since they are under the limitations.
II


State of Colorado economists are predicting that over the next five years. Colorado
will collect revenues that exceed TABOR limits by $1.5 billion. While voters could
approve spending these surplus funds, in 1998 they rejected the state's proposal to
spend $562 million in surplus funds.
History of Performance Indicators and Funding
As early as the 1970s. when Hawaii. Tennessee, and Washington
experimented with the concept, states began using performance measures to allocate
state funds to higher education. In the 1980s. some states showed renewed interest in
the Total Quality Management (TQM) movement, but failed to follow through when
tight budgets and recession hit in the early 1990s. Currently, most states that use
performance funding or performance budgeting limit the budget impact to between 2-
5.5 % of the base budget. South Carolina may become a noted exception if they
follow through on their reported plan to allocate 100 % of higher education funding
based on performance measures by fiscal year 2000 (AASCU. 1998).
A national survey of state legislators (Ruppert. 1996) indicated continuing
interest in linking higher education funding to state priorities, performance, and
productivity. Forty-five percent of the legislators responding said that their
legislatures are likely to "adopt a new funding formula in the next three to five years,"
in most cases modifying the current formula to incorporate a greater focus on
performance mechanisms. Forty-four percent responded that their legislatures were
12


likely in the next few years to *iink funding to campus efforts to increase enrollment.
graduation rates, or other measures of student or institutional performance." Many of
those responding viewed such links as an appropriate way to address concerns about
higher education's accountability. Burke and Serban (1997) writing for the Nelson A.
Rockefeller Institute, reported similar results. I used their data to develop Figure l. 1
that illustrates the geographic range of the use of performance funding.
Governor Roy Romer. in his final report as Chairman of the ECS. stated:
As state leaders, we have not done a good job of holding institutions
accountable for the kinds of results that we really care about or the
quality that counts for students, parents or states as a whole. In
Colorado. I have no way to measure effectively the "value added" by
the academic experience at most public institutions, especially in terms
that are meaningful to students and parents or relevant to public policv.
(P-3)
The Education Commission of the States in its booklet. Assessing College
Outcomes-What State Leaders Need to Know, reported the results of a 1991 survey
by the American Council on Education (ACE). According to this survey. 81% of
colleges had assessment activities under way. up from 55 % in 1988 (ECS. 1991).
This interest in assessment largely grew from mandates of statewide coordinating and
governing boards. State boards, the business community, and the public were the first
to start asking questions about higher education outcomes (ECS. 1991). Today's
productivity, performance, and quality movements are the evolutionary by-products
of the earlier assessment efforts. The stagnant or deteriorating fiscal environments
for higher education in many states has helped to forge the various performance
i
13


funding models.
Performance funding in public higher education really began gathering steam
in the first half of the 1990's. A survey conducted in late 1994 by the State Higher
Education Finance Officers revealed that nine states had adoptedand ten were
consideringmeasures that link some state funding for higher education to
achievements on priority goals and objectives (Caruthers & Lavzell. 1995).
Telephone interviews conducted in 1995 with the chairs of the higher education
committees of state legislatures found that 44% of the respondents from 49 states
believed that their states were likely to tie funding to student or institutional
performance in the next few years (Ruppert. 1996). Two surveys in 1996 suggest a
growing interest in funding for results. The first one indicated that 14 states use
quality outcomes factors in allocating state funds to institutions of higher education
(McfCeown. 1996). The other revealed that 'many states are either beginning to use
or are considering performance funding, which is a natural outgrowth of the current
public demand for the most effective use of tax dollars" (Maryland Higher Education
Commission, as cited in Burke & Serban. 1997. p.6).
Another influence helping to shape the debate on higher education
performance is what some call the "corporatization" of higher education. State
governments often look to the business community for ideas about how to improve
their own operations and efficiency. State legislators and officials may believe that
terms like productivity, efficiency, performance, market-driven, total quality
14


management, and incentive all mean the same things in higher education as they do in
the business world. State officials often apply these corporate concepts to other state
agencies and realize some successes. They believe, logically, that the same concepts
must therefore be appropriate for higher education. Since there is no other state
agency that operates quite like higher education (most agencies operate in
a very centralized fashion and are managed by bureaucrats while higher education is
de-centralized and managed by academics), these corporate concepts are often
misunderstood, resented, and/or misapplied in the higher education realm.
Unfortunately, many state legislators take the approach of regulating more corporate-
like behavior in higher education and simply add to the problem of over-regulation.
They overlook, or never see. that one of the defining differences between the
corporate environment and state government is less regulation of corporate behavior
(AASCU. 1998).
Corporate non-accredited higher education programs are also on the rise,
fueled by the successes of giant corporations like Microsoft (AASCU. 1998). It is no
wonder that these influences are changing the vocabulary and mindset of state
legislators. The new (less value laden) perspectives tend to alter the routine and
familiar ways of thinking and talking about how higher education should behave, and
how the states should fund institutions.
The Public Higher Education Program at the Rockefeller Institute of
Government conducted a telephone survey in early 1997 questioning the State Higher
15


Education Finance Officers or alternate officials in all fifty states. Puerto Rico, and
the District of Columbia. The survey was designed to differentiate between the terms
performance funding and performance budgeting. The authors analyzed the different
terms used in the responses and how the terms related to the descriptions of what was
being done in the various states. Based on this analysis, they described performance
budgeting as "state governments considering reports of achievements on performance
indicators as a factor in setting budget levels for public higher education and its
institutions, without tying designated amounts directly to performance on specific
indicators (p. 1). They define performance funding as "special state funding tied
directly to the achievements of public colleges and universities on specific
performance indicators" (p. 1).
Integrated Analysis of the Research
Accountability
Accountability surfaced as a significant force in higher education as early as
the University of Paris in the 13th century (Duryea. 1981). Its influence in higher
education policy making continues today. The public, first through lay governing
boards of private universities, and later through state legislators, has always exerted
influence over the affairs and even teachings of higher education institutions (Duryea.
1981 and McConnell 1981). Accountability is comprised of three elements: financial
16


and administrative, scientific, and social (McConnell. 1981). The National
Commission on Research says that. "When well designed, the system of
accountability involves an appropriate balance between independence and control,
between incentives and constraints, and between the costs and benefits of the various
procedures and requirements used (as cited in McConnell, p.38). Regardless of how
well designed, however, accountability crashes head on into faculties' desire for
autonomy. The "right" of faculty to govern themselves has. to a degree, been
traditionally supported by the public (Duryea. 1981). Peters (1994) denounced
accountability as the scourge of higher education. Boyer (as cited in Curry & Fischer.
1986) warned that the competing demands of accountability and autonomy could lead
to a "marriage gone sour" (p. 1). The ideological battle over who governs whom and
how much continues in the halls of learning today, but with much higher stakes. As
we shift from a domestic manufacturing-based economy to a global technology-based
economy, higher education becomes more important as a means to realizing financial
independence.
State Involvement in Higher Education
Since the Morrill Act of 1862. state governments have become more and more
involved in higher education as they provide significant financial resources to state
institutions. Hauptman (1993) reported that states paid about 30 % of the total $150
billion of higher education expenditures in 1990. Such a huge financial umbilical
17


cord carries with it public concerns about how tax dollars are being spent.
Complicating the issue are questions about the nature of quality and performance and
how to define and measure them. State governments use the only leverage they
control to exert their influencemoney. That, in a nutshell, is how funding and
quality came to be mixed together in the current debate about performance funding
for higher education.
Funding Formulas in Higher Education
James Miller (1964) provided the most thorough and most enlightening
examination of the funding formulas development and use in higher education. He
chronicled its development and evolution as a major policy tool of state governments
as they struggled to deal with the exploding demands of higher education after World
War II. Funding formulas provided higher education, its governing boards, and state
budget officers with a quantitative, simple, and equitable tool with which to analyze
budget requests and to allocate state funds. Formulas are also a vehicle for imposing
accountability. As of 1995. almost 60 percent of states reported the use of funding
formulas (AASCU. 1995).
Researchers use various, though similar, definitions of funding formulas and I
enumerate many of them later. Funding formulas are basically quantitative
procedures designed to structure the state funding-of-higher-education process into a
non-political, more objective, more equitable, and more easily understood process for
18


state legislators and higher education leaders. Objectives of funding formulas also
include achieving fairness in the way states collect and distribute state revenue to
higher education, helping to meet state higher education goals, and providing a more
stable fiscal platform from which to budget for higher education, which can prove to
be an effective economic development tool for states. States' commitments to
education, especially higher education, are often an important inducement for
industry relocation. A. stable, well-financed higher education may provide a steady
source of labor for industry.
Caruthers, McKeown. and Marks (1994) also have written about the
continuing development of funding formulas and their use in higher education.
Cuthbertson (1994) and Nelson (1989) reported the results of their dissertation
research on the use of funding formulas in specific states. The research in general
depicted funding formulas as a benign budgeting tool that, for the most part, simplify
the task of preparing, analyzing, and funding higher education budget requests.
The State of Colorado first imported their funding formula directly from New
Mexico in 1957 but called it a "cost analysis" method. They joined the nine other
states that were using similar budgeting processes by 1957.
Even as states and institutions were simplifying budget requests and the
process of allocating funds to higher education, the relationship between them was
becoming more complex. Governing boards evolved out of the need for institutions
19


of higher education and state governments to communicate more effectively. For one
thing, the state budgeting process was becoming more problematic for higher
education as competing demands for resources crowded the state capitol agendas.
Higher education needed to make its case to legislators who did not always
understand higher education. Likewise, higher education leaders did not always know
how to react in a more competitive arena. The governing boards are the intermedian.
between higher education and their benefactors (Miller. 1964).
A significant amount of research has addressed state funding as a policy tool.
Jones and Ewell (1993) elaborated on how funding policies affect behavior, and
maintain that states need to evaluate whether institutions' behavior is consistent with
state educational goals. The implication is that states can affect that behavior through
their funding policies. According to Jones and Folger (1993). states have for years
promoted access to higher education by dictating that institutions maintain tuition
rates that do not cover institutional costs (made possible by state appropriations).
The 1990s ushered in new ways to blend the same ingredients into the policy-
setting and funding smorgasbord. A variety of terms (quality, performance, and
productivity) highlight the basic idea of rewarding institutions of higher education on
their performance. Grounded in accountability terms, the concepts are readily
accepted and used by the business world.
20


Summary
My review of the literature for this study indicated that much of the research
on performance funding concentrates on the difficulty of defining quality, measuring
quality, reporting quality for institutions with different missions, and identifying
appropriate indicators of quality. Other research reported the current usage of state
binding efforts that link funding to quality, successes and failures of states' efforts,
and the state of Colorado's legislatively formalizing efforts to link some higher
education state funding to performance indicators.
Overall, the research available on funding formulas and their use by states to
allocate state money to higher education appears to be thorough. Statistical analyses
of performance data as they relate to performance funding, however, are noticeably
absent from the literature.
Theoretical Framework
Accountability
Quality I know in my bones.. .[using] inputs' and outputs' is bush league
economics. It is zeal for quantification carried to its logical absurdity (Peters. 1994.
P-20).
Why do we seek to know the condition of education? In the answer to
this question will be found the reasons for the elaborate statistical
record which forms a feature of all official school reports. We take an
21


account of education so that we may know whether it is sufficient in
amount and good in quality. (Peters, p. 48)
These two quotes represent the divergent viewpoints about accountability in
higher education today and will help to define the intensifying debate concerning
performance funding in the months and years ahead. Peters (1994) wrote that
accountability deprofessionalizes faculty and that it fails because higher
education has not adequately defined the desired outcomes of its educational process.
He likened faculty members to Mintzberg's holistic thinkers who used hunches when
coping with complex problems that defied rational analysis. Complex human
characteristics. like learning, often cannot be objectively measured and accountability
demands just such measurement, according to Peters. Folger and Jones (1993)
lamented the accountability regulations because, as they contended, they produce a
'compliance mentality* (p. 21) and. for the most part, do not result in demonstrable
quality improvements.
Is the accountability movement part of an evil plot to gain control of our
university classrooms? Is it simply a misunderstanding of the educational process on
the part of legislators and the public? The current movement toward performance
funding is a product of the traditional concept of higher education accountability and
the corporate concept of using incentives to influence behavior. Incentives are the
life-blood of the business world. The idea is that workers will increase production
when offered enough of the right kind of incentives, managers will have better ideas

i


when they get bonuses, and Chief Executive Officers will raise corporate
performance (along with stock prices) to new highs when offered enough stock
options. Incentives are the common thread woven through out corporate America. It
is only natural that state legislators would take the incentive cue and desperately want
to be able to use incentives to "fix'* higher education. The very nature of the policy
framework within which state government and higher education operate, however,
may not be conducive for such a cross-cultural transplant.
Policy Framework
Dennis Jones (1997). President of the National Center for Higher Education
Management Systems (NCHEMS) defined a policy framework as "that collection of
constitutional, statutory, and regulatory provisions that define the set of relationships
between state government, higher education institutions, and the students that attend
those institutions" (p. 2). Jones said that most state/higher education policy
frameworks are not planned, for example, as an integral piece of an over-reaching
higher education mission statement. Policy frameworks evolve from layers and
layers, over many years, of statutes and regulations. Consequently, higher education
has become virtually encased in a labyrinth of "what not to do" and "how not to do
it". The leaders of higher education, understandably, spend most of their time
looking inward in a compliance mode instead of looking outward toward a vision.
Jones also pointed out that the relationship between the states and higher education


depends on institutions deciding what to do and the states telling them how to do it
while the corporate model is just the opposite. Corporate boards of directors develop
the mission statements and charge corporate management wdth deciding how to get it
done.
Jones made a convincing argument that the typical policy framework will not
allow higher education to move forward and accomplish true reform. He believes
that the states must broaden their perspectives on higher education and recognize that
the state governments are not the only clients of higher education. States need to "de-
regulate higher education to a degree. Substituting well-designed incentives for
regulations can more effectively influence institutional behavior. States, according to
Jones, should recognize students as part of the stakeholder system and re-direct policy
making to consider students and the higher education market. Jones said that states
should incorporate performance funding in the budgeting process to help align
institutional and student behavior to be more congruent wdth state priorities (1997).
Structure of the Dissertation
Chapter 1 presents the research problem and its background, summarizes key
research, describes the specific research problem, explicates the theoretical
framework of the problem, and briefly explains the methodology.
Chapter 2 reviews the literature on accountability in higher education, state
governments and higher education, the use of funding formulas in higher education.
24


governing boards of higher education, state budgeting for higher education, and the
current state of performance funding in higher education in the United States and in
Colorado.
Chapter 3 lays out the theoretical framework for relating performance
indicators to desired outcomes.
Chapter 4 details the methodology used. The methodology includes analyzing
documents from CCHE. interviewing CCHE personnel and higher education officials,
statistically analyzing institutional performance data, interpreting the statistical
analyses, and relating the data analyses to Colorado's legislation. Chapter 4 also
describes and analyzes the data, summarizes the data and related performance
funding amounts, and discusses the limitations of the study.
Chapter 5 explains the conclusions, recommendations, and implications of the
study and identifies future potential research.
Summary'
A chorus of stakeholders is singing a refrain of higher education financing
reform. Governors, state legislators, business leaders, and researchers are tuning in
to the "quality for pay" movement. Simply put. state policy makers continue to be
frustrated with the higher education community because:
It takes so much money (slightly less than 15 % of total 1997-98 total
appropriations in Colorado).
25


\
3 The state cannot operate higher education like it does all other state agencies.
Many legislators perceive that higher education could operate much more
efficiently."
Education is a difficult product" to measure.
The public and lawmakers have different perceptions of the higher education
work environment because they cannot relate the typical faculty teaching load and
nine month teaching year to the customary" eight hour work day and 12 month
work year.
The public and lawmakers recognize how critical higher education is to society
because of the changing nature of our economy, the higher level of knowledge
and skill required, and the realization that, in general, more education means a
better chance for economic success.
Higher education is very personal and even emotional for most families, since it
involves their children and their chance for success in later life.
Consequently, the chorus for juxtaposing quality improvement with budgeting is
gaining volume. The hope is that financial incentives will propel institutions to
greater levels of productivity, performance, and quality. The most difficult obstacle
is to define higher education's output and devise ways to measure it. The State of
Colorado faces this dilemma as they implement HB 96-1219 in 1999-2000.
I
f
26


Figure 1.1
States with Performance Funding or Budgeting, 1997
and
States Expecting Adoption of Performance Funding Within
5 Years, 1996

Use Performance Budgeting or
Performance Funding
Likely or Highly Likely to Adopt ppljp,
Performance Funding
Source: Nelson A. Rockefeller Institute of Government. (1997). Performance
funding and budgeting for public higher education: Current status and future
prospects. Albany. NY: Burke & Serban.
27


Figure 1.2
Colorado Higher Education Appropriations Process 1997-98
2 Recommends HE Budget
3
CCHE
$1,189
(millions)
i
r
Trosteesof the j
Stste Colleges !
$67.1 i
Adams Stale
Mesa State
Metro State
Western State
i
State Board of
AgriaAure
$132.1
Colorado State
University
University of
Southern
Colorado
FL Lewis
T
Regents of
Univenityaf
Colorado
$178.5
CU Boulder
CU Colorado Spng.
CU Denver
Colorado School of Mines $16.4 ! { Trustees of University of j | Northern Colorado ; s-8
l
!_ ..
Community Coleges $101.3 | Local District | Coleges $14.2
Aiapahoe Otero
Aurora
Rites Peak
Denver
Front Range PueWo
Aims
Colorado Mountain
Northwestern
Lamar
Morgan
Red Rocks
Trinidad
28


CHAPTER 2
REVIEW OF THE LITERATURE
In this chapter. I briefly review the history that led to the genesis of higher
education accountability. It is in the beginnings of the university system that we see
how. and why. government became involved, often in new ways, with its colleges and
universities. State institutions of higher learning are always tied to their benefactors
(state governments) via money. I explore the states' relationships to higher education
and the vehicles used to fund them. I devote a considerable amount of space to
defining the funding formulas that states have adopted, explaining their purposes,
listing some advantages and disadvantages, and previewing how they are currently
being modified to accommodate performance funding. During the policy discussion. I
review Colorado's higher education policy environment, structure, and mechanism
for state funding.
John Dewey (Bowen. 1980) wrote. "What the best and wisest parent wants for
a child, that must the community want for all its children. Any other ideal for our
schools is narrow and unlovely; acted upon it destroys our democracy" (p. 233).
Most individuals maintain a psychic or emotional connection to their time
spent in the educational system. Whether this bond was forged by an elementary
teacher who opened his eyes to the world, a high school coach who taught her how to
29


win (and lose), or a college professor who taught her how to appreciate learning,
students carry memories of their classroom experiences with them forever. These
memories help focus the lens through which we all see our own children struggle
through their educational years, and we come to realize how important the
educational process is to our children's and to the nation's future. As students, we
had no voice. As parents, we demand a voice in how our children are educated,
socialized, and disciplined in school. We see the world becoming more complex and
the work place more competitive and demanding so our parental instincts compel us
to push our kids to achieve more, but we discover that, in many cases, the schools
will not or cannot accommodate higher achievement. We become frightened by the
incessant public criticisms of our school system's failures at educating our children.
We react by berating school board members and legislators into doing
somethinganything. Finally, we end up with a myriad of patchwork regulations,
acts. laws, and policies to solve education's woes. Built into many of these initiatives
is the age-old incentivemoneyin the belief that money can influence teachers to
teach better, and can coax higher quality from institutions. We see the use of merit
pay for high school teachers, and performance funding for colleges and universities.
This project explores, examines, and explicates the use of performance funding for
the higher education system in Colorado.
It is important to understand other states', as well as Colorado's, perspective
on performance funding. National and state data help the reader develop a clear
30


picture of Colorado's higher education institutions and how they relate to the national
landscape.
The notion of incorporating performance indicators/measures. or any type of
quality indicators, in state funding formulas to improve the quality or performance of
higher education institutions is a highly charged issue. A substantial portion of the
literature review addresses the history of performance funding, the definitions being
used, how performance funding is currently implemented and by whom, and the
status of Colorado's performance funding initiative.
If we see state policy as the "message, then we can consider funding
formulas as the "messengers that carry state policy to the state institutions of
learning. Unfortunately, the "messenger" often garbles the "message.
The History of Accountability in Higher Education
Higher education was bom with a built-in conflict between autonomy and
accountability. Accountability is. in part, an antecedent of formula funding and
performance funding. E.D. Durvea (1981) reported that the University of Paris,
founded at the turn of the thirteenth century, was the model for universities in the
United States. Cobban (Duryea. 1981) said that the Paris university was a result "of
the particular intellectual achievements of the galaxy of outstanding scholars who
raised it to the forefront of academic life in northern Europe (p. 15). Even with such
an intellectually auspicious origin, however, the university found itself in conflict
31


with the local church officials and citizens. According to Durvea. the Bishop of Paris
and his representative, the Chancellor, tried to exert control over the growing
institution. The scholars who taught there were evidently a disruptive group within
the community, and the secular peace officers often had to maintain law and order
among the abrasive educators. The scholars petitioned the Pope for protection and a
certain uneasy autonomy. As a result, they traded one authority for another which
worked just fine until national kings, in following centuries, exerted their divine
rights and supplanted the popes as lords and masters of the universities. The kings'
charters replaced the papal bulls and the universities became authorized by. and
obligated to. the state. Notwithstanding these historical bonds with the state, as
Cobban pointed out. a "principle that the essence and core of a university was its
autonomy"(p. 16) had also developed in a dubious equilibrium with political reality
that survives today.
The first universities in the United States were governed by sort of a holy triad
of leaders who spread their oversight among the church, government, and the
universities. There wras little, if any. notion of autonomy or academic freedom
(Duryea, 1981). The colleges performed a public function (that of educating the
citizenry for the clergy or for mercantile), political function, or professional function
(with a decidedly sectarian emphasis on Christian morality). Even though the
universities and colleges were chartered with private boards of control separate from
the agencies of government, they were subject to legislative will. When the
32


Massachusetts legislature changed Harvard College's charter in 1812. Harvard
accepted the change without protest (Duryea). There was no need for debate about
autonomy versus accountability, for autonomy simply was not an issue for early
universities in the United States.
Events over the next 100 years, however, changed the equation. Higher
education blossomed into a significant force in the development of a culture that was
dependent upon science and technology and committed to educational opportunity
(Duryea. 1981). Professors gained status as experts and came to be viewed as
professionals who wanted and deserved professional freedom and a say in their
employment conditions. Society slowly secularized higher education as faculty
became more specialized and began demanding a premium for their research and
teaching. In 1915. a new organization, the American Association of University
Professors, heralded a new perception of the university as a center for learning that
was entitled to a special and autonomous place in society.
The Morrill Act of 1862 was a defining moment for U.S. higher education.
The public was recognizing the increased value of higher learning and began to
demand more opportunity to share in economic success by attending college. The
Morrill Act provided for land-grant colleges and set the stage for a system of public
colleges and universities in each state, individually financed from the sale of lands.
The land sales set the precedent for state assisted public education. Of course, public
support also required that universities be responsive to public needs and desires.


During the 1950s attending college (often with help from the GI bill) became
an accepted way of life for the American middle-class. Accountability also became
an accepted way of life for the administrators of higher education. They routinely
were expected to provide annual reports to the governor, legislature, or both, covering
financial affairs and internal management. The courts routinely upheld legislative
restrictions concerning educational programs, admissions policies, and financial
affairs (Duryea. 1981).
The Nature of Accountability
When it comes to higher education, neither complete control nor unfettered
autonomy is possible. Dressel (McConnell. 1981) wrote. The extension of
substantive autonomy to an individual, organization, or group implies responsibility
and accountability (p.38).
The National Commission on Research in 1978 recognized three dements of
accountability: financial and administrative, involving evidence of financial propriety
and compliance with administrative regulations: scientific, concerned with
achievement of results and progress toward scientific objectives; and social, referring
to the extent to which specific goals have been fulfilled (McConnell. 1981). The
commission went on to say that. When well designed, the system of accountability
involves an appropriate balance between independence and control, between
34


incentives and constraints, and between the costs and benefits of the various
procedures and requirements used" (p.38).
Kaplan (as cited in Duryea. 1981) pointed out that higher education
institutions were often protected in the past by the public perception that they were
best left to regulate themselves through reliance on tradition in the privacy of
autonomy. The public believed that it was necessary to protect the profession from
repressive external control and meddling which might taint academic freedom. In
today's climate, in contrast, colleges and universities are expected to provide data on
achievement of defined outcomes and learning, as well as evidence that these results
are being accomplished at a reasonable cost.
State Governments and Higher Education
Since state governments are the primary source of funding and regulations for
state institutions of higher education, it is helpful to review the evolution of their
involvement.
The total enrollment of ail U.S. colleges and universities in 1900 was
approximately 250.000 students (representing about 4 % of the college age
population) (Miller, 1964). The Commission on Financing Higher Education
reported 547 public institutions of higher education in 1949. As of 1976, that number
had grown to 1.466 institutions as reported by the Carnegie Council on Policy Studies
in Higher Education.
35


i
Millett (1981). chronicled the fifty state governments' planning and support of
higher education in the years between 1950 and 1980. and said that, in a variety of
ways, states responded in a positive manner to the social expectations for expanded
programs, burgeoning enrollments, greater geographical access, and improved
economic access. In 1950. 2.3 million students were enrolled in institutions of higher
education, of which, 1.2 million attended public institutions. It was also at the
beginning (about 1950) of this remarkable period of growth of public higher
education, that states began to develop and use funding formulas as a way to
apportion the growing higher education budgets. The growing coffers of the state and
federal governments (due to the growing economy after World War II) made
spending on higher education even more palatable.
In 1960. over 3.5 million students (roughly 60% of college age residents)
attended college. By 1980. 12.1 million students (9.4 million in public institutions)
attended higher learning institutions.
Public institutions commanded a total annual income of 1.2 billion dollars,
including about 455 million dollars from state governments, in 1950. By 1980. it was
estimated that public institutions of higher education had an annual income of almost
50 billion dollars, of which about 20 billion dollars came from state governments.
State governments'greater involvement in higher education was in direct response to
the following social expectations: to fill the expanding demand for educated talent in
36


the American labor market, to encourage economic growth within the states, and to
advance social mobility (Millett. 1981).
The states' growing support of public higher education during this period was
not without concerns, though: what could be characterized as: (a) the mission and
performance of public institutions: (b) the future of the independent sector: (c) the
cost of higher education programs; and (d) the accountability of the public
institutions. So as early as 1980. the issues of higher education performance and
accountability appeared on state legislatures' worry lists. However, state legislators
recognized that the benefits accruing from higher education were, for the most part,
intangible and did not lend themselves readily to precise quantitative measurement.
They began to expect the state colleges and universities to be able to demonstrate
(without specifying how) that these benefits could exceed the costs. It is likely that
public expectations sprang from the broader social expectations of higher education.
It was much easier for state legislators to take up the battle cry than to explain the
difficulties to the public. So. as states increased higher education spending, there
emerged an uneasy tension between institutions and their benefactors.
Hauptman (1993) reported that states paid roughly 30 % of the total $150
billion in higher education expenditures in 1990. This financial relationship between
states and higher education is anything but constant. When times are good, states
fund higher education rather generously: when times are lean, states often cut back
and students and their families end up paying the fare in higher tuition just when they
37


have a harder time affording it. The public becomes more critical of the rising tuition
at colleges and universities. This criticism often spills over onto faculty teaching
loads, high cost structures, and the research missions of some institutions. As public
criticism grows, state legislatures begin to react.
The Use of Funding Formulas in Higher Education
As reported by the American Association of State Colleges (AASCU. 1995).
58.5 % of all states currently use funding formulas to allocate state funds to higher
education. James L. Miller (1964). the first author to really explore funding formulas
and their use. stated that funding formulas were a response to the exploding budgetary
requests of institutions after World War II. The budget requests became increasingly
complex and took more analytical expertise and time to sort out as the number of
institutions and the number of students they were trying to serve grew. Formulas
reduced the complexity and the bulk of budget requests and allowed an objective
analysis and comparison of various institutions requests. Miller defined a funding
formula as:
An objective procedure for estimating the future budgetary
requirements of a college or university through the manipulation of
objective (quantitative) data about future programs, and relationships
between programs and costs, in such a way as to derive an estimate of
future costs, (p.6)
38


A formula may be thought of as a decision rule that aids in the calculations
accompanying institutional budget requests. It reduces the complexity of the process
and allows the decision maker to focus on key aspects (such as enrollment) without
having to make a new decision every year (Meisinger. 1976).
Millett (as cited in Noe. 1986) said that the key issues in budget formulas are
equity and adequacy. Formulas present a method of calculating an equitable,
adequate, and proper need level at a specific institution during a specific time period.
They may take into account the number of students or square feet of space and apply
factors such as rates or amounts per credit hour or square foot. A formula might be
applied uniformly to either: (a) groups of comparable institutions, or (b) comparable
activities within a group of dissimilar institutions.
Cost-Anal vsis
Cost analysis also was used as an objective way to analyze historical costs
and their use toward budgetary purposes. Miller (1964) pointed out that the
differences between budget formulas and cost analysis procedures is that cost analysis
measures past relationships between costs and programs. Formulas use known past
relationships to determine future requirements for various levels of program activity.
A cost analysis measures program and cost factors without defining the relationship
between them. A formula estimates future program levels by pre-determining the
program-cost relationship. The unknown factor of a formula is the future total cost.
39


"Cost analysis measures the past [while] formulas estimate the future" (Noe. 1986.
P-6).
Miller (1964) outlined the development of cost analysis from John Dale
Russell's work during the late 1920's and 1930s, during which time Russell
developed and tested cost analysis techniques to systematically analyze the
expenditures of colleges and universities. Russell's techniques were eventually-
adopted and used by the North Central Association of Colleges and Secondary-
Schools as part of their accreditation process. Colleges and universities followed this
important lead and began using this technique internally as well. Interestingly, even
though Russell's work in effect spawned the eventual development of budget
formulas, he did not embrace their use. He continued to refer to his work as
budgetary "analysis" and feared that formulas would become a "substitute for
intelligence" (Miller, p.9).
Caruthers (as cited in McKeown & Layzell. 1994) reported that formulas
have constantly evolved since their inception. He related four long-term trends in
formula use and development:
More detailed budget categories.
More budget control and monitoring of formula categories by state boards and
legislative staff to enhance accountability.
More non-formula components such as grants for equipment and incentives for
quality improvement.
j
40


Less reliance on enrollments in anticipation of enrollment declines, (p.322)
Cuthbertson (1994) defined formula funding, traced its history, and listed
advantages and disadvantages of several of the formula funding types. He also
discussed the various costs associated with formula funding and describes several
states* uses of various formulas. A formula is defined as a procedure by which
selected variables (i.e.. student contact hours) and selected fixed factors (i.e.. salaries
or faculty/student ratios) are used to determine institutional funding. Formula funding
is believed to provide for stronger financial control of taxpayers* money and protect
academic freedom by preventing discretionary budget cuts. The objectives of
formula funding include equity and adequacy. Equity means distribution of state
funds based, not on institutional size or number of students, but primarily on program
area costs, workload, and available revenue. Adequacy of funding enables
institutions to offer quality programs needed by their respective communities.
Nelson (1989) surveyed 49 state budget offices. Using results from the 43
states that responded and examination of a 1986 study from the Michigan Legislative
Select Committee on Education she reported: 28 % of the states use incremental
funding (percentage increases are applied to the previous year's base which is
expressed in financial terms rather than work-load or program terms); 24 % use a
formula funding model; 26 % use a combination of incremental and formula funding
procedures; and 22 % use other funding distribution processes. The other" includes
41


such methods as zero-based budgeting, performance funding, marginal cost funding,
and decision packages.
Advantages and Disadvantages of Funding Formulas
Hale and Rawson (1976) pointed out that there were a variety of reasons why
states and institutions adopted funding formulas. Formulas objectify and standardize
the budgeting process and may help to deflect the charge that institutions
misrepresent income, hide reserves, or retain surpluses (Glenny. as cited in Hale and
Rawson). In other words, formulas may (or may appear to) increase an institution's
ability to be accountable to the public. The formula is a more systematic and orderly
budget process and helps institutions provide and analyze data internally (Miller.
1964). Another perceived advantage is that formulas help the state more equitably
distribute public funds. Finally, formulas may reduce inter-institutionai tension during
the budget cycle because allocation procedures and parameters are pre-defined. This
may prevent state budget officers from making arbitrary budget reductions or
reallocations (Hale and Rawson).
The disadvantages of funding formulas include the possible inappropriate use
for the internal allocation of institutional resources. State budget officers,
coordinating agencies, or the institutions may become complacent from the use of a
formula and overlook re-evaluating the assumptions, policies, or goals implicit in the
funding formula (Miller. 1964). Some fear that funding formulas have a leveling
42


effect on the quality of educational programs (Hale and Rawson. 1976). Yet. by
1990. approximately 33 states were using some type of funding formula for allocating
state funds to higher education institutions.
Governing Boards of Higher Education
Governing boards developed during colonial times to provide church groups
with some control over the affairs of the colleges they founded and supported. These
lay boards personified society's idea that colleges had a responsibility to society
which should be represented in the administration (Miller. 1964). It was no giant
leap, therefore, for states to extend this governance concept to state colleges and
universities, and by 1940. twelve states had established statewide coordinating
agencies to oversee the coordination of state higher education policies and activities.
By 1960, an additional twelve states were operating with these agencies. The higher
education institutions in five states established voluntary coordinating agencies which
were an attempt to co-opt statutory authority. Colorado was one of those five states.
The preeminent feature of all coordinating bodies, statutory or volunteer, is the fact
that they act as the intermediary between the higher education establishment and state
government in solving problems and helping to set budgeting and planning policy.
The development and use of budget formulas was obviously of great importance to
coordinating boards because it made their job of interpreting and communicating
higher education budget requests to the state much easier (Miller. 1964).
I
43


State Funding of Higher Education
Hossler. D. (1994). identified several trends affecting funding of higher
education. According to the author, the most significant trends are: (a) competing
demands for state funds, (b) fluctuating state economies, (c) declines in disposable
family incomes, and (d) increased demand for post secondary education to compete in
an increasingly complex job market.
Fischer (1990) reported that, for over a century, states' policies of financing
public higher education have followed the same basic scheme of appropriating funds
directly to public institutions so that the institutions can charge lower-than-cost
tuition to all students. This funding philosophy captures the state goal of providing
access to all students. Fischer listed several reasons why this approach of direct-aid-
to institutions is attractive: (a) higher education is a public good that should be
accessible financially to all qualified users; (b) higher education is an entitlement: (c)
states should provide a subsidy to deter their students from migrating to other states
for their education; (d) low tuition promotes equal opportunity for education: (e)
direct appropriations to institutions help states maintain control over institutions: and
(f) direct state appropriations eliminate red tape for the state, schools, and students.
Fischer (1990) took issue with all of these justifications and believes that a
more efficient and equitable funding philosophy would be to re-direct state funding to
the students and mandate institutions to charge full cost to all students. Fischer
contended the current system is inefficient, distorts student choices, and shelters
44


public institutions from competition because of the price gaps between public and
private institutions.
State Budgets
Miller (1964) offered a similar view of the budget saying. "The budget is the
major instrument of executive management" (p.38). In that regard. I would add that
the budget is a major policy tool. Burkhead (as cited in Miller) believed that the state
budget system was developed primarily by legislatures so that they could exercise
control over the executive branch and extend their own authority.
It is also in Miller* s (1964) book that I found the first reference to
performance budgeting. He reported that the First Hoover Commission in 1949
recommended that "the whole budgetary concept of the federal government... be
refashioned by the adoption of a budget based on functions, activities, and projects
(p.39). Miller believes that this idea can be traced back to F.A. Cleveland in 1910.
The Hoover report talked about quantifying program activities. Performance
budgeting has been contemplated since the early part of the century albeit in a
slightly different context.
Almost all states are besieged with competing demands on available revenues.
These include more prisons, federally mandated Medicaid increases, and burgeoning
K-12 requirements such as higher teacher salaries and increasing requirements to
provide services for disabled and other special education students. Since higher
45
I


education has independent sources of revenue (tuition, contracts, and research grants)
states have allowed higher education's share of the general tax revenue pie to shrink
in recent years. In fact, fiscal year 1992 was the first year in a long time that state
appropriations were smaller than those of the previous year. Many states have
allowed institutions to increase tuition to make up the shortfalls. Institutions have
responded by also cutting budgets across-the-board (Jones & Folger. 1993).
The Taxpayers Bill of Rights (TABOR)
Colorado's institutions are restrained from raising tuition and fees because of
a constitutional amendment passed by the voters in 1992. The Taxpayer's Bill of
Rights (TABOR) forbids net revenue gains from tax increases or similar actions
(including tuition) at all levels of government without voter approval. TABOR also
limits state government fiscal year spending to inflation plus the percentage change in
state population for the prior year, adjusted by voter approved revenue changes (The
Taxpayer's Bill of Rights. 1992 & Article XX. Colorado Constitution). Whereas in
the past institutions could enhance their state appropriations with tuition increases,
they are now legally restrained from doing so because TABOR limits the increase in
tuition and other cash funds as well. Colorado's voters have not been in a mood to
allow the state to use excess revenue either. In 1998. Colorado voters rejected a
legislative request to use $562 million of excess revenue for K-12 education, higher
education, and highway improvements. The year before the state was required to
46


return $139 million to taxpayers. It appears that Colorado voters will not soon be in
the mood to eliminate TABOR, so institutions of higher education will have to live
with limited tuition increases and state appropriations.
State Funding as a Policy Issue
State governance, funding formulas, accountability, the public's expectations,
and institutional productivity are all pieces of the higher education milieu. The
common thread that binds these issues together is policy. Policy is the legislators'
communication medium with higher education. By requiring, for instance, that
institutions submit accountability reports, they tell higher education and the public
that accountability is important. By requiring institutions to submit productivity
reports (and linking those reports to budgets) they make a statement about improving
efficiency in higher education. Legislators also use policy to exercise control over
higher education. In this section I address state policy related to higher education.
Jones and Ewell (1993) analyzed the many factors that policy makers should
consider when assessing the extent to which state policies promote or impede good
practice in undergraduate education. They identified (a) characteristics of good
practice; (b) mediating influences of institutional structure and culture that can serve
either to moderate or amplify the impact of state policy; and (c) important factors at
the state level including culture, policy, and ways in which policy is implemented.
Mediating influences include: (a) institutional culture and practices, (b) a strong sense
47


of mission and shared purpose, (c) leadership committed to achieving institutional
goals, (d) clear statements of intended instruction objectives, (e) policies and
procedures consistent with stated purposes, and (f) institutions being self-regarding
and student-centered. An important issue for legislators to consider is whether the
funding policies and procedures of the state are consistent with the stated goals for
higher education.
Resources are another important mediating influence (Jones & Ewell. 1993).
and the economic forces at both state and institutional levels play an important role in
policy making. The funding base must be adequate to allow the institution to
accomplish its mission or the institution will be preoccupied with surviving instead of
carrying out policy. Not only must resources be sufficient, but the state must also
distribute them appropriately to accomplish the stated goals. For example, if the state
never distributed funds for technology, the institutions could not maintain
technological currency in the classrooms nor could they teach their students how to
use the latest technology. The adequacy of the resource base for students may be even
more critical, especially if uncertainty pervades resource investment in undergraduate
investment decisions. Higher education financing in most states is increasingly
unlike the financing of K.-12 education or the health care system where categorical
funding, federal mandates or court orders ensure a steady stream of support (Jones &
Ewell). As a result, higher education funding is dependent on the states' economies
and subject to wide fluctuations that make sustained investment difficult. In good
48


years, this means a windfall that may cause policy makers to be reluctant to invest in
incentives for the kinds of long-term changes required in such areas as undergraduate
study. Instead, the response is to invest in special projects on the margin that, while
prudent, send a very uncertain signal about the states* commitment to fundamental
improvement (Jones & Ewell). For example, some institutions in Colorado received
funding for capital construction while at the same time cutting their operational
budgets due to an enrollment decline. These budget cuts affected faculty raises,
increased the use of adjunct faculty, and eliminated faculty searches for vacant
teaching positions.
Jones and Folger (1993) asserted that state governments have treated higher
education as a public utility, the services of which should be provided to customers as
they need them. This view tended toward a priority on access and increased higher
education capacity. Access is still high on the state policy agenda, but it is sharing
space with the view that higher education is a strategic investment that will enable
society to achieve certain goals. One of society's goals is improving the quality of
undergraduate education, which may appear at odds with higher education's research
priorities. Academic priorities manifest themselves through the reward (promotion
and tenure) system in higher education. This system usually rewards graduate
teaching and research, as opposed to improving undergraduate teaching. While
undergraduate education cuts across all disciplines, universities are organized by
discipline specific departments within colleges that routinely operate with great
49


autonomy (Hansen and Weisbrod. 1971). Faculty are evaluated and rewarded within
the colleges and may have few incentives to undertake quality improvement
initiatives in the classroom. State legislators often do not understand this mismatch of
societal priorities and higher education priorities when they debate and enact policy.
Another strategy is for higher education to do more with less" through
increased productivity, not only from the faculty, but also from the institutions
themselves. For example, some legislators have expressed the opinion that faculty
should maintain set office hours or teach a specified number of hours every semester.
State legislators are often tempted to regulate greater productivity by attacking faculty-
workloads and habits, an approach that by the very nature of the faculty-institution
relationship, is not very' effective. According to Jones and Folger. fiscal policy is the
single most potent tool of state policy makers because resource allocation focuses
attention and allows states to provide incentives instead of regulation to influence
behavior.
Jones and Folger (1993) believed that states need to restructure the funding
framework for higher education to provide a better link between policy and behavior.
They recommended a three-part budget: (1) a base or core budget. (2) a capital
budget, and (3) a special-purpose budget. The base would provide the continuing
funding that allows an institution to accomplish its mission, however it is defined.
The base would be appropriated as a lump sum and would come with few. if any.
constraints. It would, however, be contingent upon accountability processes, be
50


adjusted for cost-of-living changes, and not be dependent upon changes in
enrollment. The capital portion would be used only to acquire new physical assets:
the maintenance of assets would come from the base budget. Finally, the special-
purpose portion would provide state policy makers with the vehicle through which
direct advancement of state goals could be made, such as quality improvement with
performance funding. Jones and Folger recommend that 8-10 % of the base budget
be allocated for special-purpose funding.
McGuinness (1994) related that by 1990. two-thirds of the states had
mandated that institutions of higher education assess student learning. State roles in
higher education were evolving to:
1. Broaden the definition of 'accountability' from an emphasis on equitable
access and efficient use of resources to an emphasis on performance and
results.
2. Decentralize and deregulate state managerial controls, in return for
accountability for outcomes.
3. Establish special competitive, performance or performance funding
programs to stimulate institutional realignment of priorities and goals.
4. Emphasize public reporting of results to inform the 'market* instead of
relying on traditional internal bureaucratic reports of accountability.
51


5. Change college and university missions to emphasize undergraduate
teaching, increase admissions requirements, or establish special faculty
development centers to improve teaching and learning.
6. Use instructional technology and distance learning to stimulate new ways
of delivering education more effectively and less expensively.
7. Examine the appropriate roles of government-initiated reform.
8. Change the focus from issues such as student access and resource
distribution to a closer scrutiny of the return on investment, (p.1-3).
Even with a rash of state initiatives to assess results, there has been little
progress (McGuinness 1994) because of the difficulty of reconciling the
external pressures for improvement with higher education's perceptions of
how to accomplish change within its internal governance processes. In an
effort to more fully understand the policy environment and culture of states,
the Education Commission of the States (ECS) undertook a pilot project that
involved five states (Colorado. Maine. New Jersey. Vermont, and
Washington) during the period between 1990 and 1992. According to
McGuinness. one of the objectives was to identify characteristics that might
limit the effectiveness of higher education policies in those states.
McGuinness described some of the policy inhibitors that the study identified:
One is too much emphasis on uniformity and consistency. A one-size-fits-all
approach often detracts from efforts to consider population diversity or to initiate
52


individual improvement efforts. Two examples he gave are 1) the pressure to effect
across-the-board resource allocations or reductions, and 2) the uniform application of
state civil service requirements for staff at all public institutions.
Another is the inability to articulate a coherent long-term agenda. When the
policy process is shared by the governor, legislature, state coordinating agency, and
others, short term fixes to specific problems (e.g.. how to increase admissions, how-
to improve student retention, how to keep tuition reasonable) often dominate. Long
term goals such as the desired educational level of the state's population or the
knowledge and skills the state's population needs to become contributing members of
the state's economic and civic life are often left unaddressed.
Absence of information is another one. Turnover of state legislatures reduces
the institutional memory and. as a consequence, creates short-term solutions to long-
term problems. Limited information and analysis dominate the policy making in
most states.
The defensive nature of policy can also be an inhibitor. States tend to focus
on preventing bad things from happening rather than stimulating positive behaviors.
This results in a negative mind-set driving state policy, which in turn, elicits
defensive behavior from institutions of higher education.
Also, the diminishing agency capacity to lead the state's higher education
agenda can be a problem. Colorado was singled out for the burdensome regulatory
requirements preoccupying its state-coordinating agency (Colorado Commission of
53


Higher Education). Layer after layer of bureaucratic regulations, often with no
coherent connection, hobble many state agencies in their efforts to provide leadership
for higher education.
Another one is uncoordinated, inconsistent policy implementation. Policy
making in a vacuum, with no links between strategic planning and budgeting: little or
no understanding of education and its change processes: and targeted policy making
without the big picture contribute to haphazard policy making.
Inconsistent and disconnected financing policies may inhibit. Frequent
changes in funding policy, special funding programs that conflict with other
underlying incentives, accountability measures with no connection to the state
planning requirements, and lack of coordination of financial policies all result in
mixed signals and inconsistent behaviors.
Long-term fiscal constraints driven by competing demands for state
resources, resistance to tax increases, and continued resistance to tuition increases are
likely to exacerbate the dilemma of higher education to provide higher quality
without significant increases in financial resources (McGuinness. 1994).
Policy Framework.
Dennis Jones (1997) presented an enlightening view of the policy framework
within which states and the higher education industry' struggle. He defined a policy
framework as "that collection of constitutional, statutory, and regulatory provisions
54


that define the set of relationships between state government, higher education
institutions, and the students that attend those institutions (p. 2). He listed the
categories of relationships that provide the structure of such a framework:
Governance and structure define the policies that define organizational structures and
governance relationships that, in turn, assign decision authority and specify allowable
decision-making of entities within the structure. In higher education, institutions
generally have latitude to determine what should be done, state governments decide
how institutions should do things. Jones points out that this is just the opposite of
what is considered best management practices in the private sector where decisions
about what to do are strategic decisions made at the highest level, while decisions
about how to do it are best made closest to the action.
Planning/setting of expectations refers to a clear statement of expectations of
what is to be accomplished. Two basic expectations define the relationship between
state governments and higher education: 1) access-accommodating all citizens who
could benefit from higher education and 2) efficiencyproviding access to education
at the least cost. During the last five to ten years, according to Jones, a third
expectationqualityhas emerged on the policy agendas of many states. There is
little agreement of what quality means in higher education. Historically, it has been
defined in terms of inputs only despite the fact that it is really an output measure.
Funding refers to the allocation of resources to students and institutions.
55


Regulation is the prescription of how institutions must deal with: personnel
issues, purchase of goods and services, travel, admission of students, and many other
operational and bureaucratic issues.
Accountability means the process through which institutions and students
provide evidence that prescribed actions were taken, prescribed procedures were
followed, or intended outcomes were achieved. "Were the funds used in the ways
specified and did the institution adhere to the specified procedures in carrying out
their functions? (Jones. 1997. p. 7) Within the last decade or so. accountability has
been defined as relating to institutional performance as defined by learning outcomes.
More recently, some states have included state-defined goals and priorities in this
definition.
Jones (1997) asserted that most states* policy frameworks share the following
common characteristics:
Focus of state policy defines the institutions or the providers of education as
the policy focus as opposed to the students or other clients. This focus, in Jones*
opinion, has created a highly regulated industry.
Recognition of other policy initiators refers to federal government efforts
directed at students (financial aid) and faculty (research) influencing policy. The
federal governments policies have expanded the market by affording more students
more access and more choices. States could not ignore the federal policies and had to
react (by making more capacity available to meet demand and by rewarding faculty
56


who brought in huge research grants). Neither of these address quality of
undergraduate education.
Budgeting/resource allocation refers to institutional funding that is based on
past, current, and estimated future costs, or some combination of these. Jones points
out that funding was seldom linked to achievement of state priorities.
Regulation means that mandates or prohibitions related to institutional
behaviors are central to most relationships between states and higher education. The
regulations almost always pertain to inputs and processes and almost never to outputs
or outcomes. Jones (1997) emphasized that the regulatory environment established
for higher education by state government action creates a significant barrier to
enlightened management of most institutions" (p.7). This environment, according to
Jones, directs attention to the methods by which institutions are managed to the
detriment of any discussion about expectations or the intended purposes of the
institutions.
He related substantial evidence that the current approach to state higher
education policy has resulted in a virtual impasse between higher education and
policymakers. For example, higher education asks for more money and policymakers
reply that they cannot give them more because they have so many other needs to
address (often mandated) and taxpayers do not want them to raise taxes. Then
educators want the policymakers to eliminate some of the bureaucracy and let them
use the savings to better achieve the state's priorities and policymakers reply that
|
i
i
i
i
|
57
)


regulation is the only way they have to guide their actions. Given that a successful
higher education system is so important to the well being of most states, it follows
that states should work toward developing a more constructive relationship between
state government and institutions of higher learning. The new relationship would
redefine how the current tools and characteristics are viewed and used by the states.
This new relationship would encompass a changed policymaking philosophy and
more purposive implementation of available tools.. It would be based more on
leadership and the use of market forces instead of being based on the control of
institutions. The new relationship would depend on the following assumptions and
observations, according to Jones.
1. The state is never the only client of higher education. Therefore, the state
should not expect to exert complete control over institutions.
2. It is more productive for the state to influence the market than to control the
actions of institutions. State government should: ensure that students are able to
make informed choices about their education, and use the market so that students can
achieve their individual choices.
3. Carrots work better than sticks. Weli-designed incentives are more
effective than regulation and oversight.
A fundamental point of Jones' proposed policy re-alignment is that state
governments need to change the policy framework within which higher education
relates to the state if they expect higher education to change the way they do business.
58


The Education Commission of the States (ECS) convened a session with
educational leaders at its 1995 National Forum and Annual Meeting to explore some
of the same issues that Jones addresses in his article.
One speaker. Judith Ramaley. President. Portland State University said.
... colleges and universities must rethink their roles in very
fundamental ways that go well beyond cutting budgets in order to
respond to societal needs and societal expectations which are ever
changing ...the desire to advance overall productivity (not just do
more with less, but do better with less) required a real emphasis on
'academic productivity* (p.2-3)....I want to make it perfectly clear that
institutions can maintain their souls and increase productivity at the
same time (p. 8).
Another. Herman Blake. Vice Chancellor for Undergraduate Education.
Indiana University-Purdue University, spoke about organizing the mission around the
students.
A third. Charles Reed. Chancellor. State University System of Florida said he
believes higher education must pay more attention to teaching, to benchmarking, and
to demonstrating quality.
The public cry to improve quality, to enhance productivity, and to make
outcomes a centerpiece of higher educational policy is obviously being heard in a
variety of ways and places across the country. Some state legislatures are responding
to the public's concerns about the quality and productivity of higher education by
enacting or considering legislation that juxtapose performance indicators or measures
59


onto the state budgeting process (Eaton. 1995). In other words, institutions that
measure up receive budgetary rewards.
Brewer and deLeon (1983) described the foundation of policy analysis.
Evaluating state funding policy does, in effect, involve policy analysis with questions
such as: What are the purposes of the funding policy? How is the funding policy
being implemented? And. what are the effects of the funding policy?
Accountability Redefined for Quality
Quality indicators, performance measures or indicators, and productivity
indicators are phrases that have jumped into the educational lexicon of the 1990's.
Take this array of new concepts and fasten them to the heretofore routine processes of
higher education budgeting and funding, and one has the ingredients for widespread
confusion. It seems prudent to spend some time defining and differentiating these
concepts.
McPherson. Schapiro and Winston (1993) wondered if education is even
amenable to the concept of productivity. They asserted that, if not. it would be a
shame because to understand productivity allows one to reward higher efficiency and
to encourage improvement where efficiency exists.
Economists define productivity very simply: it is the additional output per unit
of labor input. Phrased slightly differently, productivity is the measure of the
efficiency with which inputs are converted into outputs (Greenwood. 1998).
60


Greenwood continued that most non-economists speak of faculty productivity very
simplistically and erroneously as faculty workload. Wallhaus (1996) said that many
use productivity as a synonym for cost cutting. He went on to say that productivity
means much more. Productivity encompasses the entire product-process relationship
of inputs (physical plant and faculty) to outputs (student learning). This relationship
is usually called the production function (Wallhaus). Most academicians cringe when
anyone refers to education as a production function and learning as a product.
Decreasing costs or changing the production process does not necessarily improve
productivity. One must consider the relative value of the outcomes. Here is where
the debate about higher education productivity becomes incredibly murky. Higher
education has not done a good job defining its educational output goals, and
consequently, has no idea about how to measure that output (Sebring. et al.. 1996).
The output of colleges and universities ranges from cognitive development,
community economic development, inventions, research, socialization of youth, and
retraining the work force to name a few. Not only is the diversity of outputs
staggering, but also many of the outputs are produced jointly and their fruition
realized over lifetimes, if not generations (Bogue. 1976). The task of relating
educational outputs to specific inputs and their costs is mind-boggling (Wallhaus).
Just because it is complicated does not mean, however, that higher education is
immune from the debate about improving productivity.
The relationship between individual faculty productivity and institutional
61


productivity is a murky one. Institutions have tended to concentrate on faculty
productivity while the public generally thinks in terms of the productivity of the
institution. The institutions count faculty publications and tally student evaluations
of faculty members. The public, on the other hand, wants to know how effectively
students are learning (teaching), if the faculty contributes to the community (service),
and if the campus scholars advance the body of knowledge (research). The debate
about higher education productivity is often carried on without an understanding of
the desired outputs, much less how they should be measured (Greenwood. 1998).
One element of higher education productivity that is almost always ignored is
student productivity. The student mix at many institutions of higher education has
evolved to include many students with families (many with single parents) and full or
part-time jobs. Their productivity (efficiency and effectiveness) is of much concern
to their employers and to their families. In todays world, individual faculty members
and the institutions are implicitly charged with the responsibility to help them be
more productive students (Greenwood. 1998).
Levin (as cited in Wallhaus) identified some ways to think about productivity in
higher education:
1. Efficient use of resources (operational efficiency). Positive incentives that
improve the efforts of students: faculty; and operational personnel, better use of
faculty and instructional facilities (including technology), and improved advising
can all affect productivity of institutions.
62


2. Optimal allocation of resources (allocative efficiency). Better decisions about
allocating budget dollars between academic programs, among faculty members,
and even among institutions can improve productivity.
3. Pursuit of the right goals (preference efficiency). Priorities assigned to
undergraduate education, research, and service affect productivity, (p. 4)
Quality is an even more ambiguous term, especially when applied to higher
education because there are so many stakeholders. Students, parents, employers.
administrators, faculty, state legislators, and governing boards all see quality a little
differently (Greenwood. 1998). Folger (1984) said that there are three defining
characteristics of quality: First, it is a complex, multidimensional concept. Second.
the interested parties do not have a common understanding of it. Third, it is not a
discrete program, activity', or condition but something that pervades an institution of
higher education" (p.16). Astin (as cited in Folger) offered some basis on which
quality might be assessed in higher education: (a) reputation among peers or experts.
(b) level and quality of resources (inputs), and (c) outcomes (value-added). He
believes that the last condition is the only valid criteria of quality for higher
education.
With so many stakeholders defining productivity differently, it is understandable
why faculty may react negatively to the concept. To many, it suggests doing more
work with fewer resources. This misuse of the term often hinders quality
improvement efforts. Only by formulating assessment and evaluation tools that
emphasize constructive feedback can faculty members participate in the quality
63


improvement effort that has been successful in other areas of the economy
(Greenwood. 1998).
Institutions should avoid the common trap of mistaking outcomes for inputs
and outputs. The measurement of outputs, however, is only part of the productivity
puzzle. Institutions also need data on the inputs into the various processes, of which
faculty are only one. Other input includes computing resources, infrastructure,
textbooks, library materials, classrooms, and technology. (Bowen. 1980: Greenwood.
1998).
Bowen (1980) went on to say that evaluations should be performed in light of
the major goals of education, not restricted to any particular aspects of human
development, such as those that are easily measured. His list of desirable institutional
goals follows:
1. Cognitive development of students with respect to verbal and quantitative
skills substantive knowledge, rationality, critical thinking, intellectual
tolerance, and lifelong learning.
2. Aesthetic sensibility.
3. Emotional and moral development in such areas as personal self-
discovery. human understanding, religious interest, psychological well-
being.
4. Practical competence relating to citizenship, economic productivity,
family life, consumption, leisure, and health.
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5. Direct satisfactions and enjoyment from college education during the
college years and in later life. (pp. 170-171)
Finally. Bowen (1980) believed that educational outcomes must be couched in
terms of the whole person. Evaluation instruments typically measure one aspect of a
students learning. Aggregately, such scores only reveal group scores of one
particular competency, such as verbal skills (Bowen. 1980).
Folger (1984) asserted that there is much more to defining the quality of the
educational process than simply the outputs. He maintained that there is a certain
quantitative nature to consider. For example, an institution must maintain a certain,
basic core level of physical assets in good working order. The institution must keep
enough faculty members on hand in the various disciplines. The library must stay
open a certain number of hours and keep a minimum number of volumes on hand.
The administration must keep enough well trained staff to accomplish the
incalculable administrative tasks. In other words, quality is interwoven throughout
the fabric of college life. It resides in the daily experiences of its students and faculty-
members. Over how many years does the inherent quality of the college experience
manifest itself for the beneficiaries? Some researchers believe that the educational
benefits gestation period may be five to ten years beyond the delivery point
(graduation day). I believe that the quality of our educational experience manifests
itself for the rest of our lives.
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Unfortunately, state legislators, governors, parents, the business community,
and the public at large may not care about the complicating issues. They want to be
sure that the institutions are spending tax dollars and tuition dollars wisely so they
superimpose measurement and reporting requirements onto higher education. The
stakeholders' demands for improved productivity and quality is not that surprising.
Stockholders of public corporations constantly demand more profits and increased
market value. Quality and productivity issues are just recent refinements of the
accountability issue for higher education. As confusing as it may seem, quality and
productivity are not the only terms redefining accountability. The terms of
performance budgeting or performance funding also find their way into the debate.
Carter (as cited in Layzell & Caruthers. 1995) defined the practice as allocating
resources based on achievement of program goals and results that can be measured.
All of the terms being used in policy discussions relate back to the original concept of
accountability.
Paul Brinkman (1984) reported the proceedings from a working conference.
State Funding of Public Higher Education: Improving the Practice, in Boulder.
Colorado. One of the topics of discussion was quality and included the following
points:
There has been a growing concern about quality, but not enough to translate
into additional funding.
Politicians are concerned about quality but do not know how to define it.
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The emphasis on K-12 quality affects the debate in higher education.
Value added provisions are being addressed.
There is a need to develop operational definitions of quality and performance.
Adequate funding of base mission and targeted funding are considerations.
Participants pointed out all budget mechanisms contain implicit incentives in
that some behavior is rewarded more than others. Other participants pointed out that
the scenario wherein the state built-in its priorities and goals into the funding
assumed that the state knew its priorities and goals for higher education. They
identified problems with performance funding (Brinkman):
Incentives do not always send clear signals.
Incentives can increase costs.
It is difficult to reach consensus on incentives
Incentives affect institutions differently.
Cumbersome monitoring and regulations may dilute benefits of incentives.
Many of the participants believe that incentives are appropriate to encourage better
management and performance and are preferable to more regulations.
Performance funding carries a special appeal to state lawmakers (Folger &
Jones, 1993). It has built in accountability. Naturally, higher education leaders are
wary of performance funding. Administrators know all about the difficult
measurement issues and are dubious about how the incentives will be used
(McPherson, et.al., 1993). A state can improve its chances of having an impact by
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using the following principles in its special-purpose funding design:
Select a limited number of goals and objectives for special funding. Don't try to
reform the whole system through fiscal policy alone.
Select outcomes that can be measured at reasonable costs.
Allow enough time for special purpose funding to work.
Provide enough funding to be an incentive (two to five %).
Direct the performance funding to the persons responsible for achieving the goal.
Albright and Gilleland (1993) outlined principles for moving from an
accounting driven funding model, which emphasizes inputs (such as enrollment),
to funding models that emphasize providing quality education, how to accomplish
that, and incentives for institutions to demonstrate quality improvement).
Nelson (1989) traced the origin of performance funding to the 1912 Taft
Commission as well as to both the 1949 and the 1955 Hoover Commission. She
continued by saying that performance funding is part of the continuing effort to build
evaluative criteria into state budgets and to ensure that public funds are distributed, in
part at least, to the "best" activities as measured by objective criteria.
Banta (1988) stated that, "...institutions can use assessment to demonstrate
their accountability to the constituencies they serve, provide direction for improving
programs and services, supplement strategic planning processes, develop strategies
for improving student retention, establish comparative advantage vis-a-vis other
institutions, suggest the content for faculty development, stimulate curriculum reform,
and even enhance campus fund raising activities (p. 46). Nelson (1989) suggested
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that performance funding is adaptable to diverse and changing missions, which helps
make the concept attractive to state policy makers.
Kirkwood (1992) related that government pressure in Germany has
encouraged universities to demonstrate greater efficiency while maintaining quality.
As a consequence. German institutions of higher education have adopted a range of
performance indicators. These indicators have not addressed quality in teaching,
learning, or research. Instead, tangible measures such as inputs (faculty teaching
loads) and outputs (standardized test scores) seem to dominate. Kirkwood maintained
that monitoring or measuring systems rarely consider the intellectual development of
students. He called for a combination of qualitative and quantitative evaluations to
measure the performance of schools. Next, he outlined a way for schools to apply the
principles of quality, as first espoused by Edward Deming. to educational settings.
Total-quality schools are characterized by customer focus, total stakeholder
participation, progress-assessment measurements, a systems view, and continuous
improvement (Kirkwood).
OHare (1996) reported on quality assurance practices at schools of public
policy. He also identified Deming as his model for quality assurance (QA) and listed
the following elements of a QA environment: (a) continuous improvement of the
system, (b) leadership and top level commitment, (c) experimentation and
observation, (d) teams, (e) delegation/empowerment/responsibility. (f) measurement,
(g) process focus, and (h) bench marking. OHare strongly believes that
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organizations need to know where they are on some sort of coordinate system relative
to goals and landmarks. These landmarks come from other organizations that are
doing similar things. The qualify-focused organizations benchmark against their
competition by careful comparison to their activities and accomplishments.
Benchmarking is not something that most public colleges and universities do. but the
practice could provide useful information about what kind of performance measures
would be appropriate for the higher education industry' (O'Hare).
Camp (1989) explained the history and significance of benchmarking to U.S.
industry. Benchmarking is the search for those best practices that lead to the superior
performance of an organization. He wrote that establishing operating targets based
on the best possible industry practices was critical to the success of every
organization. Camp offered the following as the best working definition of
benchmarking: Benchmarking is the continuous process of measuring products,
services, and practices against the toughest competitors or those companies
recognized as industry leaders." (David Kearns. Chief Executive Officer. Xerox
Corporation, p. 10)
The term benchmarking implies measurement and one can accomplish it in
two forms, internally or externally (Camp. 1989). The organization measures the
differences between the organization's internal practices and the external best
practices. This process leads to the opportunity for changes to best practices.
Benchmarking applies to all facets of an organization, basic products and services as
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well as to the processes or producing and delivering products or services. In fact.
Camp stated that benchmarking's main objective is to study processes and their
methods. Most importantly, he believes, is that benchmarking should encompass
those organizations that are recognized as the best or as industry leaders regardless of
their industry. In other words, higher education might look outside the education
world to identify the best practices in those processes inherent in delivering
education. Those best practices would then be the benchmarks against which the
organization would evaluate its performance.
Camp (1989) also asserted that benchmarking is a proactive endeavor that can
gather information, which helps an organization set realistic performance goals. Such
goals better fit into the context of the external environment by ensuring that those
best, feasible, and proven practices mesh into the organization's operations.
Benchmarking forces constant testing of internal practices against external standards
of industry practices. By translating best practices into operational units, according to
Camp, benchmarks allow organizations to project a future state of accomplishment.
Benchmarking might be a frame of reference within which institutions of higher
education could improve the funding process and attain a higher level of quality.
The Current State of Performance Funding Nationwide
According to the AASCU (1995). the U.S. Department of Education and its
predecessor departments have reported data on the condition of education for over
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120 years. In the I980's. they turned the focus to students and the reporting of the
effects of education. Now these efforts include Total Quality Management and
continuous improvement. At the state level, expectations for reporting results of
education systems are driving an expanded effort to develop indicators that will
gauge the results of investments in education from year to year. The focus on
indicators is marked by efforts to: (a) understand what they are. (b) develop good
ones, and (c) develop repotting contexts for indicators. The initial push came from
the U.S. Department of Education. During the 1980s. the National Center for
Education Statistics (NCES) shifted their reporting to include a list of 30 indicators
that covered student progression, context, and resources in The Condition of
Education. Today, this publication reports 60 indicators organized into: access:
participation and progress: achievement, attainment, and curriculum: economic and
other outcomes of education: size, growth, and output of educational institutions:
climate, classrooms, and diversity in educational institutions: and human and
financial resources of educational institutions. Developers of indicators face
daunting obstacles such as: (a) lack of agreement on a set of measures, (b) validity
and reliability of indicators, (c) achieving fairness in comparisons where student
characteristics are the basis of indicators, (d) the burden of reporting, and (e) the
corruptibility of indicators (AASCU).
Ruppert (1996) found that linking state funding to state priorities,
performance, and productivity is on state legislators' agendas. Her survey indicated


that 45 % of the responding legislators are likely to modify their state's current
formula to include a greater focus on performance measures. Additionally. 44 %
reported that their legislatures are likely to tie state funding to institutions' efforts to
increase enrollment, improve graduation rates, or some measures of institutional
performance. Fifty two percent of legislators asserted that some type of legislative
efforts are likely to condition funding to specific statewide priorities for higher
education. If not a groundswell. performance funding is certainly attracting
legislative attention.
The following principles can guide the development and use of indicators.
They were abstracted from the following reports: Community Colleges: Core
Indicators of Effectiveness (AACC 1994): and Charting Higher Education
Accountability (ECS 1994).
1. Does the indicator address enduring issues, measuring what is important and not
settling for what can be measured?
2. Is the indicator supported by a comprehensive information system? Can the
data be obtained at a reasonable cost?
3. Is it part of a commitment to track important data over time, ensuring that
documenting and improving effectiveness is a developmental process?
4. Is there a standard of comparison or a benchmark against which progress can be
measured?
5. Is the ongoing reliability of the indicator regularly assessed? Are changes made
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when needed?
6. Is the indicator monitoring educational outcomes and processes wherever they
occur?
7. Is the indicator credible to college personnel who are in a position to change
institutional behavior?
8. Can the indicator be readily understood by external decision-makers? Is it
credible to them?
9. Is the indicator presentation such that the public can discern strengths and
weaknesses and understand the system, even if they are not experts?
10. Does the indicator provide information that will help the institution to improve?
Does it encourage the institution to value the right things?
11. Does the indicator reflect the perspectives and concerns of multiple
constituencies?
Finney and Ruppert (1991) responded to a set of questions that they think
state legislators and higher education policy makers should be asking. Some of their
answers help to frame how higher education leaders should be thinking about
performance and quality of our educational system. For example, they said that states
have a responsibility to monitor the effectiveness of the higher education system. By
embracing a systems approach, the authors believe that states can set the stage for
colleges and universities to work together in promoting the public interests of higher
education which should be producing students who are literate, resourceful, and
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responsible. They stated that lack of purpose is consistently the missing link in
higher education assessment efforts because, typically, states, institutions, and the
public do not know why assessment is being done before they address how it should
be done. Andrea Serban and Joseph Burke (1997 reported the results of current
research concerning the ways in which states are responding to the issue of linking
higher education funding to achievement of educational goals. They reported that the
early 1970s saw some experimentation with performance funding in Tennessee.
Hawaii, and Washington. During the first half of the 1990s. a resurgence of interest
in and attention to performance funding grabbed the educational spotlight. As
opposed to funding higher education based on current costs, inflationary increases,
and projected enrollments (which has encouraged institutions tc ;ncrease enrollments,
programs, faculty, and budgets), states are beginning to fund institutions based on
achievements rather than on promises. The traditional funding models discouraged
reducing costs, reallocating resources, or restructuring administration.
Peter Ewell (as cited in Burke. 1997) listed the most common indicators for
performance funding:
1. Enrollment/graduation rates by gender, ethnicity, and program
2. Degree completion and time to degree
3. Persistence/retention rates by grade, ethnicity, and program
4. Remediation activities and indicators of their effectiveness
5. Transfer rates to and from two-and four-year institutions
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6. Pass rates on professional exams
7. Job placement data on graduates and graduates' satisfaction with
their jobs
8. Faculty workload and productivity in the form of student/faculty
ratios and instructional contact hours, (p. 3)
Sandra Ruppert (1996) reported a similar list:
1. Admission standards
2. Remediation activities and effectiveness
3. Enrollment, retention, and graduation data by gender, ethnicity,
and program
4. Total student credit hours by institution and discipline
5. Transfer rates to and from two-and four-year colleges
6. Total degrees awarded by institution and program and time to
degree
7. Pass rates on professional licensure exams
8. Placement data on graduates
9. Faculty workload and productivity data
10. Number and %age of accredited and eligible programs
11. External or sponsored research funds, (pp. 3-4)
It is interesting to note the common indicators from the two lists:
Retention/graduation rates.
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Job placement.
Licensure tesT scores,
Satisfaction surveys.
Time-to-degree. and
Two-year college transfers.
Former Colorado Governor Roy Romer (Burke. 1997). as chair of the
Education Commission of the States, wrote that the states need to be clear about
what we value in higher education so we can act on those values (p. 12). Richardson
(1997) agrees by saying. "Higher education policies reflect the core social values of
choice, equity, efficiency, and quality (p. 12). Richardson also believes. "The rule is
always. What is valued gets measured, and what is measured gets valued.' (p. 12) It
follows that what gets funded must be valued, so one can see by these early efforts at
performance funding how the states' values for higher education are beginning to
change. The challenge for the states and for higher education institutions is to come
together as collaborators, instead of as adversaries, to address what some see as a
growing public sentiment to improve the quality and effectiveness of higher
education.
A nagging and legitimate concern revolves around the nature of quality in
higher education. Many of the critics of performance funding rightly point out that it
is impossible to capture, much less quantify by indicators, the entire gamut of quality
education (Burke, 1997). Does the presence of legitimate questions negate the need
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to search for the answers? Certainly, it does not. A monumental effort was
undertaken by the National Policy Board for Higher Education Institutional
Accreditation (NPB), the Education Commission of the States (ECS) with support
from the Johnson Foundation, and the Pew Charitable Trusts to begin defining quality
in higher education, specifically undergraduate education. In a series of 15 focus
groups, conducted at five locations, consisting of education policy makers, business
leaders, higher education leaders, students, and accrediting officials, the researchers
sought out a common definition of quality in higher education (Romer. 1995).
Burkhead (as cited in Miller. 1964) also contemplated issues regarding the
measurement difficulties of budgeting, emphasizing that these difficulties become
especially great when attempting to determine program outcomes. The first problem
Burkhead saw was discovering or inventing a meaningful and consistent unit in terms
of which outcomes can be measured. A second problem arises when measuring
variations in quality among units, which in all other respects are alike. These
problems are similar to those that we encounter later in the literature review as part of
the current debate about measuring quality or performance in higher education.
The question: "What constitutes quality in undergraduate education?" while drawing
some agreement, also elicited a wide variety of perspectives from those outside
higher education and those working within higher education. Almost all of the
external parties believed that quality means what happens after the university
experience is over (i.e., returns to the individual and to society) while the internal
78


parties define quality in terms of an institution's resources. A number of institutional
leaders rejected the idea of overall quality standards on the basis of the diversity of
institutions with differing missions. All were able to reach agreement on desirable
student outcomes, which they identified as follows:
Higher-order, applied problem-solving abilities.
Enthusiasm for continuous learning.
Interpersonal skills, including communication and collaboration.
A strong sense of responsibility for personal and community action.
Ability to bridge cultural and linguistic barriers.
A well-developed sense of professionalism.' (p. 7)
Participants also identified institutional characteristics that define quality:
Student-centeredness.
Commitment to specific "good practices' in instruction.
Quality management' practices.
Efficiency and integrity of operation, (pp. 7-8)
They agreed on basic principles to govern measurement quality which are:
Multiple measures are critical.
Comparative measures might be useful among institutions with similar missions.
Contextual data reporting is necessary.
Absolute outcomes and educational value added' are important.
External sources are important.
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Mixed measures to address desired student outcomes and institutional
characteristics using both quantitative and qualitative methods are necessary.
(p. 8)
Some specific performance measures that would address these quality attributes are:
The successful and timely completion by students of their educational program.
Student performance after graduation.
Direct assessments of graduating students* abilities.
Inventories of instructional and organizational good practices.*
Direct observation through site visits, (pp. 8-9)
Good practices of undergraduate education include:
High expectations.
Respect for diverse talents and learning styles.
Emphasis on early years of study.
Coherence in learning.
Synthesizing experiences.
Ongoing practice of learned skills.
Integrating education and experience.
Active learning.
Assessment and prompt feedback.
Collaboration.
Adequate time on task.
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Out-of-class contact with faculty, (pp. 17-18)
Institutional administrators feel uneasy about public comparisons and
question the validity of the measures used and cringe at the politics of being ranked
(Morgan. 1992). Peters (1994) argued that faculty should be left alone because
external measures deprofessionalize them and their craft. Harold Enarson. former
president of Ohio State, (as cited inPeters) said. "Quality I know in my bones...
[using] 'inputs and 'outputs* is bush league economics. It is zeal for quantification
carried to its logical absurdity" (p.20). Or would that be ... "its illogical absurdity."
Peters said that other faculty objections to accountability' are: (a) no consensus on
what or how to measure, (b) external goals are mostly political, and (c) accountability
endangers diversity in education.
A faculty scorned can be an administrator's worst nightmare. Most of the
researchers acknowledge the upstream politics (state government) and its role in
shaping legislators* views on improving higher education. One needs also to consider
the downstream politics of higher education, that is. the role that faculty members
play in implementing the mandates from on high. As the street level bureaucrats
(Lipsky. 1980) who have almost unheard-of-autonomy in their classroom domains,
they had best be on board any quality improvement or productivity enhancing ship
before it sails. A considerable challenge for higher education is to communicate
clearly and in a timely manner exactly what needs to happen and work with faculty to
make it happen.
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Focus groups, surveys of legislators, conferences, and research are fine and
certainly help all of us crystallize thinking about this issue. Nothing, though,
provides new knowledge as saliently as actual experience does. Several states have
adopted some version of performance handing or quality improvement. The state of
Illinois, in 1991. undertook a program that they called Priorities. Quality, and
Productivity in Higher Education or P*Q*P for short (Wallhaus. 1996). It started out
as a response to continuing budget deterioration in the state, but became an eye-
opening exercise in reallocating resources, and reassigning priorities. PQP created a
statewide realization that higher education in Illinois was responsive to concerns
about quality. For the last three years (1995. 1996. and 1997) the legislature and the
governor have fully supported Illinois' budget requests. Recommendations are for
higher education in the state to directly link future funding to the higher education
budget process.
The most complete source of state and national data on higher education is
probably compiled by the Research Associates of Washington. Their national Higher
Education Report Card provides comparisons of state public higher education
systems and national trends including: State Profiles: Financing Public Higher
Education 1997 Rankings: State Profiles: Financing Public Higher Education 1978
to 1997 Trend Data; Higher Education Revenues & Expenditures: A Study of
Institutional Costs: and Inflation Measures for Schools & Colleges.
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Higher Education in the State of Colorado
Don C. Sowers (1924) provided a real treasure of historical perspective on
how Colorado has prioritized public education in this century. Although his book
does not deal specifically with higher education, it was very informative to read that
Colorado ranked 26th in the United States in percentage of income expended for
education in 1920. Bowers said. Colorado has been steadily losing ground
educationally ... during the last twenty years ... (p. 29). Sowers included a wealth
of statistics on public education in Colorado and all the states going back to 1890 in
some instances. The foreword referred to a similar study by Sowers related to higher
education, but I have been unable to locate it.
Although not as historically interesting. Brooks (1969). reported the results of
his dissertation research on the relationship between governmental structure and the
financing of higher education in Colorado. He did a nice job of explaining how
CCHE developed as a voluntary coordinating body in 1965. Brooks also detailed the
establishment of the Joint Budget Committee as a significant power in the state
political and budget process. His research was rich with descriptions of the evolving
political power and the interaction with higher education.
The Colorado Higher Education Master Plan1993-1998. (Colorado
Commission on Higher Education (CCHE). 1993) includes eight goals, which attempt
to address the most critical issues facing higher education today. It contains the
words and phrases: excellence, quality, efficient delivery of services, best use of
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Full Text

PAGE 1

PERFORMANCE FUNDING OF IDGHER EDUCATION: A CRITICAL ANALYSIS OF PERFORMANCE FUNDING IN THE STATE OF COLORADO by Gary Lane Bridges B.A.. Baylor University. 1968 M.B.A., University ofTexas at San Antonio. 1976 A thesis submitted to the University of Colorado at Denver in partial fulfillment of the requirements for the degree of Doctor of Philosophy Educational Leadership and Innovation 1999

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This thesis for the Doctor of Philosophy degree by Gary Lane Bridges has been approved by b 1 11'7] Date

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Bridges. Gary Lane (Ph.J? .. Educational Leadership and Innovation) Performance Funding ofHigher Education: A Critical Analysis of Performance Funding in the State of Colorado Thesis directed by Associate Professor Daphne Greenwood ABSTRACT On June 5. 1996. the governor of Colorado. Roy Romer. signed into law House Bill (HB) 96-1219. the "'Higher Education Quality Assurance Act"". House Bill 94-111 0 preceded the 1996 legislation and linked a portion of the state s higher education funding to institutions performance during the fiscal years 1994-95 to 1996-97. The purpose of my dissertation is to answer the question. Did performance funding have an effect on the desired performance indicators of higher education in the state of Colorado?"" I analyzed institutions performance data and compared the amount of performance funding provided by the Colorado s legislature to that provided by other states. Other states performance funding policies and other researchers performance funding studies helped to provide benchmarks by which to evaluate the efficacy ofColorados policy. My research indicated that 1) Colorado s performance funding policy had no effect on the state s higher education performance measures. 2) the state provided less performance funding as a percentage of higher education funding than other states. and 3) CCHE allocated the performance funding based more on enrollment than on performance indicators. This abstract accurately represents the content of the candidates thesis. I recommend its publication. Signed lll

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DEDICATION I dedicate this thesis to my wife, Shawn, for her enduring enthusiasm, tireless and unfaltering good humor while I wrote.

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ACKNOWLEDGEMENT My heartfelt thanks to Dr. Nadyne Guzman and to Dr. Rod Muth for their irrepressible good humor. steadfast professionalism. and timely nudges throughout my Ph,.D. studies My unqualified gratitude to Dr. Daphne Greenwood. who chaired my committee. for her constant and cheerful encouragement and her constructive comments. and to Dr. AI Ramirez. Dr. Robert Shirley. and Dr. Michael Murphy for their timely and discerning participation.

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CONTENTS Figures ......................................... ........................................................................ xi Tables .................................................................................................................... X\" CHAPTER I. BACKGROUND AND CONTEXT OF THE PROBLEM ..................................................... ....... ............................ 1 General Problem ...................................................................................... .... 2 The Specific Problem as Defined by Performance Funding .................................................................................... 2 Institutional Performance .......................................................................... 3 Student Satisfaction and Success .............................................................. 3 Employer Satisfaction ... ................................... .. ...................................... 3 The Performance of Colorado's System of Higher Education ..................................................................... 4 Background of the Problem ........................................................................... 5 Quality in Higher Education ................................ .................................... 5 The Budget Dilemma for Higher Education ................................................ ............. ....................... 6 Higher Education Funding in Colorado .................................................... 9 History of Performance Indicators and Funding ..... ............................... 12 Integrated Analysis of the Research ........ ............................... ................... 16 vi

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Accountability ......................................................................................... 16 State involvement in Higher Education .................................................. 17 Funding Formulas in Higher Education .................................................. 18 S umrnary ............................................... : ................. ................................... 2 1 Theoretical Framework ............................................................................... 21 Accountability ......................................................................................... 21 Policy Framework ................................................................................... 23 Structure of the Dissertation ........................................................................ 24 Sumrnary ...................................................................................................... 25 REVIEW OF THE LITERATURE ......................................................................... 29 The History of Accountability in Higher Education .................................... 31 The Nature of Accountability .................................................................. 34 State Governments and Higher Education .................................................. 35 The Use of Funding Formulas in Higher Education ............................... 38 Cost Analysis .......................................................................................... 39 Advantages and Disadvantages Of Funding Formulas .............................................................................. 42 Governing Boards of Higher Education ................................................. .43 State Funding of Higher Education ......................................................... # State Budgets .......................................................................................... 45 The Taxpayer's Bill ofRights (TABOR) ............................................... .46 vii

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State Funding as a Policy Issue .............................................................. .47 Policy Framework ................................................................................... 54 Accountabilitv Redefined For Qualitv ......................................................... 60 . The Current State of Performance Funding Nation Wide ................................................................................................ 71 Higher Education in the State of Colorado .................................................. 83 Summary ...................................................................................................... 87 3.. THEORETICAL FRA.MEWORK ............................................................................ 89 Discussion of Policy Areas and Performance Indicators ................................................................................ 90 A Theory of Student Learning ..................................................................... 94 4. METHODOLOGY. ANALYSIS AND RESULTS ..................................................................................................... 98 An Overview of Colorado's Economy and Higher Education .................................................................................. 98 Sources of Data .......................................................................................... 1 0 I Limitations of the Data .............................................................................. I 02 Procedures ................................................................................................. I 04 Analysis ..................................................................................................... 1 05 Explanation of Regression Analysis .......................................................... I 07 Results ....................................................................................................... II 0 5. CONCLUSIONS AND RECOMMENDATIONS ............................................... Il9 viii

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Misdirected Performance Funding ............................................................ 119 Recommendation .................................................................................. 120 Insufficient Performance Funding Amounts ............................................. 121 Recommendation .................................................................................. 122 Enrollment Funding Masquerading As Performance Funding ........................................................................... 123 Recommendation .................................................................................. 124 Discontinuity of the Performance Funding ............................................... 125 Recommendation .................................................................................. 125 Discontinuity of the Performance Measures ............................................. 126 Recommendation .................................................................................. 126 Research Institutions Attract Different Students and Behave Differently ............................................................... 127 Recommendation ....................................................................................... 129 Summary of Recommendations ................................................................. 130 Summary .................................................................................................... 131 APPENDIX A. COLORADO COMMISSION ON HIGHER EDUCATION POLICY AREAS AND RELATED PERFORMANCE AREAS ......................................................... 136 8. REGRESSION EQUATIONS AND DATA PLOTS ...................................................................................... 141 lX

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C. STATE OF COLORADO HIGHER EDUCATION PERFORMANCE DATA AND FUNDING BY GOVERNING BOARD ................................................................................. 151 D. HOUSE BILL 94-1110 .................................................................................. 155 E. HOUSE BILL 96-1219 .................................................................................. 163 REFERENCES .................................................................................................... 185 X

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I i i i I -I I FIGURES Figure l.l States with Performance Funding or Budgeting. 1997 and States Expecting Adoption of Performance Funding Within 1996 .............................................................................. 27 1.2 Colorado Higher Education Appropriations Process 1997-98 ................ 28 5.1 Percentage ofTotal Average Funding and the Percentage ofTotal Average Student FTE by Institution 1995-95 to 1996-97 ........................................................ 135 B.l Examples of Linear XY Relationships .................................................. l4l 8.2a Ratio ofTeaching to Non-Teaching Faculty and Staff And Related Performance Funding for Institutions .............................. 142 8.2b Ratio ofTeaching to Non-Teaching Faculty and Staff And Related Pertormance Funding tor Systems ................................... 142 8.2c Ratio ofTeaching to Non-Teaching Faculty and Staff And Related Performance Funding for Systems Excluding Research .............................................................................. 142 B.2d Ratio ofTeaching to Non-Teaching Faculty and Staff And Related Performance Funding for Research Institutions ............... 142 8.3a Institutional Support Expenditures per SFTE And Related Performance Funding for Institutions .............................. 143 8.3b Institutional Support Expenditures per SFTE And Related Performance Funding for Systems ................................... 14 3 xi

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B.Jc Institutional Support Expenditures per SFTE And Related Performance Funding for Systems Excluding Research Institutions ............................................................ 1-t 3 B.Jd Institutional Support Expenditures per SFTE And Related Performance Funding for Research Institutions .............. :1-t3 B.4a Credit Hours to Graduation and Related Performance Funding for Institutions ......................................................................... I-t-t B.4b Credit Hours to Graduation and Related Performance Funding for Systems ............................................................................. 1-t4 B.4c Credit Hours to Graduation and Related Performance Funding for Systems Excluding Research Institutions ......................... 144 B.4d Credit Hours to Graduation and Related Performance Funding for Research Institutions ......................................................... 1-t-t B.5a Weekly Undergraduate Contact Hours by FullTime Faculty and Related Performance Funding For Institutions ...................................................................................... 145 B.5b Weekly Undergraduate Contact Hours by Full-Time Faculty and Related Performance Funding for Systems ....................... l-t5 B.5c Weekly Undergraduate Contact Hours by Full-Time Faculty and Related Performance Funding for Systems Excluding Research Institutions ............................................. 145 B.Sd Weekly Undergraduate Contact Hours by Full-Time Faculty and Related Performance Funding For Research Institutions ...................................................................... 145 B.6a Relationship of GRE Scores to ACT Scores For Institutions ...................................................................................... 146 B.6b Relationship of GRE Scores to ACT Scores For Systems ........................................................................................... 146 xii

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B.6c Relationship of GRE Scores to ACT Scores For Systems Excluding Research lnstitutions ....................................... l46 B.6d Relationship of GRE Scores to ACT Scores For Research Institutions ...................................................................... 146 B.7a Relationship ofGRE Scores to Ratio of Teaching Faculty to NonTeaching Faculty and Staff for Institutions .............................................................................. 14 7 B. 7b Relationship of GRE Scores to Ratio of Teaching Faculty to Non-Teaching Faculty and Staff for Systems ................................................................................... 14 7 B.7c Relationship ofGRE Scores to Ratio of Teaching Faculty to Non-Teaching Faculty and Staff for Systems Excluding Research Institutions ............................... 14 7 B.7d Relationship ofGRE Scores to Ratio of Teaching Faculty to Non-Teaching Faculty and Staff for Research Institutions ............................................................... l4 7 B.8a Relationship of GRE Scores to Institutional Support Expenditures per SFTE for Institutions ................................................ 148 B.8b Relationship of GRE Scores to Institutional Support Expenditures per SFTE for Systems ..................................................... 148 B.8c Relationship of GRE Scores to Institutional Support Expenditures per SFTE for Systems Excluding Research Institutions ............................................................ 148 B.8d Relationship of GRE Scores to Institutional Support Expenditures per SFTE for Research Institutions ................................. 148 B. 9a Relationship of GRE Scores to Credit Hours To Graduation for Institutions ............................................................... l49 B. 9b Relationship of GRE Scores to Credit Hours To Graduation for Systems ................................................................... 149 Xlll

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B. 9c Relationship of GRE Scores to Credit Hours To Graduation for Systems Excluding Research Institutions ............................................................ 1..J9 B.9d Relationship ofGRE Scores to Credit Hours To Graduation for Research Institutions ............................................... 149 8.1 Oa Relationship of GRE Scores to Weekly Undergraduate Contact Hours for Institutions ...................................... 150 8.1 Ob Relationship of GRE Scores to Weekly Undergraduate Contact Hours for Systems ........................................... 150 8.1 Oc Relationship of GRE Scores to Weekly Undergraduate Contact Hours for Systems Excluding Research Institutions ............................................................ 150 8.1 Od Relationship of GRE Scores to Weekly Undergraduate Contact Hours for Research Institutions ...................... 150 xiv

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TABLES Table 3 .I Policy Areas. Performance Measures. And Performance Funding Amounts .............................. ............ .......... 90 4.1 Comparative Statistics: Higher Education in Colorado and the U.S. 1998 .......................... ..... ... ... .... .................. 100 4.2 Ratio of Teaching to NonTeaching Faculty and Staff and Related Performance Funding Regression Analysis Results ............................... ............ .................... I I 0 4.3 lnstitutional Support Expenditures per SFTE And Related Performance Funding Regression Analysis Results ................. ............. ............ .................... I I I 4.4 Credit Hours to Graduation and Related Performance Funding Regression Analysis Results .... ........ ............................. ... ..... ........... I 12 4.5 Weekly Undergraduate Contact Hours by FullTime Faculty and Related Performance Funding Regression Analysis Results .......................................................... ...... II3 4.6 Relationship of GRE Scores to ACT Scores Regression Analysis Results ................................................................. 114 4. 7 Relationship of GRE Scores to Ratio Of Teaching to NonTeaching Faculty and Staff Regression Analysis Results ....................................................... ......... liS XV

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4.8 Relationship of GRE Scores and Institutional Support Expenditures per SFTE Regression Analysis Results ................................................................. 1 16 4.9 Relationship ofGRE Scores and Credit Hours To Graduation 4.10 5.1 .., ),_ C.1 C.2 C.3 C.4 c.s C.6 Regression Analysis Results ................................................................. 1 17 Relationship ofGRE Scores and Weekly Undergraduate Contact Hours Regression Analysis Results ................................................................. 1 18 ComparisonsSelected Characteristics of Research Institutions to Other Institutions and Systems ....................... 128 Average Performance Funding Amounts and Percentages Compared to Average Student FTE Percentages by Institution I 994-95 to 1996-97 .................................... 133 Weighted Average Institutional Support Expenditures Per SFTE and Related Performance Funding 1988-89 to 1995-96 ............................................................................... 151 Weighted Average Ratio of Teaching Faculty to NonTeaching Faculty and Staff and Related Performance Funding 1989-90 to 1996-97 ........................................... 152 Weighted Average Credit Hours to Graduation And Related Performance Funding 1994-95 to 1996-97 ...................... 15 2 Weighted Average Weekly Undergraduate Contact Hours By Full Time Faculty and Related Performance Funding 1992-93 to 1996-97 ................................................................ 153 Weighted Average Faculty Salaries by System 1989-90 to 1996-97 ............................................................................... 15 3 Student FTE by System 1988-89 to 1997-98 ........................................ 154 xvi

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C. 7 Weighted Average ACT and GRE Scores 1989 to 1995 ...................... 154 xvii

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CHAPTER I BACKGROUND AND CONTEXT OF THE PROBLEM The higher education profession of Colorado is at a tantalizing crossroads. The easiest (and most tempting) road to travel is paved with rich traditions and comfortable ways of doing things (and not doing some things). Progress along this road will continue to be measured by mile markers that gauge how much the state pours into the educational system (i.e .. number of students enrolled. dollars or quantity of Ph.Ds. hired) rather than how much our educational system returns to society (i.e .. new learning, citizenship. values. or other intellectual enhancements). The constituencies of higher education are calling for a new direction of travel-a direction that leads to more and better output measurement from institutions of higher education and some type of incentive system that rewards institutional performance. Some such systems are currently operating in the United States and some even link institutional performance with institutional budgets. I describe the ways that 1994 and 1996 Colorado legislation embraced quality assurance, review the issue of defining quality in higher education, present the budget dilemma for higher education in the United States and in Colorado. review the history of performance funding in higher education. discuss the issue and history of accountability. discuss the genesis and use of funding formulas in higher education.

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review the role of states' governing boards. and review the current state of performance funding in the United States and in Colorado. My goal is to help answer the question ... Has performance funding improved higher education performance in Colorado? .. General Problem The academic community has largely ignored a private industry concept of Total Quality Management (TQM). Although eminent professors teach others how to incorporate TQM principles in the work place. most scholars consider TQM inappropriate for their own profession. Inappropriate or not. quality awareness and improvement are literally becoming the law of the land. Performance funding is an attempt to superimpose TQM-like principles onto the higher education community. The Specific Problem as Defined bv Performance Funding Performance funding links some portion of higher education funding to achievement of pre-specified performance or productivity goals. Did its use improve higher education performance or productivity in Colorado? Is the funding formula the appropriate vehicle to carry the quality improvement and accountability banners? On June 5, 1996. the governor of Colorado. Roy Romer. signed into law House Bill (HB) 96-1219. the 'Higher Education Quality Assurance Act"'. Section 2

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23-13-104 ofthe Act articulates the state ofColorado"s expectations and goals for higher education. Section 23-13-105 (l)(a) directs the Colorado Commission on Higher Education (CCHE) and the state's higher education governing boards to .. develop a quality indicator system to measure the overall performance of the statewide system of higher education and each governing board"s and each institution's performance in achieving the statewide expectations and goals. The Act defines the achievement areas the system will measure as follows: Institutional Performance (a) The efficiency and productivity of each institution. (b) each institution s stewardship of the assets held by it. and (c) whether the institution implements specific practices designed to enhance future institutional performance. Student Satisfaction and Success (a) Anticipated student outcomes (as measured by standardized test scores). (b) valued experiences provided by the institution. (c) student access to valued resources and services. and (d) the affordability ofthe institution in terms of the cost to the students. Emplover Satisfaction (a} Employers' satisfaction with the attitudes and skills of new employees. 3

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(b) employers' access to and satisfaction with the provision of continuing professional education opportunities by institutions. and (c) employers access to and satisfaction with the provision of relevant technical assistance and applied research by institutions. The Performance of Colorado's Svstem ofHigher Education (a) Student access to higher education. (b) the overall affordability of higher education both to students and to the state. (c) the educational development of the citizenry of the state. and (d) the institution's contributions to identified state needs and priorities. This legislation represents the second. albeit tentative. step toward a quality enhancing budgeting formula for higher education in Colorado. Previously. Colorado higher education grappled with performance funding under HB 94-lll 0. This legislation was in effect during the period 1994-95 to 1997-98. although the legislature funded only the first three years. CCHE collected extensive data from the institutions and their governing boards during this time and used that data to make funding allocation decisions. My project analyzed the performance data. tried to relate them to the performance funding allocated. and generally tried to make sense out of Colorado's performance funding policy and its implementation. 4

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Background of the Problem Qualitv in Higher Education Colorado s legislation propels the state into the forefront of the performance funding movement in the United States. An array of forces across the country is nudging this issue to the top of state legislative agendas. Fonner Governor Roy Romer has been one of those forces. so it is not surprising that Colorado has taken up this reform banner. As the outgoing chairman ( 1994-95) of the Education Commission of the States (ECS). then Governor Romer expressed his views and frustrations regarding higher education very succinctly. In the foreword to his report. Makin2 Qualitv Count in Undergraduate Education. Governor Romer said: I chose to focus on quality in higher education because of my curiosity and uneasiness about how people inside and outside colleges and universities think about quality and accountability. Because higher education is so important to our future well being. our invesonents in colleges and universities must pay high returns for both individuals and society as a whole. It seems clear to me that as state leaders and parents. we have the responsibility to take steps to ensure our institutions of higher learning meet our needs and expectations. Yet. I continue to be amazed at the resistance I encounter to examining whether we can measure and report on effective learning at individual institutions and provide good information to inform consumers about their choices. I also continue to be amazed at the inability of policy makers and public leaders to create meaningful and useful accountability systems for higher education. Finally. I am amazed at how many people are content to rest on the laurels of the past and insist that our higher education institutions need not change because they are the best in the world. 5

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Increasingly. however. both the public and state leaders are expressing concerns about the quality and effectiveness of their higher education institutions. These concerns reflect a wide range of issues. including: increasing costs. declining access. large class sizes. lack of course offerings. and reduced productivity and faculty workload. My ECS agenda focused on quality because it is the bean of addressing all these issues. Agreeing on what we mean by quality and measuring this quality in various institutions is essential to how we address issues of cost. access. and the effectiveness of teaching and learning. Decisions about which institutions grow and receive more dollars in a state higher education system should be made on the basis of which ones offer the best programs. Where students choose to attend and how much they are willing to pay for that experience should be based on the value they expect to receive. How institutions organize undergraduate degree programs and faculty work should be decided on the basis on what provides a high-quality learning experience. We need to be clear about what we value in higher education so we can act on those values. (p.v) The Budget Dilemma for Hieber Education Governors and state legislators nationwide are echoing this refrain. It is fueled by more than just concern about the efficacy of higher education. Higher education is facing a declining share of state appropriations as competition for funding grows In the state of Colorado. for example. higher education's share of total appropriations fell from just over 20 percent in 1986-87 to slightly less than 15 percent in 1997-98 (CCHE. 1997). Prisons and Medicaid have become voracious consumers of taxpayer dollars. K-12 has had trouble holding its ground and higher education has been losing ground since the early 1980s. In 1992. Medicaid spending consumed a greater portion of Colorado s state spending than did 6

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higher education. This pattern occurred in many states. In 1994. Medicaid spending grew 8.7% nationally compared to 4.9% growth in total state budgets and a 4.4% increase in higher education spending for the same period (Sweeney. 1995). Prisons have also been consuming a larger share of state spending. The American Association of State Colleges and Universities ( AASCU) in their 1995 Report of the States reported that 86% of state representatives surveyed from 48 states responded by stating that corrections spending competed with higher education: 83 % listed K-12 spending: and 60.4% listed Medicaid and welfare spending as major competitors. One dramatic example of prison spending crowding out higher education came in the early 1990" s with the state of California increasing its spending on prisons by 25 % while cutting higher education spending by 25 % during the same period (Ruppert. 1996). Ruppert also reponed that many legislators view higher education as a budget balancer. In other words. they know that higher education can increase tuition and fees to help solve their fiscal woes. In this same survey. 55 %of responding legislators stated that they believed higher education s share of their states' total budget would stay the same during the next three to five years while 16 % believed that its share would decrease during the same period. The state fundjng picture in Colorado is even bleaker. as reponed by the CCHE in their Master Plan 1993-1998. Since 1988. state general funding per student (adjusted for inflation) has declined by 8.2 %. During 1992-93. Colorado ranked 47th among states in the level of state appropriations per student. and 40th among states in 7

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state appropriations plus tuition revenue per student (CCHE. 1993 ). Paradoxically. for this same period. Colorado ranked sixth among the states in the percentage of residents who completed four or more years of college (CCHE. 1993). The heavy in migration of population from other states into Colorado accounted for much of Colorado's favorable standing as a highly educated state. Colorado has enjoyed (along with other western states) higher than normal economic and population growth during most of the 1990s. Colorado s funding environment is further complicated by the fact that it is one of three states (Colorado. Missouri. and Washington) that have directly invested the taxpayers with the sole authority to initiate new taxes or increase existing taxes (American Association of State Colleges and Universities. 1998). Colorado is also one of twenty-one states to adopt term limits between 1990 and 1995. These limits and greater legislative turnover in general. pose an additional challenge for higher education because they make higher education leadership work much more diligently to build new working relationships between higher education leadership and state legislators. In a 1995 survey. The National Education Association (NEA) reported that 54 % of education committee chairs in state legislatures were serving a first term. and that 25 % had served in the legislature five years or less. It appears to me that turnover at the state level could upset traditional relationships and alliances between state government and higher education. 8

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Higher Education Funding in Colorado The State of Colorado funds its 25 public colleges and universities from the General Fund (consisting primarily of income and tax revenues). student tuition and fee revenues. capital construction funds. and research grants. The state higher education budget consists of separate funds for capital construction projects and for annual operating expenditures. Performance funding got its start in Colorado in FY 1994-95 when the General Assembly appropriated General Fund dollars to reward performance and to provide incentives for higher education institutions showing improvement in selected priorities labeled as policy areas selected by the legislature. The legislature repealed the policy area funding during the 1997 session. but provided $4.6 million (0.-l% of total higher education funding) for FY 1997-98 to phase out two of the policy areastechnology and K-12 linkages-that had been supported under the policy area initiative. House Bill 96-1219. enacted in 1996. redirected the approach the state was taking on accountability and performance funding for higher education. This legislation charged CCHE with developing a quality indicator system to measure progress of institutions in achieving statewide expectations and goals. The statewide goals in HB 96-1219 reflect the previously reported policy areas: undergraduate 9

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education. workforce training. technology. K-12link.ages. and productivity. Funding ofHB 96-1219 will begin_ in FY 1999-2000. The Colorado General Assembly uses the Denver-Boulder Consumer Price Index (CPI) (the only one available for Colorado) to set the level of increase tor much of the higher education appropriation. In recent years. the legislature has limited tuition increases to the CPI or lower. and has even subsidized resident tuition from the General Fund. For example. for FY 1997-98. based upon the 1996 Denver Boulder CPI of3.5 %. they limited the non-resident tuition increase to 3.5 '!Ia and increased resident tuition by only 1.5 %. Student enrollments also affect higher education appropriations. For instance. when projected enrollments for FY 1996-97 fell short. CCHE reduced base funding by $1.4 million. In FY 1997-98. although enrollment was within 0.2% of projections. CCHE shifted funding from governing boards below projected enrollment to those \"\rith enrollment growth. The Colorado legislature appropriates a lump sum for the Colorado Commission on Higher Education (CCHE) which makes system-wide funding recommendations to the Governor and the legislature. CCHE allocates the overall General Fund and tuition revenue appropriations among the governing boards using funding formulas developed by CCHE and the governing boards. The six governing boards are: Trustees of the State Colleges in Colorado. State Board of Agriculture (CSU System). Regents ofthe University of Colorado. Trustees ofthe Colorado 10

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School of Mines. Trustees for the University ofNorthern Colorado. and the State Board for Community Colleges and Occupational Education. The governing boards then manage all expenditures. CCHE also consults with the Governors Office of State Planning and Budgeting that reviews CCHE"s recommendation and forwards the recommendation (after consulting with the Governor) to the legislature. At that stage the legislative Joint Budget Committee (JBC) reviews and modifies the recommendation before including it in the annual appropriations bill (see Figure I .2). Two separate spending limits constrain lawmakers in Colorado. A statutory limit approved in 1977 restricts the overall General Fund appropriations to 6 % above the prior years level (regardless of inflation or population growth) and requires that the state keep a 4% General Fund reserve. In I 992. voters approved the Taxpayer Bill of Rights (TABOR). which created a new limit on revenues and expenditures. The constitutional amendment limits the state s fiscal year spending grO\\th each year to the sum of inflation and state population growth for the previous calendar year. It applies to all funds. including cash funds such as tuition. Revenues collected in excess of the limit must be refunded to taxpayers unless voters approve spending the excess. Voters also must approve any tax rate increases State revenues exceeded the TABOR limit for the first time in FY 1996-97 by $139 million. which was refunded to taxpayers. Prior to TABOR. tuition and fees were determined by the governing boards subject to CCHE policy. Now. TABOR requires that the legislature limit tuition and fee increases (CCHE. I 997) since they are under the limitations. II

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State of Colorado economists are predicting that over the next five years. Colorado will collect revenues that exceed TABOR limits by $1.5 billion. While voters could approve spending these surplus funds. in 1998 they rejected the state's proposal to spend $562 million in surplus funds. Historv of Performance Indicators and Funding As early as the 1970s. when Hawaii. Tennessee. and Washington experimented with the concept. states began using performance measures to allocate state funds to higher education. In the l 980s. some states showed renewed interest in the Total Quality Management (TQM) movement. but failed to follow through when tight budgets and recession hit in the early 1990s. Currently. most states that use performance funding or performance budgeting limit the budget impact to between 25.5% ofthe base budget. South Carolina may become a noted exception if they follow through on their reported plan to allocate I 00 % of higher education funding based on performance measures by fiscal year 2000 (AASCU 1998). A national survey of state legislators (Ruppert. 1996) indicated continuing interest in linking higher education funding to state priorities. performance. and productivity. Forty-five percent of the legislators responding said that their legislatures are likely to .. adopt a new funding formula in the next three to five years: in most cases modifying the current formula to incorporate a greater focus on performance mechanisms. Forty-four percent responded that their legislatures were 12

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likely in the next few years to .. link funding to campus effons to increase enrollment. graduation rates. or other measures of student or institutional performance: Many of those responding viewed such links as an appropriate way to address concerns about higher education s accountability. Burke and Serban ( 1997) writing for the Nelson A. Rockefeller Institute. reported similar results. I used their data to develop Figure 1.1 that illustrates the geographic range of the use of performance funding. Governor Roy Romer. in his fmal report as Chairman of the ECS. stated: As state leaders. we have not done a good job of holding institutions accountable for the kinds of results that we really care about or the quality that counts for students. parents or states as a whole. In Colorado. I have no way to measure effectively the .. value added .. by the academic experience at most public institutions. especially in terms that are meaningful to students and parents or relevant to public policy. (p.3) The Education Commission of the States in its booklet. Assessine College Outcomes-What State Leaders Need to Know. reported the results of a 1991 survey by the American Council on Education (ACE). According to this survey. 81% of colleges had assessment activities under way. up from 55 %in 1988 (ECS. 1991 ). This interest in assessment largely grew from mandates of statewide coordinating and governing boards. State boards. the business community. and the public were the first to start asking questions about higher education outcomes (ECS. 1991 ). Todays productivity, performance. and quality movements are the evolutionary by-products of the earlier assessment efforts. The stagnant or deteriorating fiscal environments for higher education in many states has helped to forge the various performance 13

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funding models. Performance funding in public higher education really began gathering steam in the first half of the 1990"s. A survey conducted in late 1994 by the State Higher Education Finance Officers revealed that nine states had adopted-and ten were considering-measures that link some state funding for higher education to achievements on priority goals and objectives (Caruthers & Layzell. 1995). Telephone interviews conducted in 1995 with the chairs of the higher education committees of state legislatures found that 44% of the respondents from 49 states believed that their states were likely to tie funding to student or institutional performance in the next few years (Ruppert. 1996). Two surveys in 1996 suggest a growing interest in funding for results. The first one indicated that 14 states use quality outcomes factors in allocating state funds to institutions of higher education (McKeown. 1996). The other revealed that .. many states are either beginning to use or are considering performance funding. which is a natural outgro\\th of the current public demand for the most effective use of tax dollars .. (Maryland Higher Education Commission. as cited in Burke & Serban. 1997. p.6). Another influence helping to shape the debate on higher education performance is what some call the corporatization" of higher education. State governments often look to the business community for ideas about how to improve their OWn operations and efficiency. State legislators and officials may believe that terms like productivity. efficiency. performance. market-driven, total quality 14

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management. and incentive all mean the same things in higher education as they do in the business world. State officials often apply these corporate concepts to other state agencies and realize some successes. They believe. logically. that the same concepts must therefore be appropriate for higher education. Since there is no other state agency that operates quite like higher education (most agencies operate in a very centralized fashion and are managed by bureaucrats while higher education is de-centralized and managed by academics). these corporate concepts are often misunderstood. resented. and/or misapplied in the higher education realm. Unfortunately. many state legislators take the approach of regulating more corporate like behavior in higher education and simply add to the problem of over-regulation. They overlook. or never see. that one of the defining differences between the corporate environment and state government is less regulation of corporate behavior (AASCU. 1998). Corporate non-accredited higher education programs are also on the rise. fueled by the successes of giant corporations like Microsoft (AASCU. 1998). It is no wonder that these influences are changing the vocabulary and mindset of state legislators. The new (less value laden) perspectives tend to alter the routine and familiar ways of thinking and talking about how higher education should behave. and how the states should fund institutions. The Public Higher Education Program at the Rockefeller Institute of Government conducted a telephone survey in early 1997 questioning the State Higher 15

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Education Finance Officers or alternate officials in all fifty states. Puerto Rico. and the District of Columbia .. The survey was designed to differentiate between the terms performance funding and performance budgeting. The authors analyzed the different terms used in the responses and how the terms related to the descriptions of what was being done in the various states. Based on this analysis. they described performance budgeting as .. state governments considering reports of achievements on performance indicators as a factor in setting budget levels for public higher education and its institutions. without tying designated amounts directly to performance on specific indicators" (p.1 ). They define performance funding as --special state funding tied directly to the achievements of public colleges and universities on specific performance indicators .. (p.l ). [nteerated Analvsis of the Research Accountabilitv Accountability surfaced as a significant force in higher education as early as the University of Paris in the 13th century (Duryea. 1981). [ts influence in higher education policy making continues today. The public. first through lay governing boards of private universities. and later through state legislators. has always exerted influence over the affairs and even teachings of higher education institutions (Duryea. 1981 and McConnell 1981 ). Accountability is comprised of three elements: financial 16

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and administrative. scientific. and social (McConnelL 1981 ). The National Commission on Research says thaL .. When well designed. the system of accountability involves an appropriate balance between independence and controL between incentives and constraints. and between the costs and benefits of the various procedures and requirements used'" (as cited in McConnell. p.38). Regardless of how well designed. however. accountability crashes head on into faculties desire for autonomy. The right"" of faculty to govern themselves has. to a degree. been traditionally supported by the public (Duryea. 1981 ). Peters ( 1994) denounced accountability as the scourge of higher education. Boyer (as cited in Curry & Fischer. 1986) warned that the competing demands of accountability and autonomy could lead to a .. marriage gone sour .. (p.l ). The ideological battle over who governs whom and how much continues in the halls of learning today. but with much higher stakes As we shift from a domestic manufacturing-based economy to a global technology-based economy. higher education becomes more important as a means to realizing financial independence. State Involvement in Hi!ilier Education Since the Morrill Act of 1862. state governments have become more and more involved in higher education as they provide significant financial resources to state institutions. Hauptman ( 1993) reported that states paid about 30 % of the total $150 billion of higher education expenditures in 1990. Such a huge financial umbilical 17

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cord carries with it public concerns about how tax dollars are being spent. Complicating the issue are questions about the nature of quality and performance and how to define and measure them. State governments use the only leverage they control to exert their influence-money. That. in a nutshell. is how funding and quality came to be mixed together in the current debate about performance funding for higher education. Funding Formulas in Hieber Education James Miller ( 1964) provided the most thorough and most enlightening examination of the funding formula s development and use in higher education. He chronicled its development and evolution as a major policy tool of state governments as they struggled to deal with the exploding demands of higher education after World War II. Funding formulas provided higher education. its governing boards. and state budget officers \\ith a quantitative. simple. and equitable tool with which to analyze budget requests and to allocate state= funds. Formulas are also a vehicle for imposing accountability. As of 1995. almost 60 percent of states reported the use of funding formulas (AASCU. 1995). Researchers use various. though similar. definitions of funding formulas and I enumerate many of them later. Funding formulas are basically quantitative procedures designed to structure the state funding-of-higher-education process into a non-political. more objective. more equitable. and more easily understood process for 18

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state legislators and higher education leaders. Objectives of funding formulas also include achieving fairness in the way states collect and distribute state revenue to higher education. helping to meet state higher education goals. and providing a more stable fiscal platform from which to budget for higher education. which can prove to be an effective economic development tool for states. States commitments to education. especially higher education. are often an important inducement for industry relocation. A stable. well-financed higher education may provide a steady source of labor for industry. Caruthers. McKeown. and Marks ( 1994) also have written about the continuing development of funding formulas and their use in higher education. Cuthbertson (1994) and Nelson (1989) reported the results of their dissertation research on the use of funding formulas in specific states. The research in general depicted funding formulas as a benign budgeting tool that. for the most part. simplify the task of preparing. analyzing. and funding higher education budget requests. The State of Colorado first imported their funding formula directly from New Mexico in 1957 but called it a .. cost analysis .. method. They joined the nine other states that were using similar budgeting processes by 1957. Even as states and institutions were simplifying budget requests and the process of allocating funds to higher education. the relationship between them was becoming more complex. Governing boards evolved out of the need for institutions 19

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of higher education and state governments to communicate more effectively. For one thing. the state budgeting process was becoming more problematic for higher education as competing demands for resources crowded the state capitol agendas. Higher education needed to make its case to legislators who did not always understand higher education. Likewise. higher education leaders did not always know how to react in a more competitive arena. The governing boards are the intermediary between higher education and their benefactors (Miller. 1964 ). A significant amount of research has addressed state funding as a policy tool. Jones and Ewell ( 1993) elaborated on how funding policies affect behavior. and maintain that states need to evaluate whether institutions behavior is consistent with state educational goals. The implication is that states can affect that behavior through their funding policies. According to Jones and Folger (1993). states have for years promoted access to higher education by dictating that institutions maintain tuition rates that do not cover institutional costs (made possible by state appropriations). The 1990s ushered in new ways to blend the same ingredients into the policy:. setting and funding smorgasbord. A variety of terms (quality. performance. and productivity) highlight the basic idea of rewarding institutions of higher education on their performance. Grounded in accountability terms. the concepts are readily accepted and used by the business world. 20

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Summarv My review of the literature for this study indicated that much of the research on performance funding concentrates on the difficulty of defining quality. measuring quality. reporting quality for institutions ""ith different missions. and identifying appropriate indicators of quality. Other research reported the current usage of state funding efforts that link funding to quality. successes and failures of states efforts. and the state of Colorado s legislatively formalizing efforts to link some higher education state funding to performance indicators. Overall. the research available on funding formulas and their use by states to allocate state money to higher education appears to be thorough. Statistical analyses of performance data as they relate to performance funding. however. are noticeably absent from the literature. Theoretical Framework Accountabilitv Quality I know in my bones ... [using] inputs and outputs is bush league economics. It is zeal for quantification carried to its logical absurdity' (Peters. 1994. p.20). Why do we seek to know the condition of education? In the answer to this question will be found the reasons for the elaborate statistical record which forms a feature of all official school reports. We take an 21

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account of education so that we may know whether it is sufficient in amount and good in quality. (Peters. p. 48) These two quotes represent the divergent viewpoints about accountability in higher education today and will help to define the intensifying debate concerning performance funding in the months and years ahead. Peters ( 1994) wrote that accountability deprofessionalizes faculty and that it fails because higher education has not adequately defined the desired outcomes of its educational process. He likened faculty members to Mintzbergs holistic thinkers who used hunches when coping with complex problems that defied rational analysis. Complex human characteristics. like learning. often cannot be objectively measured and accountability demands just such measurement. according to Peters. Folger and Jones ( 1993) lamented the accountability regulations because. as they contended. they produce a compliance mentality (p. 21) and. for the most part. do not result in demonstrable quality improvements. Is the accountability movement part of an evil plot to gain control of our university classrooms? Is it simply a misunderstanding of the educational process on the part of legislators and the public? The current movement toward performance funding is a product of the traditional concept of higher education accountability and the corporate concept of using incentives to influence behavior. Incentives are the life-blood of the business world. The idea is that workers will increase production when offered enough of the right kind of incentives. managers will have better ideas 22

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when they get bonuses. and Chief Executive Officers will raise corporate performance (along with stock prices) to new highs when offered enough stock options. Incentives are the common thread woven through out corporate America. It is only natural that state legislators would take the incentive cue and desperately \\rant to be able to use incentives to fix higher education. The very nature of the policy framework within which state government and higher education operate. however. may not be conducive for such a cross-cultural transplant. Policv Framework Dennis Jones ( 1997). President of the National Center for Higher Education Management Systems (NCHEMS) defined a policy framework as "that collection of constitutional. statutory. and regulatory provisions that define the set of relationships benveen state government. higher education institutions. and the students that attend those institutions"" (p. 2). Jones said that most state/higher education policy frameworks are not planned. for example. as an integral piece of an over-reaching higher education mission statement. Policy frameworks evolve from layers and layers. over many years. of statutes and regulations. Consequently. higher education has become virtually encased in a labyrinth of ""what not to do" and how not to do it". The leaders of higher education. understandably. spend most of their time looking inward in a compliance mode instead of looking outward toward a vision. Jones also pointed out that the relationship between the states and higher education _,

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depends on institutions deciding what to do and the states telling them how to do it while the corporate model is just the opposite. Corporate boards of directors develop the mission statements and charge corporate management with deciding hO\v to get it done. Jones made a convincing argument that the typical policy framework will not allow higher education to move forward and accomplish true reform. He believes that the states must broaden their perspectives on higher education and recognize that the state governments are not the only clients of higher education. States need to .. de regulate" higher education to a degree. Substituting well-designed incentiYes for regulations can more effectively influence institutional behavior. States. according to Jones. should recognize students as part of the stakeholder system and re-direct policy making to consider students and the higher education market. Jones said that states should incorporate performance funding in the budgeting process to help align institutional and student behavior to be more congruent with state priorities ( 1997). Structure of the Dissertation Chapter I presents the research problem and its background. summarizes key research. describes the specific research problem. explicates the theoretical framework of the problem, and briefly explains the methodology. Chapter 2 reviews the literature on accountability in higher education. state governments and higher education. the use of funding formulas in higher education. 24

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governing boards of higher education. state budgeting for higher education. and the current state of performance funding in higher education in the United States and in Colorado Chapter 3 lays out the theoretical framework for relating performance indicators to desired outcomes. Chapter 4 details the methodology used. The methodology includes analyzing documents from CCHE. interviewing CCHE personnel and higher education officials. statistically analyzing institutional performance data. interpreting the statistical analyses. and relating the data analyses to Colorados legislation. Chapter 4 also describes and analyzes the data. summarizes the data and related performance funding amounts. and discusses the limitations of the study. Chapter 5 explains the conclusions. recommendations. and implications of the study and identifies future potential research Summarv A chorus of stakeholders is singing a refrain of higher education financing reform. Governors. state legislators. business leaders. and researchers are tuning in to the quality for pay .. movement. Simply put. state policy makers continue to be frustrated with the higher education community because: a It takes so much money (slightly less than 15% oftotal 1997-98 total appropriations in Colorado). 25

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:::1 The state cannot operate higher education like it does all other state agencies. u Many legislators perceive that higher education could operate much more efficiently. o Education is a difficult produce to measure. :::1 The public and lawmakers have different perceptions of the higher education work environment because they cannot relate the typical faculty teaching load and nine month teaching year to the .. customary'" eight hour work day and 12 month work year. ::1 The public and lawmakers recognize how critical higher education is to society because of the changing nature of our economy. the higher level of knowledge and skill required. and the realization that. in general. more education means a better chance for economic success. :::1 Higher education is very personal and even emotional for most families. since it involves their children and their chance for success in later life. Consequently. the chorus for juxtaposing quality improvement with budgeting is gaining volume. The hope is that financial incentives will propel institutions to greater levels of productivity. performance. and quality. The most difficult obstacle is to define higher education s output and devise ways to measure it. The State of Colorado faces this dilemma as they implement HB 96-1219 in 1999-2000. 26

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Figure 1.1 States with Performance Funding or Budgeting, 1997 and States Expecting Adoption of Performance Funding Within 5 Years, 1996 ./ .!!-Use Performance Budgeting or P ..& F d" e ormance un 1ng :;:7 '0 Likely or Highly Likely to Adopt Performance Funding -------b:OL::::.::::::j Source: Nelson A. Rockefeller Institute of Government. ( 1997). Performance funding and budgeting for public higher education: Current status and future prospects. Albany. NY: Burke & Serban. 27

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Figure 1.2 Colorado Higher Education Appropriations Process 1997-98 \ 1 \ I CCHE ConllliiS I TNSIIIIIS of the SlaleColeges $67.1 AdM15Siale MesaSiale MetroSiale WeAimSiale 2 Recouuueuds HE Budget t > Stale BoiRt of lqiaan $132.1 Colcndo SID!t University University at Soutllem Colcndo Fl Lewis 3 i I : I I i I Regetaof lJc1ivlnily of Collndo $178.5 cu Boukler cu Calcndo Spng. CUOenver 28 II CCHE I_ AIIOcllles 10 \ Governing Colorado School of Mines $16.4 Cormuity Colleges $101.3 Alaplhoe Otero Aurara 5 Leglsla1lve Joint Budget Committee Trustees at UniWnityof I Nac1hem Cokndo $35.8 ux:-1 Oislrict Colleges $14.2 AimS P'bsPelk Calcndo Macnlin Oenwlr Pueblo LMIIr RedRocb NariMastillm Mara-n Trril8d

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CHAPTER2 REVIEW OF THE LITERATURE In this chapter. I briefly review the history that led to the genesis of higher education accountability. It is in the beginnings of the university system that we see how. and why. government became involved. often in new ways. with its colleges and universities. State institutions of higher learning are always tied to their benefactors (state governments) via money. I explore the states relationships to higher education and the vehicles used to fund them. I devote a considerable amount of space to defining the funding formulas that states have adopted. explaining their purposes. listing some advantages and disadvantages. and previewing how they are currently being modified to accommodate performance funding. During the policy discussion. I review Colorado"s higher education policy environment. structure. and mechanism for state funding. John Dewey (Bowen. 1980) wrote. What the best and \Visest parent wants for a child. that must the community want for all its children. Any other ideal for our schools is narrow and unlovely: acted upon it destroys our democracy" (p. 233). Most individuals maintain a psychic or emotional connection to their time spent in the educational system. Whether this bond was forged by an elementary teacher who opened his eyes to the world. a high school coach who taught her how to 29

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win (and lose). or a college professor who taught her how to appreciate learning. students carry memories of their classroom experiences with them forever. These memories help focus the lens through which we all see our own children struggle through their educational years. and we come to realize how important the educational process is to our children s and to the nation s future. As students. we had no voice. As parents. we demand a voice in how our children are educated. socialized. and disciplined in school. We see the world becoming more complex and the work place more competitive and demanding so our parental instincts compel us to push our kids to achieve more. but we discover that. in many cases. the schools will not or cannot accommodate higher achievement. We become frightened by the incessant public criticisms of our school systems failures at educating our children. We react by berating school board members and legislators into doing something-anything. Finally. we end up with a myriad of patchwork regulations. acts. laws. and policies to solve educations woes. Built into many of these initiatives is the age-old incentive-money-in the belief that money can influence teachers to teach better. and can coax higher quality from institutions. We see the use of merit pay for high school teachers. and performance funding for colleges and universities. This project explores. examines. and explicates the use of pertormance funding for the higher education system in Colorado. It is important to understand other states. as well as Colorado s. perspective on performance funding. National and state data help the reader develop a clear 30

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picture of Colorado s higher education institutions and how they relate to the national landscape. The notion of incorporating performance indicators/measures. or any type of quality indicators. in state funding formulas to improve the quality or performance of higher education institutions is a highly charged issue. A substantial ponion of the literature review addresses the history of performance funding. the definitions being used. how performance funding is currently implemented and by whom. and the status of Colorado s performance funding initiative. If we see state policy as the message'. then we can consider funding formulas as the messengers that carry state policy to the state institutions of learning. Unfonunately. the messenger often garbles the message ... The Historv of Accountabilitv in Higher Education Higher education was born with a built-in conflict between autonomy and accountability. Accountability is. in part. an antecedent of formula funding and performance funding. E.D. Duryea ( 1981) reported that the University of Paris. founded at the turn of the thirteenth century. was the model for universities in the United States. Cobban (Duryea 1981) said that the Paris university was a result .. of the particular intellectual achievements of the galaxy of outstanding scholars who raised it to the forefront of academic life in northern Europe" (p. 15). Even with such an intellectually auspicious origin. however. the university found itself in conflict 31

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with the local church officials and citizens. According to Duryea. the Bishop of Paris and his representative. the Chancellor. tried to exert control over the growing institution. The scholars who taught there were evidently a disruptive group within the community. and the secular peace officers often had to maintain law and order among the abrasive educators. The scholars petitioned the Pope for protection and a certain uneasy autonomy. As a result. they traded one authority for another which worked just fine until national kings. in following centuries. exened their divine rights and supplanted the popes as lords and masters of the universities. The kings charters replaced the papal bulls and the universities became authorized by. and obligated to. the state. Notwithstanding these historical bonds with the state. as Cobban pointed out. a .. principle that the essence and core of a university was its autonomy'.(p. 16) had also developed in a dubious equilibrium with political reality that survives today. The first universities in the United States were governed by son of a holy triad of leaders who spread their oversight among the church. government. and the universities. There was little. if any. notion of autonomy or academic freedom (Duryea. 1981 ). The colleges performed a public function (that of educating the citizenry for the clergy or for mercantile). political function. or professional function (with a decidedly sectarian emphasis on Christian morality). Even though the universities and colleges were chartered with private boards of control separate from the agencies of government. they were subject to legislative will. When the 32

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Massachusetts legislature changed Harvard College's charter in 1812. Harvard accepted the change without protest (Duryea). There was no need for debate about autonomy versus accountability. for autonomy simply was not an issue for early universities in the United States. Events over the next 100 years. however. changed the equation. Higher education blossomed into a significant force in the development of a culture that was dependent upon science and technology and committed to educational opportunity (Duryea. 1981 ). Professors gained status as experts and came to be viewed as professionals who wanted and deserved professional freedom and a say in their employment conditions. Society slowly secularized higher education as faculty became more specialized and began demanding a premium for their research and teaching. In 1915. a new organization. the American Association of University Professors. heralded a new perception of the university as a center for learning that was entitled to a special and autonomous place in society. The Morrill Act of 1862 was a defining moment for U.S. higher education. The public was recognizing the increased value ofhigher learning and began to demand more opportunity to share in economic success by attending college. The Morrill Act provided for land-grant colleges and set the stage for a system of public colleges and universities in each state. individually financed from the sale of lands. The land sales set the precedent for state assisted public education. Of course. public support also required that universities be responsive to public needs and desires. 33

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During the 1950's attending college (often with help from the GI bill) became an accepted way of life for the American middle-class. Accountability also became an accepted way of life for the administrators of higher education. They routinely were expected to provide annual reports to the governor. legislature. or both. covering financial affairs and internal management. The courts routinely upheld legislative restrictions concerning educational programs. admissions policies. and financial affairs (Duryea. 1981 ). The Nature of Accountabilitv When it comes to higher education. neither complete control nor unfettered autonomy is possible. Dressel (McConnell. 1981) wrote ... The extension of substantive autonomy to an individual. organization. or group implies responsibility and accountability" (p.38). The National Commission on Research in 1978 recognized three elements of accountability: financial and administrative. involving evidence of financial propriety and compliance with administrative regulations: scientific. concerned with achievement of results and progress toward scientific objectives: and social. referring to the extent to which specific goals have been fulfilled (McConnell. 1981 ). The commission went on to say that. '"When well designed. the system of accountability involves an appropriate balance between independence and control. between 34

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incentives and constraints. and between the costs and benefits of the various procedures and requirements used .. (p.38). Kaplan (as cited in Duryea. 1981) pointed out that higher education institutions were often protected in the past by the public perception that they were best left to regulate themselves through reliance on tradition in the privacy of autonomy. The public believed that it was necessary to protect the profession from repressive external control and meddling which might taint academic freedom. In todays climate. in contrast. colleges and universities are expected to provide data on achievement of defined outcomes and learning. as well as evidence that these results are being accomplished at a reasonable cost. State Governments and Higher Education Since state governments are the primary source of funding and regulations for state institutions of higher education. it is helpful to review the evolution of their involvement. The total enrollment of all U.S. colleges and universities in 1900 was approximately 250.000 students (representing about 4% of the college age population) (Miller, 1964). The Commission on Financing Higher Education reported 547 public institutions of higher education in 1949. As of 1976, that number had grown to 1.466 institutions as reported by the Carnegie Council on Policy Studies in Higher Education. 35

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Millett ( 1981 ). chronicled the fifty state governments planning and suppon of higher education in the years between 1950 and 1980. and said thaL in a variety of ways. states responded in a positive manner to the social expectations for expanded programs. burgeoning enrollments. greater geographical access. and improved economic access. In 1950. 2.3 million students were enrolled in institutions of higher education. of which. 1.2 million attended public institutions. It was also at the beginning (about 1950) ofthis remarkable period of growth of public higher education. that states began to develop and use funding formulas as a way to apportion the growing higher education budgets. The growing coffers of the state and federal governments (due to the growing economy after World War II) made spending on higher education even more palatable. In I 960. over 3.5 million students (roughly 60% of college age residents) attended college. By 1980. 12. I million students (9.4 million in public institutions) attended higher learning institutions. Public institutions commanded a total annual income of 1.2 billion dollars. including about 45.5 million dollars from state governments. in 1950. By 1980. it was estimated that public institutions of higher education had an annual income of almost 50 billion dollars. of which about 20 billion dollars came from state governments. State governmentsgreater involvement in higher education was in direct response to the following social expectations: to fill the expanding demand for educated talent in 36

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the American labor market. to encourage economic within the states. and to advance social mobility (Millett. 1981 ). The states growing support of public higher education during this period was not without concerns. though: what could be characterized as: (a) the mission and performance of public institutions: (b) the future of the independent sector: (c) the cost of higher education programs: and (d) the accountability of the public institutions. So as early as 1980. the issues of higher education performance and accountability appeared on state legislatures worry lists. However. state legislators recognized that the benefits accruing from higher education were. for the most part. intangible and did not lend themselves readily to precise quantitative measurement. They began to expect the state colleges and universities to be able to demonstrate (without specifying how) that these benefits could exceed the costs. It is likely that public expectations sprang from the broader social expectations of higher education. It was much easier for state legislators to take up the battle cry than to explain the difficulties to the public. So. as states increased higher education spending. there emerged an uneasy tension between institutions and their benefactors. Hauptman (1993) reponed that states paid roughly 30 % of the total $150 billion in higher education expenditures in 1990. This financial relationship between states and higher education is anything but constant. When times are good. states fund higher education rather generously: when times are lean. states often cut back and students and their families end up paying the fare in higher tuition just when they 37

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have a harder time affording it. The public becomes more critical of the rising tuition at colleges and universities. This criticism often spills over onto faculty teaching loads. high cost strUctures. and the research missions of some institutions. As public criticism grows. state legislatures begin to react. The Use of Funding Formulas in Hil!her Education As reported by the American Association of State Colleges (AASCU. 1995). 58.5 % of all states currently use funding formulas to allocate state funds to higher education. James L. Miller ( 1964 ), the first author to really explore funding formulas and their use. stated that funding formulas were a response to the exploding budgetary requests of institutions after World War II. The budget requests became increasingly complex and took more analytical expertise and time to sort out as the number of institutions and the number of students they were trying to serve grew. Formulas reduced the complexity and the bulk of budget requests and allowed an objective analysis and comparison of various institutions requests. Miller defined a funding formula as: An objective procedure for estimating the future budgetary requirements of a college or university through the manipulation of objective (quantitative) data about future programs. and relationships between programs and costs. in such a way as to derive an estimate of future costs. (p.6) 38

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A formula may be thought of as a decision rule that aids in the calculations accompanying institutional budget requests. It reduces the complexity of the process and allows the decision maker to focus on key aspects (such as enrollment) without having to make a new decision every year (Meisinger. 1976). Millen (as cited in Noe. 1986) said that the key issues in budget formulas are equity and adequacy. Formulas present a method of calculating an equitable. adequate, and proper need level at a specific institution during a specific time period. They may take into account the number of students or square feet of space and apply factors such as rates or amounts per credit hour or square foot. A formula might be applied uniformly to either: (a) groups of comparable institutions. or (b) comparable activities within a group of dissimilar institutions. Cost-Analvsis Cost analysis also was used as an objective way to analyze historical costs and their use toward budgetary purposes. Miller ( 1964) pointed out that the differences between budget formulas and cost analysis procedures is that cost analysis measures past relationships between costs and programs. Formulas use known past relationships to determine future requirements for various levels of program activity. A cost analysis measures program and cost factors without defining the relationship between them. A formula estimates future program levels by pre-determining the program-cost relationship. The unknown factor of a formula is the future total cost. 39

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cost analysis measures the past [while] formulas estimate the future (Noe. 1986. p.6). Miller ( 1964) outlined the development of cost analysis from John Dale Russell s work during the late I 920's and I 930's. during which time Russell developed and tested cost analysis techniques to systematically analyze the expenditures of colleges and universities. Russeirs techniques were eventually adopted and used by the North Central Association of Colleges and Secondary Schools as part of their accreditation process. Colleges and universities followed this important lead and began using this technique internally as welL Interestingly. even though Russell"s work in effect spawned the eventual development of budget formulas. he did not embrace their use. He continued to refer to his work as budgetary analysis and feared that formulas would become a substitute for intelligence'" (Miller. p.9). Caruthers (as cited in McKeown & Layzell. 1994) reported that formulas have constantly evolved since their inception. He related four long-term trends in formula use and development: More detailed budget categories. More budget control and monitoring of formula categories by state boards and legislative staff to enhance accountability. More non-formula components such as grants for equipment and incentives for quality improvement. 40

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Less reliance on enrollments in anticipation of enrollment declines. lp.322) Cuthbertson ( 1994) defined formula funding. traced its history. and listed advantages and disadvantages of several of the formula funding types. He also discussed the various costs associated with formula funding and describes several states uses of various formulas. A formula is defined as a procedure by which selected variables (i.e . student contact hours) and selected fixed factors (i.e .. salaries or faculty/student ratios) are used to determine institutional funding Formula funding is believed to provide for stronger financial control of taxpayers money and protect academic freedom by preventing discretionary budget cuts The objectives of formula funding include equity and adequacy Equity means distribution of state funds based. not on institutional size or number of students but primarily on program area costs. workload. and available revenue. Adequacy of funding enables institutions to offer quality programs needed by their respective communities. Nelson ( 1989) surveved 49 state bude:et offices Usine: results from the 43 --states that responded and examination of a 1986 study from the Michigan Legislative Select Committee on Education she reported: 28 % of the states use incremental funding (percentage increases are applied to the previous year's base which is expressed in financial terms rather than work-load or program terms): 24% use a formula funding model: 26 % use a combination of incremental and formula funding procedures; and 22% use other funding distribution processes. The other .. includes 41

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such methods as zero-based budgeting, performance funding. marginal cost funding. and decision packages. Advantages and Disadvantages of Funding Formulas Hale and Rawson ( 1976) pointed out that there were a variety of reasons why states and institutions adopted funding formulas. Formulas objectify and standardize the budgeting process and may help to deflect the charge that institutions misrepresent income. hide reserves. or retain surpluses (Glenny. as cited in Hale and Rawson). In other words. formulas may (or may appear to) increase an institution s ability to be accountable to the public. The formula is a more systematic and orderly budget process and helps institutions provide and analyze data internally (Miller. 1964 ). Another perceived advantage is that formulas help the state more equitably distribute public funds. Finally. formulas may reduce inter-institutional tension during the budget cycle because allocation procedures and parameters are pre-defined. This may prevent state budget officers from making arbitrary budget reductions or reallocations (Hale and Rawson). The disadvantages of funding formulas include the possible inappropriate use for the internal allocation of institutional resources. State budget officers. coordinating agencies. or the institutions may become complacent from the use of a formula and overlook re-evaluating the assumptions. policies. or goals implicit in the funding formula (Miller.1964). Some fear that funding formulas have a leveling 42

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effect on the quality of educational programs (Hale and Rawson. 1976 ). Yet. by 1990. approximately 33 states were using some type of funding formula for allocating state funds to higher education institutions. Governine Boards of Higher Education Governing boards developed during colonial times to provide church groups ""ith some control over the affairs of the colleges they founded and supported. These lay boards personified societys idea that colleges had a responsibility to society which should be represented in the administration (Miller. 1964 ). It was no giant leap. therefore. for states to extend this governance concept to state colleges and universities. and by 1940. twelve states had established statewide coordinating agencies to oversee the coordination of state higher education policies and activities. By 1960. an additional twelve states were operating with these agencies. The higher education institutions in five states established voluntary coordinating agencies which were an attempt to co-opt statutory authority. Colorado was one of those five states. The preeminent feature of all coordinating bodies. statutory or volunteer. is the fact that they act as the intermediary between the higher education establishment and state government in solving problems and helping to set budgeting and planning policy. The development and use of budget formulas was obviously of great importance to coordinating boards because it made their job of interpreting and communicating higher education budget requests to the state much easier (Miller. 1964 ). 43

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State Funding of Higher Education Hossler. D. (1994). identified several trends affecting funding ofhigher education. According to the author. the most significant trends are: (a) competing demands for state funds. (b) fluctuating state economies. (c) declines in disposable family incomes. and (d) increased demand for post secondary education to compete in an increasingly complex job market. Fischer (1990) reported that. for over a century. states policies of financing public higher education have followed the same basic scheme of appropriating funds directly to public institutions so that the institutions can charge lower-than-cost tuition to all students. This funding philosophy captures the state goal of providing access to all students. Fischer listed several reasons why this approach of direct-aid to institutions is attractive: (a) higher education is a public good that should be accessible financially to all qualified users; (b) higher education is an entitlement: (c) states should provide a subsidy to deter their students from migrating to other states for their education: (d) low tuition promotes equal opportunity for education: (e) direct appropriations to institutions help states maintain control over institutions: and (f) direct state appropriations eliminate red tape for the state. schools. and students. Fischer ( 1990) took issue with all of these justifications and believes that a more efficient and equitable funding philosophy would be to re-direct state funding to the students and mandate institutions to charge full cost to all students. Fischer contended the current system is inefficient. distorts student choices, and shelters 44

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public institutions from competition because of the price gaps between public and private institutions. State Budgets Miller ( 1964) offered a similar view of the budget saying. The budget is the major instrument of executive management"" (p.38). In that regard. I would add that the budget is a major policy tool. Burkhead (as cited in Miller) believed that the state budget system was developed primarily by legislatures so that they could exercise control over the executive branch and extend their own authority. It is also in Miller s ( 1 964) book that I found the first reference to performance budgeting. He reported that the First Hoover Commission in 1949 recommended that .. the whole budgetary concept of the federal government. .. be refashioned by the adoption of a budget based on functions. activities. and projects (p.39). Miller believes that this idea can be traced back to F .A. Cleveland in 1910. The Hoover report talked about quantifying program activities. Performance budgeting has been contemplated since the early part of the century. albeit in a slightly different context. Almost all states are besieged -with competing demands on available revenues. These include more prisons. federally mandated Medicaid increases. and burgeoning K-12 requirements such as higher teacher salaries and increasing requirements to provide services for disabled and other special education students. Since higher 45

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education has independent sources of revenue (tuition. contracts. and research grants) states have allowed higher education s share of the general tax revenue pie to shrink in recent years. In fact. fiscal year I 992 was the first year in a long time that state appropriations were smaller than those of the previous year. Many states have allowed institutions to increase tuition to make up the shortfalls. Institutions have responded by also cutting budgets across-the-board (Jones & Folger. I993). The Taxpaver's Bill of Rights
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return $139 million to taxpayers. It appears that Colorado voters will not soon be in the mood to eliminate TABOR. so institutions of higher education will have to live with limited tuition increases and state appropriations. State Fundine as a Policv Issue State governance. funding formulas. accountability. the public s expectations. and institutional productivity are all pieces of the higher education milieu. The common thread that binds these issues together is policy Policy is the legislators communication medium with higher education. By requiring. for instance. that institutions submit accountability reports. they tell higher education and the public that accountability is important. By requiring institutions to submit productivity reports (and linking those reports to budgets) they make a statement about improving efficiency in higher education. Legislators also use policy to exercise control over higher education. In this section I address state policy related to higher education. Jones and Ewell (1993) analyzed the many factors that policy makers should consider when assessing the extent to which state policies promote or impede good practice in undergraduate education. They identified (a) characteristics of good practice; (b) mediating influences of institutional structure and culture that can serve either to moderate or amplify the impact of state policy: and (c) important factors at the state level including culture. policy. and ways in which policy is implemented. Mediating influences include: (a) institutional culture and practices. (b) a strong sense 47

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of mission and shared purpose. (c) leadership committed to achieving institutional goals. (d) clear statements of intended instruction objectives. (e) policies and procedures consistent with stated purposes. and (f) institutions being self-regarding and student-centered. An important issue for legislators to consider is whether the funding policies and procedures of the state are consistent with the stated goals for higher education. Resources are another important mediating influence (Jones & EwelL 1993 ). and the economic forces at both state and institutionalleve1s play an important role in policy making. The funding base must be adequate to allow the institution to accomplish its mission or the institution will be preoccupied \\'ith surviving instead of carrying out policy. Not only must resources be sufficient. but the state must also distribute them appropriately to accomplish the stated goals. For example. if the state never distributed funds for technology. the institutions could not maintain technological currency in the classrooms nor could they teach their students how to use the latest technology. The adequacy of the resource base for students may be even more criticaL especially if uncertainty pervades resource investment in undergraduate investment decisions. Higher education financing in most states is increasingly unlike the financing ofK-12 education or the health care system where categorical funding. federal mandates or court orders ensure a steady stream of support (Jones & Ewell). As a result. higher education funding is dependent on the states economies and subject to wide fluctuations that make sustained investment difficult. In good 48

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years. this means a windfall that may cause policy makers to be reluctant to invest in incentives for the kinds of long-term changes required in such areas as undergraduate study. Instead. the response is to invest in special projects on the margin that. while prudent. send a very uncenain signal about the states commitment to fundamental improvement (Jones & Ewell). For example. some institutions in Colorado received funding for capital construction while at the same time cutting their operational budgets due to an enrollment decline. These budget cuts affected faculty raises. increased the use of adjunct faculty. and eliminated faculty searches tor vacant teaching positions. Jones and Folger ( 1993) asserted that state governments have treated higher education as a public utility. the services of which should be provided to customers as they need them. This view tended toward a priority on access and increased higher education capacity. Access is still high on the state policy agenda. but it is sharing space with the view that higher education is a strategic investment that will enable society to achieve cenain goals. One ofsocietys goals is improving the quality of undergraduate education. which may appear at odds with higher education s research priorities. Academic priorities manifest themselves through the reward (promotion and tenure) system in higher education. This system usually rewards graduate teaching and research. as opposed to improving undergraduate teaching. While undergraduate education cuts across all disciplines. universities are organized by discipline specific departments within colleges that routinely operate with great 49

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autonomy (Hansen and Weisbrod. 1971 ). Faculty are evaluated and rewarded \\ithin the colleges and may few incentives to undertake quality improvement initiatives in the classroom. State legislators often do not understand this mismatch of societal priorities and higher education priorities when they debate and enact policy. Another strategy is for higher education to .. do more with less"" through increased productivity, not only from the faculty. but also from the institutions themselves For example. some legislators have expressed the opinion that faculty should maintain set office hours or teach a specified number of hours every semester State legislators are often tempted to regulate greater productivity by attacking faculty workloads and habits. an approach that by the very nature of the faculty-institution relationship. is not very effective. According to Jones and Folger. fiscal policy is the single most potent tool of state policy makers because resource allocation focuses attention and allows states to provide incentives instead of regulation to influence behavior. Jones and Folger (1993) believed that states need to restructure the funding framework for higher education to provide a better link between policy and behavior. They recommended a three-part budget: ( l) a base or core budget. (2) a capital budget. and (3) a special-purpose budget. The base would provide the continuing r..mding that allows an institution to accomplish its mission. however it is defined. The base would be appropriated as a lump sum and would come with few. if any. constraints. It would however. be contingent upon accountability processes. be 50

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adjusted for cost-of-living changes. and not be dependent upon changes in enrollment. The capital portion would be used only to acquire new physical assets: the maintenance of assets would come from the base budget. Finally. the special purpose portion would provide state policy makers with the vehicle through which direct advancement of state goals could be made. such as quality improvement with performance funding. Jones and Folger recommend that 8-10% ofthe base budget be allocated for special-purpose funding. McGuinness ( 1994) related that by 1990. two-thirds of the states had mandated that institutions of higher education assess student learning. State roles in higher education were evolving to: 1. Broaden the definition of accountability" from an emphasis on equitable access and efficient use of resources to an emphasis on performance and results. 2. Decentralize and deregulate state managerial controls. in return for accountability for outcomes. 3. Establish special competitive. performance or performance funding programs to stimulate institutional realignment of priorities and goals. 4. Emphasize public reporting of results to inform the market" instead of relying on traditional internal bureaucratic reports of accountability. 51

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5. Change college and university missions to emphasize undergraduate teaching. increase admissions requirements. or establish special faculty development centers to improve teaching and learning 6 Use instructional technology and distance learning to stimulate new ways of delivering education more effectively and less expensively. 7. Examine the appropriate roles of government-initiated reform. 8. Change the focus from issues such as student access and resource distribution to a closer scrutiny of the return on investment. (p.l-3). Even with a rash of state initiatives to assess results. there has been linle progress (McGuinness 1994) because ofthe difficulty of reconciling the external pressures for improvement with higher education s perceptions of how to accomplish change within its internal governance processes. In an effort to more fully understand the policy environment and culture of states. the Education Commission ofthe States (ECS) undertook a pilot project that involved five states (Colorado. Maine. New Jersey. Vermont. and Washington) during the period between I 990 and I 992. According to McGuinness. one of the objectives was to identify characteristics that might limit the effectiveness of higher education policies in those states. McGuinness described some of the policy inhibitors that the study identified: One is too much emphasis on uniformity and consistency. A one-size-fits-all approach often detracts from efforts to consider population diversity or to initiate -., ,_

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individual improvement efforts. Two examples he gave are I ) the pressure to effect across-the-board resource allocations or reductions. and 2) the uniform application of state civil service requirements for staff at all public institutions. Another is the inability to articulate a coherent long-term agenda. When the policy process is shared by the governor. legislature. state coordinating agency. and others. short term fixes to specific problems (e.g .. how to increase admissions. how to improve student retention. how to keep tuition reasonable) often dominate. Long term goals such as the desired educational level of the state s population or the knowledge and skills the state s population needs to become contributing members of the state s economic and civic life are often left unaddressed. Absence of information is another one. Turnover of state legislatures reduces the institutional memory and. as a consequence. creates short-term solutions to long term problems Limited information and analysis dominate the policy making in most states. The defensive nature of policy can also be an inhibitor. States tend to focus on preventing bad things from happening rather than stimulating positive behaviors. This results in a negative mind-set driving state policy. which in tum. elicits defensive behavior from institutions of higher education. Also. the diminishing agency capacity to lead the state s higher education agenda can be a problem. Colorado was singled out for the burdensome regulatory requirements preoccupying its state-coordinating agency (Colorado Commission of 53

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Higher Education). Layer after layer of bureaucratic regulations. often \\ith no coherent connection. hobble many state agencies in their efforts to provide leadership for higher education. Another one is uncoordinated. inconsistent policy implementation. Policy making in a vacuum. with no links hetween strategic planning and budgeting: linle or no understanding of education and its change processes: and targeted policy making without the big picture contribute to haphazard policy making. Inconsistent and disconnected financing policies may inhibit. Frequent changes in funding policy. special funding programs that conflict with other underlying incentives. accountability measures with no connection to the state planning requirements. and lack of coordination of financial policies all result in mixed signals and inconsistent behaviors. Long-term fiscal constraints driven by competing demands tor state resources. resistance to tax increases. and continued resistance to tuition increases are likely to exacerbate the dilemma of higher education to provide higher quality without significant increases in financial resources (McGuinness. 1994 ). Policv Framework. Dennis Jones ( 1997) presented an enlightening view of the policy framework within which states and the higher education industry struggle. He defined a policy framework as "that collection of constitutional. statutory. and regulatory provisions 54

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that define the set of relationships between state government. higher education institutions. and the students that attend those institutions (p. 2). He listed the categories of relationships that provide the structure of such a framework: Governance and structure define the policies that define organizational structures and governance relationships that. in tum. assign decision authority and specify allowable decision-making of entities within the structure. In higher education. institutions generally have latitude to determine what should be done. state governments decide how institutions should do things. Jones points out that this is just the opposite of what is considered best management practices in the private sector where decisions about what to do are strategic decisions made at the highest level. while decisions about how to do it are best made closest to the action. Planning/setting of expectations refers to a clear statement of expectations of what is to be accomplished. Two basic expectations define the relationship between state governments and higher education: l ) access-accommodating all citizens who could benefit from higher education and 2) efficiency--providing access to education at the least cost. During the last five to ten years. according to Jones. a third expectation--quality--has emerged on the policy agendas of many states. There is little agreement of what quality means in higher education. Historically. it has been defined in terms of inputs only despite the fact that it is really an output measure. Funding refers to the allocation of resources to students and institutions. 55

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Regulation is the prescription of how institutions must deal with: personnel issues. purchase of goods services. traveL admission of students. and many other operational and bureaucratic issues. Accountability means the process through which institutions and students provide evidence that prescribed actions were taken. prescribed procedures were followed. or intended outcomes were achieved. were the funds used in the ways specified and did the institution adhere to the specified procedures in carrying out their functions?" (Jones. 1997. p. 7) Within the last decade or so. accountability has been defined as relating to institutional performance as defined by learning outcomes. More recently. some states have included state-defined goals and priorities in this definition. Jones ( 1997) asserted that most states policy frameworks share the folio \\ling common characteristics: Focus of state policy defines the institutions or the providers of education as the policy focus as opposed to the students or other clients. This focus. in Jones opinion. has created a highly regulated industry. Recognition of other policy initiators refers to federal government efforts directed at students (financial aid) and faculty (research) influencing policy. The federal government's policies have expanded the market by affording more students more access and more choices. States could not ignore the federal policies and had to react (by making more capacity available to meet demand and by rewarding faculty 56

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who brought in huge research grants). Neither of these address quality of undergraduate education. Budgeting/resource allocation refers to institutional funding that is based on past. current. and estimated future costs. or some combination of these. Jones points out that funding was seldom linked to achievement of state priorities. Regulation means that mandates or prohibitions related to institutional behaviors are central to most relationships between states and higher education. The regulations almost always pertain to inputs and processes and almost never to outputs or outcomes. Jones ( 1997) emphasized that .. the regulatory environment established for higher education by state government action creates a significant barrier to enlightened management of most institutions .. (p. 7). This environment. according to Jones. directs attention to the methods by which institutions are managed to the detriment of any discussion about expectations or the intended purposes of the institutions. He related substantial evidence that the current approach to state higher education policy has resulted in a virtual impasse between higher education and policymakers. For example. higher education asks for more money and policymakers reply that they cannot give them more because they have so many other needs to address (often mandated) and taxpayers do not want them to raise taxes. Then educators want the policymakers to eliminate some of the bureaucracy and let them use the savings to better achieve the states priorities and policymakers reply that 57

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regulation is the only way they have to guide their actions. Given that a successful higher education system is so important to the well being of most states. it follows that states should work toward developing a more constructive relationship between state government and institutions of higher learning. The new relationship would redefine how the current tools and characteristics are viewed and used by the states. This new relationship would encompass a changed policymaking philosophy and more purposive implementation of available tools.. It would be based mnre on leadership and the use of market forces instead of being based on the control of institutions. The new relationship would depend on the assumptions and observations. according to Jones. I. The state is never the only client of higher education. Therefore. the state should not expect to exert complete control over institutions. 2. It is more productive for the state to influence the market than to control the actions of institutions. State government should: ensure that students are able to make informed choices about their education. and use the market so that students can achieve their individual choices. 3. Carrots work better than sticks. Weli-designed incentives are more effective than regulation and oversight. A fundamental point of Jones proposed policy re-alignment is that state governments need to change the policy framework within which higher education relates to the state if they expect higher education to change the way they do business. 58

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The Education Commission of the States (ECS) convened a session with educational leaders at its 1995 National Forum and Annual Meeting to explore some of the same issues that Jones addresses in his article. One speaker. Judith Ramaley. President. Portland State University said . . colleges and universities must rethink their roles in very fundamental ways that go well beyond cutting budgets in order to respond to societal needs and societal expectations which are ever changing ... the desire to advance overall productivity (not just do more with less. but do better with less) required a real emphasis on academic productivity (p.2-3) ... .1 want to make it perfectly clear that institutions can maintain their souls and increase productivity at the same time (p. 8). Another. Herman Blake. Vice Chancellor for Undergraduate Education. Indiana University-Purdue University. spoke about organizing the mission around the students. A third. Charles Reed. Chancellor. State University System of Florida said he believes higher education must pay more attention to teaching. to benchmarking. and to demonstrating quality. The public cry to improve quality. to enhance productivity. and to make outcomes a centerpiece of higher educational policy is obviously being heard in a variety of ways and places across the country. Some state legislatures are responding to the public's concerns about the quality and productivity of higher education by enacting or considering legislation that juxtapose performance indicators or measures 59

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onto the state budgeting process (Eaton. 1995). In other words. institutions that .. measure up'" receive budgetary rewards. Brewer and deLeon ( 1983) described the foundation of policy analysis. Evaluating state funding policy does. in effect. involve policy analysis with questions such as: What are the purposes of the funding policy? How is the funding policy being implemented? And. what are the effects of the funding policy? Accountabilitv Redefined for Qualitv Quality indicators. performance measures or indicators. and productivity indicators are phrases that have jumped into the educational lexicon of the 1 990 s. Take this array of new concepts and fasten them to the heretofore routine processes of higher education budgeting and funding. and one has the ingredients for widespread confusion. It seems prudent to spend some time defining and differentiating these concepts. McPherson. Schapiro and Winston ( 1993) wondered if education is even amenable to the concept of productivity. They asserted that. if not. it would be a shame because to understand productivity allows one to reward higher efficiency and to encourage improvement where efficiency exists. Economists define productivity very simply: it is the additional output per unit of labor input. Phrased slightly differently. productivity is the measure of the efficiency with which inputs are converted into outputs (Greenwood. 1998). 60

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Greenwood continued that most non-economists speak of faculty productivity very simplistically and erroneously as faculty workload. Wallhaus (1996) said that many use productivity as a synonym for cost cutting. He went on to say that productivity means much more. Productivity encompasses the entire product-process relationship of inputs (physical plant and faculty) to outputs (student learning). This relationship is usually called the production function (Wallhaus). Most academicians cringe when anyone refers to education as a production function and learning as a product. Decreasing costs or changing the production process does not necessarily improve productivity. One must consider the relative value of the outcomes. Here is \vhere the debate about higher education productivity becomes incredibly murky. Higher education has not done a good job defining its educational output goals. and consequently. has no idea about how to measure that output (Sebring. et al.. 1996). The output of colleges and universities ranges from cognitive development. community economic development. inventions. research. socialization of youth. and retraining the work force to name a few. Not only is the diversity of outputs staggering, but also many ofthe outputs are produced jointly and their fruition realized over lifetimes. if not generations (Bogue. 1976). The task of relating educational outputs to specific inputs and their costs is mind-boggling (Wallhaus). Just because it is complicated does not mean. however. that higher education is immune from the debate about improving productivity. The relationship between individual faculty productivity and institutional 61

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productivity is a murky one. Institutions have tended to concentrate on faculty productivity while the generally thinks in terms of the productivity of the institution. The institutions count faculty publications and tally student evaluations of faculty members. The public. on the other hand. wants to know how eftectively students are learning (teaching). ifthe faculty contributes to the community (service). and ifthe campus scholars advance the body ofknowledge (research). The debate about higher education productivity is often carried on without an understanding of the desired outputs. much less how they should be measured (Greenwood. 1998 ). One element of higher education productivity that is almost always ignored is student productivity. The student mix at many institutions of higher education has evolved to include many students with families (many with single parents) and full or part-time jobs. Their productivity (efficiency and effectiveness) is of much concern to their employers and to their families. In today's world. individual faculty members and the institutions are implicitly charged with the responsibility to help them be more productive students (Greenwood. 1998). Levin (as cited in W allhaus) identified some ways to think about productivity in higher education: I. Efficient use of resources (operational efficiency). Positive incentives that improve the efforts of students: faculty: and operational personnel. better use of faculty and instructional facilities (including technology). and improved advising can all affect productivity of institutions. 62

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Optimal allocation of resources (allocative efficiency). Better decisions about allocating budget dollars between academic programs. among faculty members. and even among institutions can improve productivity. 3. Pursuit of the right goals (preference efficiency). Priorities assigned to undergraduate education. research. and service affect productivity. (p. 4) Quality is an even more ambiguous term. especially when applied to higher education because there are so many stakeholders. Students. parents. employers. administrators. faculty. state legislators. and governing boards all see quality a little differently (Greenwood. 1998). Folger ( 1984) said that there are three defining characteristics of quality: "First. it is a complex. multidimensional concept. Second. the interested parties do not have a common understanding of it. Third. it is not a discrete program. activity. or condition but something that pervades an institution of higher education .. (p.l6). Astin (as cited in Folger) offered some basis on which quality might be assessed in higher education: (a) reputation among peers or experts. (b) level and quality of resources (inputs). and (c) outcomes (value-added). He believes that the last condition is the only valid criteria of quality for higher education. With so many stakeholders defining productivity differently. it is understandable why faculty may react negatively to the concept. To many. it suggests doing more work with fewer resources. This misuse of the term often hinders quality imorovement efforts. Only by formulating assessment and evaluation tools that emphasize constructive feedback can faculty members participate in the quality 63

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improvement effort that has been successful in other areas of the economy (Greenwood. 1998). Institutions should avoid the common trap of mistaking outcomes for inputs and outputs. The measurement of outputs. however. is only part of the productivity puzzle. Institutions also need data on the inputs into the various processes. of which faculty are only one. Other input includes computing resources. infrastructure. textbooks. library materials. classrooms. and technology. (Bowen. 1980: Greenwood. 1998). Bowen ( 1980) went on to say that evaluations should be performed in light of the major goals of education. not restricted to any particular aspects of human development. such as those that are easily measured. His list of desirable institutional goals follows: I. Cognitive development of students with respect to verbal and quantitative skills substantive knowledge. rationality. critical thinking. intellectual tolerance. and lifelong learning .., Aesthetic sensibility. 3. Emotional and moral development in such areas as personal self discovery. human understanding. religious interest. psychological well being. 4. Practical competence relating to citizenship. economic productivity. family life. consumption. leisure. and health. 64

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5. Direct satisfactions and enjoyment from college education during the college years and in later life. (pp. 170-1 71) Finally. Bowen ( 1980) believed that educational outcomes must be couched in terms of the whole person. Evaluation instruments typically measure one aspect of a studenfs learning. Aggregately. such scores only reveal group scores of one particular competency. such as verbal skills (Bowen. 1980). Folger (1984) asserted that there is much more to defining the quality of the educational process than simply the outputs. He maintained that there is a cenain quantitative nature to consider. For example. an institution must maintain a cenain. basic core level of physical assets in good working order. The institution must keep enough faculty members on hand in the various disciplines. The library must stay open a cenain number of hours and keep a minimum number of volumes on hand. The administration must keep enough well trained staff to accomplish the incalculable administrative tasks. In other words. quality is interwoven throughout the fabric of college life. It resides in the daily experiences of its students and faculty members. Over how many years does the inherent quality of the college experience manifest itself for the beneficiaries? Some researchers believe that the educational benefits gestation period may be five to ten years beyund the delivery point (graduation day). I believe that the quality of our educational experience manifests itself for the rest of our lives. 65

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Unfortunately. state legislators. governors. parents. the business community. and the public at large may not care about the complicating issues. They want to be sure that the institutions are spending tax dollars and tuition dollars wisely so they superimpose measurement and reporting requirements onto higher education. The stakeholders demands for improved productivity and quality is not that surprising. Stockholders of public corporations constantly demand more profits and increased market value. Quality and productivity issues are just recent refinements of the accountability issue for higher education. As confusing as it may seem. quality and productivity are not the only terms redefining accountability. The terms of performance budgeting or performance funding also find their way into the debate. Carter (as cited in Layzell & Caruthers. 1995) defined the practice as allocating resources based on achievement of program goals and results that can be measured. All of the terms being used in policy discussions relate back to the original concept of accountability. Paul Brinkman ( I 984) reported the proceedings from a working conference. State Funding of Public Higher Education: Improving the Practice. in Boulder. Colorado. One of the topics of discussion was quality and included the following points: There has been a growing concern about quality. but not enough to translate into additional funding. Politicians are concerned about quality but do not know how to define it. 66

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The emphasis on K -12 quality affects the debate in higher education. Value added provisions are being addressed. There is a need to develop operational definitions of quality and performance. Adequate funding of base mission and targe!ed funding are considerations. Participants pointed out all budget mechanisms contain implicit incenthes in that some behavior is rewarded more than others. Other participants pointed out that the scenario wherein the state built-in its priorities and goals into the funding assumed that the state knew its priorities and goals for higher education. They identified problems with performance funding (Brinkman): Incentives do not always send clear signals. Incentives can increase costs. It is difficult to reach consensus on incentives Incentives affect institutions differently. Cumbersome monitoring and regulations may dilute benefits of incentives. Many of the participants believe that incentives are appropriate to encourage better management and performance and are preferable to more regulations. Performance funding carries a special appeal to state lawmakers (Folger & Jones. 1993). It has built in accountability. Naturally. higher education leaders are wary of performance funding. Administrators know all about the difficult measurement issues and are dubious about how the incentives will be used (McPherson. et.al .. 1993 ). A state can improve its chances of having an impact by 67

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using the following principles in its special-purpose funding design: Select a limited numb.er of goals and objectives for special funding. Don "t try to reform the whole system through fiscal policy alone. Select outcomes that can be measured at reasonable costs. Allow enough time for special purpose funding to work. Provide enough funding to be an incentive (two to five%). Direct the performance funding to the persons responsible for achieving the goal. Albright and Gilleland ( 1993) outlined principles for moving from an accounting driven funding model. which emphasizes inputs (such as enrollment). to funding models that emphasize providing quality education. how to accomplish that. and incentives for institutions to demonstrate quality improvement). Nelson ( 1989) traced the origin of performance funding to the 1912 Taft Commission as well as to both the 1949 and the 1955 Hoover Commission. She continued by saying that performance funding is part of the continuing effort to build evaluative criteria into state budgets and to ensure that public funds are distributed. in part at least. to the ""best"" activities as measured by objective criteria. Banta (1988) stated that. .. .institutions can use assessment to demonstrate their accountability to the constituencies they serve. provide direction tor improving programs and services. supplement strategic planning processes. develop strategies for improving student retention. establish comparative advantage vis-a-vis other institutions. suggest the content for faculty development. stimulate curriculum reform. and even enhance campus fund raising activities (p. 46). Nelson ( 1989) suggested 68

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that performance funding is adaptable to diverse and changing missions. which helps make the concept attractive to state policy makers. Kirkwood ( 1992) related that government pressure m Germany has encouraged universities to demonstrate greater efficiency while maintaining quality. As a consequence. German institutions of higher education have adopted a range of performance indicators. These indicators have not addressed quality in teaching. learning. or research. Instead. tangible measures such as inputs (faculty teaching loads) and outputs (standardized test scores) seem to dominate. Kirkwood maintained that monitoring or measuring systems rarely consider the intellectual development of students. He called for a combination of qualitative and quantitative evaluations to measure the performance of schools. Next. he outlined a way for schools to apply the principles of quality. as first espoused by Edward Deming. to educational settings. Total-quality schools are characterized by customer focus. total stakeholder participation. progress-assessment measurements. a systems view. and continuous improvement (Kirkwood). oHare ( 1996) reported on quality assurance practices at schools of public policy. He also identified Deming as his model for quality assurance (QA) and listed the following elements of a QA environment: (a) continuous improvement of the system. (b) leadership and top level commitment. (c) experimentation and obser.ration. (d) teams. (e) delegation/empowerment/responsibility. (f) measurement. (g) process focus. and (h) bench marking. O"Hare strongly believes that 69

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organizations need to know where they are on some sort of coordinate system relative to goals and landmarks. These landmarks come from other organizations that are doing similar things. The qualify-focused organizations benchmark against their competition by careful comparison to their activities and accomplishments. Benchmarking is not something that most public colleges and universities do. but the practice could provide useful information about what kind of performance measures would be appropriate for the higher education industry (O"Hare). Camp (1989) explained the history and significance of benchmarking to U.S. industry. Benchmarking is the search for those best practices that lead to the superior performance of an organization. He \\Tote that establishing operating targets based on the best possible industry practices was critical to the success of every organization. Camp offered the following as the best working definition of benchmarking: Benchmarking is the continuous process of measuring products. services. and practices against the toughest competitors or those companies recognized as industry leaders. (David Keams. Chief Executive Officer. Xerox Corporation. p. 10) The term benchmarking implies measurement and one can accomplish it in two forms. internally or externally (Camp. 1989). The organization measures the differences between the organization's internal practices and the external best practices. This process leads to the opportunity for changes to best practices. Benchmarking applies to all facets of an organization. basic products and services as 70

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well as to the processes or producing and delivering products or services. In fact. Camp stated that benchmarking s main objective is to study processes and their methods. Most importantly. he believes. is that benchmarking should c!ncompass those organizations that are recognized as the best or as industry leaders regardless of their industry. In other words. higher education might look outside the education world to identify the best practices in those processes inherent in delivering education. Those best practices would then be the benchmarks against which the organization would evaluate its performance. Camp ( 1989) also asserted that benchmarking is a proactive endeavor that can gather information. which helps an organization set realistic performance goals. Such goals better fit into the context of the external environment by ensuring that those best. feasible. and proven practices mesh into the organization s operations. Benchmarking forces constant testing of internal practices against external standards of industry practices. By translating best practices into operational units. according to Camp. benchmarks allow organizations to project a future state of accomplishment. Benchmarking might be a frame of reference within which institutions of higher education could improve the funding process and attain a higher level of quality. The Current State of Performance Funding Nationwide According to the AASCU (1995). the U.S. Department of Education and its predecessor departments have reported data on the condition of education for over 71

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120 years. In the l980"s. they turned the focus to students and the reponing of the effects of education. Now these efforts include Total Quality Management and continuous improvement. At the state leveL expectations for reponing results of education systems are driving an expanded effort to develop indicators that \\ill gauge the results of investments in education from year to year. The focus on indicators is marked by efforts to: (a) understand what they are. (b) develop good ones. and (c) develop reporting contexts for indicators. The initial push came from the U.S. Department of Education. During the 1980s. the National Center for Education Statistics (NCES) shifted their reporting to include a list of 30 indicators that covered student progression. context. and resources in The Condition of Education. Today. this publication reports 60 indicators organized into: access: participation and progress: achievement. attainment. and curriculum: economic and other outcomes of education: size. growth. and output of educational institutions: climate. classrooms. and diversity in educational institutions: and human and financial resources of educational institutions. Developers of indicators face daunting obstacles such as: (a) lack of agreement on a set of measures. (b) validity and reliability of indicators. (c) achieving fairness in comparisons where student characteristics are the basis of indicators. (d) the burden of reporting. and (e) the corruptibility of indicators (AASCU). Ruppert ( 1996) found that linking state funding to state priorities. performance. and productivity is on state legislators agendas. Her survey indicated 72

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that 45 % of the responding legislators are likely to modify their state"s current formula to include a greater focus on performance measures. Additionally. -+4 % reported that their legislatures are likely to tie state funding to institutions efforts to increase enrollment. improve graduation rates. or some measures of institutional performance. Fifty two percent of legislators asserted that some type of legislative efforts are likely to condition funding to specific statewide priorities for higher education. If not a groundswelL performance funding IS certainly attracting legislative attention. The following principles can guide the development and use of indicators. They were abstracted from the following reports: Communitv Colle2es: Core Indicators of Effectiveness ( AACC 1994 ): and Charting Hieber Education Accountabilitv (ECS 1994 ). I. Does the indicator address enduring issues. measuring what is important and not settling for what can be measured? 2. Is the indicator supported by a comprehensive information system? Can the data be obtained at a reasonable cost? 3. Is it part of a commitment to track important data over time. ensuring that documenting and improving effectiveness is a developmental process? 4. Is there a standard of comparison or a benchmark against which progress can be measured? 5. Is the ongoing reliability of the indicator regularly assessed? Are changes made 73

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when needed? 6. Is the indicator moJ?-itoring educational outcomes and processes wherever they occur? 7. Is the indicator credible to college personnel who are in a position to change institutional behavior? 8. Can the indicator be readily understood by external decision-makers? Is it credible to them? 9. Is the indicator presentation such that the public can discern strengths and weaknesses and understand the system. even if they are not experts? I 0. Does the indicator provide information that will help the institution to improve? Does it encourage the institution to value the right things? 11. Does the indicator reflect the perspectives and concerns of multiple constituencies? Finney and Ruppert ( 1991) responded to a set of questions that they think state legislators and higher education policy makers should be asking. Some of their answers help to frame how higher education leaders should be thinking about performance and quality of our educational system. For example. they said that states have a responsibility to monitor the effectiveness of the higher education system. By embracing a systems approach. the authors believe that states can set the stage for colleges and universities to work together in promoting the public interests of higher education which should be producing students who are literate. resourceful. and 74

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responsible. They stated that lack of purpose is consistently the missing link in higher education assessment efforts because. typically. states. institutions. and the public do not know why assessment is being done before they address how it should be done. Andrea Serban and Joseph Burke { 1997 reported the results of current research concerning the ways in which states are responding to the issue oflinking higher education funding to achievement of educational goals. They reponed that the early 1970s saw some experimentation with performance funding in Tennessee. Hawaii. and Washington. During the first half of the 1990s. a resurgence of interest in and attention to performance funding grabbed the educational spotlight. As opposed to funding higher education based on current costs. inflationary increases. and projected enrollments (which has encouraged institutions tc 'ncrease enrollments. programs. faculty. and budgets). states are beginning to fund institutions based on achievements rather than on promises. The traditional funding models discouraged reducing costs. reallocating resources. or restructuring administration. Peter Ewell (as cited in Burke. 1997) listed the most common indicators for performance funding: 1. Enrollment/graduation rates by gender. ethnicity. and program 2. Degree completion and time to degree 3. Persistence/retention rates by grade. ethnicity. and program 4. Remediation activities and indicators of their effectiveness 5. Transfer rates to and from two-and four-year institutions 75

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6. Pass rates on professional exams 7 Job placement data on graduates and graduates satisfaction v.ith their jobs 8. Faculty workload and productivity in the form of student/faculty ratios and instructional contact hours. (p. 3) Sandra Ruppert ( 1996) reported a similar list: l. Admission standards 2. Remediation activities and effectiveness 3. Enrollment. retention. and graduation data by gender. ethnicity. and program 4. Total student credit hours by institution and discipline 5. Transfer rates to and from two-and four-year colleges 6. Total degrees awarded by institution and program and time to degree 7. Pass rates on professional licensure exams 8. Placement data on graduates 9. Faculty workload and productivity data 10. Number and %age of accredited and eligible programs 11. External or sponsored research funds. (pp. 3 -4) It is interesting to note the common indicators from the two lists: ! Retention/graduation rates. 76

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: Job : Licensure tesT -t Satisfaction surveys. : Time-to-degree. and : Two-year college transfers. Former Colorado Governor Roy Romer (Burke. 1997). as chair of the Education Commission of the States. wrote that the states .. need to be clear about what we value in higher education so we can act on those values' (p. 12). Richardson ( 1997) agrees by saying ... Higher education policies reflect the core social values of choice. equity. efficiency. and quality'. (p. 12). Richardson also believes ... The rule is always. What is valued gets measured. and what is measured gets valued: (p. 12) It follows that what gets funded must be valued. so one can see by these early efforts at performance funding how the states values for higher education are beginning to change. The challenge for the states and for higher education institutions is to come together as collaborators. instead of as adversaries. to address what some see as a growing public sentiment to improve the quality and effectiveness of higher education. A nagging and legitimate concern revolves around the nature of quality in higher education. Many of the critics of performance funding rightly point out that it is impossible to capture. much less quantify by indicators. the entire gamut of quality education (Burke. 1997). Does the presence of legitimate questions negate the need 77

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to search for the answers? Certainly. it does not. A monumental effort was undertaken by the National Policy Board for Higher Education Institutional Accreditation (NPB). the Education Commission of the States (ECS) v.-ith support from the Johnson Foundation. and the Pew Charitable Trusts to begin defining quality in higher education. specifically undergraduate education. In a series of 15 focus groups. conducted at five locations. consisting of education policy makers. business leaders. higher education leaders. students. and accrediting officials. the researchers sought out a common definition of quality in higher education (Romer. 1995). Burkhead (as cited in Miller. 1964) also contemplated issues regarding the measurement difficulties of budgeting. emphasizing that these difficulties become especially great when attempting to determine program outcomes The first problem Burkhead saw was discovering or inventing a meaningful and consistent unit in terms of which outcomes can be measured. A second problem arises when measuring variations in quality among units. which in all other respects are alike. These problems are similar to those that we encounter later in the literature review as part of the current debate about measuring quality or performance in higher education. The question: 'What constitutes quality in undergraduate education?' while drawing some agreement. also elicited a wide variety of perspectives from those outside higher education and those working within higher education. Almost all of the external parties believed that quality means what happens after the university experience is over (i.e . returns to the individual and to society) while the internal 78

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parties defme quality in terms of an institution s resources. A number of institutional leaders rejected the idea of overall quality standards on the basis of the diversity of institutions with differing missions. All were able to reach agreement on desirable student outcomes. which they identified as follows: + Higher-order, applied problem-solving abilities. + Enthusiasm for continuous learning. Interpersonal skills. including communication and collaboration. + A strong sense of responsibility for personal and community action. + Ability to bridge cultural and linguistic barriers. + A well-developed sense of professionalism. (p. 7) Participants also identified institutional characteristics that define quality: Student-centeredness. Commitment to specific good practices in instruction. Quality management" practices. Efficiency and integrity of operation. (pp. 7-8) They agreed on basic principles to govern measurement quality which are: a Multiple measures are critical. a Comparative measures might be useful among institutions with similar missions. a Contextual data reporting is necessary. a Absolute outcomes and educational value added are important. a External sources are important. 79

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o Mixed measures to address desired student outcomes and institutional characteristics using quantitative and qualitative methods are necessary. (p. 8) Some specific performance measures that would address these quality attributes are: The successful and timely completion by students of their educational program. Student performance after graduation. Direct assessments of graduating students abilities. Inventories of instructional and organizational good practices. Direct observation through site visits. (pp. 8-9) Good practices of undergraduate education include: High expectations. Respect for diverse talents and learning styles. Emphasis on early years of study. Coherence in learning. Synthesizing experiences. Ongoing practice of learned skills. Integrating education and experience. Active learning. Assessment and prompt feedback. Collaboration. Adequate time on task. 80

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Out-of-class contact with faculty. (pp. 17-18) Institutional administrators feel uneasy about public comparisons and question the validity of the measures used and cringe at the politics ofbeing ranked (Morgan. 1992 ). Peters ( 1994) argued that faculty should be left alone because external measures deprofessionalize them and their craft. Harold Enarson. former president of Ohio State. (as cited inPeters) said ... Quality l know in my bones ... [using] "inputs" and outputs is bush league economics. lt is zeal for quantification carried to its logical absurdity .. (p.20). Or would that be ... its illogical absurdity: Peters said that other faculty objections to accountability are: (a) no consensus on what or how to measure. (b) external goals are mostly political. and (c) accountability endangers diversity in education. A faculty scorned can be an administrators worst nightmare. Most of the researchers acknowledge the upstream politics (state government) and its role in shaping legislators views on improving higher education. One needs also to consider the downstream politics of higher education. that is. the role that faculty members play in implementing the mandates from on high. As the street level bureaucrats (Lipsky. 1980) who have almost unheard-of-autonomy in their classroom domains. they had best be on board any quality impiOvement or productivity enhancing ship before it sails. A considerable challenge for higher education is to communicate clearly and in a timely manner exactly what needs to happen and work with faculty to make it happen. 81

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Focus groups. surveys of legislators. conferences. and research are fine and certainly help all of us crystallize thinking about this issue. Nothing. though. provides new knowledge as saliently as actual experience does. Several states have adopted some version of performance funding or quality improvement. The state of Illinois. in 1991. undertook a program that they called Priorities. Quality. and Productivity in Higher Education or PQP for short (Wallhaus. 1996). It started out as a response to continuing budget deterioration in the state. but became an eye opening exercise in reallocating resources. and reassigning priorities. PQP created a statewide realization that higher education in Illinois was responsive to concerns about quality. For the last three years ( 1995. 1996. and 1997) the legislature and the governor have fully supported Illinois budget requests. Recommendations are tor higher education in the state to directly link future funding to the higher education budget process. The most complete source of state and national data on higher education is probably compiled by the Research Associates of Washington. Their national Higher Education Report Card provides comparisons of state public higher education systems and national trends including: State Profiles: Financing Public Higher Education 1997 Rankings; State Pro_fi/es: Financing Public Higher Education 1978 to 1997 Trend Data: Higher Education Revenues & Ecpenditures: A Study of Institutional Costs: and Inflation iHeasures for Schools & Colleges. 82

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Hie:her Education in the State of Colorado Don C. Sowers ( 1924) provided a real treasure of historical perspective on how Colorado has prioritized public education in this century. Although his book does not deal specifically with higher education. it was very informative to read that Colorado ranked 26th in the United States in percentage of income expended for in 1920. Bowers said. colorado has been steadily losing ground educationally ... during the last twenty years .. : (p. 29). Sowers included a wealth of statistics on public education in Colorado and all the states going back to 1890 in some instances. The foreword referred to a similar study by Sowers related to higher education, but I have been unable to locate it. Although not as historically interesting. Brooks ( 1969). reported the results of his dissertation research on the relationship between governmental structure and the financing of higher education in Colorado. He did a nice job of explaining how CCHE developed as a voluntary coordinating body in 1965. Brooks also detailed the establishment of the Joint Budget Committee as a significant power in the state political and budget process. His research was rich with descriptions of the evolving political power and the interaction with higher education. The Colorado Higher Education Master Plan-1993-1998. (Colorado Commission on Higher Education (CCHE). 1993) includes eight goals. which attempt to address the most critical issues facing higher education today. It contains the words and phrases: excellence. quality. efficient delivery of services. best use of 83

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faculty time (implying efficiency). reducing unnecessary overhead costs (implying efficiency). and strengthen higher education's accountability by continuing to implement ... assessment. Former Governor Roy Romer ( 1995) expounded on the subject of making quality count in undergraduate education in his report to the Education Commission of the States The Colorado State Legislature (I 996) passed House Bill 96-12 I 9. otherwise known as the ""Higher Education Quality Assurance Act. which in pan reads. ... concentrate on improving both the quality and cost effectiveness of higher education in the state .. This legislation specifies the state s goals and expectations for higher education. establishes a quality indicator system for higher education. flirts with linking quality improvement to funding. and mandates a consumer guide to state-supported institutions by the fiscal year I 999-2000. Consistent with its history. Colorado is at the forefront of developing higher education funding and accountability systems. CCHE (1997) provides a concise and understandable recap of the Colorado higher education funding structure. Their guide covers the basics of: the funding sources. the uses of higher education funds, the determination of the funding leveL and the state s revenue and spending limits. It is a very useful explanation of the funding mechanics, but CCHE"s ( 1980) policy paper delves into the background and philosophy that drive the state s higher education funding philosophy. The authors said that there are concerns about higher education being able to educate citizens efficiently and effectively. Five factors drive that objective and one of them uses the 84

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phrase. provide quality programs .. (p. I-2). Another factor includes the wording: each institution must be accountable ..... (p. I-2). This reflects the fact that quality. effectiveness. accountability. and efficiency have been a part of the higher education consciousness in Colorado for many years. David Longanecker (unpublished). while serving as Executive Director of CCHE. reported in a Master Plan background paper CCHE"s vision statement for Colorado higher education. He warned that by the year 2000. Colorado will face a dilemma of increased demand for higher education coupled with a tlat or decreasing funding base. Longanecker listed six choices facing Colorado policy makers: (a) Sustain public funding to meet the demand. (b) Prioritize access. (c) Constrain convenience. (d) Allow quality to decline. (e) Improve productivity. or (t) Consider new ways to subsidize higher education. Given the data on dte economic viability of the state. one might wonder why (or if) there should be a problem funding any increased demand for higher education. State government tax receipts grew by 37% between 1992 and I 996. personal income grew 32 % during that period. and economists project state surpluses of at least $I .5 billion over the next five years. Despite this no one is projecting significant increases for higher education in Colorado. This may be due. in part. to the projected needs to increase prison spending. Medicare spending. and K-12 spending. The state legislature may also be counting on out-of-state students to continue contributing significant amounts to higher education revenue. 85

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Gordon Van de Water's ( 1994) case study takes the reader through the historical development of_CCHE and state policy on accountability. The author provided insights on how higher education in Colorado has evolved. The American Association ofState Colleges and Universities CAASCU. 1995) provided a wealth of comparative data about the state of higher education. Their 1995 Report of the States provided excellent statistics on the fiscal status of states. enrollment. accountability reponing. and more. In 1998. the AASCU changed the name of the report to the State Issues Digest. which reports on state funding support. college costs. policy implications. and performance funding. Their presentation and depth of data was invaluable. Bu.xman ( 1996) provided some interesting data about enrollment growth and the financing of higher education. He contributed primarily by reporting how an educated citizenry benefits society and the state of Colorado. For example. better educated citizens generally earn more money and contribute more to the economy. they are able to make more informed decisions. and they support the community and the educational system by actively participating. In addition to the AASCU reports. I relied heavily upon the Colorado Legislative Council Staff Report for monthly and yearly economic facts about the state and the condition of higher education. CCHE provides biannual report cards on higher education which serve as the basis for enrollment data. appropriations data. 86

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and various performance indicators from all institutions of higher education in the state. Summarv Accountability has always been pan of the higher education landscape (Duryea 1981 ). Administrators and constituents continually re-balance the often contentious equilibrium between higher education autonomy and accountability. Today. an issue in the balance is performance funding. Incentives to improve quality. performance. and productivity. or a combination of all three. are indeed the basis of debates raging across state legislatures. coordinating agencies. and campuses. As Americans returned to work and to school after World War II. the national and state economies began to flourish as did higher education. Colleges and universities needed massive funding from state governments to meet the demand for their services. As higher education s budgets grew larger and more complex. states devised funding formulas to quantify and. hopefully. objectivy the funding process. Funding formulas also incorporated the concept of accountability and addressed the issues of equity and adequacy The higher education profession and most of the states rely on higher education coordinating agencies. with varying degrees of regulatory authority. to intermediate policy issues. interpret budget requests. enforce regulations. and further 87

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state educational goals. These agencies are the instigators. interpreters. and enforcers for much of the funding arena. The debate concerning performance indicators. quality indicators. and/or productivity in higher education focuses on the issues of measurability of outcomes. diverse missions of institutions. lack of states educational goals. lack of agreement on definitions of quality. the diffuse nature of higher education s outputs. and the multiple beneficiaries of higher education. This debate has not. though. completely stymied the advancement of performance funding models. A recent survey indicates that about 45% of states will ""likely .. or most likely .. incorporate some type of performance funding with their higher education budgeting process within the next five years or so. Colorado is one of about ten states embracing performance funding. House Bill 96-1219 requires CCHE and the higher education institutions to identify performance indicators that will be highlighted in a planned consumer guide of higher education institutions by the academic year 1999-2000. 88

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CHAPTER3 THEORETICAL FRAMEWORK The question I will examine is. Did performance funding improve outcomes in higher education in Colorado?'" During the years 1994-95 through 1997-98. the Colorado Commission on Higher Education (CCHE) collected data from all of the state"s institutions of higher education to comply with HB 94-1129. This legislation mandated allocating extra funding to the higher education system in Colorado based upon institutional performance in a number of policy areas defined by the legislature and CCHE. These policy areas and their related performance areas are listed in Appendix A. CCHE rated the institutions performances by assigning points for increases or decreases in certain indexes and for the institutions ranking relative to other institutions. Some of the performance measures required qualitative evaluations by CCHE staff while other measures were easily quantifiable. I selected the quantitative measures that CCHE had collected from the institutions for this study. The legislation did not require that CCHE allocate the performance funding directly to the institutions so CCHE awarded the performance funding to the governing boards based upon the collective performance of the institutions in each system. Historically, the state legislature has always appropriated higher education funding to 89

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CCHE who has then allocated the funds to the governing boards. The policy areas and the specific performance areas that I selected were: I POLICY AREA I Productivity Productivity I Productivity High Quality. Efficient, and Expeditious Undergraduate 1 Education. High Quality. Efficient. and Expeditious Undergraduate Education Table 3.1 Policy Areas. Performance Measures. and Performance Funding Amounts PERFORMANCE I PERFORMANCE MEASURES FUNDING S Ratio ofTeaching Faculty I 1994-95 $75.000 I to Non-Teaching Faculty I 1995-96 $200.000 and Staff. 1996-97 $200.000 Reducing or 1994-95 $75.000 Demonstrating Low 1995-96 $200.000 Administrative Costs. 1995-96 $200.000 Effective Student I 1996-97 $200.000 Learning. I I Low or Decreasing I I Average Credit Hours to I 1996-97 $120.000 Graduation. I Demonstration of a High I 1995-96 $75.000 I I or Increased Level of I 1996-97 $120.000 I 1 Student-Faculty Contact. I I I Discussion of Policv Areas and Performance Indicators Eleven states currently use or are proposing to implement performance I i ; I I I I I I i I I i I I ! i I I indicators. Burke and Serban ( 1998) have categorized each of the indicators by: a} the type of indicator (input. process. output, or outcome). b) the value the indicator 90

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measures (efficiency. quality. equity. or choice). c) the concern reflected by the indicator (external or internal). and d) the model reflected by the indicator (reputational. strategic investment. or customer oriented). For this discussion. I have used Burke's and Serban's ( 1998) model to categorize the performance indicators I analyzed and I have identified the other states using those indicators. The indicator "Ratio ofTeaching to Non-Teaching Faculty and Staff' is used by no other state except Colorado. Burke and Serban ( 1998) classified this indicator as a process and said that it measures an institution's efficiency. They described it as an external (originating from outside the institution. i.e .. the legislature as opposed to from internally) concern and a strategic investment for the institution. In other words. this indicator measures how an institution has deployed its human resources. A larger or increasing ratio is seen as being more efficient in delivering education as opposed to a smaller ratio. which would indicate that a greater share of the institution's human resources were related to administrative or support tasks. On the surface. this seems to make sense. As Greenwood ( 1998) pointed out. though. student productivity is affected by the support structure of the institution. Measuring a teaching to non teaching ratio might imply to some that if an institution employed only teaching faculty and no support staff. students would be better off. That is clearly not the case. Who would operate the computer labs. the distance learning technology. the library. 91

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the financial aid office. and the records office? Clearly. more research is needed before relying too heavily on this indicator. The indicator "Reducing or Demonstrating Low Administrative Costs" is used by Colorado. Arkansas. and South Carolina. Burke and Serban ( 1998) classified this indicator as a process and said that it measures efficiency. They indicated that it originates from the external environment and is viewed by institutions as a strategic investment. The philosophy behind measuring this indicator is very similar to the philosophy behind measuring the "Ratio ofTeaching to Non-Teaching Faculty and Staff". That is that institutions need to become more cost effective (spending money on activities directly related to learning). One way to do that. some believe. is to reduce overhead by decreasing administrative costs. Again. student learning depends on multiple inputs. some of which (financial aid. counseling. university governance. facilities maintenance. and security) are embedded in the institution's administrative infrastructure (Greenwood. 1998). Encouraging institutions to cut administrative costs by offering performance funding appears contradictory and could lead to dangerous reductions in institutions' infrastructure. The indicator "Effective Student Learning" is used by Colorado. Minnesota. and Tennessee. Burke and Serban ( 1998) classified it as a process and said that it is meant to measure quality. It was developed in response to both external and internal concerns and is a strategic investment but also affects the institutions' reputations. Colorado chose a number of national standardized exams to measure student learning. 92

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Among those chosen were: a) the Graduate Record Exam (GRE). b) the Certified Public Accountants (CPA) exam. nurse qualification exams. and d) the lawyers' Bar Exam. I selected the GRE scores for this study because the GRE is taken by more students. the GRE spans more academic disciplines. and there were more GRE scores over a longer period of time to analyze. States and institutions need to do much more research on how to measure student learning before committing large sums of money based on students' test scores. The indicator "Low or Decreasing Average Credit Hours to Graduation" is used in Colorado. Arkansas. Louisiana. Ohio. and Tennessee. Burke and Serban ( 1998) classified this indicator as an output and said that it is meant to measure efficiency. It was developled from an external concern and is a strategic investment for institutions. The concern is that institutions are graduating students with more credit hours than the catalogues require. In other words. institutions are hanging on to students either through inefficient scheduling of classes. poor advising. or other bureaucratic impediments. The institutions are being asked. in effect. to encourage students to complete their education in a pre-determined number of hours without taking into account the myriad reasons students may have for delaying their graduations. For example. students may benefit in the long run by changing majors or students may decide to pursue a double major and improve their career prospects. These decisions may delay their graduation but probably enhance their education. Working students, especially those with families. strive to maintain a balance 93

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between school. work. and their home life. Their personal and their family's health may require that they longer to complete their studies. but their families benefit The indicator "Demonstration of a High or Increased Level of Student-Faculty Contact" is used only in Colorado. Burke and Serban ( 1998) classified this indicator as a process and wrote that it is meant to measure quality and efficiency. They said that it is an external concern and is customer (student) oriented The concerns center around the number of hours that faculty members teach versus conducting research. the number of hours that are taught by faculty members versus graduate students or teaching assistants. Presumably. students benefit from more contact hours with faculty members. What is missing. though. is any discussion from the state about the quality of the contact hours. Is it bener for a faculty member to advise a student poorly than for an administrative assistant to advise a student well? The answer is. of course not. Other types of faculty/student contact such as. independent study courses. thesis advising. and club sponsorship were not measured but may be just as important as classroom contact. More research is needed before the state commits significant amounts of money to rewarding institutions for "improving" this measure. A Theorv of Student Learning Higher education productivity means more than faculty productivity or institutional productivity. What about student productivity? Many of higher education s stakeholders. for example. employers. legislators. the public. students. 94

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and students families are concerned about the efficiency of the student learning process. in other words their learning productivity. As more and more adult learners return to school. often with families and jobs. the efficiency of the learning process becomes more important. As students with limited time try to optimize their time on campus and in the classroom. they become aware of impediments to their efficiency. Since faculty and the institution are prime inputs to the student learning process (Greenwood. 1998). students become sensitive to their respective inefficiencies. For example. class scheduling may prevent the working students from attending classes in a continuous time block. which reduces their efficiency. If the institution does not have adequate computer labs open. students may not have the needed access to computers. If a faculty member does not schedule office hours to accommodate working students. that creates inefficiencies for the student. Student productivity relies on many factors. To name a few: faculty ltraining. industry experience. teaching style. interest in students. time spent with students) students previous learning. students family support. the student mix on campus and in specific classes. the institution s resources (computers. classrooms. staff. administrators. libraries. software. and tutoring) all play a part in the student learning equation (Greenwood. 1998). State policies may actually impede. even though indirectly. student productivity. The state may desire greater diversity and greater access to institutions. As faculty adjust their teaching to accommodate more students with limited or poor 95

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preparation. better prepared students may fmd that their learning productivity suffers. If this happens. are the faculty members any less productive or capable? On one hand standards may suffer. but a higher societal goal is being addressed. Of course. faculty members may use more advanced teaching methods (the internet or multimedia technology) to upgrade their teaching and improve student productivity. Expressing student learning as a function of various inputs might look something like: S L = f (Fi + Is + Sm + Sb + Nc + Fs) where Fi is faculty input Is is institutional support Sm is student mix at the institution Sb is student background Nc is native competency Fs is family support (Greenwood. 1998). Measuring these inputs is much more complex than measuring ratios and measuring student learning is defined by much more than GRE scores. Ratios simply express the quantitative relationship between two or more numbers. They do not explain the nature of the behavior or the phenomenon that is being measured by the ratio. For example. the performance indicator "Ratio of Teaching Faculty to Non Teaching F acuity and Staff' expresses the relationship between the number of teaching faculty and non-teaching faculty and staff but does not explain the various roles played by each group nor does it measure their respective contributions. GRE 96

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scores are routinely used by various groups (i.e .. graduate school admissions boards) as indicators of student achievement. Thousands of students from all across the country take the GRE. and have for years. providing valuable historical data. So they are a useful tool for researchers even though many people recognize their limitations as a measure of student learning (i.e .. possible cultural biases). CCHE assumes that SL (GRE) = f(Rt + Ch + Fi + lc) where Rt represents the ratio of teaching faculty to non-teaching faculty and staff Ch represents student/faculty contact hours Fi represents high quality faculty instruction Ic represents improving curriculum Rt. Ch. and Fi would be defined as faculty input in Greenwood's ( 1998) model and lc would be defined as institutional support. The CCHE model does not consider student mix. student background. native competency. nor family support. My findings indicate that ACT scores are a powerful predictor ofGRE scores (see Chapter 4) and should be defined as a combination of student background and native competency in Greenwood's model. 97

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CHAPTER4 METHODOLOGY. ANALYSIS AND RESULTS An Overview of Colorado's Economv and Hieher Education The state of Colorado. though doing very well economically. does not compare very well to other states in financial support of higher education. The index numbers for Colorado in Table 4.1 provide a comparison of how Colorado is performing in certain higher education areas compared to the U.S. as a whole. The rankings show how Colorado ranks among the 50 states. For example. Colorado's tax potential index of98 indicates that it is almost at the U.S. average (index of 100). and it ranks 20th out of 50. In other words 19 states have a higher tax potential and 30 states have a lower tax potential than Colorado. The definitions of Table 4.1 's attributes are found in the accompanying table note. Colorado's tax potential (total state taxable resources) is almost at the national average. yet their index for appropriations per student full-time equivalent (FTE) is only 70 and they rank 4 71h out of 50 states. This disparity suggests that Colorado is not using their tax base to fund education to the extent that most other states do. Colorado's index for tuition per student FTE is 131. well above the U.S. index of 100. and they rank 14th in the U.S. This suggests that Colorado higher education receives 98

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a disproponionate share (compared to the U.S. average) of their total funding from tuition. Out-of-state students pay higher tuition and take some of the financing burden away from the state's residents/taxpayers. For example. resident students at the University of Southern Colorado. in 1999. pay $109.70 per credit hour in tuition ($88.30) and fees ($21.40) while non-resident students pay $433.90 per credit hour in tuition ($412.50) and fees ($21.40). At the University of Colorado. out-of-state students pay 110% of costs. A related statistic is the family share oftotal funding which measures tuition revenue as a percent of total revenues from state and local government education appropriations plus student tuition revenues. This ratio suggests the relative imponance of student tuition as a funding source compared to state-local appropriations. A high ratio suggests a large proportion of out-of-state students paying high nonresident tuition. Colorado's index is 148 (U.S.= 100) and their family share percent is 46.4 %. Only four states have a higher family share percent. One danger of this reliance upon out-of-sta:e tuition revenue. is that if fewer out-of-state students applied to Colorado colleges and universities. the state would be ill prepared to take up the slack. Some other statistics in Table 4.1 include: a) Colorado has the l51h largest higher education system (on a student FTE per 1.000 population basis) in the U.S .. b) Colorado's student participation (the ratio of student FTE to high school graduates) is 4th in the U.S. A complementary statistic. retention (the starting rate of resident high school graduates at in-state public institutions) is almost equal to the U.S. average (index of96) and ranks 20th in the U.S. Colorado 99

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has the 15m largest higher education system (per 1.000 population) in the l".S .. yet is almost last ( 4 7lh) in state per student FTE. It appears that the state has made a strategic decision to rely more on out-of -state tuition than on state appropriations for higher education funding. Table 4.1 Comparative Statistics: Higher Education in Colorado and the U.S. 1998 Colorado's Colorado's Attributea Index (U.S.=100) U.S. Rank (1 =first, 50 = last place) Tax Potential 98 20 System Size 22 In-Migration 224 9 Relative Size 114 15 Student Participation 126 4 Retention 96 20 Attendance 95 28 Share of Starters 102 24 Total Funding 89 40 Appropriations per FTE 70 47 Tuition per FTE 131 14 Note. 3T a"{ Potential refers to total state taxable resources. System Size refers to total student FTE in the public higher education system. In-Migration refers to the percent of all first-time freshmen from out-of-state. Relative Size refers to FTE public students per 1.000 population. Student Participation refers to the ratio of FTE public students to high school graduates. 100

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Retention refers to starting rate of recent resident high school graduates at in state public institutions. Attendance refers to the starting rate of recent resident high school graduates attending anywhere. Share of Starters refers to the percent of all high school graduates starting college attending in-state public institutions. Total Funding refers appropriations plus net tuition revenues per FTE student. Appropriations refer to appropriations per FTE student. Tuition refers to net tuition revenues per FTE student. From: Research Associates ofWashington (1997). State profiles: Financing public higher education 1998 Washington. DC: Halstead. K. Sources of Data My study relied heavily on CCHE for documents including minutes of their meetings to understand the legislation: how it was enacted and implemented: where the state seems to be heading relative to using performance funding: and the processes that CCHE. the governing boards. and the institutions used. Extensive reading in the areas of funding formulas. policy. the evolution of states involvement with higher education. and other states use of performance funding for higher education helped me understand this complex policy area. l also interviewed higher education officials (Hille Dias and Greg Appling, CCHE: John Bliss. CSU System; 101

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and Steve Bronn and Miriam Fultz. USC) including those at my own institution to better understand the current higher education budgeting environment and processes in Colorado. Research Associates of Washington provided me with extensive data and statistics on the higher education systems in the United States (by state). Other organizations that shared their research with me included the Rockefeller Institute of Government and the Education Commission of the States. In addition to using regression analysis. I constructed simple plots of the data points that show the relationships among various performance measures and the respective performance funding amounts to help me interpret the data. I shared the data and the results of my various analyses with higher education budgeting expens (John Bliss. Vice Chancellor of the CSU system and Steve Bronn. USC Vice President of finance) my institution's (USC) assessment director. and others to help me see the ""big picture'' (i.e .. policy implications for the state of Colorado). Limitations of the Data The data were limited by three factors: I) Performance funding was not allocated for all indicators for all years that the legislation was in effect. Funding varied from one year for some performance measures to three years for others. 2) Many of the performance measures were qualitative in nature. 3) CCHE revised some of the performance measures from year-to-year. The shon time period during which funding was allocated (the legislature discontinued funding). the inconsistency of 102

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some of the performance measures. and the qualitative nature of many of the measures prevented me from having an adequate sample size for the majority of my statistical tests. The data analyses. at the least point the way for future research in this area. and at the most. provide state lawmakers and higher education officials with some first approximations about the relationships among performance funding and performance variables that they hope to influence The results may challenge some of their assumptions about these relationships. Due to the short time period ( 1994-95 to 1996-97) that performance funding was available in Colorado. I had limited choices. When dealing with limited amounts of data (a rule of thumb says that 30 is the minimum sample size). combining (pooling) the data from different time periods (time series) provides replication and increases the number of data points and improves reliability. For example. where a performance indicator might have been funded for only two years. by pooling the indicators from all 26 institutions. I could analyze 52 data points (two years x 26 ). When testing for relationships of data over time. it is often helpful to compare the changes in the variables in addition to the values Analyzing the changes in the variables would have been especially meaningful in this study because it was really the changes that interested me. In other words. how much. if any. did the difference in performance funding from one year to the next cause a change (and if so. how much) in the performance measures? Because the state of Colorado provided only three years' (1994-95 to 1996-97) performance funding. it was not very meaningful to 103

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compare the changes in the performance indicators to the changes in performance funding amounts. For example. when performance funding was provided in all three years. changes occurred between year one and year two and between year two and year three yielding two years of change to compare. Some of the performance indicators were actually funded for only one or two years. The apparent trends. consistencies. inconsistencies. relationships. and lack of relationships between and among the performance measures do begin to reveal patterns of how higher education institutions behave and do not behave and how performance funding does and does not affect their behavior. I hope that. limitations and aiL my effort at quantifying and analyzing the results ofColorados performance funding efforts will serve as a foundation for further research at a minimum. Procedures For purposes of this analysis. I assumed that the performance funding amounts allocated to the governing systems would affect future behaviors or performances. Therefore I matched each years funding amounts to the next years performance measures. For example. I matched 1994-95 funding with the performance measures from 1995-96 to determine what effect. if any. the funding had on future performance. When comparing ACT scores with GRE scores. I matched each years ACT scores with the GRE scores reported four years later to better match pre-higher education (ACD scores with post-higher education (GRE) scores for the same cohort 104

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of students. It is important to note that Colorado institutions of higher education use a combination of a student's ACT /SAT scores plus high school GP A or high school class standing (which ever is most beneficial) to determine an index for admissions purposes. Additional research is needed to determine how or if high school GPA and/or high school class standing affect GRE scores. I used simple regression analysis instead of multiple regression analysis. and tested only for the effect of ACT scores on GRE scores. Other variables. such as students socio-economic status. may also affect GRE scores. I used MINIT AB to perform all of the regression analyses (see Tables 4.2 through 4.10). By stacking all of the years data under each variable (for example. GRE) I. in effec4 pooled the cross-section and data time series. Using the graphing function of MINIT AB. I constructed all of the plots for each relationship analyzed (Appendix B). The plots give a visual image of all the data points and suggest the nature and direction of the relationship between the variables over time. The regression equations produced by MINIT AB represent the mathematical relationship and quantify the amount of change in the dependent variable explained by the explanatory (independent) variable. Analvsis Appendix A lists all of the policy areas funded by the state legislature in each of the policy area years ( 1994-95 to 1996-97). I selected the performance areas (see 105

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Table 4.1) for which there were quantifiable data provided directly by institutions or governing boards and om_itted those for which CCHE staff used qualitative material (such as policy statements) provided by the institutions or governing boards. The research questions were 1) Did the performance funding allocated to the higher education systems in Colorado have an effect on those systems performances as measured by the indexes that determined the performance funding allocation. In other words. did performance funding change performance? 2) I tested whether there was any relationship between the performance indexes (referred to above) used by the state and student learning in college as measured by GRE scores. In other words. do any ofthe performance indexes (i.e .. ratio of teaching to non-teaching faculty and staft) actually affect what is one of the basic objectives ofhigher education. student learning? Using MINITAB. I performed simple linear regression analysis of the performance funding amounts against the next year's related performance indexes to determine if there was any statistical relationship. In other words. did the performance funding amounts ( x. independent variables} cause any change in the next year's performance indexes (y. dependent variables)? I also performed regression analysis. using GRE as they value (dependent variable) against each of the individual performance indexes as the x value (independent variable) to determine if any statistical relationship existed. I constructed simple plots of the data with MIN IT AB to illustrate any apparent linear relationships between the measures. Based upon my 106

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initial observations of relationships (some expected and some unexpected). I analyzed the data aggregated by systems (governing boards). on a subset of research Institutions (University of Colorado at Boulder. Colorado State University. and Colorado School ofMines). and on a subset of non-research Institutions. Explanation of Reeression Analvsis Regression analysis is a statistical tool used to construct models that measure the direction and strength of the relationship between two or more variables. These models are often used to make predictions as well as to test the underlying relationships. For example. if one knows the nature of the relationship between Y (called the dependent variable because it depends on how some other variable behaves) and X (called the independent or explanatory variable because it explains the behavior of Y) one can predict y s behavior in the future given various values or behaviors ofX. Regression analysis produces a mathematical formula that describes the relationship between Y and X based upon historical values of the two variables (Smith, 1991 ). Prediction was not my motive in using regression analysis for this project, however. I used regression analysis because of its ability to describe the nature and the strengths of the relationships between variables. Correlation is the primary indicator of the degree of relationships between variables. The regression model goes beyond the sample correlation coefficient by allowing for multiple variables. It also accounts for random and unknown errors that occur in all data and 107

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produces a number called the coefficient of determination (commonly expressed as R2). indicates the proportion of the change occurring in Y (the dependent variable) that is explained by the regression model. A higher R:: generally indicates a stronger relationship between the Y and X variables. Another important element of the regression equation (model) is the term B. which represents the amount of change in the X (explanatory variable) necessary to affect Y (dependent variable). When viewed on a graph of a linear relationship. B represents the amount of change in the slope of the line. The p value for the estimated B measures the likelihood that a given variable s influence on Y is random. The smaller the p value (relative to .05) the greater the likelihood that an actual relationship exists. The benchmark .05 is often used to indicate reliability of the estimate. because it corresponds to 95% confidence that there is a relationship (Guynes. Kvanli. and Pavur. 1992). As with all statistical analysis tools. the smaller the number of cases (or relationships in this instance) being analyzed. the less reliable the analysis results. A standard rule is to have at least 30 observations. As I have indicated elsewhere in this paper. insufficient data is one of the weaknesses that I could not overcome. The various representations (regression equations: the R::. B. and P values [see Table 4.2-Table 4.10]; and the data plots [see Appendix 8) of the data afford multiple perspectives and paint a more complete picture of the relationships. I analyzed the data in four different sub groups: (a) data from all state institutions, (b) 108

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data aggregated by governing system. (c) data aggregated by governing system excluding the research institutions. and (d) data from the research institutions. The institutions. by governing system. are listed below with the research level I institutions shown in bold. Trustees of the State Colleges (Trustees) Adams State Mesa State Western State Metro State Regents ofthe Universitv ofColorado (CU) State Board of Agriculture
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Results Table 4.2 Ratio ofTeaching to Non-Teaching Faculty and Staff And Related Performance Funding Y=a+Bx V =Ratio of Teaching Faculty R:: No. b I p to NonTeaching Faculty 0/o of Forb X= Funding$ Cases Institutions (See Fig.B.2a) 0.6 48 -o.ooooo5 1 0.613 Systems (See Fig B. 2b) 12.6 11 0.000007 0.257 Systems Excluding (Fig.B.2c) 1.6 10 0.000001 i 0.718 Research Institutions I Research I 50.1 6 0.000011 I 0.116 I Institutions (See fig B.2d) i I I I ; J i i \ i The regression results for the Ratio ofTeaching Faculty to the related performance funding indicate weak or no statistically significant relationships. Even in the case of the Research lnstitutions, where approximately 50 percent of the change (R2 of 50.1) in the ratio was apparently attributable to the change in performance funding. the very small b value (amount of change in x). the low number of cases. and the high p value of .116 indicate a very weak. if even measurable. relationship. 110

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Table 4.3 Institutional Support Expenditures per SFTE And Related Performance Funding Y =a+ Bx Y = Expenditures per RZ I No. of b SFTE O.fo Cases X=FundingS Institutions (Fig.B.3a) 18.0 I 24 0 .103 I Systems (Fig B.3b) 0.2 i 6 I -0.0016 I Systems w/o Research I 88.7 I 5 0.0428 I I Institutions (Fig.B.3c) Research Institutions I 60.8 ... -0.0615 .) ... I (Frg.B.->d) i p Of b i I ; I 0.039 i i 0.936 I i : 0.017 I : I I I i I i 0.431 I I I These regression results definitely send mixed signals The size of the P of b values for the Systems Without Research and for the Institutions indicate a significant relationship. but the small number of data points contributing to the analysis. and the low b values. indicate that the nature of the relationships are relatively weak. This table suggests that research institutions and the systems without the research institutions behave differently Ill

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Table 4.4 Credit Hours to Graduation And Related Performance Funding Y= a+ Bx Y = Credit Hours RZ No. of b X=Funding$ % Cases Institutions (Fig.B.4a) 5.0 ., .. _,;, 0.00130 Systems (Fig.8.4b) 15.1 6 -0.00087 I Systems w/o Research 1.2 I 5 1 -0.00030 i Institutions (Fig.8.4c) I Research Institutions I 51.9 6 I -0.00110 (Fig.B.4d) i p Of b i 0.307 I 0.447 t I I 0.863 i I 0.106 I Once again. the Research Institutions are the only ones to show a I I i I I I I I I i I i statistically significant relationship but with a very low b value and a limited number of cases. 112

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j I I Table 4.5 Weekly Undergraduate Contact Hours by FullTime Faculty And Related Performance Funding Y=a+Bx Y = Contact Hours RZ No. of b p X= Fundin s Ofo Cases Of b Institutions (Fig.B.5a) 20.8 24 -0.000921 0.025 Systems (Fig.B.5b) 17.4 6 0.000287 0.411 1 Systems w/o Research 11.6 5 0.000925 0.574 Institutions (Fi .B.5c) Research Institutions 50.0 ... -0.000193 0.500 (Fig.B.5d) The P ofb value for the Institutions indicate that a negative relationship exists between Contact Hours and the related performance funding. This would indicate that as funding increased. the amount of contact hours decreased. Additional research is needed in this area 113

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Table 4.6 Relationship of GRE Scores to ACT Scores Y =a +Bx Y = GRE Scores RZ No. of b X =ACT Scores Ofo Cases Institutions (Fig.B.6a) 60.1 50 j 41.7 I Systems (Fig.B.6b) 83.5 .,-I 57.8 _, I Systems w/o Research 44.8 20 34.2 Institutions (Fig.B.6c) Research Institutions 66.3 15 j 49.1 (Fig.B.6d) I p I Of b I 0.000 i I 0.000 I 0.001 I 0.000 I I The GRE/ ACT relationship is the only one showing consistent. statisticallv : : I i i t I significant results across categories as shown above. The respective data plots on the following pages also illustrate the nature of what appears to be a positive. linear relationship. Once again. we see how Research Institutions evidently skew the performance results of all other categories. I matched the GRE scores with ACT scores reported four years earlier in an attempt to more closely align the pre-higher education (ACT) scores with the appropriate post-higher education (GRE) scores. 114

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Table 4.7 Relationship of GRE Scores and The Ratio ofTeaching to Non-Teaching Faculty and Staff Y =a+ Bx Y=GRE No. of I b i p X= Ratio ofTeacbing 0/o Cases Ofb To NonTeaching Faculty and Staff I I ; Institutions (fig. B.7a) I 14.5 I 66 I -115 l 0.002 I I Systems (fig. B.7b) 47.0 34 I -296 I 0.000 Systems Excluding 1.4 27 -34.6 I 0.550 Research Institutions ) (See Fie. B.7c) Research 78.8 I 21 I -390 I 0.000 I Institutions I i Institutions. Research Institutions. and Svstems demonstrate a strong . .. possible relationship between GRE scores and the Ratio T/N. The regression I I I I I I I ! I l equation. the B value. and the data plot indicate that this relationship is negative. In other words. as the Ratio ofTeaching Faculty to Non-Teaching Faculty and Statf increases (a presumably positive occurrence for learning). the GRE scores decline. This result suggests that non-teaching faculty and staff (research. grant writers. lab assistants. counselors. and advisors) may have a much stronger role in student learning. 115

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Table 4.8 Relationship of GRE Scores And Institutional Support Expenditures per SFTE Y=a+Bx I Y=GRE 1 X = Exp per SFTE i I Institutions (See Fig. B.Sa) 33.3 Systems (See Fig. B.Sb) 75.5 Systems Excluding 63.4 I Research Institutions I (See Fie. B.Sc) I Research i 56.2 I i Institutions (Fie. B.Sd) No. of Cases 54 29 ., ... 18 I I I I I i b I I 0.361 0.392 0.163 I : i 0.234 p Of b 0.000 0.000 0.000. 0.000 I I I I I This relationship also appears to be strong as all of the categories exhibit significant relationships. In other words. as institutions increase their institutional support expenditures on a per SFTE basis. their GRE scores apparently increase proportionately. CCHE used this indicator to measure institutional overhead and rewarded a low or decreasing rating. In other words. this statistical relationship is contrary to CCHE's use of the indicator. 116

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Y=GRE X = Credit Hours Table 4.9 Relationship of GRE Scores And Credit Hours to Graduation Y=a+Bx I RZ I No. of I b i % I Cases I I I I I i i Institutions (See Fig. 8.9a) 6.7 I ,, -l.86 -' I i Systems (See Fig. 8.9b) I 70.1 10 i 27.4 I Systems Excluding 11 ., 8 I 16.6 Research Institutions (See Fig. B.9c} Research 22.6 I 6 I 7.49 i 0 lnsutuuons (Fl-. B.9d) p Ofb O .::!-l6 I i 0.003 i I I 0.135 l 0.341 I The State of Colorado used this performance indicator to try and influence institutions to decrease the credit hours to graduation. Systems is the only group to exhibit a significant relationship. In other words. as credit hours-to-graduation increased. GRE scores increased. This is contrary to what CCHE rewarded. 117

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Table 4.10 Relationship of GRE Scores And Weekly Undergraduate Contact Hours Y=a+Bx I Y=GRE Rz I No. of I b I 1 X = Contact Hours 0/o I Cases I I I I Institutions (See Fig. B.l Oa) I 11.1 33 -11.2 I I I Systems (See Fig. B lOb) 7 6 10 -11.8 i I Systems Excluding 40.1 16 -13 1 Research Institutions (See Fig. B.IOc) Research 13.5 I 11 i 26.3 I Institutions (Fig. 8.1 Od) I I i I I p orb 0.058 0 238 0 008 0 .1..JO Systems Excluding Research Institutions exhibits a significant negative \ I I 0 I i I relationship. In other words. as faculty contact hours decrease. GRE scores increase. This is contrary to the manner in which CCHE rewarded this performance indicator. 118

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CHAPTERS CONCLUSIONS AND RECOMMENDATIONS Misdirected Performance Funding The performance funding policy in Colorado required CCHE to allocate the performance funding to the higher education governing boards. which put the policy at odds with the higher education governance structure and faculty compensation system (see Folger & Jones. 1993 for discussion of this issue). The legislation (see Appendix E) did not require the governing boards to forward the performance funding amounts to their respective institutions even though it was the institutional performances that drove the performance funding process. Faculty members and individual institutions. who are the true agents of change for many of the performance measures used. were completely left out of the model. The governance structure and the faculty compensation system in place at most (including Colorado "s) higher education institutions directly impede performance funding and render wholesale institutional change in educational practices extremely difficult. Faculty members govern themselves within individual departments. housed within separate schools and colleges. Some faculty members may rely on the concept of academic freedom to resist any or all changes in the 119

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classroom. Faculty members reward systems (including annual merit. pay. promotion. and tenure) are usually driven primarily by research publications and.lor student evaluations. In fact. student evaluations often make up a significant portion of a faculty member's overall evaluation. Many faculty members are hesitant to introduce changes that might affect their student evaluations (i.e .. tougher grading standards or stricter attendance policies). Wholesale changes of departmental or school policies (i.e .. office hours in the evening) require faculty approval. Faculty may resist new policies or actions that threaten their ability to engage in research when research plays a significant part in their evaluations. While not insurmountable. these and other structural impediments to change should be considered by policy makers. Recommendation Establish a mechanism whereby incentive funding flows through the systems and institutions and (under the institutions' control) to the schools. colleges. and department levels where it could directly affect institutions. their faculty. and their staff. Incorporate the state's educational goals for undergraduate education and related improvements into the faculty evaluation process for promotion and tenure. For example, an academic department might receive performance funding dollars if their students showed improvement in test scores on the Major Field Achievement Test (MFA T). The extra money could be used to provide bonus pay for faculty 120

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members and/or to enhance traveL research. or other departmental activities. Once these goals carry as much weight as research and publication. faculty members will have the incentives to effect significant change in accordance v.ith the state s agreed upon goals The governing systems could also be financially rewarded for processes that ensure that performance funding flows to the levels that generated the results. Insufficient Performance Funding Amounts Colorado's performance funding was considerably shon ofthe 15% of base funding experts recommend (see Folger & Jones. I993 for discussion). During the three fiscal years ( I994-95 to I 996-97) that HB 94-III 0 was funded. the legislature allocated approximately I. 7 % of their general fund appropriation or about $2 I million to the policy areas. I reduced that amount by approximately $I 0 million that was non-performance related (this was money to make up for previously lost enrollment funding and to enhance fmancial aid funding). The remaining $11 million penained to performance measures (productivity. technology. workforce training. KI2 alliances. and high quality. efficient. & expeditious education) or .9% (nine-tenths of one percent) of the state s general fund appropriation for that three year period. When I compare the total performance funding to the total higher education budget (including tuition revenue) the percentage drops to .2% (two tenths of one percent). Some examples of the performance funding amounts that CCHE" s formula would have allocated to specific institutions (if they had received the funds directly) are 121

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shown in Table 5 .1. They indicate what a weak effect. if any. one would expect the funding to have on institutional performance. Recommendation TABOR (see page 46) restricts the amount of funding increase possible for higher education in Colorado and most higher education administrators would surely resist reallocating 2 -5 % of their existing budgets to performance funding. After all. they would be allocating money from already tight budgets to an unproven model that may or may not work. Then where would they be? [t is not politically realistic to expect 2 -5 % increased state appropriations for higher education (see pages 6 12). So Colorado seems to be in an irreconcilable dilemma as far as increasing funding to achieve a more effective level of performance funding. One approach to increasing the amount of performance funding amount might be for the state of Colorado to match the amounts that institutions shifted from their base budgets. If the state allowed the institutions three to five years to incrementally allocate a portion (which the institutions would control) of their base budgets to perfonnance funding and set an upper limit of two percent of the total higher education budget to be used for performance funding. the state could more easily increase total performance funding and mitigate the TABOR concern. The institutions would be participants in a partnership (with the state) instead of reacting to regulation. The amount of new funding from the state would depend on the 122

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I I I i I amounts committed by the institutions. and could also be phased in over three to five I years. Without sufficient funding amounts. any performance funding model is doomed to failure. Enrollment Funding Masquerading as Performance Funding The "performance funding" model in Colorado was actually administered as an enrollment funding model (see Table 5.2 and Figure 5.1 ). By weighting the performance results by student FTE. CCHE. intentionally or otherwise. abrogated the performance element of HB 94-1110. For example. the University of Colorado at Boulder (UCB). the largest institution. received the most performance funding (as indicated by bold lettering) for three of the four performance measures in Table 5.2. Colorado State University (CSU). the second largest institution. received the second most performance funding in those cases and the most funding for the fourth performance measure (UCB was second in that case). Together UCB and CSU received 38 %. 38 %. 25 %. and 36% of the total performance funding for the four performance measures compared to their 49% share of the total General Fund appropriations to four year public institutions during the period 1994-95 to 1996-97. When Metro State College of Denver's (MSCD) performance funding was added to that ofUCB and CSU. I found that the three largest institutions. as a group. received 4 7 %, 46 %. 36 %. and 48 % of the total performance funding from these four 123

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performance measures while accounting for 41 % of the total student FTE of those institutions participating .. Their combined share ofthe total General Fund appropriations for that same period was 58%. The far right hand column of Table 5.2 displays the percentages of the total average performance funding amounts next to the FTE percentages. There is a much higher correlation between institution size and performance funding (. 98 vs. perfect correlation of 1.0) than of performance on key indicators and performance funding. I did not test the relationships between performance funding and the qualitative performance indicators (such as the quality of jobs taken by graduates and post-tenure review policies). It is possible that additional research would determine different results for those performance indicators. Figure 5 .I demonstrates the close relationship of performance funding and student FTE by institution. Recommendation Administer the performance funding model with less regard to SFTE so that institutions/systems are rewarded primarily on the basis of performance as defined by the policy. Student FTE should not be ignored but it should influence the performance funding model less than it did under HB 94-1110. 124

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Discontinuitv of the Performance Funding The Colorado State legislature discontinued funding for HB 94-1110 (the performance funding legislation. see Appendix E and page 9) in 1997-98. before the legislation expired. Within the funding period, various performance measures were funded for periods ranging from one year to three years. This discontinuity created uncertainty among the governing boards and the institutions as to the legislature's commitment to performance funding as a state policy. When the next performance funding legislation (HB 96-1219) goes into effect (1999-2000). it is possible that the higher education institutions will not be as committed to the concept as they might have been due to the inconsistent funding of HB 94-1110. Recommendation The state legislature. in concert with CCHE and higher education leadership. should establish a long-term agenda. complete with an evaluation timetable. and stick "With it. This does not suggest that the state cannot make minor adjustments to a performance funding model. but it is important to maintain the funding dollars from vear to vear. Otherwise. thev are likelv to have little effect and it will be difficult to .. . measure their effectiveness. 125

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Discontinuity of the Performance Measures CCHE modified many of the performance indicators during the period that HB 94-lllO (1994-95 to 1997-98) was in effect (see Appendix A). They made the adjustments in an attempt to achieve more meaningful results. but this also made it very difficult to analyze the results. Without understanding how or if performance funding affected higher education performance. policymakers cannot know whether to continue this policy or how to modify it to better meet the state's goals. Faculty and administrators may also become confused about what the state's goals are if the performance measures are not consistent. Recommendation CCHE should make as few adjustments as possible to performance indicators throughout any performance funding effort. The state should also consider incorporating more performance indicators that coincide with the student learning model discussed on page 96. I recommend that the state expand the student satisfaction indicator currently included in HB 96-1219 (effective 1999-2000) to require institutions to survey graduating seniors plus alumni one year after graduation. five years after graduation. and ten years after graduation. Longitudinal surveys would provide a much more meaningful response from graduates as they mature in their careers and lives. 126

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In addition. the state should include evaluations of teaching effectiveness (aggregated by institution) as a performance indicator. Institutions could be rewarded for improving the reliability of their evaluations (using peer evaluations more effectively) and for demonstrating overall improvement of teaching effectiveness. The state should also include an indicator for improving services for nontraditional students. for example. more evening hours for services (cashiers office. advising, bookstore), the number of core courses offered at night. and on-line registration. Institutions should be rewarded for programs that involve students in community service. Community service helps build better citizens and provides much needed services to the community. It can provide student internships and may introduce students to the workforce. Research Institutions Attract Different Students and Behave Differentlv I found that the three institutions classified by CCHE as .. Research I .. universities (Colorado School of Mines/CSM. University of Colorado at Boulder/UCB, and Colorado State University/CSU) admitted higher-achieving students (as evidenced by index scores [ACT plus high school GPA/class standing]). delivered education differently (as evidenced by differences in their weekly contact hours with students), and paid higher faculty salaries. 127

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Table 5.1 Comparisons Selected Characteristics of Research Institutions to Other Institutions and Systems Institution! Minimum GRE Scoresc Average Contact System a Index Scoresb F acultv Salariesd Hours.: CSM no 1815 $64931 I 7.7 I UCB 103 I 1713 I $58957 5.1 csu 101 1609 I $57665 I 6.6 UCD 93 1590 $52327 5 0 uccs 92 1564 $49083 8 8 UNC 92 1463 $44212 9.3 SBA 80 1573 $43691 I 12.9 Trustees 80 1566 $41221 12.9 Note. aResearch institutions are shown in bold. CSM refers to Colorado School of Mines. UCB refers to University of Colorado at Boulder. CSU refers to Colorado State University. UCD refers to University of Colorado at Denver. UCCS refers to University of Colorado at Colorado Springs. UNC refers to University ofNorthem Colorado. SBA refers to the State Board of Agriculture system. Trustees refers to the Trustees of State Colleges system. i I ] I I I blndex score consists of the student"s ACT score plus the better of their high school GPA or class standing index. 128

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cl996 dl995-96 c:Student-Faculty weekly contact bows. See page 96 for discussion. The students at research institutions achieved higher GRE scores. which. according to my research. is largely (about 70 %) attributable to the institutions' ability to attract students with higher ACT scores. In other words. the most important indicator of student learning. as measured by CCHE (GRE scores). appears to be the very nature of the students attracted to institutions. Yet. the state s performance funding model rewarded higher or improving GRE scores equally (as weighted by student FTE) for all the institutions. In other words. the research institutions that attracted high-achieving students (as measured by their ACT scores) reaped the rewards of the performance funding model simply because of the type of students they served. See Tables 4.24.10. Figures B.2aB.10d. Table 5.1. Figure 5.1. and Appendix C for regression results. data plots. and graphs. Recommendation Structure the performance funding model so that it distinguishes between research and non-research institutions. which may be expected to perform differently. Alternatives to differentiate research institutions include: 1. Consider each institution s mission. geographic location. and student demographics carefully when applying performance indicators. 129

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2. Reward institutions with ACT /index scores above a certain level differently for their students' GRE scores. 3. Distinguish between high ACT/index. medium ACT/index. and low ACT/index institutions for performance measurement purposes. 4. Weight performance indicators by their importance to specific institutions. Individual institutions would identify those areas needing improvement (most important) with CCHE"s concurrence. 5. Base performance funding for test scores on improvement from a specified (determined by institutions and CCHEO base level or benchmark. 6. Identify other institution-specific characteristics (for example. large percentages of non-traditional. working students who do not intend to graduate in four years) and structure the performance funding model so that those characteristics do not count against institutions with those characteristics. Summarv of Recommendations The legislature should decide if it is committed to performance funding as a vehicle to achieve the states higher education goals and to improve quality in institutions of higher education. It is difficult for any state legislature to behave strategically or to commit to a long-term agenda for any issue given the political realities of term limits and biannual elections. But to support .. quality for pay it must 130

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a) legislatively commit to a long-term agenda of performance funding and b) truly reward institutions for performance. In other words. it must make performance funding allocations based more on performance than on student FTE. The current approach does not reward the institutions directly. much less their faculty or staff. and is based on measures that may or may not reflect the true nature of higher education productivity. efficiency. quality. and certainly not student learning .. The Colorado Commission on Higher Education. in partnership with the states higher education community. with leadership from the legislature and the governor. should determine I) if performance funding should play a role in Colorado s higher education budgeting process. 2) how to better incorporate faculty and staff participation in the selection of performance indicators and in the policy implementation process. and 3) how to structure and administer the performance funding model with more regard to performance than to enrollment. Summarv My conclusions may appear to be overly critical of Colorado"s efforts to implement performance funding. I recognize that policy formulation and implementation is an inexact science. Performance funding policy is especially difficult to formulate and implement because of the large number of variables with their individual complexities and their intricate (and not well-understood) relationships with one another. Colorado has taken a tentative first step toward 131

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reforming higher education funding :md I hope that my efforts will in some way contribute to future efforts. 1 ... ., _,_

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UJ UJ School ASC MSC MSCD wsc csu FLC usc UCB uccs UCD UCI-ISC ACC CCA ceo FRCC LCC MCC OJC PPCC PCC RRCC' TSJC CSM UNC Teaching Ratio$ 6050 11525 40525 5550 84800 11325 12425 96275 12500 26475 17850 14900 8625 13550 26250 2800 5200 1900 16125 11150 17550 4800 7744 17379 Table 5.2 Avcrnge Performance Funding Amounts and Percentages Compared to Average Student FTE Percentages by Institution 1994-95 to 1996-97 Teaching Exp./ Exp./ Contact Contact Credit Credit Ratio FTE $ FTE I tours$ Hours Hours$ II ours %of$ %of$ %of$ %of$ 1.27 4750 1.00 4470 2.29 1200 1.00 2.43 15450 3 .25 5820 2.98 2280 1.90 8.53 37325 7 .86 21525 11.04 14640 12.20 1.17 5525 1.16 1770 0.91 3240 2.70 17.85 81025 17.06 27150 13.92 15240 12.70 2.38 13375 2 .82 5145 2.64 3480 2.90 2.62 13550 2.85 3450 1.77 2280 1.90 20.27 97875 20.61 21300 10.92 28200 23.50 2.63 12375 2 .61 6210 3.12 4910 4.10 5.57 20150 4.24 7875 4.04 4200 3.50 3.76 44950 9.46 2055 1.05 240 0.20 3.14 10925 2 .30 6690 3.43 4800 4.00 1.82 4625 0.97 7290 3.74 3240 2.70 2.85 9550 2.01 7815 4.01 2640 2.20 5.53 14350 3 .02 18045 9.25 7560 6.30 0.59 750 0.16 1485 0.76 600 0.50 1.09 2575 0.54 1335 0.68 600 0.50 0.40 1975 0.42 930 0.48 960 0,80 3.39 14225 2 .99 5175 2.65 4200 3.50 -----... 2.35 6675 1.41 )915 2.01 1680 1.40 -----3.69 II 125 2.34 9885 5.07 700 0.58 --1.01 3175 0 .67 2595 1.33 1400 1.17 ------1.63 13141 2 .77 5910 3.03 2943 2.45 17130 r8.78 ---3.66 33365 7.02 7517 6.26 -Percent Percent of of Perlbnn. lin grad. Funding FTE 1.77 1.31 3 .10 2 .78 9.50 9.05 1.73 1.28 15.14 16.53 3.18 2.65 3.00 2.52 16.79 19.34 3.13 2.86 5.43 4.66 1.95 5.17 3.16 2.96 2.00 1.89 3.34 2.66 5.06 5.25 0.52 0.45 0.60 0.77 0.62 1-3 .64 3.15 1------2 .20 1.86 ------------3.08 3.12 ----1.18 0 .95 ----------2.47 2.36 1----------------7.44 5.98 -----------

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Table 5.2 (continued) ASC Adams State College CSM Colorado School ofMines MSC Mesa State College UNC University ofNorthem Colorado MSCD Metropolitan State College-Denver WSC Western State College CSU Colorado State College FLC Ft. Lewis College USC University of Southern Colorado UCB University of Colorado at Boulder UCCS University of Colorado Colorado Springs UCD University ofColorado at Denver UCHSC University ofColorado Health Science Center ACC Arapahoe Community College CCA Community College of Aurora CCD Community College of Denver FRCC Front Range Community College LCC Lamar Community College MCC Morgan Community College OJC Otero Junior College PPCC Pikes Peak Community College PCC Pueblo Community College RRCC Red Rocks Community College TSJC Trinidad State Junior College I J I l I I

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Figure 5.1 Percentage of Total Average Funding And the Percentage ofT otal Average Student FTE By Institution 1994-95 to I 996-97 --1 fUcBl 20 L:::::J 15 10 5 -Funding v ..::,G
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1994-95 APPENDIX A COLORADO COMMISSION ON HIGHER EDUCATION POLICY AREAS AND RELATED PERFORMANCE AREAS Workforce Training $250.000 Appropriated Quality and nature of jobs taken by graduates. Opportunities for cooperative education and internships. Graduates placed in positions relevant to the needs of the state. Degree of program access for all students. Productivitv $400.000 Appropriated + Increasing the number or demonstrating a high number of undergraduate teaching hours, undergraduate student contact hours. and undergraduate advising hours completed by full-time faculty. + Ratio of teaching faculty to non-teaching faculty and staff. + Reducing or demonstrating low administrative overhead costs. + Reporting requirements for productivity include: + Increasing the number of sections available for students in high-demand required courses if an insufficient number of such sections exist. + Increasing the number or demonstrating a high number of undergraduate teaching hours. undergraduate contact hours. and undergraduate advising hours. + Improving the curriculum through analysis of the performance rate on graduate school and licensing exams. + Establishing a system to supervise and oversee paid faculty sabbaticals. decreasing the number or demonstrating a low number of paid non-educational faculty and administrator leaves. and maintaining a public record of the purpose and general results of all paid sabbaticals and all paid extended and administrator leaves. + Demonstrating a high degree of personnel efficiency. including the establishment of post-tenure review 136

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Financial Aid Implementation of programs to increase the successful participation of low income and underrepresented students in higher education. Implementation of programs to provide information about financial aid to K -1:! students. Implementation of summer educational programs for low income and underrepresented students in grades nine through twelve. Implementation of programs to encourage the recruitment of additional minority faculty and staff. 1995-96 Ensuring that the state has an adult population with skills and a base of knowledge that are central to the general welfare or economy of the state. $250.000 Appropriated (a) The quality and nature of jobs taken by graduates. and (b) the number of graduates placed in positions relevant to the needs of the state. The number of graduates placed in positions within the state as compared to positions outside the state. The opportunities for cooperative education and internships included in the program. The degree of program access for all students. Lease costs for off-campus facilities. Increasing Productivitv $600.000 Appropriated Increasing the number of sections available for high-demand required courses if an insufficient number of such sections exist. Increasing the number or demonstrating a high number of undergraduate and graduate teaching hours. undergraduate and graduate student contact hours. and undergraduate and graduate advising hours completed by full-time faculty. Increasing the ratio or demonstrating a high ratio of teaching faculty to non teaching faculty and staff. Increasing the number or demonstrating a high number of full-time or part-time faculty who teach undergraduate and graduate students. Reducing or demonstrating low administrative overhead costs. Establish joint ventures with other institutions of higher education to enable students to take classes at the freshman and sophomore levels at community 137

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colleges and finish their degrees at four-year colleges or research universities. Such joint ventures shall provide for coordination of curriculum and faculty between the institutions and agreements to ensure the transfer of credits so that transferring students can complete a degree in four years. Increasing or demonstrating a high number of students who graduate within five years of matriculation. Demonstrating a high rate of retention or increasing the retention of students. Coordination of the delivery of education to students in kindergarten through grade twelve with the delivery of education to students in institutions of higher education. $400,000 Appropriated Competitive grants Development and use of technology. $2.000.000 Appropriated 1996-97 Workforce preparation and training $600.000 Appropriated Whether the institution provides programs that produce graduates who possess the basic abilities and skills necessary in a variety of careers. Whether the institution implements information systems that provide students with potential employment opportunities and forecasts for the job market that are specific to degree programs prior to the time that students must declare a major The quality and nature of jobs obtained by graduates relevant to their degrees. The number of graduates placed in positions that are relevant to the state s needs The number of graduates placed in jobs within the state. Whether the institution provides opportunities for cooperative education and internships. Demonstrating high or increasing operational productivitv $1.000.000 Appropriated Whether the institution, for high demand courses. has an adequate number or increases the number and availability of course sections when necessary. Whether the institution demonstrates a high or increased utilization of existing space for academic purposes. Whether the institution operates with low or decreased non-instructional costs. Whether the institution can demonstrate a high or increased ratio of teaching faculty to non-teaching faculty and staff. 138

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Providing students with a high quality. efficient. and expeditious undenrraduate education. $600.000 Appropriated a Low or decreasing average credit hours completed by students receiving degrees. a Demonstration of a high or increased level of student-faculty contact. a Demonstration of a high or increased number of advising hours performed by faculty and staff. :::J Demonstration of a high or increased rate of transferability between the institution and other institutions of higher education. a Recognition and reward of improved or existing high quality faculty instruction and student learning. Providing a linkage between the elementary and secondary education system and higher education $600.000 Appropriated. 1997-98 Workforce preparation and training (unfunded) : Whether the institution provides programs that produce graduates who possess the basic abilities and skills necessary in a variety of careers. : Whether the institution implements information systems that provide students with potential employment opportunities and forecasts for the job market that are specific to degree programs prior to the time that students must declare a major. : The quality and nature of jobs obtained by graduates relevant to their degrees. : The number of graduates placed in positions that are relevant to the state s needs. : The number of graduates placed in jobs within the state. : Whether the institution provides opportunities for cooperative education and internships. Demonstrating high or increasing operational productivity (unfunded) Whether the institution. for high demand courses. has an adequate number or increases the number and availability of course sections when necessary. Whether the institution demonstrates a high or increased utilization of existing space for academic purposes. Whether the institution operates with low or decreased non-instructional costs. Whether the institution can demonstrate a high or increased ratio of teaching faculty to non-teaching faculty and staff. 139

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I I I I I I I I I + Whether the institution can demonstrate effective student learning as evidenced by achievement of higher than national pass rates on standardized national licensure or board examinations. or graduate school entrance examinations. Providing students \\ith a high quality. efficient. and expeditious undergraduate education (unfunded). a Delivery of a degree in the number of credit hours specified in the course catalogue. o Demonstration of a high or increased level of student-faculty contact. ::J Demonstration of a high or increased number of advising hours performed by faculty and staff. CJ Demonstration of a high or increased rate of transferability between the institution and other institutions of higher education. CJ Recognition and reward of improved or existing high quality faculty instruction and student learning. Providing a linkage between the elementary and secondary education system and higher education (unfunded). Competitive grants. Use of technology to lower costs and improve the quality and delivery of education (unfunded). 140

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I I ! I I APPENDIXB REGRESSION EQUATIONS AND DATA PLOTS Below are examples of data plots. similar to the plots I use in Appendix B. to demonstrate how various dependent (Y) variables relate to the respective explanatory (X) variables. Figure B.l Examples of Linear X Y Relationships Positive Relationship Negative Relationship y y X X No Relationship y X 141

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N z j::: 0 111 0::: Ratio of Teaching to Non-Teaching Faculty and Staff And Related Performance Funding 3 -1 d 20-, lm.IIIUIIIN" I I' II!IIC ll2b e e Raltu ltN UIHifKJS Kalin f;N S S)'SICIIIS Rallo liN 1100007 Rauu f /N S j" 2 :. 1 fi-0 1 o-l, os--1; 0 10000 20000 30000 40000 0 10000 20000 30000 40000 fiOOOO 60000 70000 60000 Ratio TIN$ RATIO TIN$ 2.0 hHliC 1121: --------] S\'Al.Ctn\ wn R.esc..uch E: 1.0 hyu1c ll2d g "i IUX102flauol!NS 1-ltc.CIIh lnOIIIUIIOIII 0 0.9 Rauu liN -11000 II rtN S 0:: 111 0::: 10; I I I I I I I I I I 0.5 0 11XXl0 2IXXXl 300Xl 4IXXlO !iOOXIIKXXXJ 70000 IKXXXl 0 10000 20000 30000 40000 RATIO TIN$ Ratio TIN$

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I..J 5000 4000-JQOO-;B-2000- ::L Institutional Support Expenditures per SFTE And Related Performance Funding I 1500-el l'tgUic II 3i1 lnS1111111ms hp SFII: 711-1 I IIIJbpSFIH L._ __ 1000a: I soo-Figlfc H .\h S)lilcn-c; Exp'Stti'E I1Xl7 OlfJ l:xp'SI'Il! S 0 10000 20000 30000 0 10000 20000 30000 40000 50000 60Wl 1500-J ... 500-0 -. ExpiSFTE$ I'ICIIC ll k S) lil,IIS 1\ u E'l' srn: m 11-128 E'l''srn: s 10000 20000 XXXXl 40000 50000 60000 ExpiSFTE$ t EXP/SFTE$ II :kl lbaud1 lll2ll-lJt>ISbpSFil : s 0 1 200Xl 3CXXX) ExpiSFTE$

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200.., I!! :::1 .... 0 t u 100 .... 0 t 150-140 130 I!? 120 :::1 0 t 110 u 100 80-70 -!,-. 0 Credit Hours to Graduation And Related Performance Funding I 160-hgurc 114H IIISIIIUIIUIIS Cr limns IU7 !KIIlU l'r I huns S 140 1..------130-I 120- G I'IIJIICII4h tOO yMcrns 90 Cr I kJUJ) 148 IKK187 t'r I hrrs S ao70 I 10000 20000 30000 0 10000 20000 30000 CrHoursS Crt-lours$ I 155 f'IIJUIC IJ4rJ S)srcms "., llcscarda J I!? Cr llmus I H 011111111"1 I hns \ :::1 0 :I: 145 l"r lluurs 151. 111111!1 Cr llmrrs S .. u 13S 10000 20000 30000 40000 40000 0 CrHours$ 5000 10000 15000 Cr Hours$

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Vl 20 I!! 15 :I 0 J: c 0 0 10 5 0 10000 Weekly Undergraduate Contact I lours by Full-Time Faculty And Related Performance Funding -rrgurell Sc S)slcms "'o Research Ill> 7 87 t UOU211S 1'101 If,. S 20000 30000 40000 ConHours$ I!! :I 0 155 ,-----:---,============--- lrpmcll Rcseardr l'1w1 ffli 1 811 IKlO 11111 "1w1 fils S J: 145- u I 135 --1 I I I I I 0 5000 10000 15000 Cr.Hours$

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----------------Relationship ofGRE Scores to ACT Scores

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-......, w 0:: (!) w 0:: (!) Relationship of GRE Scores To Ratio of Teaching to Non-Teaching Faculty and Staff 190o- L hMur,c117 1800 Iiiii: INS I H R,,,,., I ,N 1700 1600 tl& ... 1500 ... 1400 .... 13oo --. ------1--.. ,------.. -I 0 1 2 3 RalioT/N 1700 --J el l'lgmc II 7c S)m "'" Rd liRE IH2 H I Rallu J,N 1600- 1500-l 1400 -i 10 I 5 20 RATIO TIN w 0:: (!) w 0:: (!) 1800 1700-16001500-1400-.,... 05 1eoo-1800-IIOO-1600- I l'lllUIC B 7h OIU: 1'111(1 21Jb lwmr.'N L__ ________ __, ., '.. ... :, 10 15 RATIO TIN lltlUI< II lc Knelh;h 20 liRJ: I S\2 14 11 lln1111 I 'N ------ 0 55 0 65 0 75 0 65 0 95 1 05 1 15 I 25 Ratto TIN

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Relationship of GRE Scores To Institutional Support Expenditures per SFTE 190o-., ltgtiiC liRa ... I'IJ!lrcllHh I lllliii11UIIt1Uti 1800 OK!: l.lUK llol h1>'Srl 1: 111Xl
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Relationship of ORE Scores To Credit I lours to Graduation

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-VI 0 teoo-1BOo w 1700 a:: (.!) 1600 tsoo 1400 13oo--, o w a:: (.!) 1700 1600 1!100 1400 -- 111. - .,. Relationship of ORE Scores To Weekly Undergraduate Contact Hours 1900 -I .... Sy.lcm 1800l GRI: II'IH 12 K "'"'" ---w 1700-a:: (.!) 1600 -I .. 1500-( 1400-( ------.,------------r-------, 10 20 30 ConHours 5 10 15 20 ConHours hau1clllll< Syi1enn v.fo Retarch ORE IIH I l I c,., 1900-1 I IIIOd I OR I' I lfll Con "''"" _j 1800 w a:: r-(.!) 1700 1600 s 10 15 Con Hours 20 --,-5 6 7 8 9 Con Hours --------------------------------

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FY 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1994-95 1995-96 APPENDIXC THE STATE OF COLORADO HIGHER EDUCATION PERFORMANCE DATA AND FUNDlNG Table C. I Weighted Average Institutional Support Expenditures Per SFTE and Related Performance Funding 1988-89 to 1995-96 Trustees SBA cu SBCCOE I CSM I I I 603 611 1193 557 I 1338 690 638 898 567 1:!30 692 671 978 596 l 1:!63 652 698 967 617 1439 662 70:! 1003 635 1493 693 743 1095 649 1415 761 807 1:!17 709 1689 $10650 $11550 $31350 Sl3950 $:!137 $35800 $41000 $55600 $45400 $5305 UNC I I I 556 j 555 i 558 f 589 l 706 687 I 738 J $5165 i Sl718:! This indicator is meant to measure whether institutions operate with low or decreased non-instructional costs. The indicator is expressed in expenditures per SFTE. The bottom two rows represent the amount of performance funding allocated. Trustees: Mesa State. Western State. Metro State College of Denver. Adams State State Board of Agriculture (SBA): Colorado State University. Ft. Lewis College. University of Southern Colorado Regents (CU): University of Colorado at Boulder. University of Colorado at Denver. University of Colorado at Colorado Springs Community Colleges (SBCCOE): Arapahoe Community College. Community College of Aurora. Community College of Denver. Front Range Community College. Lamar Community College. Morgan Community College. Otero Junior College. Pikes Peak Community College. Pueblo Community College. Red Rocks Community College. Trinidad State Junior College CSM: Colorado School ofMines UNC: University of Northern Colorado 151

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FY 1989-90 1990-91 I 1991-92 1992-93 1993-94 1994-95 1995-96 1994-95 1995-96 1996-97 FY 1994-95 1995-96 1996-97 1996-97 Table C.2 Weighted Average Ratio ofTeaching Faculty to Non-Teaching. I I I I I I Faculty and Staff and Related Performance funding I 989-90 to 1996-97 Trustees SBA cu SBCCOE 1.66 1.04 1.03 1.86 1.70 1.15 I .98 i 1.80 i 1.62 1.18 1.03 1.84 1.64 1.20 1.02 1.96 1.64 1.24 1.04 1.95 i 1.67 1.21 1.05 1.89 1.66 1.16 1.09 1.87 CSM I .68 .66 I .59 .59 .57 I .63 i .61 S9450 $19950 S23100 I $19050 $1123 i S24600 $45200 $67600 I S50200 I $2864 I S29600 S43400 l $62400 I $53800 i S3757 : Table C.3 Weighted Average Credit Hours to Graduation And Related Performance Funding 1994-95 to 1996-97 Trustees SBA cu SBCCOE CSM 139.25 141.68 138.9 74.93 I 146. 7 138.62 141.08 138.95 75.53 151.6 138.23 142 33 140.33 73.79 153.3 $21360 $21000 $37560 $27240 $2943 152 I I UNC .91 .90 .97 .94 .93 .95 .96 S2466 $9444 $5469 UNC 139.8 138.9 138.8 $7517 I i I I I ' I i I I I

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I FY 1992-93 1993-94 1994-95 1995-96 1995-96 1996-97 FY 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 Table C.4 Weighted Average Weekly Undergraduate Contact Hours By Full Time Faculty and Related Performance Funding 1992-93 to 1996-97 Trw. tees SBA cu SBCCOE I CSM i 14.48 8.79 4.89 20.45 8.9 13.99 8.90 4.89 20.38 9.3 14 "'6 8.49 5.04 20.29 I 8.4 13.67 8.45 5.16 19.73 7.7 $11025 $14625 $18900 $22200 $1950 $22560 $21120 $18600 $39120 $3960 Table C.5 Weighted Average Faculty Salaries by System 1 989-90 to 1996-97 I I I I i I I i UNC 8.4 I 8.5 I 9.4 9.3 I $6450 J $10680 I 1 Trustees I SBA cu SBCCOE CSM UNC i TOTAL 34256 41947 45625 28434 I 45730 360:!1 :!32013 I 36973 44337 44954 29793 48068 37:!12 241337 38591 46032 46476 I 27984 50621 38654 248358 39160 47314 47780 31035 55065 39185 1 259539 I 39527 47981 50778 31309 56682 38503 264780 40559 49567 54132 33636 58865 41674 278433 41539 49858 55636 36563 63424 42838 289858 43689 53679 56096 38548 64931 I 44212 301155 .l 153 I I

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FY Trustees 1988-89 20050 1989-90 20514 I 1990-91 20747 1991-92 20946 1992-93 20924 1993-94 20362 1994-95 20555 1995-96 20588 Year Trustees 1989 1-168 1990 1991 19.90 1-132 1992 20.11 /50-I 1993 19.87 1505 1994 19.75 1388 1995 19.56 1566 Table C.6 Student FTE by System 1988-89 to 1997-98 SBA I cu SBCCOE CSM i UNC i TOTAL 25655 33649 24870 2268 I 8992 I 115..J84 26260 34586 27547 2330 9065 26376 35735 29174 2371 I 9543 26719 36101 30454 2573 9772 27082 35861 32462 2858 9706 27244 35709 32641 3006 9840 27234 35067 32665 3094 9721 27569 35112 32673 3189 9554 Table C.7 Weighted Average ACT and GRE Scores 1989 to 1995 SBA cu CSM I 1616 1621 /7'-10 1598 /60-1 1898 I I :!2.99 1581 23.67 /601 27.00 /9/.J :!2.89 1538 23.60 /603 27.00 1836 i :!2.65 1537 23.36 !59-I 26. 90 1836 22.71 r-., :J:J_ 23.42 15i-l 26.40 t8r :!2.92 1573 23.11 15-17 26.10 1815 154 1:20302 1:23946 i 126565 128893 I 128802 : 128336 I 128685 UNC L I-u6 I l-18-:" 21.-JO I /-153 21.30 I /-16-I 21.40 I /-168 21.70 jl-123 2t.8o I 1-163 : I I

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APPENDIXD HOUSE BILL 94-lll 0 BY REPRESENTATIVES Foster. Oyer. Jarke. Owen. and Sullivan: also SENATORS Norton. Meiklejohn. Owens. Rizzuto. Tabedo. and Traylor. CONCERNING IDENTIFICATION OF SPECIFIC POLICY AREAS FOR ADDITIONAL FUNDING IN HIGHER EDUCATION. Be it enacted by the General Assembly of the State of Colorado: SECTION I. 23-1-105. Colorado Revised Statutes. 1988 Rep I. VoL as amended. is amended BY THE ADDITION OF A NEW SUBSECTION to read: 23-l-105. Duties and powers ofthe commission with respect to appropriations. (9) (a) IN ADDITION TO THE FORMULA ESTABLISHED PURSUANT TO SUBSECTION (3) OF THIS SECTION. FOR THE 1994-95 FISCAL YEAR. THE COMMISSION SHALL ESTABLISH FOUR DISTRIBUTION FORMULAS AND ONE GRANT PROGRAM FOR DISTRIBUTION OF ANY APPROPRIATIONS BY THE GENERAL ASSEMBLY TO THE GOVERNING BOARDS IN EACH OF THE FOLLOWING POLICY AREAS: (1) COORDINATION OF THE DELIVERY OF EDUCATION TO STUDENTS IN KINDERGARTEN THROUGH TWELFTH GRADE WITH THE DELIVERY OF EDUCATION TO STUDENTS IN INSTITUTIONS OF HIGHER EDUCATION: (II) INCREASING PRODUCTIVITY: (III) ENSURING THAT THE STATE HAS AN ADULT POPULATION WITH SKILLS AND A BASE OF KNOWLEDGE THAT ARE CENTRAL TO THE GENERAL WELFARE OR ECONOMY OF THE STA TUTE(IV) INCREASING ENROLLMENT: AND (V) INCREASING FINANCIAL AID (b) ANY APPROPRIATIONS MADE FOR THE POLICY AREAS SPECIFIED IN SUBPARAGRAPHS (II) TO (V) OF PARAGRAPH (a) OF THIS SUBSECTION (9) SHALL BE DISTRIBUTED PURSUANT TO DISTRIBUTION FORMULAS ADOPTED BY THE COMMISSION AS PROVIDED IN SUBSECTION (3.5) OF 155

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THIS SECTION. NOTWITHSTANDING THE PROVISIONS OF SUBSECTION (3.5) OF THIS SECTION. ANY APPROPRIATIONS MADE FOR THE POLICY AREA SPECIFIED IN SUBPARAGRAPH (I) OF PARAGRAPH (a) OF THIS SUBSECTION (9) SHALL BE MADE IN A SINGLE LINE ITEM TO THE COMMISSION FOR DISTRIBUTION BY A GRANT PROGRAM ESTABLISHED BY THE COMMISSION PURSUANT TO THE PROVISIONS OF SECTION 23-1122 (2). (c) THE COMMISSION SHALL BASE THE DISTRIBUTION FORMULAS AND GRANT PROGRAM REQUIRED PURSUANT TO THIS SUBSECTION (9) ON THE PARAMETERS AND MEASURES ESTABLISHED IN SECTION 23-1122. APPLICATION OF THE DISTRIBUTION FORMULAS AND GRANT PROGRAM TO EACH INSTITUTION OF HIGHER EDUCATION SHALL NOT RESULT IN AN EXPANSION OF ANY INSTITUTION'S ROLE AND MISSION. SECTION 2. Article I of title 23. Colorado Revised Statutes. 1988 Rep I. VoL. as amended. is amended BY THE ADDITION OF A NEW SECTION to read: 23-1-122. Commission directiveseparately funded policy areas. (I) THE GENERAL ASSEMBLY HEREBY FINDS THAT. BECAUSE OF THE LIMITED AVAILABILITY OF STATE RESOURCES AND THE INCREASING EDUCATIONAL NEEDS OF THE RESIDENTS OF COLORADO. THE ALLOCATION OF STATE RESOURCES TO THE SPECIFIC POLICY AREAS WITHIN HIGHER EDUCATION THAT WILL MOST BENEFIT THE RESIDENTS OF COLORADO IS OF INCREASING IMPORTANCE AND OF HIGH PRIORITY TO THE GENERAL ASSEMBLY. THE GENERAL ASSEMBLY FURTHER FINDS THAT THE FUNDING OF HIGHER EDUCATION IN COLORADO IS A POLICY DECISION THAT IS INTENDED TO REWARD EXCELLENCE IN EDUCATION AND INCREASES IN SERVICES WHICH ARE DEMANDED BY AND BENEFICIAL TO THE STATE OF COLORADO AND ITS CITIZENS. IT IS THEREFORE THE INTENT OF THE GENERAL ASSEMBLY THAT THE COMMISSION APPLY THE PARAMETERS AND MEASURES SPECIFIED IN THIS SECTION TO DISTRIBUTE TO THE GOVERNING BOARDS ANY AMOUNT WHICH THE GENERAL ASSEMBLY MAY APPROPRIATE TO THE POLICY AREAS SPECIFIED IN THIS SECTION AND THAT SUCH DISTRIBUTIONS BE MADE IN CONCERT WITH THE UNIQUE ROLE AND MISSION OF EACH INSTITUTION OF HIGHER EDUCATION SO AS NOT TO EXPAND SUCH ROLE AND MISSION. SUCH DISTRIBUTION SHALL BE IN ACCORDANCE WITH THE DISTRIBUTION FORMULAS ESTABLISHED BY THE COMMISSION AS REQUIRED IN SECTION 23-1-105 (9). 156

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(2) (a) FOR THE 1994-95 FISCAL YEAR ADDITIONAL APPROPRIATIONS MAY BE AVAILABLE. THROUGH A COMPETITIVE GRAi\fT PROCESS, TO GOVERNING BOARDS WHICH HAVE IN PLACE OR ESTABLISH PROGRAMS OR SERVICES WHICH COORDINATE THE DELIVERY OF EDUCATION TO STUDENTS IN KINDERGARTEN THROUGH TWELFTH GRADE WITH THE DELIVERY OF EDUCATION' TO STUDENTS IN INSTITUTIONS OF HIGHER EDUCATION. SUCH PROGRAMS OR SERVICES SHALL FALL WITHIN THE FOLLOWING PARAMETERS: (l) PROGRAMS FOR THE DEVELOPMENT AND IMPLEMENTATION OF CONTENT STANDARDS FOR UNDERGRADUATE EDUCATION WHICH ARE CONSISTENT WITH THE CONTENT STANDARDS DEVELOPED FOR KINDERGARTEN THROUGH TWELFTH GRADE PURSUANT TO PART 4 OF ARTICLE 53 OF TITLE 22. C.R.S.; (II) PROGRAMS WHICH COMBINE THE EFFORTS OF SECONDARY SCHOOLS AND INSTITUTIONS OF HIGHER EDUCATION. INCLUDING COMMUNITY COLLEGES AND VOCATIONAL EDUCATION PROGRAMS. TO ENABLE STUDENTS TO COMPLETE PROGRAMS OF POSTSECONDARY EDUCATION QUICKLY AND EFFICIENTLY; (Ill) PROGRAMS FOR SHARING FACULTY. ADMINISTRATORS, EDUCATIONAL AND.NONEDUCA TIONAL SERVICES. FACILITIES. AND OTHER RESOURCES BETWEEN ANY SCHOOL DISTRICT OR ANY PUBLIC SCHOOL AND ANY INSTITUTION OF HIGHER EDUCATION: (IV) PROGRAMS TO PROVIDE JOINT EDUCATIONAL EXPERIENCES FOR STUDENTS IN GRADES KINDERGARTEN THROUGH TWELVE AND POSTSECONDARY STUDENTS: (V) PROGRAMS THAT OFFER EFFECTIVE EDUCATIONAL PROGRAMS TO STUDENTS IN KINDERGARTEN THROUGH TWELFTH GRADE THROUGH THE USE OF TECHNOLOGY; (VI) PROGRAMS, IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 23-1-119. UNDER WHICH THE INSTITUTION OF HIGHER EDUCATION REPORTS TO THE SECONDARY PUBLIC EDUCATION SYSTEM CONCERNING THE SKILLS AND ABILITIES. AND LEVEL OF PROFICIENCY THEREOF, NECESSARY FOR FIRST-YEAR STUDENTS. THE LEVEL OF PROFICIENCY IN SUCH SKILLS AND ABILITIES CURRENTLY EXHIBITED BY FIRSTYEAR STUDENTS, THE LEVEL OF ACHIEVEMENT 157

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CURRENTLY EXHIBITED BY FIRSTYEAR STUDENTS. AND ANY OTHER INFORMATION THAT WILL PROVIDE A BETTER TRANSITION FOR STUDENTS BETWEEN THE TWO EDUCATION SYSTEMS: AND (VII) PROGRAMS THAT DEVELOP OR IMPROVE THE QUALITY OF THE EDUCATIONAL SKILLS OR EFFICIENCY OF TEACHERS. PRINCIPALS. AND ADMINISTRATORS IN KINDERGARTEN THROUGH TWELFTH GRADE. (b) THE COMMISSION SHALL ESTABLISH AND ADMINISTER THE COMPETITIVE GRANT PROCESS FOR DISTRIBUTING FUNDS UNDER THIS SUBSECTION (2). INCLUDING SETTING TIME FRAMES FOR SUBMISSTON OF APPLICATIONS TO THE COMMISSION AND DECISIONS REGARDING SUCH APPLICATIONS. DETERMINING WHICH GOVERNING BOARDS WILL RECEIVE FUNDS. AND DETERMINING TilE 'AMOUNT RECEIVED BY SUCH GOVERNING BOARDS. (3) (a) FOR THE 1994-95 FISCAL YEAR. ADDITIONAL APPROPRIATIONS MAY BE AVAILABLE TO THE GOVERNING BOARDS TO REWARD OR ENCOURAGE PRODUCTIVITY WHICH CON CENTRA. TES ON DELIVERY OF EFFICIENT AND PRODUCTIVE. YET HIGH QUALITY. EDUCATION. IN THIS REGARD. ALL FACULTY SHALL BE ASSUMED TO HAVE A TEACHING ROLE. (b) A GOVERNING BOARD MAY RECEIVE FUNDS PURSUANT TO THIS SUBSECTION (3) BY DEMONSTRATING AN EMPHASIS. OR INCREASING ITS EMPHASIS. ON PRODUCTIVITY BY IMPLEMENTING STRUCTURAL CHANGES AND REQUIREMENTS WITHIN THE FOLLOWING PARAMETERS: (I) INCREASING THE NUMBER OF SECTIONS AVAILABLE FOR STUDENTS IN HIGH-DEMAND REQUIRED COURSES IF AN INSUFFICIENT NUMBER OF SUCH SECTIONS (II) INCREASING THE NUMBER OR DEMONSTRATING A HIGH NUMBER OF UNDERGRADUATE TEACHING HOURS. UNDERGRADUATE STUDENT CONTACT HOURS. AND UNDERGRADUATE ADVISING HOURS COMPLETED BY FULL-TIME FACULTY; (III) INCREASING THE RATIO OR DEMONSTRATING A HIGH RATIO OF TEACHING FACULTY TO NONTEACHING FACULTY AND STAFF: 158

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(IV) INCREASING THE PERCENTAGE OR DEMONSTRATING A HIGH PERCENTAGE OF FULL-TIME OR PART-TIME FACULTY WHO TEACH UNDERGRADUATE STUDENTS: (V) IMPROVING THE CURRICULUM THROUGH ANALYSIS OF THE PERFORMANCE RATE ON GRADUATE SCHOOL AND PROFESSIONAL LICENSING EXAMS; (VI) ESTABLISHING A SYSTEM TO SUPERVISE AND OVERSEE PAID FACULTY SABBA TITALS. DECREASING THE NUMBER OR DEMONSTRATING A LOW NUMBER OF PAID NONEDUCATIONAL EXTENDED FACULTY AND ADMINISTRATOR LEAVES. AND MAINTAINING A PUBLIC RECORD OF THE PURPOSE AND GENERAL RESULTS OF ALL PAID SABBATICALS AND ALL PAID EXTENDED FACULTY AND ADMINISTRATOR LEAVES: (VII) REDUCING OR DEMONSTRATING LOW ADMINISTRA TIVEOVERHEAD COSTS: (VIII) DEMONSTRATING A HIGH DEGREE OF PERSONNEL EFFICIENCY. INCLUDING THE ESTABLISHMENT OF POST-TENURE REVIEW; AND (IX) REDUCING THE AMOUNT OR DEMONSTRATING A LOW AMOUNT OF REQUIRED ADMINISTRATIVE PAPERWORK FOR STUDENTS AND FACULTY. (4) (a) FOR THE 1994-95 FISCAL YEAR. ADDITIONAL APPROPRIATIONS MAY BE AVAILABLE TO THE GOVERNING BOARDS FOR IMPLEMENTING PROGRAMS TO ENSURE THAT THE STATE HAS AN ADULT POPULATION WITH SKILLS THAT ARE CENTRAL TO THE COLORADO ECONOMY AND TO INCREASE THE TECHNICAL MANAGEMENT SKILLS OF THE COLORADO WORK FORCE. SUCH PROGRAMS SHALL FALL WITHIN THE FOLLOWING PARAMETERS: (I) PROGRAMS TO PROVIDE BASIC SKILLS EDUCATION TO ENABLE STUDENTS TO FUNCTION ADEQUATELY IN ENTRY-LEVEL JOBS: 159

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(II) VOCATIONAL TRAINING WHICH INCLUDES TRAINING IN SKILLS NECESSARY FOR SPECIFIC TRADES AND IN BUSINESS MANAGEMENT AND ENTREPRENEURIAL SKILLS: (III) PROGRAMS TO PROVIDE JOB RETRAINING AND SKILL UPGRADING FOR NONTRADITIONAL STUDENTS: (IV) PROGRAMS TO PROVIDE TRAINING IN NEW TECHNOLOGY TO ENHANCE THE OVERALL SKILL LEVEL OF THE COLORADO WORK FORCE AND TO ENABLE THE STATE TO COMPETE IN GLOBAL MARKETS: (V) PROGRAMS TO ENSURE THAT PERSONS THROUGHOUT THE STATE OF COLORADO HAVE THE NEEDED SKILLS TO PERFORM THE JOBS NECESSARY IN. AND USE THE TECHNOLOGY APPLICABLE TO. EACH AREA OF THE STATE: AND (VI) PROGRAMS TO CONDUCT RESEARCH ON ISSUES THAT AFFECT THE STATE'S ECONOMY AND ON METHODS TO INCREASE THE QUALITY. VIABILITY. AND NUMBER OF JOBS IN THE STATE. (b) THE SUCCESS OF ANY WORK FORCE SKILLS TRAINING PROGRAM SHALL BE MEASURED BY: (I) THE QUALITY AND NATURE OF JOBS TAKEN BY GRADUATES: (II) THE NUMBER OF GRADUATES PLACED IN POSITIONS RELEVANT TO THE NEEDS OF THE STATE: (Ill) THE NUMBER OF GRADUATES PLACED IN POSITIONS WITHIN THE STATE AS COMPARED TO POSITIONS OUTSIDE THE STATE: (IV) THE OPPORTUNITIES FOR COOPERATIVE EDUCATION AND INTERNSHIPS INCLUDED IN THE PROGRAM. AND (V) THE DEGREE OF PROGRAM ACCESS FOR ALL STUDENTS. (5) {a) FOR THE 1994-95 FISCAL YEAR. ADDITIONAL APPROPRIATIONS MAY BE AVAILABLE TO THE GOVERNING BOARDS FOR THE PURPOSE OF FUNDING PAST INCREASES IN RESIDENT ENROLLMENT AT INSTITUTIONS WHICH DID NOT RECEIVE lNCREASED ENROLLMENT FUNDING AT THE TIME SUCH INCREASE OCCURRED AND 160

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FOR THE PURPOSE OFT ARGETING INCREASED ENROLLMENT OF RESIDENT STUDENTS. (b) TO RECEIVE ADDITIONAL APPROPRIATIONS PURSUANT TO THIS SUBSECTION (5). A GOVERNING BOARD MUST DEMONSTR..<\ TE: (I) SPECIFIC FISCAL YEARS SINCE FISCAL YEAR 1990-91 IN WHICH IT EXPERIENCED INCREASED RESIDENT ENROLLMENT WHICH WAS UNFUNDED BY GENERAL FUND APPROPRIATIONS: (II) AN INCREASE IN ENROLLMENT OF RESIDENT UNDER REPRESENTED STUDENTS OVER THE NUMBER OF RESIDENT UNGER REPRESENTED STUDENTS ENROLLED DURING THE 1992-93 AND 1993-94 SCHOOL YEARS; (Ill) SPECIFIC FISCAL YEARS SINCE FISCAL YEAR 1990-91 IN WHICH THE BOARD CAPPED UNDERGRADUATE RESIDENT ENROLLMENT AT A SPECIFIC INSTITUTION IN RESPONSE TO LIMITED REVENUES: OR (IV) EFFORTS TO INCREASE ENROLLMENT IN GRADO ATE PROGRAMS AND COURSES DELIVERED TO UNDER-SERVED AREAS OF THE STATE \\''HERE SUFFICIENT DEMAND IS DEMONSTRATED AND WHERE SUCH PROGRAMS AND COURSES ARE PROVIDED BY INSTITUTIONS AUTHORIZED BY THE COMMISSION TO OFFER SUCH PROGRAMS AND COURSES. (6) (a) FOR THE 1994-95 FISCAL YEAR. ADDITIONAL APPROPRIATIONS MAY BE AVAILABLE TO THE COLORADO COMMISSION ON HIGHER EDUCATION FOR THE PURPOSE OF INCREASING FINANCIAL AID FOR AND DIVERSITY IN THE STUDENT POPULATION BY INCREASING ACCESS TO INSTITUTIONS OF HIGHER EDUCATION WITHIN THE STATE FOR ECONOMICALLY DISADVANTAGED AND UNDER-REPRESENTED STUDENTS. (b) TO RECEIVE ADDITIONAL APPROPRIATIONS PURSUANT TO THIS SUBSECTION (6). AN INSTITUTION OF HIGHER EDUCATION MUST DEMONSTRATE: (I) A HIGH PERCENT AGE OF NEED IN STUDENT FINANCIAL 161

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(II) IMPLEMENTATION OF A PROGRAM TO INCREASE THE SUCCESSFUL PARTICIPATION OF LOW-INCOME AND UNDER REPRESENTED STUDENTS AT THE INSTITUTION OF HIGHER EDUCATION: (III) IMPLEMENTATION OF PROGRAMS TO PROVIDE INFORMATION REGARDING FINANCIAL AID TO LOW-INCOME AND UNDER-REPRESENTED STUDENTS IN GRADES KINDERGARTEN THROUGH TWELVE: (IV) IMPLEMENTATION OF SUMMER EDUCATIONAL PROGRAMS FOR LOW-INCOME AND UNDER-REPRESENTED STUDENTS IN GRADES NINE THROUGH TWELVE: OR (V) IMPLEMENTATION OF PROGRAMS THAT ENCOURAGE THE RECRUITMENT OF ADDITIONAL MINORITY FACULTY AND STAFF. SECTION 3. Safety clause The general assembly hereby finds. determines. and declares that this act is necessary for the immediate preservation of the public peace. health. and safety. 162

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APPENDIX E HOUSE BILL 96-1219 BY REPRESENTATIVES Allen. Keller. Anderson. Dean. DeGette. Leyba. Lyle. Mace. Morrison. Prinzler. and Tupa; also SENATORS Meiklejohn. Nonon. Tanner. Alexander. Feeley. Matsunaka. R. Powers. Wells. Wham. and Wattenberg. CONCERNING HIGHER EDUCATION REFORM. AND. IN CONNECTION THEREWITH. ESTABLISHING THE HIGHER EDUCATION QUALITY ASSURANCE ACT AND REQUIRING A STUDY OF GRADUATE EDUCATION. Be it enacted by the General Assembly of the State ofColorado: SECTION l. Article 13 of title 23. Colorado Revised Statutes. 1995 Rep I. Vol.. is REPEALED AND REENACTED. WITH AMENDMENTS. to read: ARTICLE 13 Higher Statewide Expectations and Goals and Quality Indicator System 23-13-101. Short title. THIS ARTICLE SHALL BE KNOWN AND MAY BE CITED AS THE "HIGHER EDUCATION QUALITY ASSURANCE ACT". 23-13-102. Legislative declaration. THE GENERAL ASSEMBLY FINDS THAT. WITH THE PROJECTED INCREASES IN STUDENT ENROLLMENT AND THE DECREASING AVAILABILITY OF FUNDING FOR HIGHER EDUCATION. IT IS CRUCIAL THAT THE STATE CLEARLY DEFINE ITS EXPECTATIONS FOR THE STATEWIDE HIGHER EDUCATION SYSTEM AND THAT THE STATEWIDE HIGHER EDUCATION SYSTEM DEVELOP A MECHANISM FOR DETERMINING WHETHER THE SYSTEM IS MEETING THOSE EXPECTATIONS. THE GENERAL ASSEMBLY FURTHER FINDS THAT THE INCREASING FINANCIAL PRESSURES ON STUDENTS AND THEIR FAMILIES DEMAND THAT THE STATEWIDE SYSTEM OF HIGHER 163

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EDUCATION CONCENTRATE ON IMPROVING BOTH THE QUALITY AND COST-EFFECTIVENESS OF HIGHER EDUCATION IN THE STATE. THE GENERAL ASSEMBLY ALSO FINDS THAT. AS INSTITUTIONS OF HIGHER EDUCATION MEASURE AND COMMUNICATE THEIR ACHIEVEMENT OF THE STATE'S EXPECTATIONS. THE GENERAL ASSEMBLY WILL RECEIVE THE INFORMATION IT NEEDS TO JUDGE ACCURATELY THE HIGHER EDUCATION SYSTEM'S LEVEL OF EFFICIENCY AND EFFECTIVENESS AND STUDENTS AND THEIR FAMILIES WILL HAVE THE INFORMATION THEY NEED TO CHOOSE THE MOST APPROPRIATE AND COST-EFFECTIVE METHOD OF OBTAINING HIGHER EDUCATION IN THE STATE. 23-13-103. Def'mitions. AS USED IN THIS ARTICLE. UNLESS THE CONTEXT OTHERWISE REQUIRES: ( l) "COMMISSION" MEANS THE COLORADO COMMISSION ON HIGHER EDUCATION CREATED IN SECTION 23-l-102. (2) "INSTITUTION" MEANS ANY STATE-SUPPORTED INSTITUTION OF HIGHER EDUCATION IN COLORADO. INCLUDING JUNIOR COLLEGES AND AREA VOCATIONAL SCHOOLS. (3) "QUALITY INDICA TOR SYSTEM" MEANS THE SYSTEM OF DATA COLLECTION AND COMPILATION DEVELOPED BY THE COMMISSION PURSUANT TO SECTION 23-13-105 TO MEASURE THE QUALITY OF UNDERGRADUATE EDUCATION PROVIDED BY EACH GOVERNING BOARD AND EACH INSTITUTION. (4) "STATEWIDE EXPECTATIONS AND GOALS" MEANS THE STATEWIDE EXPECTATIONS AND GOALS FOR HIGHER EDUCATION ESTABLISHED IN SECTION 23-13-l 04. 23-13-l 04. Statewide expectations and goals for higher education. (I) IT IS THE GENERAL ASSEMBLY'S INTENT IN THIS SECTION TO CLEARLY DEFINE THE STATE'S EXPECTATIONS FOR THE STATEWIDE SYSTEM OF HIGHER EDUCATION BY ESTABLISHING THE FOLLOWING SPECIFIC STATEWIDE EXPECTATIONS AND GOALS THAT EACH INSTITUTION. IN ACCORDANCE WITH ITS ROLE AND MISSION. SHALL WORK TOWARD ACHIEVING: (a) PROVISION OF A HIGH QUALITY. EFFICIENT. AND EXPEDITIOUS UNDERGRADUATE EDUCATION. CONSISTENT WITH EACH 164

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INSTITUTION'S STATUTORY ROLE AND MISSION. IN ACHIEVING THIS GOAL. EACH INSTITUTION SHALL DEMONSTRATE. BUT IS NOT LIMITED TO. THE FOLLOWING: (I) DELIVERY OF A DEGREE IN THE NUMBER OF CREDIT HOURS SPECIFIED IN THE COURSE CATALOGUE: EXCEPT THAT THE INSTITUTION MAY MAKE EXCEPTIONS TO ACCOMMODATE STUDENTS WHO ARE PURSUING DOUBLE MAJORS AND OTHER STUDENTS WITH SPECIAL CIRCUMSTANCES. IN DELIVERING A DEGREE IN THE REQUISITE NUMBER OF CREDIT HOURS. EACH INSTITUTION SHALL AT A MINIMUM: (A) PROVIDE FREQUENT AND CONVENIENT SCHEDULING OF REQUIRED AND CORE COURSES; (B) DEVISE PROCEDURES TO ENSURE THAT NO STUDENT'S GRADUATION IS DELAYED DUE TO LACK OF ACCESS TO OR AVAILABILITY OF REQUIRED AND CORE COURSES: (C) SCHEDULE COURSES TO ACCOMMODATE THE SCHEDULES OF WORKING STUDENTS. WHICH COURSE SCHEDULES MAY INCLUDE BUT ARE NOT LIMITED TO OFFERING COURSES IN THE EVENING AND ON WEEKENDS: AND (D) ENSURE THAT ANY STUDENT WHO CHANGES HIS OR HER DEGREE PROGRAM LOSES ONLY THOSE CREDIT HOURS THAT CLEARLY AND JUSTIFIABLY CANNOT APPLY IN THE DEGREE PROGRAM TO WHICH THE STUDENT TRANSFERS: (II) DEMONSTRATION OF A SIGNIFICANT OR INCREASED EMPHASIS ON DELIVERY OF SERVICES AND SUPPORT TO FRESHMEN AND SOPHOMORE STUDENTS: (III) CONTINUAL ENHANCEMENT AND IMPROVEMENT OR DEMONSTRATION OF HIGH LEVELS OF STUDENT LEARNING OUTCOMES THROUGH CURRICULUM REVIEW. DEVELOPMENT OF NEW PROGRAMS. SOLICITATION AND CONSIDERATION OF EMPLOYER AND STUDENT INPUT AND FACULTY EVALUATIONS. AND INCREASED AVAILABILITY OF SMALL CLASSES AND CLINICAL LEARNING EXPERIENCES: 165

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(IV) IMPLEMENTATION OF AN ADVISING SYSTEM THAT IS RESPONSIVE TO THE NEEDS OF STUDENTS. INCLUDING. AT A MINitv1UM. ASSIGNMENT OF EACH STUDENT TO A FACULTY OR STAFF MEMBER. OR BOTH. TO WHOM THAT STUDENT CAN GO FOR ADVICE CONCERNING BOTH COURSE STUDY AND SCHEDULING OF COURSES: (V) RECOGNITION ANDREW ARD OF HIGH QUAUTY OR IMPROVED FACULTY AND STUDENT LEARNING BY. AT A MINIMUM: (A) ENSURING THAT THE FACULTY MEMBERS IN EACH DEPARTMENT OR COLLEGE SPEND. IN THE AGGREGATE. A SPECIFIED. APPROPRlA TE PERCENTAGE OF TIME TEACHING STUDENTS: (B) BASING A HIGH PROPORTION OF EACH FACULTY MEMBER'S RATING AND EVALUATION ON THE AMOUNT OF TIME THE FACULTY MEMBER SPENDS TEACHING AND THE QUALITY OF THE INSTRUCTION PROVIDED: AND (C) DEVELOPING A SYSTEM OF INSTRUCTIONAL SUPERVISION AND EVALUATION TO ENSURE QUALITY OF INSTRUCTION: (VI) IMPLEMENTATION OF LOCAL OR ON-CAMPUS PROGRAMS FOR FACULTY AND STAFF DEVELOPMENT. INCLUDING BUT NOT LIMITED TO TRAINING IN: (A) ADVISING AND COUNSELING SKILLS: AND (B) TEACHING SKILLS AND METHODS. (b) PROVISION OF ASSISTANCE TO ELEMENTARY AND SECONDARY EDUCATION IN ACHIEVING SYSTEMIC REFORM AND CREATION OF APPROPRIATE LINKAGES BETWEEN ELEMENTARY AND SECONDARY EDUCATION AND HIGHER EDUCATION. IN ACHIEVING THIS GOAL, EACH INSTITUTION SHALL DEMONSTRATE. BUT IS NOT LIMITED TO, THE FOLLOWING: (I) IMPLEMENTATION OF EFFORTS TO ALIGN HIGHER EDUCATION ADMISSION REQUIREMENTS WITH THE ACHIEVEMENT LEVELS ADOPTED FOR STUDENTS IN ELEMENTARY AND SECONDARY EDUCATION, INCLUDING. AT A MINIMUM, PRECISE ARTICULATION AND 166

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EFFECTIVE COMMUNICATION OF THE SKILLS AND ABILITIES THAT A FRESHMAN STUDENT MUST HAVE TO BE SUCCESSFUL AT THE INSTITUTION; (II) ENHANCEMENT AND IMPROVEMENT OF OR DEMONSTRATION OF SUCCESS IN THE ENROLLMENT. RETENTION. AND GRADUATION OF ECONOMICALLY DISADVANTAGED STUDENTS AND STUDENTS FROM TRADITIONALLY UNDERREPRESENTED GROUPS BY. AT A MINIMUM. IMPLEMENTING PRECOLLEGIA TE EXPERIENCES AND PROGRAMS COOPERATIVELY DESIGNED BY ELEMENTARY AND SECONDARY AND HIGHER EDUCATION INSTITUTIONS TO INCREASE THE NUMBER OF ECONOMICALLY DISADVANTAGED STUDENTS AND STUDENTS FROM TRADITIONALLY UNDERREPRESENTED GROUPS WHO ARE QUALIFIED TO ENTER POSTSECONDARY EDUCATION: (Ill) COMBINATION OF EFFORTS WITH SECONDARY SCHOOLS TO ENABLE STUDENTS TO COMPLETE PROGRAMS OF POSTSECONDARY EDUCATION QUICKLY AND EFFICIENTLY AND TO ENCOURAGE AND ALLOW TWELFTH GRADE STUDENTS TO TAKE POSTSECONDARY COURSES; (IV) IMPLEMENTATION OF STANDARDS BASED ON THE STANDARDS DEVELOPED IN ELEMENTARY AND SECONDARY EDUCATION AS THEY RELATE TO THE REQUIREMENTS FOR ADMISSION TO INSTITUTIONS; (V) IMPROVEMENT OF OR DEMONSTRATION OF SUCCESSFUL EXISTING ELEMENTARY AND SECONDARY EDUCATOR PREPARATION AND PROFESSIONAL DEVELOPMENT THROUGH IN-SERVICE AND PRESERVICE PROGRAMS. INCLUDING BUT NOT LIMITED TO PROGRAMS FOR PREPARATION OF AND PROFESSIONAL DEVELOPMENT FOR PRINCIPALS: AND (VI) IMPLEMENTATION OF FACULTYTO-FACULTY EXCHANGES AND CONFERENCES. INVOLVING SECONDARY AND POSTSECONDARY FACULTY MEMBERS. TO ASSIST IN ARTICULATING AND COMMUNICATING STUDENT REQUIREMENTS AND IN NURTURING COOPERATION BETWEEN THE ELEMENTARY AND SECONDARY AND HIGHER EDUCATION SYSTEMS. 167

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(c) PROVISION OF WORK FORCE PREPARATION AND TRAINING. IN ACHIEVING THIS GOAL. EACH INSTITUTION SHALL DEMONSTRATE. BUT IS NOT LIMITED TO. THE FOLLOWING: (I) PROVISION TO STUDENTS OF INFORMATION CONCERNING POTENTIAL EMPLOYMENT OPPORTIJNITIES FOR EACH MAJOR AND DEGREE PRIOR TO THE TIME THAT STUDENTS ARE REQUIRED TO DECLARE A MAJOR; (II) PREPARATION OF GRADUATES WHO POSSESS THE BASIC ABILITIES AND SKILLS NECESSARY IN A VARIETY OF CAREERS: (III) INTEGRATION OF REAL WORLD EXPERIENCES INTO THE EDUCATIONAL PROCESS AND FACILITATION OF SCHOOLTO-WORK OPPORTUNITIES; (IV) PROVISION OF OPPORTUNITIES FOR COOPERATIVE EDUCATION AND INTERNSHIPS: (V) COOPERATION WITH EMPLOYERS TO ASSESS THEIR LEVEL OF SATISFACTION WITH THE PREPARATION OF GRADUATES: AND (VI) RESPONSIVENESS TO COLORADO BUSINESSES THROUGH DEVELOPMENT OF WORK FORCE TRAINING PROGRAMS AND RESEARCH NEEDED FOR ECONOMIC DEVELOPMENT. (d) USE OF TECHNOLOGY TO LOWER THE INSTITUTION'S CAPITAL AND ADMINISTRATIVE COSTS AND IMPROVE THE QUALITY AND DELIVERY OF EDUCATION. IN ACHIEVING THIS GOAL EACH INSTITUTION SHALL DEMONSTRATE. BUT IS NOT LIMITED TO. ACHIEVEMENT OF THE FOLLOWING: (I) INTEGRATION OF TECHNOLOGY INTO THE EDUCATIONAL PROCESS IN WAYS THAT REDUCE THE INSTITUTION'S COST PER UNIT OF EDUCATION; (II) INTEGRATION OF TECHNOLOGY INTO THE EDUCATIONAL PROCESS IN WAYS THAT DEMONSTRABLY IMPROVE THE MARKET ABILITY OF GRADUATES IN THE WORKPLACE; 168

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(Ill) IMPROVEMENT IN OR DEMONSTRATION OF A HIGH DEGREE OF STUDENT ACCESS AND CONTINUING EDUCATION THROUGH INCREASED USE OF DISTANCE LEARNING TECHNOLOGIES: {IV) IMPROVEMENT IN ORDEMONSTRA TION OF A HIGH DEGREE OF LEARNING PRODUCTIVITY THROUGH THE USE OF TECHNOLOGY. (e) PROVISION OF SERVICES WITH A HIGH LEVEL OF OPERATIONAL PRODUCTIVITY AND EFFECTIVENESS. IN ACHIEVING THIS GOAL. EACH INSTITUTION SHALL DEMONSTRATE. BUT IS NOT LIMITED TO, THE FOLLOWING: (I) ESTABLISHMENT OF POSITIVE TRENDS. CONSISTENT WITH EACH INSTITUTION'S STATUTORY ROLE AND MISSION. IN STUDENT OUTCOMES AND LEVELS OF ACHIEVEMENT. INCLUDING BUT NOT LIMITED TO STUDENT RETENTION. SDJDENT TRANSFERS. GRADUATION RATES. AND JOB PLACEMENT OR PARTICIPATION IN FURTHER EDUCATION BY GRADUATES; (II) PROVISION OF INSTRUCTION. STUDENT SERVICES. AND ADMINISTRATIVE SERVICES USING AN EFFICIENT AND PRODUCTIVE DELIVERY SYSTEM: (III) DIRECTION OF STATEAND TUITION-FUNDED ACADEMIC RESEARCH IN LARGE MEASURE TO PROJECTS THAT WILL HAVE A DIRECT BENEFICIAL IMP ACT ON COLORADO, INCLUDING BENEFITTING THE STATE ECONOMY. CIVILIZATION. ELEMENTARY AND SECONDARY EDUCATION SYSTEM. AND ENVIRONMENT. (2) IN DETERMINING ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS. IN APPLYING THE QUALITY INDICA TORS DEVELOPED PURSUANT TO SECTION 23-13-105. AND IN ALLOCATING ANY MONEYS APPROPRIATED TO REWARD ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS. THE COMMISSION AND THE GOVERNING BOARDS SHALL ENSURE THAT THE EXPECTATIONS FOR EACH INSTITUTION ARE IN ACCORDANCE WITH THE INSTITUTION'S ROLE AND MISSION AND THAT APPLICATION OF THE STATEWIDE EXPECTATIONS AND GOALS AND OF THE QUALITY INDICATORS DO NOT RESULT IN AN EXPANSION OR LIMITATION OF ANY INSTITUTION'S ROLE AND MISSION. 169

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(3) EACH STATE-SUPPORTED INSTITUTION OF HIGHER EDUCATION SHALL ACHIEVE OR MAKE SUBSTANTIAL AND MEASURABLE PROGRESS TOWARD ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS BY FALL SEMESTER 1999 AND SHALL CONTINUE TO OPERATE IN CONFORMANCE WITH AND WORK TOWARD FURTHER ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS AFTER THAT DATE. ( 4) THE COMMISSION SHALL ENSURE THAI PERFORMANCE OF ALL DUTIES ASSIGNED TO IT AND ADOPTION OF ALL POLICIES REQUIRED UNDER THIS TITLE SHALL BE FOCUSED TO THE GREATEST POSSIBLE EXTENT ON THE TIMELY. EFFICIENT. AND EFFECTIVE ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS. (5) THE COMMISSION SHALL ANNUALLY REVIEW THE STATEWIDE EXPECTATIONS AND GOALS AND SHALL RECOMMEND TO THE GENERAL ASSEMBLY ANY CHANGES IN THE STATEWIDE EXPECTATIONS AND GOALS THAT MAY BE APPROPRIATE. (6) THE COMMISSION AND EACH GOVERNING BOARD SHALL CONSIDER THE BALANCE BETWEEN INSTRUCTION. RESEARCH. AND COMMUNITY SERVICE AT THE INSTITUTION THAT IS APPROPRIATE FOR THE FACULTY MEMBERS OF EACH INSTITUTION MANAGED BY THE GOVERNING BOARD. 23-13-105. Quality indicator system-development-implementationreports. (I) (a) THE COMMISSION AND THE GOVERNING BOARDS SHALL DEVELOP A QUALITY INDICA TOR SYSTEM TO MEASURE THE OVERALL PERFORMANCE OF THE STATEWIDE SYSTEM OF HIGHER EDUCATION AND EACH GOVERNING BOARD'S AND EACH INSTITUTION'S PERFORMANCE IN ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS AND THE POLICY AREAS ADOPTED PURSUANT TO SECTION 23-1105 (3.5). AT A MINIMUM THE QUALITY INDICATOR SYSTEM SHALL MEASURE ACHIEVEMENT IN THE FOLLOWING AREAS: (I) INSTITUTIONAL PERFORMANCE; (II) STUDENT SATISFACTION AND SUCCESS; (Ill) EMPLOYER SATISFACTION; AND 170

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(IV) THE LEVEL OF PERFORMANCE OF THE STATEWIDE SYSTEM OF HIGHER EDUCATION. (b) IN MEASURING INSTITUTIONAL PERFORMANCE. THE COMMISSION. AFTER CONSULTING WITH THE GOVERNING BOARDS. MAY CONSIDER. BUT IS NOT LIMITED TO. THE FOLLOWING: _(I) THE EFFICIENCY AND PRODUCTIVITY OF EACH INSTITL1TION: (II) EACH INSTITUTION'S STEWARDSHIP OF THE ASSETS HELD BY IT: AND (III) WHETHER THE INSTITUTION IMPLEMENTS SPECIFIC PRACTICES DESIGNED TO ENHANCE FUTURE INSTITUTIONAL PERFORMANCE. (c) IN MEASURING STUDENT SATISFACTION AND SUCCESS. THE COMMISSION. AFTER CONSULTING WITH THE GOVERNING BOARDS. MAY CONSIDER. BUT IS NOT LIMITED TO. THE FOLLOWING: AND (I) ANTICIPATED STUDENT OUTCOMES: (II) THE VALUED EXPERIENCES PROVIDED BY THE INSTITUTION: (III) STUDENT ACCESS TO VALUED RESOURCES AND SERVICES: (IV) THE AFFOR.DABILITY OF THE INSTITUTION IN TERMS OF THE COST TO THE STUDENTS. (d) IN MEASURING EMPLOYER SATISFACTION. THE COMMISSION. AFTER CONSULTING WITH THE GOVERNING BOARDS. MAY CONSIDER. BUT IS NOT LIMITED TO. THE FOLLOWING: (I) EMPLOYERS' SATISFACTION WITH THE ATTITUDES AND SKILLS OF NEW EMPLOYEES: (II) EMPLOYERS' ACCESS TO AND SATISFACTION WITH THE PROVISION OF CONTINUING PROFESSIONAL EDUCATION OPPORTUNITIES BY INSTITUTIONS: AND 171

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(Ill) EMPLOYERS' ACCESS TO AND SATISFACTION WITH THE PROVISION OF RELEVANT TECHNICAL ASSISTANCE AND APPLIED RESEARCH BY INSTITUTIONS. (e) IN MEASURING THE LEVEL OF PERFORMANCE OF THE STATEWIDE SYSTEM OF HIGHER EDUCATION. THE COMMISSION MAY. CONSIDER. BUT IS NOT LIMITED TO. THE FOLLOWING: (I) STUDENT ACCESS TO HIGHER EDUCATION; (II) THE OVERALL AFFORD ABILITY OF HIGHER EDUCATION BOTH TO STUDENTS AND TO THE (Ill) THE EDUCATIONAL DEVELOPMENT OF THE CITIZENRY OF THE STATE; AND (IV) THE INSTITUTION'S CONTRIBUTIONS TO IDENTIFIED STATE NEEDS AND PRIORITIES. (2) (a) ON OR BEFORE JULY I. 1997. AND ON OR BEFORE JULY I OF EACH YEAR THEREAFTER. THE COMMISSION. IN COOPERATION WITH THE GOVERNING BOARDS. SHALL IDENTIFY A SET OF STATEWIDE QUALITY INDICATORS WITHIN THE AREAS SPECIFIED IN SUBSECTION (1) OF THIS SECTION TO BE REPORTED BY EVERY INSTITUTION. THE COMMISSION SHALL SELECT THE QUALITY INDICA TORS TO GENERATE OAT A MEASURING THE OVERALL PERFORMANCE OF THE STATEWIDE SYSTEM OF HIGHER EDUCATION WITH REGARD TO THE STATEWIDE EXPECTATIONS AND GOALS AND THE POLICY AREAS ADOPTED PURSUANT TO SECTION 23-1-105 (3.5). THE COMMISSION SHALL ANNUALLY REEXAMINE THE STATEWIDE QUALITY INDICA TORS AND MODIFY THEM AS NECESSARY TO GENERATE THE NECESSARY INFORMATION FOR MEASURING THE PERFORMANCE OF THE STATEWIDE SYSTEM OF HIGHER EDUCATION. (b) ON OR BEFORE JULY 1. 1997, AND ON OR BEFORE JULY 1 OF EACH YEAR THEREAFTER. EACH GOVERNING BOARD. WITH THE APPROVAL OF THE COMMISSION. SHALL SELECT WITHIN THE AREAS SPECIFIED IN SUBSECTION (I) OF THIS SECTION A SET OF QUALITY INDICATORS TO BE REPORTED BY EACH INSTITUTION UNDER THE GOVERNING BOARD'S MANAGEMENT. THE GOVERNING BOARDS SHALL SELECT SETS OF QUALITY INDICATORS THAT ARE DESIGNED TO 172

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GENERATE THE NECESSARY DATA TO MEASURE EACH INSTITUTION'S ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS AND THE FIVE POLICY AREAS ADOPTED PURSUANT TO SECTION 23-1-105 (3.5). THE GOVERNING BOARDS SHALL ENSURE THAT EACH SET OF QUALITY INDICATORS IS UNIQUE TO THE INSTITUTION FOR WHICH THEY ARE CHOSEN. BASED ON THE INSTITUTION'S ROLE AND MISSION. FOR PURPOSES OF MEASURING SYSTEMWIDE PERFORMANCE. THE COMMISSION MAY ADD INDICA TORS TO ANY INSTITUTION'S SET OF QUALITY INDICATORS THAT ARE IN ADDITION TO THOSE CHOSEN BY THE GOVERNING BOARD. EACH GOVERNING BOARD SHALL ANNUALLY REEXAMINE EACH INSTITUTION'S QUALITY INDICA TORS AND MODIFY THEM AS NECESSARY TO GENERATE THE NECESSARY INFORMATION FOR MEASURING THE INSTITUTION' PERFORMANCE. (3) IN DEVELOPING AND IMPLEMENTING THE QUALITY INDICATOR SYSTEM. THE COMMISSION AND THE GOVERNING. BOARDS MAY CONTRACT WITH ONE OR MORE PUBLIC OR PRIVATE ENTITIES WITH EXPERIENCE IN MEASURING THE QUALITY OF HIGHER EDUCATION INSTITUTIONS. (4) (a) IN IMPLEMENTING THE QUALITY INDICATOR SYSTEM. THE COMMISSION AND THE GOVERNING BOARDS MAY OBTAIN INFORMATION THROUGH V ARlO US METHODS. INCLUDING BUT NOT LIMITED TO: (I) REQUESTING INFORMATION FROM THE GOVERNING BOARDS AND INSTITUTIONS: (II) DEVELOPING AND ADMINISTERING SURVEYS OF ACTUAL AND POTENTIAL EMPLOYERS AND STUDENTS. GRADUATES. AND THEIR FAMILIES: AND (Ill) REQUIRING THE GOVERNING BOARDS OR INSTITUTIONS TO ADMINISTER AND COMPILE STUDENT. GRADUATE. AND EMPLOYER SURVEYS (b) THE GENERAL ASSEMBLY MAY APPROPRIATE ADDITIONAL MONEYS TO THE DEPARTMENT OF HIGHER EDUCATION AS NECESSARY TO DEVELOP AND ADMINISTER SURVEYS OR OTHER INFORMATIONGA THERING TOOLS PURSUANT TO THIS SECTION. 173

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(c) EACH GOVERNING BOARD AND INSTITUTION SHALL COOPERATE TO THE FULLEST EXTENT WITH THE COMMISSION IN IMPLEMENTING THE QUALITY INDICA TOR SYSTEM. INCLUDING BUT NOT LIMITED TO PROVIDING ANY INFORMATION REQUESTED BY THE COMMISSION AND ADMINISTERING AND COMPILING STUDENT. GRADUATE. AND EMPLOYER SURVEYS. (5) (a) ON OR BEFORE DECEMBER 1. 1998. AND ON OR BEFORE DECEMBER I OF EACH YEAR THEREAFTER. THE COMMISSION SHALL PROVIDE TO THE PERSONS SPECIFIED IN SECTION 23-1-105 {3.5) (a). TO THE EDUCATION COMMITTEES OF THE HOUSE OF REPRESENTATIVES AND THE SENATE. AND TO EACH GOVERNING BOARD A REPORT OF THE DATA COLLECTED THROUGH THE QUALITY INDICATOR SYSTEM INDICATING THE OVERALL PERFORMANCE OF THE STATEWIDE SYSTEM OF HIGHER EDUCATION AND EACH GOVERNING BOARD'S AND INSTITUTION'S PERFORMANCE IN ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS AND THE POLICY AREAS SPECIFIED IN SECTION 23-l-105. THE COMMISSION SHALL ALSO PROVIDE COPIES OF THE REPORT TO OTHER MEMBERS OF THE GENERAL ASSEMBLY AND MEMBERS OF THE PUBLIC ON REQUEST. (b) IT IS THE GENERAL ASSEMBLY'S INTENT THAT THE GOVERNING BOARDS AND THE INSTITUTIONS SHALL RESPOND APPROPRIATELY TO THE INFORMATION PROVIDED IN THE QUALITY INDICA TOR REPORT AND TAKE SUCH CORRECTIVE ACTIONS AS MAY BE NECESSARY TO IMPROVE THE QUALITY OF EDUCATION PROVIDED BY EACH INSTITUTION. (6) ON OR BEFORE JANUARY 30. 1999. AND ON OR BEFORE JANUARY 30 OF EACH YEAR THEREAFTER. THE COMMISSION AND THE GOVERNING BOARDS SHALL REPORT TO A COMBINED MEETING OF THE EDUCATION COMMITTEES OF THE HOUSE OF REPRESENTATIVES AND THE SENATE ON THE INFORMATION RECEIVED FROM THE QUALITY INDICATOR SYSTEM AND THE ACTIONS BEING TAKEN OR PLANNED BY THE GOVERNING BOARDS IN RESPONSE TO THE INFORMATION. 23-13-106. Consumer guide to state-supported institutions of higher education. ( 1) BEGINNING WITH THE FISCAL YEAR 1999-2000. AND FOR EACH FISCAL YEAR THEREAFTER. THE COMMISSION SHALL ANNUALLY PUBLISH A CONSUMER GUIDE TO THE INSTITUTIONS OF HIGHER EDUCATION LOCATED IN THIS STATE. THE GUIDE SHALL INCLUDE. 174

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I I I BUT NOT BE LIMITED TO. THE RESULTS OBTAINED FROM THE QUALITY INDICATOR SYSTEM THAT ADDRESS THE CONCERNS OF STUDENTS AND THEIR FAMILIES. THE COMMISSION SHALL PROVIDE COPIES OF THE CONSUMER GUIDE TO INDIVIDUALS UPON REQUEST AND SHALL DISSEMINATE THE CONSUMER GUIDE ANNUALLY TO ALL PUBLIC LIBRARIES AND SECONDARY SCHOOLS THROUGHOUT THE STATE. IN ADDITION. THE COMMISSION SHALL MAKE THE CONSUMER GUIDE AVAILABLE ELECTRONICALLY THROUGHOUT THE STATE. THE COMMISSION MAY CHARGE A FEE FOR EACH CONSUMER GUIDE TO ASSIST IN OFFSETTING THE COSTS INCURRED IN PRODUCING THE CONSUMER GUIDE. (2) THE CONSUMER GUIDE MAY INCLUDE INFORMATION CONCERNING PRIVATE AND PROPRIETARY INSTITUTIONS OF HIGHER EDUCATION. TO BE INCLUDED IN THE CONSUMER GUIDE. A PRIVATE OR PROPRIETARY INSTITUTION OF HIGHER EDUCATION SHALL PROVIDE INFORMATION TO THE COMMISSION THAT IS COMPARABLE IN SUBSTANCE AND FORM TO THE INFORMATION PROVIDED BY THE STATE INSTITUTIONS OF HIGHER EDUCATION THROUGH THE QUALITY INDICA TOR SYSTEM. IN PROVIDING THE INFORMATION. THE PRIVATE OR PROPRIETARY INSTITUTION OF HIGHER EDUCATION SHALL PROVIDE SUPPORTING MATERIALS TO DEMONSTRATE THE ACCURACY OF THE INFORMATION PROVIDED. THE COMMISSION SHALL ESTABLISH GUIDELINES FOR THE SUBMITTAL OF INFORMATION BY PRIVATE AND PROPRIETARY INSTITUTIONS OF HIGHER EDUCATION. THE COMMISSION MAY ESTABLISH A TIMELINE FOR PHASING-IN INCLUSION OF INFORMATION CONCERNING PRIVATE AND PROPRIETARY INSTITUTIONS OF HIGHER EDUCATION IN THE CONSUMER GUIDE. (3) THE COMMISSION MAY CONTRACT WITH ONE OR MORE PRIVATE OR PUBLIC ENTITIES FOR PREPARATION AND PUBLICATION OF THE CONSUMER GUIDE TO THE INSTITUTIONS OF HIGHER EDUCATION LOCATED IN THE STATE. 23-13-107. Funding incentives to achieve the statewide expectations and goals. ( 1) BEGINNING IN THE FISCAL YEAR 1999-2000. THE COMMISSION SHALL ANNUALLY REVIEW EACH GOVERNING BOARD'S AND EACH INSTITUTION'S PERFORMANCE BASED ON DATA RECEIVED THROUGH THE QUALITY INDICA TOR SYSTEM AND DETERMINE WHETHER THE GOVERNING BOARD OR INSTITUTION HAS ACHIEVED OR IS MAKING SATISFACTORY PROGRESS TOWARD ACHIEVING THE STATEWIDE 175

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EXPECTATIONS AND GOALS. FOR EACH FISCAL YEAR. THE COMMISSION MAY MAKE THE FOLLOWING RECOMMENDATIONS: (a) IF THE COMMISSION DETERMINES THAT A GOVERNING BOARD OR INSTITUTION IS NOT MAKING SATISFACTORY PROGRESS TOWARD ACHIEVING ONE OR MORE OF THE STATEWIDE EXPECTATIONS AND GOALS. IT MAY RECOMMEND TO THE JOINT BUDGET COMMITTEE THAT THE GOVERNING BOARD BE REQUIRED TO SET ASIDE UP TO ONE PERCENT OF ITS GENERAL FUND APPROPRIATION FOR SPECIFIC APPLICATION TO IMPROVING ITS PERFORMANCE ON THE ST A TEWIDE'EXPECTATIONS AND GOALS. IF THE JOINT BUDGET COMMITTEE ADOPTS THE COMMISSION'S RECOMMENDA T!ON. THE Al'AOUNT TO BE SET ASIDE SHALL BE SPECIFIED IN A FOOTNOTE TO THE GENERAL APPROPRIATIONS BILL. (b) IF THE COMMISSION DETERMINES THAT A GOVERNING BOARD OR INSTITUTION HAS ACHIEVED OR IS MAKING SA TISF ACTOR Y PROGRESS TOWARD ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS. IT MAY RECOMMEND TO THE JOINT BUDGET COMMITTEE THAT THE GOVERNING BOARD OR INSTITUTION RECEIVE ADDITIONAL FUNDING AS A REWARD FOR ACHIEVEMENT. 23-13-108. Enrollmentstatewide plan. (1) ON OR BEFORE JULY l. 1998. THE COMMISSION. IN CONJUNCTION WITH THE GOVERNING BOARDS. SHALL ADOPT A STATEWIDE ENROLLMENT PLAN THAT SHALL INCLUDE ENROLLMENT PLANS DEVELOPED BY THE COMMISSION FOR EACH TYPE OF INSTITUTION. THE STATEWIDE AND INSTITUTIONAL TYPE ENROLLMENT PLANS SHALL TAKE INTO ACCOUNT: (a) THE OVERALL COSTS OF ACCOMMODATING GROWTH: (b) THE USE OF UNDERUTILIZED INSTITUTIONS: (c) REGIONAL NEEDS: AND (d) STUDENT DEMAND FOR DIFFERENT KINDS OF EDUCATIONAL EXPERIENCES. 176

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SECTION 2. 23-1-104 (I) (a) (I). Colorado Revised Statutes. 1995 Repl. Vol.. is amended. and the said 23-1-104 is further amended BY THE ADDITION OF A NEW SUBSECTION. to read: 23-1-l 04. Financing the system of postsecondary education. ( I ) (a) (I) The general assembly shall make annual appropriations of general fund moneys and of cash funds received from tuition income pursuant to the provisions of section :!3-1103.5 as a single line item to each governing board for the operation of its campuses consistent with the distribution percentages developed by the commission pursuant to section 23-1-105 (3). EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION ( 1.5) OF THIS SECTION. each governing board shall allocate said appropriations to the institutions under its control in the manner deemed most appropriate by such governing board. ( 1.5) IN ALLOCATING GENERAL FUND APPROPRIATIONS. EACH GOVERNING BOARD SHALL CONSIDER THE PROGRESS MADE BY THE INSTITUTIONS UNDER ITS CONTROL TOWARD ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION :!3-13104 AS MEASURED BY DATA RECEIVED THROUGH THE QUALITY INDICA TOR SYSTEM ESTABLISHED PURSUANT TO SECTION 23-13-105. THE GOVERNING BOARD SHALL ENSURE THAT ANY AMOUNT REQUIRED TO BE SET ASIDE FOR APPLICATION TO ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS PURSUANT TO SECTION 23-13107 (1) (a) IS ALLOCATED FOR THAT PURPOSE. fN ADDITION. IN ALLOCATING ANY GENERAL FUND APPROPRIATIONS RECEIVED UNDER A POLICY AREA. AS PROVIDED IN SECTION 23-1-105 (3.5). EACH GOVERNING BOARD SHALL ENSURE THAT THE MONEYS RECEIVED ARE USED TO ACHIEVE OR MAINTAIN THE GOALS SPECIFIED FOR THE POLICY AREA. SECTION 3. 23-l-l 05 (3 ). Colorado Revised Statutes. 1995 Repl. VoL is amended BY THE ADDITION OF A NEW PARAGRAPH to read: 23-1-105. Duties and powers of the commission with respect to appropriations. (3) The commission shall establish. after consultation with the governing boards of institutions. the distribution formula of general fund appropriations and the distribution formula of appropriations of cash funds received as tuition income by the general assembly to each governing board under the following principles: 177

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(d) TO REFLECT THE GOVERNING BOARD'S AND THE INSTITUTION'S LEVEL OF ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION 23-I3-I 04. AS MEASURED BY DATA FROM THE QUALITY INDICA TOR SYSTEM ESTABLISHED PURSUANT TO SECTION 23-I3-105. SECTION 4. 23-I-105 (2) and (3.5) (a). Colorado Revised Statutes. I995 Repl. Vol.. are amended. and the said 23-l-I05 is further amended BY THE ADDITION OF A NEW SUBSECTION. to read: 23-l-l 05. Duties and powers of the commission with respect to appropriations. (2) The commission shall make annual system wide funding recommendations. after consultation with the governing boards of institutions. for the state-supported institutions of higher education to the general assembly and the governor. IN MAKING ITS RECOMMENDATIONS. THE COMMISSION SHALL CONSIDER EACH GOVERNING BOARD'S AND EACH INSTITUTION'S LEVEL OF ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION 23-13-104. AS MEASURED BY DATA COLLECTED THROUGH THE QUALITY INDICA TOR SYSTEM ESTABLISHED IN SECTION 23-I3-I05. (3.5) (a) Prior to January I. I994. and prior to January I of each even numbered year thereafter. the commission. in collaboration with the governor. the speaker of the house of representatives. the president of the senate. the majority and minority leaders of the house of representatives and the senate. THE CHAIRPERSONS OF THE EDUCATION COMMITTEES OF THE HOUSE OF REPRESENTATIVES AND THE SENATE. and the joint budget comminee. shall identify UP TO five policy areas for additional funding within the state system of higher education. Funding for such policy areas. if approved by the general assembly. shall be in addition to base funding for the state system of higher education. For the purposes of this section. "base funding" means the appropriation distributed pursuant to the distribution formula established by the commission pursuant to subsection (3) of this section. (3.7) (a) IN ADDITION TO RECOMMENDING POLICY AREAS PURSUANT TO SUBSECTION (3.5) OF THIS SECTION. FOR FISCAL YEAR 1999-2000 AND FOR FISCAL YEARS THEREAFTER. THE PERSONS IDENTIFIED IN PARAGRAPH (a) OF SUBSECTION (3.5) OF THIS SECTION. AS A GROUP. MAY RECOMMEND TO THE JOINT BUDGET COMMITTEE THAT THE GENERAL ASSEMBLY APPROPRIATE MONEYS TO PROVIDE INCENTIVES AND REWARDS TO THOSE STATE-SUPPORTED 178

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INSTITUTIONS OF HIGHER EDUCATION THAT HAVE ACHIEVED OR ARE MAKING SATISFACTORY PROGRESS TOWARD ACHIEVING THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION :!3-13104. THE GROUP SHALL BASE ITS RECOMMENDATION ON DATA COLLECTED THROUGH THE QUALITY INDICATOR SYSTEM AND ANNUALLY REPORTED PURSUANT TO SECTION :!3-13-105. ANY MONEYS APPROPRIATED PURSUANT TO THIS SUBSECTION (3.7) SHALL BE IN .AJ>DITION TO ANY MONEYS THAT MAY BE APPROPRIATED AS BASE FUNDING OR TO FUND THE POLICY AREAS SELECTED PURSUANT TO SUBSECTION (3.5) OF THIS SECTION. (b) THE COMMISSION SHALL DISTRIBUTE ANY MONEYS APPROPRIATED PURSUANT TO THIS SUBSECTION (3.7) TO EACH GOVERNING BOARD BASED ON THE LEVEL OF ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION :!3I 3104 BY THE INSTITUTIONS MANAGED BY EACH GOVERNING AS MEASURED BY DATA RECEIVED THROUGH THE QUALITY INDICATOR SYSTEM ESTABLISHED IN SECTION 23-13-105. MONEYS APPROPRIATED UNDER THIS SUBSECTION (3.7) SHALL BE INCLUDED IN THE GENERAL APPROPRIATIONS BILL IN THE LINE ITEM APPROPRIATION FOR EACH GOVERNING BOARD WITH A LETTERED NOTE EXPLANATION OF THE PERCENTAGE APPROPRIATED PURSUANT TO THIS SUBSECTION (3.7). (c) BEGINNING WITH THE RECOMMENDATIONS MADE BY THE COMMISSION FOR FISCAL YEAR 2000-01. AND FOR EACH FISCAL YEAR THEREAFTER. THE COMMISSION SHALL MAKE A RECOMMENDATION TO THE JOINT BUDGET COMMITTEE CONCERNING WHETHER AN AMOUNT EQUAL TO OR LESS THAN THE AMOUNT APPROPRIATED TO A GOVERNING BOARD UNDER THIS SUBSECTION (3.7) FOR THE PREVIOUS FISCAL YEAR SHOULD BE INCLUDED TO INCREASE THE AMOUNT APPROPRIATED TO THE GOVERNING BOARD AS BASE FUNDING FOR THE COMING FISCAL YEAR. SECTION 5. Part 3 of article 53 oftitle 22, Colorado Revised Statutes. 1995 Repl. Vol.. is amended BY THE ADDITION OF A NEW SECTION to read: 22-53-304.5. Study of graduate education and research. ( I ) THE COMMISSION SHALL REVIEW AND MAY RECOMMEND LEGISLATION CONCERNING THE ROLE OF GRADUATE EDUCATION AND RESEARCH IN COLORADO. IN CONSIDERING THE NEEDS OF THE STATE IN THE AREA 179

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OF GRADUATE RESEARCH AND EDUCATION. THE COMMISSION SHALL INCLUDE. BUT IS NOT LIMITED TO. THE FOLLOWING AREAS: (a) THE ROLE OF GRADUATE RESEARCH AND EDUCATION IN STATEWIDE ECONOMIC DEVELOPMENT: (b) THE ROLE OF GRADUATE EDUCATION AT EACH AUTHORIZED INSTITUTION: (c) THE ROLE OF GRADUATE STUDENTS IN TEACHING AT INSTITUTIONS OF HIGHER EDUCATION: (d) RECRUITMENT OF GRADUATE STUDENTS: (e) FUNDING OF GRADUATE EDUCATION: (f) STATE FUNDING OF GRADUATE RESEARCH: AND (g) THE STATE'S ROLE IN PURCHASING APPLIED RESEARCH. (2) ANY LEGISLATION RECOMMENDED BY THE COMMISSION PURSUANT TO THIS SECTION SHALL BE TREATED AS BILLS RECOMMENDED BY AN INTERIM LEGISLATIVE COUNCIL COMMITTEE FOR PURPOSES OF ANY INTRODUCTION DEADLINES OR BILL LIMITATIONS IMPOSED BY THE JOINT RULES OF THE GENERAL ASSEMBLY. SECTION 6. 23-1-107 (1). (2) (a). and (3). Colorado Revised Statutes. 1995 Repl. Vol.. are amended to read: 23-l-107. Duties and powers of the commission with respect to program approval, review, reduction, and discontinuance. ( 1) The commission shall review and approve, consistent with the institutional role and mission and THE statewide edt:tealieeal seeds EXPECTATIONS AND GOALS SPECIFIED IN SECTION 2313-104, the proposal for any new program before its establishment in any institution and transmit its decision to the institution within oee Rl:H'tdr=e tweety days A REASONABLE TIME after receipt of such proposal. The eoFRFRissiee and the iestitHtioe FR&y mt:itt:ially agree to aa exteesiee of eat FRere tbaa fefty days. failHFe ef the eeHUBissiee to saeFRit its deeisioa shall ee deeFRed appro .. at ef the proposal fer a ee'l/ program. No institution shall establish a new program without first receiving the approval of the commission. As used in this subsection (l ). "new program" includes any new curriculwn wRieft THAT would lead to a new vocational or academic 180

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degree. The commission shall further define what constitutes an academic or vocational program and shall establish criteria or guidelines whieft THAT define programs and procedures for approval of new academic or vocational program offerings. (2) (a) The commission shall establish. after consultation with the governing boards of institutions. policies and cri(eria for the discontinuance of academic or vocational programs. IN ADOPTING THE POLICIES AND CRITERIA. THE COMMISSION SHALL ENSURE THAT THEY CONFORM TO ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION 23-13-104. The commission may direct the respective governing boards of institutions. including the board of regents of the university of Colorado. to discontinue an academic or vocational degree program area. as. program area is defined by commission policies. (3) Each governing board of the state-supported institutions of higher education shall submit to the commission a plan describing the procedures and schedule for periodic program reviews and evaluation of each academic program at each institution consistent with the STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION 23-13-104 AND THE role and mission of each institution. The information to be provided to the commission shall include. but shall not be limited to. the procedures for using internal and external evaluators. the sequence of such reviews. and the anticipated use of the evaluations. SECTION 7. The introductory portion to 23-1-108 ( 1 ). Colorado Revised Statutes. 1995 Repl. Vol.. is amended to read: 23-1-108. Duties and powers of the commission with regard to systemwide planning. ( l) The commission shall develop and submit to the governor and the general assembly a master plan for Colorado post secondary education. IN DEVELOPING THE MASTER PLAN. THE COMMISSION SHALL EXAMINE THE STATEWIDE EXPECTATIONS AND GOALS SPECIFIED IN SECTION 2313-104 AND RECOMMEND THAT THE GENERAL ASSEMBLY AMEND THE STATEWIDE EXPECTATIONS AND GOALS IF NECESSARY. FOLLOWING AMENDMENT OF THE STATEWIDE EXPECTATIONS AND GOALS. THE COMMISSION SHALL DESIGN THE MASTER PLAN TO ASSURE ACHIEVEMENT OF THE STATEWIDE EXPECTATIONS AND GOALS IN THE MOST TIMELY. EFFICIENT. AND EFFECTIVE MANNER. This plan shall recognize the importance of private and proprietary institutions and the role and relationship of elementary and secondary education in the state. though their inclusion in the plan in no way implies control or state authority over their operations. The 181

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commission. after consultation ""ith the governing boards of institutions and as. a part of the master planning process, shall have the authority to: SECTION 8. Repeal. 23-1-11 7. Colorado Revised Statutes. 1995 Rep I. Vol.. is repealed. SECTION 9. 24-113-104 (3) (b). Colorado Revised Statutes. 1988 Repl. VoL is repealed as follows: 24-113-104. Competition with private enterprise by institutions of higher education-rules. (3) (b) The gm'eming eoanl ofeaek mstirutioa ofkigker shall st:lemit semiB:l'Hlt:lal Fef!orts to the eol'HI'Rissioa regar-eliag the eomplaiat proeeal:H'e estaeliskea ey the ge\'emiag eoarEI. SECTION 10. 23-1-102 (6), Colorado Revised Statutes. 1995 Repl. VoL is amended to read: 23-1-102. Commission abolished-commission reestablished-terms of office. ( 6) The commission shall meet aot less thaa oaee a moRth aaa as often as necessary to carry out its duties as defined in this article. SECTION 11. 23-1-105 (6). Colorado Revised Statutes. 1995 Repl. Vol.. is repealed as follows: 23-1-105. Duties and powers of the commission with respect to appropriations. (6) The Bireetor shall make funeiag reeoRU!leaaatioas to the govemer aae the geaeraJ assemely. after eoasiaeratiOR oftke Bt:laget reEJI:lests St:lBR'littea tO the exeet:ltive aireeter, for the state eoaaeil oa the arts ana the state kistorieal soeiety. as aivisions of the aepaitmeat ofhigaer eat:leatioR. aaa fur the operatioR of the Colorado aaYaaeea teeJ:mology iastitl:lte, aaa fur Sl:lft other Sf!eeial programs as the geaeral assemely shall estaelisk ey statl:lte. The geaeral assemely skall make ar..et:lal apf!rOf!AatiORS. iR Sl:leh furm as the geaeral assemely SHall eetermiae af!f!FBf!Aae. for the Of!eratiOR of tHe diYiSiBRS aaa the f!regrams eeserieea iR this St:lbseetiOR (6). SECTION 12. Part 2 of article 80 of title 24. Colorado Revised Statutes. 1988 Repl. Vol.. as amended. is amended BY THE ADDITION OF A NEW SECTION to read: 24-80-202.5. Funding recommendations. THE PRESIDENT OF THE SOCIETY SHALL MAKE FUNDING RECOMMENDATIONS TO THE GOVERNOR AND THE GENERAL ASSEMBLY FOR THE OPERATION OF 182

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THE STATE HISTORICAL SOCIETY. THE GENERAL ASSEMBLY SHALL MAKE ANNUAL APPROPRIATIONS. IN SUCH FORM AS THE GENERAL ASSEMBLY SHALL DETERMINE APPROPRIATE. FOR THE OPERATION OF THE STATE HISTORICAL SOCIETY. SECTION 13. Article 9 oftitle 23. Colorado Revised Statutes. 1995 Repl. VoL is amended BY THE ADDITION OF A NEW SECTION to read: 23-9-104.5. Funding recommendations. THE CHAIRMAN OF THE COUNCIL SHALL MAKE FUNDING RECOMMENDATIONS TO THE GOVERNOR AND THE GENERAL ASSEMBLY FOR THE OPERATION OF THE COUNCIL. THE GENERAL ASSEMBLY SHALL MAKE ANNUAL APPROPRIATIONS. IN SUCH FORM AS THE GENERAL ASSEMBLY SHALL DETERMINE APPROPRIATE. FOR THE OPERATION OF THE COUNCIL. SECTION 14. Article 11 oftitle 23. Colorado Revised Statutes. 1995 Repl. VoL. is amended BY THE ADDITION OF A NEW SECTION to read: 23-11-106.5. Funding recommendations. THE CHAIRMAN OF THE COMMISSION SHALL MAKE FUNDING RECOMMENDATIONS TO THE GOVERNOR AND THE GENERAL ASSEMBLY FOR THE OPERATION OF THE INSTITUTE. THE GENERAL ASSEMBLY SHALL MAKE ANNUAL APPROPRIATIONS. IN SUCH FORM AS THE GENERAL ASSEMBLY SHALL DETERMINE APPROPRIATE. FOR THE OPERATION OF THE INSTITUTE. SECTION 15. 23-1-120 (8). Colorado Revised Statutes. 1995 Repl. Vol.. is repealed as follows: 23-1-120. Commission directive-incentives for improvement initiative grants. (8) The eemmission sk:all reJ)Ort annHally to me general on tk:e deYelopmeRt aad implemeRtatioR ofthis seetieR. SECTION 16. 23-7-103 (2.5). Colorado Revised Statutes. 1995 Repl. VoL. is repealed as follows: 23-7-103. Presumptions and rules for determination of status. (2.5) fa} The Colorado eoHUHissioR OR aigher may. HpOR ilie applieatioR aad FeEft:lest of an institl:ltioR. make reasoaaele aad appropriate exeeptioRs to the preslHBptioas and rules iR this seetioa emd elassify a srudent for tHition pW'poses as in state wk:ere elassifieation as ol:ft of state is dt:te to I:HUISt:tal or exeeptioaal faJBily eiFeWHstanees and wot:tld eoRtir-EPleae the of this seetioa or plaee an l:fftdt:te k:ardsaip oR st:tek: persoa. perseRS are Rot limited to. an l:fftemaneipated miRor who 183

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aas ftlaimamed a resiaeRce ift the state efCelerade graauatieR from a Celemee aigh sclieol ana vAtese fJaFeel:S are eot demiciled iR Celeraae er an l:lftemaaciJJated RliBer wlie eeeemes the vrard efa legal guar-dian ROt demieilea ia Coleraao as a resalt efthe death eftlie Hlieer's pareet or legal gt:lafCiian .vae aaa eeea domiciled ie Celorade. (e) Any exeefJtiea maae ooder JJaragn:tfJli (a) efthis sueseetiea (2.5) may ee made eely .vliea saeli JJerseR has graduates or will graauate frem a Celeraae high sclieel and aas Ret estaelisliea a demieile ie another state. SECTION 17. No appropriation. The general assembly has determined that this act can be implemented within existing appropriations. :md therefore no separate appropriation of state moneys is necessary to carry out the purposes of this act. SECTION 18. Safety clause. The general assembly hereby finds. determines. and declares that this act is necessary for the immediate preservation of the public peace. health. and safety. 184

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REFERENCES Albright. B.N .. & Gilleland. D. S. (1994). A clean slate: Principles for moving to a value-driven higher education funding model. Paper presented at the Annual Meeting of the State Higher Education Finance Officers. Denver. CO. American Association of State Colleges and Universities. ( 1995). Report of the states. Washington. DC: Sweeney. R.M. American Association of State Colleges and Universities. ( 1998). State issues digest. Washington. DC: ReindL T. Banta. T. W. (1988). Assessment as an instrument of state funding_ policy. New Directions for Institutional Research. 59. 81-89. Bogue. E.G. (1976). Measuring institutional performance at the state level. Paper presented at the National Conference of the American Association for Higher Education. Chicago. IL Bowen. H.R. (1980). The costs of higher education. San Francisco. CA: Josey-Bass. Brewer. G.D. & deLeon. P. (1983). The foundations ofpolicv analvsis. Homewood. ILL: Dorsey. Brooks. G.H. ( 1969). The relationship between governmental structure and the financing of public higher education Unpublished doctoral dissertation. Colorado State College. Burke. J.C. & Serban. A.M. (eds.). (1998). Performance fundinl! for public higher education: Fad or trend?. San Francisco. CA: Josey-Bass. Buxman. L. ( 1996 ). Enrollment growth and financing Colorado s higher education system. Unpublished thesis. The University of Northern Colorado. Caruthers. J.K .. & Marks. J.J. (1994). Funding methods for public higher education in the SREB states. Southern Regional Educational Board. Atlanta. GA. 185

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