The Massachusetts Community College Performance-based Funding Formula: A New Model for New England?

The Massachusetts community college system is entering a second year with funding for each of its 15 schools determined using a new performance-based formula. Under the new model, 50% of each college’s allocation is based on performance on metrics related to enrollment and student success, with added incentives for “at-risk” students completing certificates and degrees and those graduating in disciplines that fuel that state’s economy. The new funding model provides clarity, equity and accountability to students and taxpayers.

The evolution to this new formula is an accomplishment that sets Massachusetts apart nationally. With the exception of Tennessee—the first state to adopt value-added assessment for evaluating K-12 teachers, and where all funding for higher education is based on performance—no other state has been so bold to tie 50% of funding to performance.

Ultimately, the Massachusetts funding model highlights the values of the system and its commitment to aligning education with the workforce needs of the state. The new funding formula also preserves the system’s historical commitment to the liberal arts and encouraging students to transfer to bachelor’s-degree granting institutions.

Evolution to current funding Model

In November 2011, the Boston Foundation published a report critical of the outcomes, organization and governance of the state’s community colleges. The report was sharp in its critique and received the attention of a range of stakeholders. In his January 2012 State of the Commonwealth address, Massachusetts Gov. Deval Patrick also targeted community colleges, linking the “middle skills gap” to the need for community college system to be more responsive to workforce needs, and signaling funding and governance changes to come, along with an influx of $10 million into the system in the following budget session. By FY 2014, a new community college funding model was unveiled. The new model introduced an accountability component primarily for enrollment and student success with academic program and workforce alignment as added incentives. Under the new model, 50% of each community college’s funding is contingent upon its performance relative to student access and success.

While the Boston Foundation report may have been the catalyst for change, it was not the first attempt to evolve the system. In 2011, Commissioner of Higher Education Richard Freeland introduced the Vision Project which established seven key outcomes for the entire public higher education system, six of which applied to community colleges. The Vision Project, along with the adopted funding model, have the potential to fuel the state economy at an unprecedented scale by significantly reducing the skills gap and aligning education with high-demand fields.

Basics of new funding model

The new Massachusetts funding model consists of two main components: a base and a performance funding allocation. Each accounts for 50% of the funding for community colleges. In addition, each college is allowed a cost of operation subsidy in the amount of $4.5 million per college. To allow the colleges a transition period to adjust to the new performance model, the state set aside nearly $13.2 million to create a stop-loss fund. This allows each college to receive a minimum of a 3.5% increase over the prior year. This is especially important during the transition period as some colleges would have experienced zero increases to double-digit decreases in funding compared to the prior fiscal year. This and other adjustments, result in less than 50% of funding being currently based on performance. However, this easing into full implementation helps the colleges, as it creates a lag period between adoption of new strategies and realization of favorable outcomes that can increase their performance-based funding.

The 50% performance component of the formula is based on three key sets of variables: 1) enrollment; 2) completion; and 3) alignment. The first set of variables, around college enrollment, is organized into clusters whose weights are tied to the cost of running specific academic programs. Cluster one includes the most expensive programs to operate while cluster three includes the least costly ones.

The second set of variables, around completion, relate to student progress and success. The weight percentages in this section add up to 100. The most heavily weighted variable here is a composite variable, weighted at 45%, that is aligned with the national initiative. This composite variable gives credit to the community colleges for first-time degree-seeking students, who after six years, achieve any of the following outcomes:

• Earn a certificate or degree from a community college;
• Earn a certificate or degree from a community college and transfer to a bachelor’s degree-granting institution;
• Transfer to a bachelor’s degree-granting institution before graduating from his/her community college;
• Is retained at a community college with at least 30 credits earned.

Associate degree completions are weighted at 15% and certificate completions at 10%. Transfers to four-year institutions are weighted at 5%. Completion of developmental math and English courses are weighted at 8% and 7% respectively. The last 5% of the weights reward colleges for full-time equivalent enrollment awards reached per fiscal year.

The third and last set of variables is the alignment multipliers. Eligibility for the federal Pell program that provides need-based grants for low-income undergraduates is commonly used as a proxy for socioeconomic and at-risk status. The Massachusetts community college funding model assigns a 2.0 multiplier for certificate and degree completers who are Pell recipients. A 1.30 multiplier is assigned to priority certificate and associate completions in disciplines that fuel that state’s economy. This means that each college gets additional funding for graduating students deemed at risk of not completing college and those who graduate in high demand field.

Values in new funding formula

Community colleges attract students who are diverse in race, age, socioeconomic status and academic preparation. More than 50% of community college students are age 25 or older and a significant proportion are the first in their families to enroll in college. Moreover, the state’s community colleges enroll 36% of its high school graduates, according to a study by the Boston Foundation. Half of all undergraduate students in public higher education in Massachusetts enroll in community colleges. Nine of 10 community college students remain in the state after graduation. Given these statistics, a statewide strategy that incentivizes postsecondary educational attainment and aligns education to fields where residents have a high probability of securing well-paying salaried positions will help sustain economic growth, equity and mobility toward the middle class.

The new funding model incentivizes high enrollment, completion and transfer in a segment of higher education where the annual cost of attendance is about $5,000. It is built to reward rather than penalize schools for enrolling low-income, at-risk students. It incentivizes progress through remedial/developmental education and rewards colleges not just for graduation, but also progress toward graduation and transfer even if students transfer before graduating from their community college. Additionally, given the complex lives of community college students, the model accounts for variation in the pace of college completion by embracing a six-year time frame. Lastly, it acknowledges variations in academic program cost. Fully implementing the model without dilution is the challenge before the community college system in Massachusetts.

Yves Salomon-Fernandez is vice president for strategic planning, institutional effectiveness and grants development at MassBay Community College and executive officer of MassBay’s Framingham Campus.

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