Cutting Cost by Formula Change

While studying the performance funding question I stumbled upon one aspect of cost that I had never considered. Reading “Investing for Success”, a report from the Texas Higher Education Coordinating Board, it occurred to me that millions of dollars are wasted every year when performance funding is based on enrolled headcount. (Texas uses a formula that takes headcounts on the 12th day of class; Tennessee uses headcounts on the 14th day.) Consider that public money is distributed to universities based on enrollment by students who will drop the class after the headcount day. This is wasted money. Texas estimated that over $300 million is lost each year from courses that are not completed. In other words there are courses started by students that drop the courses before completion thus resulting in allocations that are too high based on actual student cost.

For example an institution might knowingly enroll students that have little or no chance of completing courses/degrees. The headcount day passes, money is allocated based on the headcount, and at the end of the semester a number of the students are no longer enrolled. The students are no longer enrolled in higher education while the institution is bringing in dollars based on false enrollment numbers.

Maybe I am cynical but I believe this happens in too many cases. Institutions are desperate for funding dollars so they recruit students that are unqualified. Completion based funding cannot be manipulated in this manner. Of course completion based funding can be manipulated by lower standards and allowing more through put (graduates) which is also not desirable. Formula funding that uses both enrollment and completion data would appear to be the ideal.

Reference

Investing for success: A comprehensive funding strategy. (2009). Texas Higher Education Coordinating Board. Retrieved October 23, 2009 from : http://katrinacollegestudents.org/reports/PDF/1742.PDF?CFID=3946743&CFTOKEN=18669638