BIRMINGHAM, Ala. – Lawmakers are proposing to tie tens of millions of dollars in higher education funding to how well Alabama’s public colleges and universities help students graduate, find jobs and meet workforce needs.
Companion bills, which were filed by the both chamber’s education budget chairmen, would establish a performance-based funding program for many of the state’s colleges and universities.
Senate Education Budget Chairman Arthur Orr, R-Decatur, filed Senate Bill 344, and House education budget committee Chairman Danny Garrett, R-Trussville, filed House Bill 565.
Orr told Alabama Daily News the legislation would create a formal connection between state funding and outcomes such as graduation rates, employment and workforce demand.
“We give hundreds of millions to higher ed every year but have very little say in the outputs of the university or whether they’re giving back to the state like we would want them to,” Orr said.
“The question becomes if the taxpayers of Alabama are making an investment in this institution and 90-plus percent of their students that come in freshman year are not graduating four years later, is that a good investment for the taxpayers of Alabama? And I’ve got to ask that question.
“We understand our lane, but there’s a desire among the Legislature to raise the bar as we can for our institutions in a very targeted and focused way.”
Garrett and Orr co-chaired a joint committee that met last year to hear from experts and review performance-based funding systems used in other states.
The bill creates the College and Higher Education Excellence and Results, or CHEER Fund, which would provide bonus funding to eligible colleges and universities that meet performance goals. The Alabama Commission on Higher Education would distribute the funding.
All of Alabama’s public colleges, universities and community colleges are eligible, as well as Tuskegee University, a private historically Black university.
The proposal would be funded by lawmakers’ plan to move $500 million from the Educational Opportunities Reserve Fund into the CHEER Fund and the fund established to send targeted funding to K-12 schools with high-need students, the RAISE Fund.
Under the traditional split in the Education Trust Fund budget, about 67% would go to K-12 schools and 33% to higher education, meaning about $373 million would go to the RAISE Fund for K-12 schools and about $137 million to the CHEER Fund for colleges and universities.
Orr said lawmakers plan to initially pull $50 million from the CHEER Fund and add it to the $15 million that was set aside for performance-based higher education funding in 2023 but has not yet been distributed.
Orr said it is important to move that $500 million into the Educational Opportunities Reserve Fund to show education officials in higher education and K-12 they are committed to the bonus funding program for multiple years.
“This commitment will be there and we’ll keep funding it.”
Orr said the funding will help colleges address areas they need to improve, such as completion rates. He said there are higher education institutions with very low completion rates that he hopes this funding can help improve.
Improvement takes time, he said.
“What we want to see year over year over year is growth.”
The program is scheduled to begin Oct. 1, but lawmakers and higher education officials still must determine the specific measures institutions will be evaluated on and where performance goals will be set.
Lawmakers have said institutions will not be compared against each other but instead will be evaluated based on their own performance and progress toward goals they help establish.
The bill outlines several broad categories of performance measures that could be used to evaluate institutions.
Those include “student success factors,” such as postgraduate employment in a high-wage job or high-demand field, completion or graduation rates and student retention.
Measures will also consider how well institutional performance aligns with economic development and workforce needs and whether the university conducts research.
Another category, identified as “innovation,” would evaluate how institutions accelerate or remove barriers for students.
Orr said lawmakers hope institutions will use the program to find new and better ways to help students succeed.
Orr said lawmakers want to reward colleges and universities that are producing more degreed students in the professions Alabama communities need.
“We need teachers and engineers,” he said.
The bill also establishes the Outcomes-Based Higher Education Funding Coordinating Committee, which will work with higher education officials to determine the specific performance measures and set the goals institutions must meet.
The committee will be made up of 11 members, including a member of the Alabama Council of Presidents, the chancellor of the Alabama Community College System, the executive director of ACHE, the chairmen of the Senate and House Education Policy and Education Budget committees, ranking minority members of the Senate and House Education Budget committees and the Minority Leaders of the House and the Senate.
The committee will work with higher education officials to set their performance goals, starting some time after the session, Orr said.
In addition to helping institutions set their performance goals, the committee will collect and analyze data related to student outcomes and publish a report on the impact of the program.
Orr said the bill was shared with higher education officials and the input lawmakers received is reflected in the final bill.
The bill also repeals a 2017 outcomes-based funding formula for community colleges.
“At the end of the day, we hope to focus on one or two things with each school and then give them the money to go improve, then hold them accountable,” Orr said.
“It all takes time,” he said. “This is a long game.”
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