Designing state funding formulas for public higher education to center equity

We collected state funding formula data at the sector-state-year level. In many cases, this led to one observation in each year and each state for the community college system and for the four-year university system (e.g., we coded the California Community College System’s funding formula as the California community college funding formula each year). But in other states, the presence of institutions within the same sector in different systems or subject to different funding formulas necessitated separate data collection within a sector. For example, the California State University and University of California systems have different funding models, so we code for two four-year systems each year in the state. The resulting dataset includes data for 59 four-year sector systems and 60 community college sector systems.

Examples of state funding formula coding

Pennsylvania

The Pennsylvania State System of Higher Education’s (PASSHE) funding formula for FY04 through FY14 included a base appropriation (coded as base adjusted in our dataset), an adjustment for small universities (coded as equity in our dataset), instructional costs per full-time equivalent (FTE) student that are weighted by field and level (coded for enrollment, field, level, and FTE). The system also had a performance funding system in place since the early 2000s with an equity metric for racially minoritized students, so the system is coded as 1 for performance and equity in these years.

The PASSHE Board of Governors meeting minutes indicate the formula was adjusted over time, but these main components stayed the same. In FY2015, the board began to use a new funding formula to request funds. This formula included fixed costs that consisted of E&G costs (coded in our dataset as base) and enrollment (coded as enrollment), a second part of the formula included instructional costs, again weighted by field and level (coded for field, level, and FTE), the system had a performance funding system with equity metrics in place until the board suspended the formula in 2019 during a system redesign. We coded it as performance funding and equity until the board paused the use of performance funding.

Georgia

The second example is the University of Georgia, which consists of the state’s four-year institutions and institutions that grant both bachelor’s and associate degrees. As a result, the system’s formula is coded as both a four-year sector formula and a two-year sector formula. Each year the USG uses the formula to request funding from the state and then allocates funds to institutions in the system. From FY04-20, the board altered the formula it used to request funds, but the main components stayed the same. The formula included operating needs and adjustments for square footage, coded for base adjusted in our data, and enrollment growth based on credit hours (coded as enrollment and FTE).

Historical versions of the USG Business Procedures Manual report that the USG allocates funds to institutions using the formula just described for 80% of funds; the other funds are described as being awarded using performance metrics and other considerations. However, we did not code this as performance funding since our communication with the board indicated that prior performance was not considered in awarding funds.