‘Life ring’ or ‘anvil’? Morehead State, KSU say new funding formula could drown them.

Morehead State University President Joseph “Jay” Morgan said the state’s funding formula punishes schools with smaller enrollments.
Morehead State University President Joseph “Jay” Morgan said the state’s funding formula punishes schools with smaller enrollments. The Herald-Leader

State budget officials recently divided up $31 million in state funding between Kentucky’s public universities, but Morehead State University, Kentucky State University and four Eastern Kentucky community colleges each got zero.

That’s thanks to Kentucky’s new performance funding model, which bases dollars on statistics such as graduation rates and STEM course completion. Two years after it was established, the tug of war continues over whether it hurts smaller schools.

Currently, the formula is based on the number of those degrees, rather than percentages, which naturally rewards larger schools over smaller ones. Morehead and Kentucky State have the smallest student bodies in the state. So while they got zero, along with Big Sandy, Hazard, Henderson and Southeast community colleges, go nothing, the University of Kentucky received $9.1 million.

“I think everyone knew this was going to happen,” said Morehead State President Jay Morgan. “I think the model needs to be reviewed sooner rather than later. I want Morehead to compete, I just want to compete against ourselves, not against the big boy down the road. It’s hard for a small rural school.”

Morehead’s enrollment has fallen about two percent a year for the past five years, Morgan said, mirroring the economic downturn of its region.

Rep. Rocky Adkins, D-Sandy Hook, agrees with Morgan, firing off an outraged letter to Council on Postsecondary Education President Robert King last month, arguing for an immediate review of the policy. He said he’d been warning about this outcome for several years.

“If you’re a lifeguard and see a struggling swimmer, do you toss him a life ring or an anvil?” Adkins wrote. “When we as policymakers saddle colleges and universities with a series of funding cuts over several budget cycles and them tell them they have to produce under a funding model in which some of them do not share, we have definitely tossed some of these institutions an anvil that will only cause them to sink further.”

But King said he “flatly rejects” the premise that Morehead and Kentucky State will be drowned through lack of funding.

“I don’t agree with any premise,” of the argument that the formula was designed to hurt small schools. “Everybody understood at the outset and agreed to the principles and metrics, including Wayne Andrews,” the president of Morehead at the time.

King said the formula was initially aimed at righting historic funding problems in which schools were funded according to what had been received the year before. That hurt schools like Northern Kentucky University and Western Kentucky University, which had big enrollment growth through the 2000s, but never received commensurate funding.

“The basic rationale for the model is that the money that had been going to the campuses had been distorted frankly by the actions of various politicians in leadership who could push more money to campuses in their districts,” King said. “The model creates at long last a more rational way of distributing funds by tying the funds and enrollment and graduation and mission.”

The funding model rewards schools in three categories: operational support for campuses, course completion and student success.

Thirty-five percent of funding is based on student success, which is measured by bachelor degree production, the number of students continuing to progress in credit hours attained, the number of STEM (Science, Technology, Engineering and Math) degrees awarded, and the number of degrees awarded to low-income and under-represented students.

Another 35 percent is based on course completion, measured by each university’s share of total student credit hours earned in Kentucky. The number is weighted to account for cost differences by degree level and academic discipline.

The last 30 percent of funding is for operations, or what the bill’s authors call “open the door” money, based on each institution’s share of three things: square footage dedicated to student learning, spending on instruction and full-time students.

Numerous states have adopted performance funding, but only with new increases in higher education funding. Kentucky will be the only state to funnel all state funding through such a formula.

EKU students held a mock funeral to protest budget cuts to Kentucky higher education on Monday, April 23, 2018.

Both Morehead and Kentucky State were protected by a “stop loss” clause, which means they can’t lose money, but that will end over the next few years. By 2021, Morgan said, Morehead could lose $3 million through the formula

“I think Morehead has to rethink how it utilizes its resources,” King said. “I know that Morehead can turn things around if they’re prepared to do it. They have this fabulous program in space science, they need to expand it and promote it and market it. I reject the notion that Morehead will go away, it won’t.”

Kentucky State University President Christopher Brown.

Like Morgan, Kentucky State President Christopher Brown joined the school after the performance funding model was created.

“I have to respect and appreciate the hard work that went into it and the process they used,” he said. “Notwithstanding, after almost 20 years in higher education, I have never seen a performance formula that is written this way.”

Most states have used a national consulting group, the National Center for Higher Education Management Systems (NCHEMS), which was greatly involved in designing Kentucky’s higher education reform act in 1997. But Kentucky developed its system through a council work group, including presidents and other higher ed officials, along with deep involvement from Gov. Matt Bevin’s office.

Brown said because the formula is based on volume rather than percentages, and because it’s also based on rolling averages of past year performance, “even if I enroll 10,000 new students this fall, my performance funding would move zero dollars.

“I think the goal was to address the inequities that exist between some universities but this model grossly disrupts the original intention.”

Sen. David Givens, R-Greensburg, was deeply involved with the creation of the funding model.

“I think we’re in a really good spot,” he said. “By and large the formula is performing exactly as it should.”

Givens thinks Morehead and Kentucky State are on track to pull themselves back into positive dollars in the formula, although he said he scheduled to meet with Morgan next week.