Rationale and Methodology

Promoting transparency and measuring student success in new ways can push institutions to improve and give students the tools they need to make smart higher education investments. But states can also do more, by enacting broad policies that foster student success and encourage postsecondary productivity. Together, state leadership and a thriving higher education market can promote real improvement. For this section, we explored three components of the state policy environment. First and foremost, states have the ability to set performance goals for the higher education system and individual colleges and universities, to hold those institutions accountable when they do not reach those targets, and to identify areas in which the system is achieving its mission and those where it might be falling short.

Second, states have the power of the purse. State colleges and universities rely on state subsidies to operate, and these monies are typically awarded on the basis of student enrollment. Funding on the basis of enrollment provides incentive to make sure students walk in the door every fall, but less incentive to focus on how quickly students cross the finish line. In an encouraging development, some states have begun to tie a portion of this funding to student outcomes like course and degree completion.

Finally, state leaders can also act to remove barriers that may prevent students from making progress in their path toward a degree. In particular, states can work to ensure that students can move credits from one public campus to another, thereby encouraging transfers and protecting against lost time and money.

By no means do these three components encompass the full extent of strategies at a state’s disposal. However, we believe that leadership in these three areas is indicative of a broader commitment to promoting degree completion and the responsible stewardship of public money. To that end, we graded states on the nature of their goals for the higher education system, whether they fund institutions on the basis of student outcomes, and whether they have a statewide articulation policy that facilitates the transfer of credit.

As with the “Transparency & Accountability” area, to evaluate each indicator we searched each state’s higher education websites, as well as those of university and community college systems. For outcomes-based funding, we also contacted higher education officials in each state.

State Goals for Higher Education.

In an effort to determine which states were making a concerted and public effort to craft thoughtful policies, particularly surrounding efficiency and cost-effectiveness, this indicator examined state goals for their higher education systems. To score this metric, we searched for each state’s higher education plan, strategic vision, or list of goals and priorities. A state was given a point if their plan had a goal that focused on outputs and an additional point if the plan’s goals had a concrete target (e.g., to achieve an attainment rate of 60% by 2025). In many cases, a state had a plan that covered both four- and two-year systems; if not, we searched for additional plans covering each system. Finally, each state could earn additional points if their plans included student outcomes beyond graduation rates (such as student learning outcomes or labor market outcomes) and measures of efficiency (such as cost per degree). Using these criteria, we rated states on a six-point scale, with six points signifying the best possible score.

Outcomes-Based Funding.

One popular effort to encourage postsecondary productivity is to shift from funding an institution based solely on enrollment (e.g., the number of students or credit hours enrolled) to a formula that includes some student outcomes like course or degree completion. To score this indicator, we asked state leaders whether their state had implemented an outcomes-based funding (OBF) system and searched state legislative and regulatory records to analyze the details of the program itself. For states that had such a system, we awarded additional points on the basis of two criteria. First, was the OBF a component of an institution’s base funding, or was it a bonus that institutions could win on top of their base funding? Second, did the policy include safeguards that encouraged institutions to continue to enroll traditionally underrepresented students? Four- and two-year systems were graded separately. OBF systems were rated on a three-point scale, with three points signifying the best possible score.

Credit Transfer and Articulation.

A third way to encourage postsecondary efficiency is to facilitate the transfer of credit between institutions. Somewhere between one-third and half of students obtain credits from more than one institution during their college careers. This includes not only transfers from community colleges to four-year bachelor’s degree programs, but also students who transfer between four-year colleges, and even some who may move from four-year back to two-year colleges. Unfortunately, policies governing credit transfer often leave it up to the receiving institution to decide whether they will award credit. Too often, students trying to earn a degree from one institution are left holding nearly worthless credits from another. This status quo is terribly inefficient, and labyrinthine credit transfer policies are directly at odds with the nation’s interest in promoting timely degree completion. Such opaque and inconsistent policies may also discourage students from transferring in the first place, leaving behind qualified students with an interest in further study. Last, ill-conceived articulation rules can also make it difficult to create additional capacity through online course delivery. In a more seamless system, students who were unable to get a spot in a necessary course at their institution could take that course online through another state-sanctioned provider and be confident that those credits would transfer under a statewide policy.

We assessed articulation policies first by seeing if the state had a formal statewide policy governing articulation and credit transfer. We looked to see if the policy permitted students to transfer individual courses as opposed to a block of classes. Some states guarantee transfer only if a student has completed a set of specified courses (e.g., the core general education classes), rather than the individual courses themselves. We then went a step further to see if the state system had specifically identified which courses could be transferred between which campuses. We also coded whether a student could earn an associate’s degree from a community college and transfer that degree in full to enter with junior standing at a four-year university.

Finally, we looked to see if the state had developed a common course numbering system across institutions. We rated articulation policies on a five-point scale, with five points signifying the best possible score.

Findings

We found a handful of states that were active in all of the policy areas we identified. Louisiana, Indiana, Ohio, and Tennessee emerged as top states. These states have each developed OBF systems for both their four- and two-year campuses and have developed a solid, though not perfect, articulation policy. Louisiana’s 2011 Master Plan identifies three overarching goals and 18 concrete objectives under those three goals, and lays out the performance measures that will be used to assess progress. While Louisiana’s completion rates and education attainment lag behind much of the country, the state’s effort to create a policy environment that promotes improvement deserves recognition.

Florida and Illinois ranked just behind Louisiana on our measures of policy environment, indicating some progress, albeit incomplete, in the areas that we have identified. For instance, Florida’s credit-transfer policies earned top marks in that category, but its outcomes-based funding policy applies only to its two-year college system. Illinois scored well because of its outcomes-based funding policies, but lost points with its transfer of credit policy.

Outside of these top performers, most states had a long way to go in their policy efforts. Six states (Connecticut, Delaware, Maine, Michigan, Nebraska, and Vermont) had neither OBF nor an articulation policy that fulfilled our criteria. California’s 2010 report on its Master Plan bluntly asserted, “The State of California has no articulated, comprehensive statement of goals for California’s system of higher education.”

Detailed Findings

State Goals for Higher Education

Laying out a coherent set of goals and objectives for higher education is an important first step in pushing the system to do better. Whereas almost all states (41 out of 50) had some sort of state plan for higher education, far fewer expressed these goals in terms of concrete targets (16 states), or had goals surrounding student outcomes other than retention and completion (17 states) or the efficient use of resources (19 states). One of the leaders on this front is Indiana. The state’s “Reaching Higher, Achieving More” plan presents clear goals regarding its major initiatives—Completion, Productivity, and Quality — including specific goals such as degree completion, adult enrollment, system efficiency (cost per degree), and student outcomes (assessing student learning). The goals are often compared with other states or with a baseline.

Outcomes-Based Funding.

Over the past 10 to 15 years, as many as 20 to 25 states have experimented with some form of outcomes- (or performance-) based funding, yet many have retreated from it in the wake of budget shortfalls. This is especially true for states that treated OBF as a bonus “add-on” to an institution’s base funding— making it easy to offer when state coffers were flush with cash and easily dispensable during an economic downturn. Our goal was to try to find states that connected outcomes to a portion of an institution’s base funding, which we considered a stronger commitment to rewarding states for their outputs.

Currently, 19 states have some form of OBF. Thirteen states had it in place for both four- and two-year systems, while six had it for one system but not the other. The manner in which the states approach OBF, however, is dramatically different. Ohio has a strong outcomes-based funding system that was enacted in 2009 for the fiscal year 2010–2011. By fiscal year 2011, Ohio was tying 5% of a community college’s funding and 10% of a four-year university’s funding to student success factors such as degree and course completion, with additional funding incentives for course completion in STEM subjects and for at-risk students. Ohio also has a stop-loss provision stating that no institution can lose more than 1% of its funding per year. The state with the longest record of OBF experimentation is Tennessee, stretching back to the late 1970s. The most recent iteration can be found in the 2010 Complete College Tennessee Act, which bases funding largely on student retention and degree completion rates. The metrics are also risk-adjusted; there is a 40% “premium” on Pell-eligible students (i.e., each counts for 1.4 students) if they graduate. This helps ensure that Tennessee promotes student success without any incentives to restrict the access of traditionally underrepresented students.

Credit Transfer and Articulation.

In order to help students navigate the higher education system, pursue further study, and find necessary courses, states must have clear articulation agreements and guidelines about which credits will transfer to which institutions. While we found some states that were leading the pack on facilitating the movement of credits across institutions, many states have yet to recognize the importance of this issue.

Based on our criteria, Texas, North Dakota, Florida, Montana, Arizona, and Kentucky all received top marks for their articulation policies. Each of these states has a common course numbering system and policies requiring institutions to accept credits earned at other public institutions in the state. For instance, Arizona’s articulation and credit transfer system is highly rated. The state identified 35 credit hours of general education coursework, termed the Arizona General Education Curriculum (AGEC), that can be taken at the state’s community colleges and are guaranteed to meet the lower division general education requirements at the three Arizona University System institutions. Students are also able to search for transferable individual courses through a new online tool, aztransfer.com. Montana is another leader. Students can transfer an associate’s degree in full to a four-year institution and enter with junior standing, the state uses a common course numbering system, and there is a very clear course equivalency guide that allows potential transfer students to see how classes at one institution will transfer to another.