State budget director: Funding model rewards schools

By Paige Pearcy, Daily Staff Reporter
Published December 11, 2011

Despite objections from University leaders, the state is moving toward implementing a new funding mechanism for higher education that's aimed at increasing the amount allocated to school throughout Michigan.

The planned release of the state budget in January will create a new process for funding state higher education institutions. Before the overhaul, money was distributed on a school-by-school basis, but the new budget could provide a formula that will decide the amount of money given to each of the state’s public universities.

This year the state allocated about $268.5 million to the University, a 15-percent decrease from last year, but that amount could change with the implementation of the new policy.

Despite the difficulty in designing a fair allocation system, State Budget Director John Nixon said in a telephone interview he’s developing the formula in hopes of increasing funding for higher education.

“There hasn’t been a systematic approach, so there’s really no rhyme or reason to why universities are getting funding,” Nixon said. “Moving to a formula really will allow us to bring all the 50 institutions together, establish a baseline and then really be able to mark our improvements, and show our improvement over time which I think will hopefully justify more funding going into the system.”

The University has spoken out against the new formula because of the variations between the state's public universities. In a communication to the University’s Board of Regents last month, University President Mary Sue Coleman wrote that the state should put more emphasis on academic performance, rather than just fulfil criteria like graduation and retention rates.

In an interview with The Michigan Daily last week, Coleman echoed her previous statements and said she’s worried about the equality of the new funding plan.

“I’ve never seen a formula that could be fair,” Coleman said in her office on the second floor of the Fleming Administration Building. “I’m very concerned since the funding level in the state is the bottom 10 percent in the nation among states, that somehow we would do harm to institutions right now by saying, ‘OK, suddenly we’re going to have a formula that seems willy-nilly.’”

Coleman suggested using the Carnegie Classification of Institutions of Higher Education to decide the state’s appropriated funds. The system groups comparable universities and has controls for institutional differences, making it a useful tool in analyzing various universities.

Because the state's formula is still being developed, Nixon said he wasn’t able to comment on specifics details. However, he said the formula will include performance-based metrics like graduation rates.

In an interview with the Daily last week, University Provost Phil Hanlon said though the University supports performance metrics, the construction of the formula must be very specific in those measurements.

“We’re not at all opposed to performance-based funding,” Hanlon said. “How the formula’s constructed is really important, and an important piece is that it captures performance and not activity.”

Last month Coleman and Hanlon sent a letter to Nixon’s office voicing their concerns regarding the formula.

Nixon told the Daily he's "not offended by the letter," but added the formula’s development is based on realistic options for the state.

"We are dealing with a certain set of realities as we put together the budget and those realities are that we aren’t flush with cash,” Nixon said. “So as you look at the resources we have, you have to take great care in allocating them.”