New State Funding Formula Beneficial To OU

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While the state of Ohio’s new formula to fund public higher education institutions undoubtedly increases volatility into college and university budgets, Ohio University administrators say they are happy with the formula, which puts more emphasis on course and degree completion.

State Share of Instruction is OU’s second largest revenue stream behind student tuition and fees. SSI makes up approximately one-third of OU’s budget.

OU Vice President for Finance and Administration Stephen Golding updated the OU Board of Trustees Resources Committee about how OU is faring under the new State Share of Instruction funding formula on Thursday. Golding said that Gov. John Kasich asked public college and university presidents to explore alternative funding scenarios last year. The recommendation was to award public higher education institutions that have higher percentages of students who complete courses and four-year degrees.

Under the new formula, Golding said the public universities and colleges are actually competing against each other for the State Share of Instruction funds.

The changes in the SSI formula will be implemented over two years. For fiscal year 2014, changes include more emphasis on degree completion, basing funding on three-year averages (compared to two-year averages under the old formula), and reducing the funding for out-of-state degrees from 100 percent to 25 percent.

Next year, changes that will be phased in include merging main campus and regional campus funding models into a single stream — removing prior restrictions on what regional campuses could offer — and providing a subsidy for associate degrees as part of degree completion.

OU President Roderick McDavis said that OU supports the new funding formula as the university is currently positioned well among its peers to receive additional state funding. In fact, Golding said that the university will receive an additional $6.7 million in SSI funds than expected for fiscal year 2014.

“We did significantly better than we thought we were going to do,” Golding said on Thursday.

Under the old funding formula, 25 percent of the SSI funding colleges received was based on degree completion. The new formula increased that percentage to 50 percent. Golding said the higher emphasis on degree completion is changing behaviors at public institutions.

The new formula also encourages public higher education institutions to enroll more Ohio students instead of recruiting those from out of state. Under the old formula, universities received full degree subsidies for out-of-state students. The new formula only provides universities with a 25 percent subsidy for non-Ohio students. When asked if this would change universities’ out-of-state recruitment efforts, McDavis said it could. However, he said that OU has a balanced number of Ohio and non-resident students. McDavis told the Resources Committee that approximately 90 percent of OU’s enrollment is Ohio students.

To ensure that public universities aren’t losing money by accepting non-Ohio students, McDavis said institutions need to make sure their out-of-state tuition costs make up for that lost state subsidy amount. He said that unless universities are enrolling more than 30 percent of non-resident students, they shouldn’t see significant budget losses.

McDavis said he doesn’t plan on recruiting fewer non-Ohio students, but noted that OU saw more applications from Ohio residents this year than in the past few years.

Historically, public colleges and universities have been mostly dependent on tuition, fees and SSI for revenue. McDavis said that he believes schools that really excel will have additional revenue streams from private donations and innovative programs that generate money.

In a memo to the OU Board of Trustees earlier this month, Golding said that the changes in the SSI formula “in the near term are beneficial to the university.” He wrote that he projects steady increases in OU’s proportional share of SSI and for those increases to continue for the next several years.

“We like the view from the top,” McDavis said.