NOTE: This article was published in Commonwealth Magazine on December 16, 2018.

Earlier this week, The Boston Foundation and the Massachusetts Taxpayers Foundation released a new report, Grade Incomplete: Implementation of the Community College Funding Formula in Massachusetts.

The report examines the “performance-based funding” formula developed in 2012 as a tool for allocating state resources to Massachusetts’ fifteen community colleges based not only on “inputs” like the number of students enrolled, but also on “outputs” like graduation from degree and certificate programs, transfer to four-year institutions, and completion of workforce development credentials in high demand fields.

The formula was only applied for a few years, and in a limited way, before insufficient resources and attention to other priorities once again shifted the higher education budgeting process.  Grade Incomplete recommends revisiting and simplifying the formula, establishing clear goals for its success, enshrining it permanently in state law, and lobbying for increased funding to pursue the critical mission of the state’s community colleges.

It’s a solid, well-researched, mostly accurate report that manages to combine a lot of complicated data with important insights into community colleges, state government, and national trends; and present it all in a clear, straightforward way.

And the Boston Foundation deserves plenty of credit and deep appreciation for becoming one of the most constructive critics, and staunchest advocates, for the Commonwealth’s underfunded and overlooked community colleges, which educate nearly 100,000 students each year for a fraction of the state’s higher education budget.

But, while there is plenty to agree with and support in Grade Incomplete, the report’s ultimate proposal—that Massachusetts double down on the performance-based funding formula created in 2012 and use it to channel all of the public resources for community colleges—has some fundamental flaws that should point policymakers toward a different solution.

The Evolution of Performance-Based Funding in the Commonwealth

Back in 2012, the creation of Massachusetts’ community college performance-based funding (PBF) formula was part of a growing national trend—to date, 32 states have adopted some kind of PBF formula for their higher education dollars—as well as a sort of grand bargain among the colleges, the Department of Higher Education, the governor’s office, and the legislature.

Although enrollments had been soaring on college campuses, state funding, particularly through the Great Recession, had been shrinking faster than ever.  In exchange for agreeing to link at least a portion of our funding to the needs of employers, the goals of the Department of Higher Education, and accountability measures that included both carrots and sticks to keep community colleges focused on constant improvement, we would receive increased funding for our efforts.

It sort of worked: for one year.

In FY14 when it was implemented, the governor and legislature allocated an additional $20 million for community colleges to be distributed through the formula.  The new funding largely flowed to three community colleges—Bristol, Bunker Hill, and Quisigamond—where enrollments had significantly increased over the years and previous funding had not kept up; though every campus managed to receive at least some portion of the increase.

Missing from Grade Incomplete, however, is an agreement among the campuses that went largely unnoticed that year: In exchange for the additional state support, we all agreed to a “fee freeze” and did not increase our costs to students for FY14.  Consequently, even though a college received a modest increase in state support through the formula, it may have experienced an overall reduction in its budget that year if it was planning to increase its fees.

In FY15, an additional $13 million flowed through the formula; and in FY16 although on paper it appears that $9 million was devoted through PBF, the impact was significantly reduced on campuses because the state did not fund collective bargaining agreements that year and made mid-year “9C” cuts that further reduced college budgets.

The formula hasn’t been used since then.

The Problems with Performance-Based Funding for Community Colleges

The story of those three years between 2013-2016 highlights two of the critical flaws of performance-based funding for community colleges:

  1. There aren’t enough resources to begin with: As Grade Incomplete and a number of other studies have noted, Massachusetts lags far behind other states in community college spending as a share of total budgetary expenditures, in the share of community college operating budgets that come from state and local support, and in per student state support.  The fifteen community college campuses in Massachusetts educate nearly half of the undergraduates in public higher education for around 25% of the higher ed budget.  So, while the $20 million allocated to the formula in FY14 was a sizable increase desperately needed by the campuses and their students, it was still only a sixth of the $120 million it would have taken to lift Massachusetts up toward national averages for community college support.
  2. Funding formulas in Massachusetts aren’t sustainable: The community college experience with the funding formula since 2012 is a familiar one for many areas of state funding, even when they are codified in state law.  Cities and towns struggle every year with insufficient local aid.  Earlier this year, the Massachusetts Budget and Policy Center released a reporttelling us what we already knew: the state underfunds K-12 education by nearly a billion dollars each year ($888 million) because it uses a 25-year-old formula that underestimates expenses.  The Quinn Bill that used to provide incentive pay from the state for police officers to pursue college degrees was abandoned in 2010, leaving local departments on the hook for funding.

And on and on…

Beyond these challenges which may be specific to Massachusetts, there are other problems with performance-based funding formulas that we have known all along, and some that we have learned about since 2012, as other states have gotten into the game:

  1. Geography is destiny:Very often, prospective community college students are not deciding which college to go to; they are deciding whether to go to college. Any barrier placed in their way, including distance, can delay or completely derail them.  According to Education Deserts, a 2016 national report by the American Council on Education, the median distance a community college student travels to campus is 8 miles.  Here at Northern Essex Community College, 90% of our students live within five miles of either our Haverhill or Lawrence campus.

If a performance-based funding formula is used to take resources from a community college in one part of the state and give them to another college somewhere else as a reward for superior performance, the students will not be able to follow the resources.  Instead, they will simply be left with even less support, and the poor performance downward spiral is likely to get worse.

  1. Performance-based funding hits disadvantaged students hardest: We already know that school performance is as much about student preparedness, income, family background, and a number of other factors that are beyond the school’s influence as it is about high-quality teaching and support systems.  When resources are taken from underperforming schools with high populations of low income, first generation, minority, English language learning students in Gateway Cities and delivered to higher performing schools in affluent suburbs, problems for already disadvantaged students only get worse.
  2. We need collaboration, not competition: In an era of stretched resources and declining enrollments, the community colleges, state universities, and UMass campuses have been focusing on collaborativeefforts to serve students.  Together, we have created the Mass Transfer Agreement, the Commonwealth Commitment, and opportunities for Reverse Transferthat, together, provide a far more efficient and less expensive route to a college degree.  Performance Based Funding formulas that incentivize individual performance over collective performance work against these kinds of partnerships that better serve a population of students that is constantly swirling among our campuses.
  1. Performance-based funding for higher education is not working anywhere else: Two years ago, the Century Foundation produced Why Performance-Based College Funding Doesn’t Work, an extensive analysis of PBF formulas used by 32 states. Among the findings that we shouldn’t ignore:
  • States using performance-based funding do not out-perform other states.
  • In some states, universities have become more selective and less diverse while also not improving degree production.
  • States using performance-based funding sometimes end up decreasing degree production.

The goals of Grade Incomplete are laudable and appreciated, but perhaps one of the most important final challenges to note is that we are at least twenty-five years too late for a discussion about a performance-based funding formula for Massachusetts colleges and universities.

A quarter century ago, colleges like NECC were approximately 75% state-funded.  Today, all fifteen community colleges in Massachusetts are between 35-45% state funded; while state universities hover between 25-35% and UMass campuses are even less.

There is not a single college or university in the state of Massachusetts that receives more than half its funding from the Commonwealth.

To put it more bluntly, Massachusetts no longer has a system of public higher education the way we once conceived of it.  That social compact has changed, and we are now an entire state of private colleges, twenty-nine of which receive some state support.  And while that support is still critical to our operations, it is becoming less impactful each year.

So, rather than spend more time haggling over how to allocate diminishing resources through a formula that will never work effectively; the best way forward for our campuses and our students lies in creatinga new social compact for community colleges in the Commonwealththat relies on partnering with policymakers, employers, and supportive organizations like the Boston Foundation and the Massachusetts Taxpayers Foundation to help us transition into our new role as public-private colleges with increased attention to fundraising, employer sponsorships, return on investment, entrepreneurial business models, and, yes, helping every student to succeed.