Establishing outcome metrics in the next budget

As most readers will know, under the budget proposal by Gov. Scott Walker, new funding for the UW System is tied to performance metrics that would rank UW campuses and distribute the funding based on how well each school does in comparison to the other system schools. Tying funding to performance metrics has been tried by a number of states in the past and has been much discussed in higher education.

Let me start by being clear about language. I much prefer the term “outcome-based metrics” rather than “performance-based metrics” because that makes it clear that funding is tied to results. For instance, the number of teaching hours or the number of students admitted to a particular program (metrics that are sometimes proposed) are inputs, not outputs, and do not belong in an outcome metric.

A recent analysis done by UW-Madison Associate Professor of Educational Leadership and Policy Analysis Nicholas Hillman shows that UW-Madison does very well under the funding proposal laid out in the budget, but I strongly believe that it would be better for the state as a whole if our campuses were not pitted against each other for funding.

Each campus in the UW System has its own mission and serves a different student population.  Other UW System schools complement UW-Madison’s undergraduate offerings much more than they compete against them and this diversity benefits our state workforce. By comparing us to each other, the new funding formula could mean only a few schools would receive most of the new funding.

I have no problems with accountability requirements. Indeed, the entire UW System already reports on a series of accountability measures that can be found here. But the devil is in the details when you start trying to figure out how to tie the distribution of dollars to these metrics.  To do this right – without unforeseen and negative consequences – requires some real thought and some knowledge of the UW System schools and how they operate. That’s why we are asking that the Board of Regents be given the authority to define and operationalize a set of metrics and a process by which they might be used to distribute funding.

As state legislators consider this proposal, it’s important to note that outcome-based funding experiments did not work as intended in several other states that put them in place. For example, in order to meet its outcome metrics, Indiana’s university system became far more selective in admissions. This made the campuses less diverse and didn’t increase the number of degrees awarded. Neither Tennessee’s graduation nor retention rate increased under this type of funding formula, and Pennsylvania didn’t see an increase in degrees after using outcome-based funding for over a decade. In the end, these states were forced to make significant changes to their performance metric systems.

Even once a set of outcome measures is agreed upon, the biggest challenge is to decide how to operationalize those measures. This has to be done with some nuance. Here are the principles I’d recommend:

  • Compare each school with its defined peers on these measures.
    1. If the school is above its peers, the distribution formula should reward maintaining that positive differential.
    2. If the school is below its peers, the distribution formula should reward progress toward the peers’ average outcome.
  • Because of the substantial differences among schools within the UW System, do not establish a single set of metrics that each school should meet, but allow schools to choose among a set of possible metrics. This is what the technical colleges in the state currently do.

Let me give some examples here at UW-Madison. What if one metric were retention rates for our students between their freshman and sophomore years? Right now we have a retention rate of almost 96 percent, well above our peers’ average retention rate. We should be rewarded for maintaining this exceptional rate. Indeed, if we were told we had to improve this metric, we simply couldn’t do it.

Alternatively, what if one metric were research dollars expended on campus? It is possible that in the next few years there will be major cuts in research funding at the federal level. In this circumstance, we should be judged on how well we do relative to our peers. If our research funding falls less than research funding among our peers, we should be rewarded for that … even though the metric is declining. It means we’re doing better than others at retaining research dollars in a tough environment.

These are two examples of the nuances that one needs to bring to outcome-based measurement. Simple rules (“if the metric goes up, you’re doing well, and if it goes down, you’re doing poorly”) do not work.

We should also be particularly careful about writing outcome measures into state statute. If we need to make adjustments to respond to the changing workforce and research needs of our state, it would be quicker for our legislators to work with the Board of Regents to make changes than to pass a new law through the state Legislature.

A good example of how this could be a problem happened just last week. After a Canadian company announced it will no longer buy Wisconsin milk after May 1, numerous state legislators sent UW System President Ray Cross a letter asking him to direct UW System researchers to explore alternative uses for milk. UW System campuses can respond quickly to requests like this right now. However, if this response diverted resources away from activities that enhanced the outcome measures on which campus funding was based, campuses may be reluctant to shift any resources toward the new research out of fear they will lose state funding.

The good news is UW-Madison has many researchers working on dairy issues and they are also creating new milk-based products. Just this week we announced a new ice cream with ingredients designed to help athletes recover after a workout. The Florida Gators may have Gatorade, but athletes will probably enjoy Badger Babcock ice cream after a tough workout even more. You can see the video here:

I’m confident UW schools and the Board of Regents can work with state leaders to identify ways we can ensure education dollars are being spent effectively for students, taxpayers and individual institutions. I look forward to working with legislative leaders on this issue as it moves forward.