Prior to 2016, Kentucky’s leaders appropriated state funding based on each public institution’s share of the higher education budget (i.e., a “base plus” approach). This approach did not take into consideration growth in enrollment and student outcomes, which help the state meet its educational attainment goals.
As part of the 2016-2018 state budget, the Kentucky General Assembly created a Postsecondary Education Work Group, consisting of the Council president, postsecondary institution leaders and representatives from the Governor’s office and the legislature, to develop a funding model that aligns state funding to performance and student success metrics.
Based on the work group’s recommendations, the legislature enacted two very similar funding models: one for the public universities and one for the community colleges. In addition to establishing the models (hereafter referred to as “the model”), the statute directed the Council to call back the Postsecondary Education Working Group in 2021 and every three years thereafter to monitor the model's performance, identify any unintended consequences and recommend any adjustments.
Postsecondary Education Working Group
Per statute, the working group is comprised of
- President of the CPE;
- President or designee of each public postsecondary institution, including the president of KCTCS
- Governor or designee
- Speaker of the House or designee
- President of the Senate or designee.
This group reviews the model and makes recommendations. These recommendations are then presented to the legislature for vote and implementation.
- Postsecondary Education Working Group records archive
- Final Report of the Postsecondary Education Working Group (2016)
Goals of the Model
Specifically, the model’s goals are to
- Increase retention and progression of students.
- Increase the number of degrees and credentials earned by all types of students.
- Grow the number of degrees and credentials that garner higher salaries upon graduation: STEM+H fields, high-wage, high-demand fields.
- Close achievement gaps by increasing the number of degrees and credentials earned by low-income, minority and underprepared students.
These goals are in alignment with the state’s 60 by 30 educational attainment goal: raising Kentucky's educational attainment level from 45 percent to 60 percent by 2030, as outlined in the state's strategic plan for postsecondary education.
The models for the public universities and KCTCS were phased in over three years, beginning in fiscal year 2018-19. Funding distribution is based on three basic components:
- Student Success (35% of allocable resources distributed based on relative success in achieving student progression milestones and degree and credential production).
- Course Completion (35% of allocable resources distributed based on share of earned student credit hours).
- Operational Support (30% of allocable resources distributed in support of vital campus operations, services, and infrastructure related to student learning and success).
In the first three years of implementation, the statute included “stop-loss” provisions, which limited the amount of potential transfer among institutions due to the model.
New for fiscal year 2021-22, a “funding floor” was established at each institution, as recommended by the Work Group and incorporated in statute. Barring state budget reductions, institutions will receive this floor funding. Any additional appropriations for postsecondary education, however, will be placed in the performance fund, and will be distributed to the institutions based on student success and operational support metrics.
It is important to keep in mind that all of the state funds for institutional operations are run through the model (i.e., are taken into consideration), and this informs how the performance funds are distributed. In other words, the performance fund is more than a “bonus” pool, because it ensures that, to the extent possible, institutions receive state funding commensurate with their student success and operational support metrics. For this reason, Kentucky’s model is one of the most robust in the country.
Aligning state funding with college completion and other student success metrics incentivizes institutions to enroll, progress, and graduate more students. The model also rewards the efficient production of degrees and credentials, and provides premiums when institutions graduate low-income, underrepresented minority, and STEM+H students. An overall rise in the number of graduates maximizes taxpayers’ return on investment in higher education and translates to a more highly skilled workforce.
Rewards for progressing and graduating students should help reduce college costs for Kentucky’s students and families who pay more when school takes longer to complete. The model also encourages campuses to take aggressive measures to close achievement gaps of minority and low-income students.
Last Updated: 2/7/2022