As states grapple with how to fund colleges and universities in an equitable and sustainable way, several are revising their higher education funding formulas. These formulas – a primary mechanism by which states distribute funding to and among institutions of higher education (IHEs) — are a critical piece of the overall funding picture for colleges and universities, with state and local funds augmented by other sources like tuition and federal funding. For example, to better align their funding formulas with state goals and priorities, states have adjusted formulas by incorporating new student weights and adopting outcomes-based approaches. But, how do those changes come about? And what do these policies look like as they are implemented?
Dollars and Degrees: Perspectives From the Field is an ongoing series of discussions with leaders from states where higher education finance policy reform recently occurred or is happening now to answer these questions and more. By talking with leaders involved in reform efforts, advocates and policymakers elsewhere can learn promising practices from the challenges and successes their states faced.
Spotlight on California
In 2018, California adopted the Student Centered Funding Formula (SCFF), significantly changing the way community colleges are funded statewide. While the prior funding approach was almost entirely based on enrollment, the SCFF funds institutions based on a combination of enrollment (70%), student socioeconomic status (20%), and student success outcomes (10%). The formula is intended to increase student completion rates and minimize achievement gaps outlined in the California Community Colleges Chancellor’s Office’s strategic plan.
California’s passage of the SCFF was not without controversy. The inclusion of outcomes-based funding caused backlash, and a coalition — including some community college faculty, leaders, and unions — have sought to abolish the SCFF before it is ever fully implemented. For stakeholders who support the new funding formula, sustained advocacy has been necessary, as the hold harmless provision of the formula—which stabilized funding for community colleges while they adjust to the new formula—expires during the upcoming 2024-25 school year.
To learn more about the SCFF and how California advocates are working to ensure its implementation, I spoke with Jessie Ryan, president of the Campaign for College Opportunity, about challenges and opportunities ahead.
Christine Dickason: How did the idea for community college funding formula reform begin? Who were the major champions of the policy change in California?
Jessie Ryan: The idea started long before the SCFF. This work really began with some courageous higher education leaders and researchers who were willing to illuminate difficult data on student outcomes. Nancy Shulock, a respected community college researcher, wrote a paper entitled “Rules of the Game” in 2007. The report illuminated the practice of community colleges funding students on the basis of the third week of enrollment alone, and it had some troubling data related to colleges dropping students at three weeks plus a day, and the potential creation of a culture within a system that was benefiting from a revolving door of student enrollment versus a focus on supporting student progression and completion.
At that same time, there was increasing focus at the national level on moving from access to student success and looking at alternative funding formulas. The Lumina Foundation gave state practitioners (administrators, college presidents, and nonprofit leaders) the opportunity to participate in a learning session about what was happening in the field. I had the chance to visit Tennessee as it was launching its funding formula, and also visited Pennsylvania to look at their funding formula. We took someone from the Legislative Analyst’s Office and a researcher on both of these trips, which was a really good opportunity to talk about the potential applications to California’s community colleges.
In 2008, I started working with the then head of Long Beach City College and three other “renegade” presidents from community colleges across California that were interested in piloting an alternative funding formula to focus on student success in exchange for flexibility from a set of onerous regulations that were preventing them from being able to meet the needs of students on their campuses. We introduced that legislation as a pilot but it faced staunch opposition and it did not make its way to the governor’s desk.
The experience set the stage for the SCFF. Less than a decade later, the conditions were such that we had leadership and a coalition — not just the Campaign for College Opportunity (the Campaign), but also education equity partners like The Education Trust-West, Public Advocates, The Institute for College Access and Success (TICAS) and other community based organizations — drawing a line in the sand, saying that eliminating racial equity gaps should be our North Star and required reimagining our funding incentives. That was our goalpost moving forward that allowed us to advance the creation of a successful systemwide funding formula revision.
CD: Which stakeholder groups and agencies were involved in the actual design of the new formula?
JR: In 2018, the Campaign led a series of regional meetings with equity partners, practitioners, education leaders, and students across the state. We walked away from the convenings with a set of mutually agreed-on principles for the design of any student-centered funding formula revision. We agreed that we had to explicitly call out race and ethnicity, and focus on closing racial equity gaps. We agreed on key progression points that should be considered in the formula, including completion of transfer level courses and credit accumulation. We also agreed that colleges should benchmark against themselves by establishing their own baseline with data from the prior year and earn points by improving on their own performance. The final component we agreed on was creating a statewide implementation advisory board that included students, faculty, administrators, and equity partners to ensure implementation with fidelity.
Once we moved from principles to policy development, the stakeholders at the table included the community colleges, the Chancellor’s Office, the Governor’s Office, and the Department of Finance. Additionally, we were part of a coalition that included 31 equity partners, who contributed to the formula throughout the policymaking process and budget debates.
CD: What’s the role of outcomes-based funding in this new formula?
JR: Outcomes-based funding makes up 10% of the SCFF. In looking at other states, the consensus was it had to be at least 10% for it to be a significant enough factor to move institutional behavior through the formula. Given how monumental a change this was, we also agreed that there needed to be a hold harmless provision to ensure that there was not undue burden as colleges implemented the new funding formula.
CD: Was there any backlash around the decision for 10% of the funding formula to be outcomes-based?
JR: I think regardless of the percentage, we still would have seen opposition. Initial conversations settled on a 20% success premium before scaling back to 10% as the bare minimum necessary to still drive impact. Many institutions and associations were vehemently against change. So, I don’t believe 10% was the boiling point for opposition. I think any change to an access-only formula would have incited significant outrage. We did ask the field the question, “What would be the right percentage for outcomes-based funding?” And it was very difficult to get anyone to go on the record with their preferred percentage. Instead, we heard a lot of desire to protect the status quo despite data that clearly demonstrated it did not serve minoritized students well.
CD: What challenges have there been, if any, as California moves from policy design to implementation?
JR: We called for an advisory group that would see through the implementation, because we’ve realized that 90% of the victories, whether it’s policy or budget, really rest in implementation with fidelity. The coalition of equity partners, including the Campaign, worked hard to ensure the right representation on that committee to do the deeper implementation work that we thought was going to be necessary moving forward. Even with that committee, however, a lot of the field wanted to just wait it out, or were calling for policymakers to undo the proposed formula changes from the onset. Almost annually since the SCFF passed, we have had a set of institutional stakeholders pressuring policymakers and the governor to revert to the status quo.
Adding to that challenge is initiative fatigue. Our community colleges were dealing with the aftermath of a recession, and then managing a set of reforms on everything from placement into college level coursework to guided pathways to mandatory education plans for all students. All of this required mindset shifts, and then the global pandemic hit. We were essentially asking systems to quickly shift the way that they had become accustomed to operating for their entire existence. Detractors who didn’t want the formula change in the beginning felt that this would prevent them from keeping their colleges solvent. However, we saw some declines in enrollment due to the pandemic and the funding formula has allowed for funding stability, and, in fact, increases in funding for the vast majority of community colleges. So that was a nice surprise, despite the initiative fatigue and the challenges related to the COVID-19 pandemic.
CD: What challenges remain for the future of the formula?
JR: The expiration of the hold harmless provision is a big looming issue in California. Colleges kept getting the hold harmless provision extended, which created a perpetual safeguard. That heightens concerns at the very time when we’re seeing a lot of students and families questioning the value of two- or four-year college. This is a national conversation, especially when many students and families are deeming college unaffordable.
We would be out of touch with students’ current realities if we didn’t also recognize the impacts of the FAFSA debacle. We have seen significant declines in applications for FAFSA, and it has a chilling effect on whether students will choose to enroll or continue on their educational journeys. The SCFF includes a focus on racial equity and student progression, so it considers the number of students who receive a Pell Grant versus students that are Pell-eligible. I am worried that if we have a drastic under-ability to access Pell due to the FAFSA mishaps — and if we aren’t able to shift our funding formula to focus on Pell eligibility versus awards — we may lose students we are trying to serve.
CD: How are advocates like you working to sustain the promise of equity within the formula?
JR: It is a constant focus of our work. I am very encouraged by the gains that we’ve seen on equitable placement reform, a key marker of the funding formula and a place where you really can ensure innovative, racial equity-focused metrics. We have new state legislation to end the practice of dead-end remedial education sequences and allow students to have direct access to college-level math and English, which is already showing incredible gains for racially minoritized students across the state. We didn’t just pass these bills in isolation. We were able to build corresponding progression metrics in the funding formula. I think that the marrying of a vision for success set by the Chancellor’s Office and the alignment of these policies with the funding formula are also instrumental to resetting institutional culture and ensuring a shared focus on racial equity and student success.
It is a constant effort to educate policymakers and center student voices and experiences around the funding formula reform. But I also think it’s important to have humility to see what’s working and what’s not working and make adjustments where necessary. The North Star must remain ensuring that we are meeting the needs of students and closing racial equity gaps.
CD: What have you and others in California learned through this process that other states can learn from?
JR: I think California can teach others that racial equity should be central to any higher education finance redesign. Starting with that as the goalpost changed our dialogues, changed the composition of the tables that we had set, and allowed for an authentic space for students and equity allies to share their best thinking and be participants in co-creating something more equitable. Our best policies at the Campaign come when we have authentic partnerships with students and equity allies at the table as part of the design. Their input made the SCFF better, and when it comes to the hard work of implementation, they are there holding feet to the fire to see the work through with fidelity.
I think the other key lesson is that you cannot in good faith redesign higher education financing and then step away and hope that it will work out. If you’re truly committed to student success, you have to focus on finance reform implementation, which includes collecting real-time data on what works and where remaining barriers exist. You have to go beyond assessing the data to really understand the root causes of why some campuses might be performing better than others, and do what you can as partners to ensure that all campuses—irrespective of leadership– are meeting the needs of students. You have to have the courage, commitment, and team that is going to stay the course in both instituting and redesigning education financing to meet the needs of students, not just for today, but for decades to come.
For more from Bellwether on higher education finance, check out the Dollars and Degrees series that offers a crash course in the essentials of higher education finance for policymakers, advocates, and others interested in improving postsecondary funding.
