A598

An Act establishing performance-based funding plans for public institutions of higher education, amending N.J.S.18A:64A-22, and supplementing chapter 3B of Title 18A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. N.J.S.18A:64A-22 is amended to read as follows:

18A:64A-22. Notwithstanding any other law to the contrary, the Council of County Colleges may submit to the State Treasurer annual budget requests for State support of county colleges. Within the limits of funds appropriated for such purposes, the board of trustees of a county college may based upon the itemized statement fixed and determined pursuant to N.J.S.18A:64A-17 apply to the State Treasurer and receive State support:

a. For capital projects in amounts not to exceed one-half of the cost of said capital projects, and

b. [For] Except as otherwise provided pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), for operational costs to the extent of 43% but not to exceed 50% of the educational and general costs of the county colleges in the base year; provided, however, that for the purposes of determining State aid, only credit courses and noncredit remedial, developmental, general education development and adult basic education courses shall be included in calculating such costs. This sum shall be distributed to the county colleges by the treasurer in consultation with the Council of County Colleges according to a formula that includes categorical support and differential funding based on program costs.

No county college shall receive more than 50% of its projected educational and general costs through the provisions of this act.

Each county which operates a county college shall continue to provide moneys for the support of the college in an amount no less than those moneys provided in the year in which this act is enacted or 25% of the operational expense in the base State fiscal year, whichever is greater.

State support for the operational expenses of county colleges shall be made within limits of State appropriation.

(cf: P.L.1994, c.48, s.134)

2. (New section) a. The Secretary of Higher Education shall develop performance-based funding plans for the public institutions of higher education. The purpose of the plans shall be to increase accountability and efficiency and improve student outcomes at the public institutions of higher education. The secretary shall develop a plan for the county colleges and a plan for the four-year public institutions of higher education. The secretary may develop a separate plan for the public research institutions if the secretary determines that to be appropriate.

b. The secretary shall collaborate with the presidents and the governing boards of the public institutions of higher education, business and industry, Statewide organizations representing faculty and staff, and such other stakeholders as the secretary deems appropriate, to develop a system for allocating a percentage of State operating aid to each public institution based upon the institution’s achievement of established measures.

c. In developing the performance-based funding plans, the secretary shall review performance-based funding models in other states, including funding measures and methodologies, and the weighting of measures to better recognize the unique mission of each sector of public higher education. The secretary shall align the performance-based funding plans with the goals and priorities of the State as outlined in the comprehensive master plan created pursuant to subsection a. of section 14 of P.L.1994, c.48 (C.18A:3B-14).

The performance-based funding plans shall seek to promote and increase the satisfactory progression, matriculation, and graduation of all students enrolled in State-supported public institutions of higher education. The plans shall be sensitive to the differing programmatic missions of the institutions, responsive to changes within the institutions, and hold institutions accountable for the quality of instruction and student learning.

3. (New section) a. The performance-based funding plan for the county colleges shall include, but is not limited to, the following measures:

(1) the number of students earning their first 15 semester credit hours of college-level course work at that institution by a given year of enrollment;

(2) the number of students earning their first 30 semester credit hours of college-level course work at that institution by a given year of enrollment;

(3) the number of students who progress from remedial courses to college-level courses during the academic year;

(4) number of students who earn an associate’s degree from that institution or complete a certificate program during the academic year; and

(5) the number of students who completed at least 15 semester credit hours at that institution and subsequently enroll for the first time in a four-year institution of higher education.

b. The performance-based funding plan for the four-year public institutions of higher education shall include, but is not limited to, the following measures:

(1) student graduation rate;

(2) student retention;

(3) student transfers;

(4) completion of credit hours;

(5) completion of degree programs;

(6) types of degrees awarded;

(7) job placement and employment rate upon graduation;

(8) academic degrees awarded in critical needs shortage areas, such as the science, technology, engineering, and mathematics (STEM) fields; and

(9) reducing achievement gaps for low-income students, minority students, and transfer students.

4. (New section) a. Upon approval of the performance-based funding plans, State operating aid appropriated to each public institution of higher education shall incorporate the performance-based funding plan in accordance with the following percentages and schedule:

(1) 5% for fiscal year 2019;

(2) 10% for fiscal year 2020

(3) 15% for fiscal year 2021;

(4) 20% for fiscal year 2022; and

(5) 25% for fiscal year 2023 and each successive fiscal year.

b. During fiscal year 2018, the secretary shall provide each institution with a detailed report on what the impact of the performance-based funding plan would have been, if it had been implemented at 5% in fiscal year 2018.

c. For fiscal year 2019, no institution shall receive more than a 2% reduction in State operating aid as compared to fiscal year 2018 due to the implementation of the performance-based funding plan.

d. Each institution that uses enrollment as part of its budgeting process shall calculate enrollment as the number of students enrolled in the institution at the end of the prior academic year.

5. (New section) The Office of the Secretary of Higher Education shall post on its website by September 1 of each year the performance-based funding plans, evaluation criteria, performance results for each institution, and the amount of funding each institution received in the fiscal year based on the performance-based funding plan. The information shall be posted on the website in a prominent and easily accessible location.

6. (New section) The secretary shall review the performance-based funding plans established pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) on an annual basis, and submit a report by September 1 of each year to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1). The report shall contain an assessment of the performance-based funding plans, including the effects on student outcomes, and recommendations for any modifications to the plans and on the continued use of the plans in the allocation of State operating aid.

7. This act shall take effect immediately.

STATEMENT

This bill directs the Secretary of Higher Education to develop performance-based funding plans for the public institutions of higher education. The purpose of the plans will be to increase accountability and efficiency and improve student outcomes at the public institutions. In addition, the plans should seek to promote and increase the satisfactory progression, matriculation, and graduation of all students enrolled in the public institutions. The secretary will create a funding plan for the county colleges and a funding plan for the four-year public institutions, and may create a separate funding plan for the public research institutions if deemed appropriate.

Under the bill’s provisions, the secretary is directed to work with the presidents and governing boards of the public institutions of higher education, business and industry, Statewide organizations representing faculty and staff, and other stakeholders to develop a system for allocating a percentage of State operating aid based on the institution’s achievement of established measures. The secretary will review performance-funding models in other states to assess funding measures and methodologies, and the weighting of measures. The plans should be sensitive to the differing programmatic missions of the institutions, responsive to changes within the institutions, and hold institutions accountable for the quality of instruction and student learning.

The bill establishes a number of performance measures, including degree and credit completion, to be included in the performance-based funding plans; however, the secretary is not limited to those measures.

The bill establishes a schedule that will gradually phase-in the percentage of each public institution’s State operating aid that will be affected by the performance-based funding plan. Beginning in fiscal year 2019, the following percentages and schedule will apply:

- 5% for fiscal year 2019;

- 10% for fiscal year 2020;

- 15% for fiscal year 2021;

- 20% for fiscal year 2022; and

- 25% for fiscal year 2023 and each successive fiscal year.

Fiscal year 2018 will be a “learning year” in which no institution will be affected by the performance-based funding plans, but the secretary will provide each institution with a detailed report on what

the impact of the plans would have been, if they had been implemented at 5% in that year. The bill includes a stop-loss provision for fiscal year 2019, so that no institution will experience a reduction of more than 2% in State operating aid as compared to fiscal year 2018.