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2012-13 Budget Overview

Last year, the State of Tennessee implemented an outcomes-based funding formula for higher education, as called for in the Complete College Tennessee Act (CCTA). Productivity, meaning improved retention and graduation rates rather than enrollment, now drives the methodology by which the Tennessee Higher Education Commission (THEC) recommends state funding for higher education institutions.

Fiscal year 2012–13 will be the second year of implementation. This process also includes phasing out a previous “hold harmless” provision which resulted in institutions being funded unequally at different percentages of their funding formula calculations. Once the hold harmless provision is completely removed in 2013–14, institutions will be funded equitably at the same percentage of their outcomes-based funding formula.

For planning purposes, the Department of Finance and Administration instructed state agencies to prepare the 2012–13 budget with a 5 percent reduction in state appropriations. For higher education, this would result in a reduction in state appropriations of $51.1 million. For MTSU, the reduction would be $4.219 million. Combined with the second year of the implementation of the outcomes-based funding formula, MTSU’s net reduction would be $4,243,200. We will not have firm details for several weeks, however, until Gov. Bill Haslam proposes a budget and submits it to the General Assembly.

THEC recently approved a second distribution recommendation for 2012–13 operating funds that reflects the increase in institutional performance across the various outcomes in 2010–11. The aggregate increase in outcomes was 3.3 percent, requiring an increase of $19.3 million in state appropriations. THEC’s recommendation for MTSU in this regard would be an increase in state appropriations of $1,961,800.

These recommendations have been submitted to the Department of Finance and Administration for consideration in the governor’s proposed budget.