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State Budget Formula Rewards Retention, Graduation

Fiscal year 2013–14 will be the third and final year of implementation of the state’s new outcomes-based funding formula, as called for in the Complete College Tennessee Act. Under the act, productivity rather than sheer enrollment drives state funding distribution. 

Based on this final phase, MTSU’s 2013–2014 recurring state funding will be reduced by $1,752,100. However, the Tennessee Higher Education Commission (THEC) voted at its November 2012 meeting to propose new state funding totaling $35,500,000 for higher education institutions. MTSU’s share of the proposed new funding will be $3,470,600. Thus, MTSU’s state funding could actually increase by a net of $1,718,500.

The commission voted to recommend $7,590,000 in Capital Maintenance funds for MTSU projects, including the Murphy Center roof/ceiling replacement project; the Central Plant cooling tower replacement project; the Absorption Chiller/ Tower replacement project; the Jones Hall plumbing update project; and various projects entailing electrical updates to campus buildings.

THEC’s recommendations have been submitted to the Department of Finance and Administration for consideration in the proposed budget that Governor Bill Haslam will be submitting to the state legislature in the coming weeks. At that point, we will have more information regarding our likely 2013–14 state appropriations.

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.

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