Welcome to the New Year and the first Friday after the holiday recess. This report continues discussion found in the December 5, 2003, First Friday regarding public funding issues in Arkansas higher education. An attachment to that report depicted early work on a “new” funding formula being developed by the Department of Higher Education.

There have been additional discussions among the universities to refine the first iteration of the formula, and the following changes are depicted on Attachment A of today’s report:

• Since all of higher education is funded from the same “pot” of money, and we realize our proportional share of the “pot” in relation to other institutions, it seems worthwhile to consider on the same page all entities which receive appropriations. That way, we can all see clearly what the proposed distributions will be to everyone, including the medical campus and division of agriculture (two big budgets), and the smaller entities, such as technical centers and system budgets. Attachment A shows a range of all of the larger institutions, their budget figures and other details.
• It seems worthwhile to define a “least appropriation” scenario, historically a sum sufficient to equal 2.7% of educational and general budgeted salaries, excluding auxiliary salaries and those paid by grants. That sum is indicated for each entity on the yellow line, or fifth row of numbers. For ASU-Jonesboro, our number is $947,267, using 2002-03 salary data.
• It seems important to establish an arbitrary baseline (in this case 75%) to identify equity needs for those entities which currently fall below a specific level of full formula funding requirements. The sixth row of numbers indicate that Arkansas Tech University and the medical campus have equity needs, but that the rest of us fall somewhere above 75% of full funding requirements without additional appropriation of new money.
• When every increase is factored in the distribution of new money necessary to achieve 75% of recommendation and 2.7% salary money, ASU-Jonesboro receives 7.07% ($947,267) of the $10,575,252 in new money required for these objectives.
• We also wondered in the last report how a formula distribution could be scaled in an equitable manner if varying amounts of appropriations were received, as indicated toward the bottom of Attachment A. For example, if $50,000,000 in new money could be found and appropriated to higher education, ASU-Jonesboro would receive $3,729,580 in addition to the 2.7% salary figure of $947,267.

As we study Attachment A, we can see that our sister university, the University of Central Arkansas, which has fewer students, passes the ASU-Jonesboro distribution as more than $100,000,000 is appropriated. UALR, a companion institution similar to our size and scope of programs, starts out ahead of ASU-Jonesboro in appropriations required, even though their enrollment and 2.7% salary adjustment need is less than ours. How can these variations occur if we follow the formula?

Answers may be found in Attachment B, which defines how the ASU-Jonesboro formula is defined. The formula is derived from a matrix which includes the cost of various teaching disciplines at the university, the definition of FTE faculty required to teach the credit hours generated in those disciplines, and the average salaries needed to pay faculty at the undergraduate, graduate (masters and specialists), and doctoral levels. A summary of related expense allocations is included toward the bottom of the page. Several things may be seen by comparing these charts for all universities:

• Among the Level 3 institutions (UCA, UALR, and ASU-J), we have fewer post-baccalaureate credit hours than our peers. UCA passes us, and UALR begins ahead of our appropriation because of graduate-level enrollments.
• More money is produced in the formula by post-baccalaureate credit hour activity.
• Although ASU-Jonesboro has remained relatively constant in FTE student enrollments, other institutions have increased enrollments and credit hour production to the point that our share of the formula distribution has been diminished.
• These data reflect only the four-year universities and big budget entities, but not the two-year institutions. If the “whole pie” includes all providers, the two-year schools have increased their share of the pie faster than other entities, and they have a different funding methodology.
• Some aspects of the expense categories at the bottom of the formula page are still being defined, such as funding for facilities or library costs, but the numbers depicted typically do not reflect actual expenses necessary in these areas.

This information is provided to prompt your response to any aspect of the formula distribution plan or the conceptual basis of this developmental effort. Your commentary will be helpful in several respects:

• It will help form our response to ADHE and the legislature about a method of distribution of funds which seems equitable to all of us. Or, if something appears out of order, commentary will help us bring things forward in discussion and resolution.
• The collective response will represent a unified voice for higher education instead of fragmentary approaches to funding, an aspect of previous operations which has been faulted by the contemporary Legislature.
• Our local responses and considerations will be important in our current strategic planning activity. For example, if we determine to focus on post-baccalaureate credit-hour production, we may develop specific plans and focused activities to achieve those goals.
• If we can produce an equitable formula and understand how our campus activity changes the delivery of funds, we may determine how additional funding can be produced.

Much more work remains to be done on the funding formula, but any iteration of a needs-based formula indicates that more money is needed for higher education in Arkansas. That objective also will require much more work before our funding needs are realized, but we can start on it today.

I would welcome and value your comments on this material, and urge that you contact me at president@astate.edu.

Les Wyatt, President