FILE - PA Pat Browne 10-23-2019

Pennsylvania state Sen. Pat Browne addresses a hearing Oct. 23, 2019, of the Pennsylvania Public Higher Education Funding Commission.

As state lawmakers delve into how to fund higher education in the Keystone State, they're looking to establish a funding formula that could include outcomes-based funding (OBF) as part of their approach.

OBF is a hot-button topic within the higher education space and generally rewards institutions for increasing their enrollment. But it could pose a problem for some schools struggling on that front.

“It really is important to create a process that has deep and sustained involvement from each postsecondary sector,” Kate Shaw, executive director of Research for Action and a former deputy secretary of postsecondary and higher education in the Pennsylvania Department of Education, said in testimony before the Public Higher Education Funding Commission.

“When the fiscal pie itself is small, you can get pretty intense competition across those sectors for those resources, and the stakes become even higher when those resources are going to be distributed based on performance,” Shaw said. “It’s not as though you will have a kumbaya moment if you include all the sectors, but you will ensure that every consideration from each sector is put on the table and weighed against each other when you’re crafting a policy.”

The 19-member Public Higher Education Funding Commission, established by Act 70, will deliver a report of its findings and recommendations to lawmakers and Gov. Tom Wolf. The proposed formula will only go into effect if the Legislature enacts it as law.

"The theory behind outcomes-based funding is that it makes a direct alignment between the state's finance policy and the state goals," Scott Boelscher of HCM Strategists, a public policy firm, told the commission members. "... It has the ability to influence institution actions through financial incentives, is what springs to mind first, but also through awareness of state priorities and awareness of institutional performance. And it provides incentives to adopt and scale evidence based student success best practices."

Boelscher said this contrasts with past practices where budgeting was only increased or decreased based on funding availability, or based on outdated metrics that didn't drive educational goals effectively.

“It’s really important for us to collectively determine what we want out of this,” state Sen. Pat Browne, R-Lehigh County, said. “In the 25 years I’ve served, the commonwealth has really not had a higher education strategy, goals and priorities in terms of what we would want out of a very diverse system. What we would potentially produce, or recommend to produce out of here, needs to start with this commission deciding what we want to get out of it.”

Pennsylvania has a unique mix of higher education institutions that includes public schools, such as community colleges and state-owned schools, said Patricia Landis, bureau director of the state Department of Education's Bureau of Postsecondary and Adult Education. The mix also has state-aided private, nonprofit institutions and private, for-profit schools.

“I really think in the planning and implementation process, you have to try to level that playing field, and we have a really profoundly unlevel playing field in this state, which makes us just like every other state,” Shaw said. “It’s not unique to Pennsylvania, but it becomes a more acute problem under OBF.”

Shaw added: “You have to make sure that you’re reviewing your data all the time, and you have to … create a balance between making sure that your formula is stable enough that institutions can adjust to it and making sure that you’re flexible enough to adjust for unintended consequences.”