As enrollment for post-secondary education rapidly increases, so does the struggle to efficiently distribute funding. This year, Ontario will explore moving to a differentiated system. This would require post-secondary institutions to identify a certain area to specialize in — such as a specific subject area, research intensity, or vocation — as funding will be allocated based on these specialties.

In Tennessee, foregoing enrollment-based funding completely for an outcome-based funding formula has proved to be a more successful method for publicly funding education. An outcome-based funding model distributes funds based on the productivity and efficiency of institutions. This is measured through variables such as graduation rates: number of degrees given at the bachelor’s, master’s, and phd levels, as well as program and student accreditation and satisfaction.

Such a model encourages institutions to shift priorities to maximize the success of currently enrolled students, rather than simply enrolling more students.

Currently, full-time enrollment is a primary factor in distributing funds, with over 90 per cent of Ontario’s Ministry of Training, Colleges and Universities’ grants going towards the operating budgets of post-secondary institutions, distributed according to enrollment rates. The rest of the funds depend on factors such as meeting certain government objectives and research intensity. U of T, which has the highest enrollment rate in the province, receives up to $616,772,000 — more than double that of York University, which receives the second-highest amount of funding from the province.

Enrollment-based funding is a common system across North America, and while it has been successful in increasing accessibility to post-secondary education, it is becoming gradually less effective as institutions are beginning to prioritize enrollment over providing value to current students.

In Ontario, an outcome-based model would benefit schools like Ryerson University, which currently receives the seventh-highest amount of funding from the province, despite granting the third-highest number of bachelor’s degrees. In the long run, such a system may shift the motivations of all institutions to focus on their graduation rates.

Before implementing the outcome-based model, Tennessee experienced what Ontario currently faces — growing enrollment accompanied by rapidly increasing operating budgets of institutions. The model is now going into its fourth year and Russ Deaton, the associate executive director for finance and administration at the Tennessee Higher Education Commission, says that it has been a success so far, as the economic incentives of institutions have become aligned with student success. Institutions have initiated various measures to focus on the needs of students more through academic advising and counselling designed to assist students who are falling behind.

However, the outcome-based model is not without its criticisms. The model works similarly to Ontario’s recently proposed differentiation framework. In Tennessee, the outcomes are weighted differently depending on the mission of the university — larger, more complex universities that have a higher degree of production are weighted more heavily than smaller, regional schools.

In Ontario’s proposed framework, U of T would be in a category on its own simply because it is so much larger than any other university in the province — both by enrollment, and research volume. When asked about whether such a system would continue to restrict smaller institutions from progressing towards a higher level, Deaton said that this was not the case in Tennessee, and that: “In fact, the best performance school in the last four years of the outcomes model has been one of our smaller bachelor’s degree-granting institutions.”

Another major concern of relying on outcomes is that institutions will eventually become degree mills, and that the quality of education will decline as increasing graduation rates becomes the primary goal of institutions in order to attain funding. Deaton acknowledges that this is a common concern of the model, but added that: “We have not seen any evidence so far that there has been a deterioration in quality. Our campuses tell us that they haven’t experienced it so far. I think that it’s a theoretical concern that we’re watching that just has not played out in a negative way here.”

Deaton credits the success of this funding formula to the efforts of campus leadership and communication with the various institutions. Throughout the process of creating the system, Deaton says “efforts to involve our campus presidents and leadership into decisions when we made the model was critical.” If  this is the case, Ontario has taken a step in the right direction with its Strategic Mandate Agreement (SMA) proposals in the fall of 2012. Institutions were asked to determine what they considered to be their mandate — their goals, strengths, and the future of their institution.

Althea Blackburn-Evans,  Acting-Director, Media Relations for U of T, says that discussions between the university and the ministry are ongoing, but that overall, the university is supportive of a differentiated system.

When asked about whether an outcome-based model would work in Ontario, the ministry responded that it was “aware of the Tennessee performance funding model, and welcomes any discussion centred around improving student outcomes and making post-secondary education in Ontario as innovative, accessible, and affordable as possible. The ministry will continue to work diligently to ensure that the evolving needs of Ontario’s post-secondary sector are met.”