Performance-Based Funding

The Kentucky General Assembly implemented a performance-based funding model with the passage of SB 153 in the 2017 Regular Session. The legislature determined that a need existed for a funding model that would align the Commonwealth’s investment in postsecondary education with state policy goals and objectives. The model focuses on student completion and ensuring that Kentucky’s educational attainment level for adults increases from 45% to 60% by the year 2030.

Additional aims of the model are to increase student persistence, increase the number of credentials awarded to all students (especially low-income and underrepresented), and to increase the number of credentials awarded in STEM+H field and those deemed high-wage and high-demand.

The passage of SB 135 in the 2021 session of the Kentucky General Assembly established a new funding floor for colleges and universities based on the current state appropriation. Moving forward, new funding will move into the performance-based funding model that would reward institutions for their performance in key metrics that emphasize the student completion of credentials, student progressions, successful transfer, and completion of courses. Additional metrics in the model recognize institutional space dedicated to student learning and spending in key student and academic affairs areas.

The model was updated in the 2024 legislative session through Senate Bill 191. Some metrics are now based on three-year rolling averages (other than Maintenance & Operations) and a Community Needs Index was added while other metrics were removed. Weighting was adjusted in several metrics as well. 

Components of the model are discussed in additional detail below.

Student Completion (Semester Credit Hours) - 35%

• Three-year average of credit hours passed (weighted by 2-digit CIP code) within the academic year by delivering college. Passing grade is defined as A, B, C, D, or P.
  Weights: Low-Cost Program Areas=1.0; Medium-Cost Program Areas=1.5; High-Cost Program Areas=2.0.

Student Success 

• Community Needs Index: (Adjustment outside model; 10%): The Community Needs Index (CNI) is a normalized (z-score) measure of community economic disadvantage based on 5-year American Community Survey estimates measuring unemployment, labor force participation, and individual poverty. Counties are aligned to colleges via the enrollment cluster crosswalk.
• Adult Credentials (4%): Three-year average of earned credentials (certificates, diplomas, and associate degrees) awarded to individuals between 25-64 years of age.
• Credentials Tied to the Economy (8%): Three-year average of credentials awarded by college tied to occupations identified as critical to the economic infrastructure of the
  United States.
• Low-Income Credentials (4%): Three-year average of credentials awarded to low-income students (Pell recipient at any KCTCS college in any academic year [AY] between
  2005-06 and the AY the credential(s) was awarded).
• Underprepared Credentials (4%): Three-year average of credentials awarded to underprepared students (students who tested into developmental English, math, or reading
  as a first-time, credential-seeking student/transfer since 2010-11).
• First-Generation Credentials (4%): Three-year average of credentials earned by first-generation students at KCTCS; students are considered first-generation if at least one
  parent was reported as having less than a college-level education and neither parent education level is college-level on any FAFSA through the degree award year.
• Progression (1%/2%/4%): Three-year average of the number of students reaching or surpassing 15, 30, or 45 cumulative earned credits for the first time in a given academic year by home college. Earned credits are defined by non-developmental passed credit hours including transfer and other articulated credits. Students are only counted in the highest progression bucket within the academic year.
• Transfer (4%): Three-year average of transfers in an academic year calculated based on a cohort of students enrolled at KCTCS in the prior academic year who enrolled at a four-year institution between the term end date of their maximum KCTCS enrollment term in the
  prior academic year through June 30th of the academic year. Exclusions: students who re-enrolled at KCTCS in the academic year, students who enrolled at a non-KCTCS, non-four-year institution within the noted timeframe prior to the four-year institution, and students
  who were previously reported as a four-year transfer (from 2008-09 through current).

Campus Operations - 30%

• Maintenance & Operations (10%): Square Footage: distributed based on total instructional and non-Instructional square feet as reported to CPE in Fall 2024. Previous years' data lagged one year. **Based on fiscal year; not a three-year average.
• Institutional Support (10%): Three-year average direct cost share in thousands of dollars, distributed based on each institution’s share of direct instructional and student services costs per fiscal year (as reported on KCTCS’ audited financial statements).
• Academic Support (10%): Three-year average of academic year Full-Time Equivalent (FTE): distributed based on each delivering institution’s share of total FTE student enrollment. FTE calculation: sum of total credit hours taken by a student in an academic year divided by 30.