The Indiana Commission for Higher Education unanimously approved a new outcomes-based formula that places heavy emphasis on how many degrees and what kinds of credentials graduates are earning.
The new formula is a much simpler approach than what was previously in place. Commissioner heard feedback from lawmakers and leaders in businesses, industry and higher education who wanted fewer metics in the formula.
“Simplicity was really an important priority in staying completely student-focused, and outcome-focused,” Indiana Secretary of Education Katie Jenner told reporters after Thursday’s meeting.
The funding provided to the state’s public colleges and universities through the formula would be on top of the base state-allocated funding. During the 2024-25 fiscal year, that funding only amounted to 1% of the state's entire pool of funding for higher education.
For the 2025-26 budget session, state lawmakers didn’t allocate any funding to the performance-based formula.
However, Jenner said she’s confident that won’t happen again in this upcoming budget session, depending on the budget forecast in the coming months.
“So while 1% was kind of the number in the past, and zero most recently, we should expect that to go up significantly,” Jenner said.
The state is required to approve one funding formula for all four-year public institutions and one for Ivy Tech Community College and Vincennes University for sub-associate and associate degrees.
What is in the new formula?
The formula's primary metric is degree completion. How much funding a college receives will depend on what kind of degree a student earns — sub-associate credential, associate degree, bachelor's degree or in-demand graduate degree — with higher-level credentials earning more.
However, the exact dollar amount for each kind of degree hasn’t been determined yet.
Universities can only earn this extra funding if the degree is earned by an Indiana resident.
On top of that, universities can earn bonus funds by showing that the degrees obtained also satisfy requirements laid out in three different buckets that center around affordability, access and alignment to the state’s workforce goals.
Cody Robison, the deputy chief financial officer for higher education, said these additions are meant to provide universities other options to earn funding based on their different abilities.
“It's meant to allow institutions to demonstrate their unique missions while staying focused on the things that we, as the state, believe and know will move the needle for students in an impactful and meaningful way,” Robison said during the meeting.
The metric weighted most heavily within the three buckets is alignment — whether a credential includes hands-on work experience tied to employer needs, falls in a state-designated Targeted Field, or scores a 3 or higher on the the state’s Credentials of Value list.
Indiana has had a performance-based funding formula since 2003, and the metrics that are used in the formula have changed over time.
In past formulas, there was a retention component, giving weight to universities whose graduates remained in the state. However, the delayed data caused the funding to be held back.
The new formula is now based on more timely data, Jenner said, delivered by universities more quickly, and the state can feel more confident in its accuracy as well.
“We've got to tighten it up so that the outcomes we're producing, the incentive is very very fast, and the return is very very fast,” Jenner said.
For the first time, the formula will also take into account what students gain even in high school, and the Indiana College Core will also be used in the formula if it is earned by a current Indiana high school student.
The only special student demographic that is included in the formula is students who earn a credential through one of the state’s financial aid programs like the 21st Century Scholars or the Frank O’Bannon Grant.
The formula will now be presented to the State Budget Committee this fall, and recommended appropriations based on the formula will be included in the commission's budget recommendations sent to state lawmakers.
The new formula takes effect for the 2027-28 fiscal year and will remain in place for two years.
Contact WFYI Government Reporter Caroline Beck at cbeck@wfyi.org.
