SB3250

SECTION 1. The legislature finds that the University of Hawaii is accountable to the legislature and should be accountable for its funds in a manner that is consistent across the campuses and understandable by the legislature and the public. This necessitates that the goals of the system's strategic plan shall be measurable terms that relate to fiscal allocations. The overall purpose of this measure is to delineate a budgeting system.

The University of Hawaii has been developing a long-term finance plan pursuant to a request from the legislature to establish such plan under Senate Concurrent Resolution No. 137, adopted in 2007. Additionally, Senate Concurrent Resolution No. 79, adopted in 2007, requested the University of Hawaii to report on the linking of funding for individual campuses and performance goals, which would require the University of Hawaii to develop a budgeting system that reflects achievements, challenges, and needs.

Presently, the University of Hawaii's operational funding is determined each fiscal biennium based on specific program and personnel requests. In addition, supplemental budget requests are prepared for the second year of each fiscal biennium to address unforeseen issues and funding deficiencies that have arisen after the biennium budget has been approved and funds allocated. State appropriations for the University of Hawaii fluctuate based on current spending needs and state general revenue levels.

As a guide, the University of Hawaii system strategic plan was prepared in 2002 as a means for the university to chart its course through 2010. The strategic plan outlined the University of Hawaii's vision, mission, commitments and core values, and planning imperatives. The plan identified the following key strategic goals for the university as a means of advancing its strategic imperatives, including:

(1) Educational effectiveness and student success;

(2) A learning, research, and service network;

(3) A model local, regional, and global university;

(4) Investment in faculty, staff, students, and their environment; and

(5) Resources and stewardship.

During fiscal year 2007-2008, the University of Hawaii reexamined its strategic plan to update it for the next eight years. As the only public higher education institution in the State, the University of Hawaii is largely responsible for helping the State meet its higher education needs, which include:

(1) Increasing the educational capital of the State;

(2) Expanding workforce development initiatives;

(3) Assisting in diversifying the economy; and

(4) Addressing underserved regions and populations of the State, particularly the native Hawaiians.

These goals are being incorporated into the strategic plan that will guide the university through 2015.

The next step is to develop a finance plan to reach the strategic goals. The goal is to develop an educational compact which would define the long-term goals to address Hawaii's major economic challenges and align the University of Hawaii to the achievement of these goals. In turn, the university would be accountable for meeting performance standards. The higher education compact would be used to clearly link funding for the university with specific goals and performance measures.

Developing the educational compact requires delineating a finance plan which would link the strategic plan goals to accompanying funding. Thus, there will be a long-term component to the financial plan that indicates the long-term costs of achieving the strategic goals and by providing long-term funding targets for each institution within the University of Hawaii system. There will also be a medium-term component to the finance plan that will cover three biennium periods, starting with the 2009-2011 biennium budget and extending to 2015 to cover the same period as the strategic plan. The finance plan will outline the financial costs to achieve the strategic plan and will be based on measurable goals.

The long-term component will include the following:

(1) Base operating funds- the ongoing fiscal obligations that need to be adjusted for inflation and obligations such as collective bargaining;

(2) Capital improvement funding- annual and deferred maintenance obligations; and

(3) Incentive and performance outcome funding- funds provided as a result of achieving specific performance goals.

The purpose of this Act is to require the University of Hawaii to develop an incentive and performance outcome funding component for the long-range finance plan. This requirement shall attempt to accomplish the following:

(1) Increasing the legislative and public support for higher education;

(2) Allocating funds through a dual approach of incentives and performance-based funding;

(3) Monitoring the general condition of the University of Hawaii system;

(4) Identifying potential sources of problems or areas for improvement;

(5) Improving the effectiveness and efficiency of colleges and universities within the University of Hawaii system;

(6) Focusing college, campus, department, and university efforts on State priorities and goals;

(7) Assessing progress on State priorities and goals to improve graduate and undergraduate education; and

(8) Improving consumer information on higher education.

SECTION 2. (a) The University of Hawaii shall prepare an annual incentive and performance report in November of each year that reflects the success of the University of Hawaii's previous incentive and performance plans and proposes the plan for the following year. The purpose of the annual incentive and performance report is to facilitate the legislature in allocating approximately two per cent of the University of Hawaii annual budget to facilitate the university's strategic plan and related state goals; provided that:

(1) During the 2009-2011 fiscal biennium, the focus shall be on developing incentive plans that have measurable performance outcomes; and

(2) Beginning with the 2011 fiscal year, the allocation of funds shall be based on the annual incentive and performance annual report.

(b) The University of Hawaii shall include within its strategic plan, measurable goals and performance-based outcome data.

(c) The University of Hawaii shall collect and maintain records of the following data, which shall be utilized in formulating the 2009 annual report required under subsection (d):

(1) Regular admissions standards and comparisons of entering students to these standards;

(2) Remediation activities and indicators of remedial effectiveness;

(3) Enrollment, retention, and graduation data by gender, ethnicity, and program;

(4) Total student credit hours produced by institution and discipline;

(5) Amount of tuition collected and how the tuition was expended;

(6) Transfer rates to and from two-year and four-year colleges or universities;

(7) Total degrees awarded by institution and program and time to degree;

(8) Pass rates on professional licensure examinations;

(9) Placement data on graduates;

(10) Results of follow-up satisfaction studies of alumni, students, parents, and employers;

(11) Faculty workload and productivity data;

(12) Number and percentage of accredited and eligible programs;

(13) External or sponsored research funds; and

(14) Any additional relevant measurable goals and performance-based outcome data.

(d) The annual report shall describe the success of previous incentive and performance plans by analyzing the outcome performance measures in relation to the goals. The report also shall propose the following year's incentive plan, including identifying the goals and the performance outcome measures. The annual report shall reflect the following five state goals: education quality and effectiveness, access-diversity-equity, efficiency and productivity, contributions to state needs, and connection and contribution to other education sectors. The data that shall be analyzed under each category are delineated under the following state goals:

(1) Education quality and effectiveness - emphasizing undergraduate and graduate teaching and learning. Data may include standardized entrance scores; number of students in remediation; effectiveness of remediation; availability of academic programs; amount of financial commitment to instruction; student-faculty ratios; class size; percentage of students taking at least one course with fewer than fifteen students; student assessment results; student performance on nationally-normed examinations; type of faculty teaching lower-division courses; time to degree completion; course demand analysis; graduation rates; performance of graduates on licensure examinations; job placement rates; graduate and employer satisfaction; number of degrees awarded by discipline and number of degrees granted;

(2) Access-diversity-equity - changing demographics and the changing needs of the student population, including persistence and graduation rates by ethnicity and gender, availability of financial aid, faculty diversity, college participation rates, progress in affirmative action, and student demographics compared to the state population demographics;

(3) Efficiency and productivity - how well and at what cost particular goals or priorities are met, including program costs, time to degree and number of credits by institution and degree, classroom and laboratory utilization, changes to students, state appropriations per capita and per resident student, total contact hours of instruction by faculty rank, facilities maintenance, average faculty salary, and student-faculty ratios;

(4) Contribution to state needs - concerns about workforce development and economic competitiveness issues, including what programs have been modified or added to meet employer needs, the number of graduates in critical employment fields, the economic impact on the state of graduates, and the continuing education patterns; and

(5) Connection and contribution to other education sectors - concerning the educational system as a whole, including effectiveness of remedial education, feedback on performance to high schools, and research and service in support of public education.

The proposed incentive and performance plan for the following years shall include descriptions of proposals to be carried out at the program, department, campus, or system level. The incentive plan proposals shall be distributed across all levels and funding shall go back to those levels if plans are successful as demonstrated by their outcome performance measures. The plan shall include a summary of what amount or percentage of the approximately two per cent of the overall incentive and performance plan budget shall be allocated to each program, department, college, campus, or system level.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3250
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII