KRS 164.092: Comprehensive funding model for the public postsecondary education

system -- Legislative findings and declarations -- Separate funding formulas

for public university sector and KCTCS sector -- Distribution of funds --

Annual certification of fund ing distribution amounts -- Postsecondary

education working group -- Administrative regulations -- Postsecondary

education performance fund.

(1) For purposes of this section:

(a) "Category I and Category II square feet" means square footage that falls under

space categories as defined by the Postsecondary Education Facilities

Inventory and Classification Manual published by the United States

Department of Education;

(b) "Comprehensive university" has the same meaning as in KRS 164.001;

(c) "Council" means the Council on Postsecondary Education;

(d) "Equilibrium" means a condition in which every institution has an

appropriately proportionate level of resources as determined by the

performance funding model established in this section given each institution's

level of productivity in achieving student success outcomes, course

completion outcomes, and other components included in the model;

(e) "Formula base amount" means an institution's enacted general fund

appropriation amount minus debt service on bonds and appropriations for

mandated programs;

(f) "Hold-harmless provision" means a provision included in the funding

formulas as described in subsection (9) of this section that prevents a

reduction of a designated portion of funding for an institution through

operation of the funding formula;

(g) "Institution" means a college in the Kentucky Community and Technical

College System or a public university;

(h) "KCTCS" means the Kentucky Community and Technical College System;

(i) "KCTCS institution allocable resourc es" means the formula base amount net

of any equity adjustment as described in subsection (7)(b) of this section, any

amount protected by a hold -harmless provision, and any applicable increase

or decrease in general fund appropriations;

(j) "Mandated program" means a research or public service activity that is not

integral to the instructional mission of the institution and is identified by the

General Assembly in the biennial budget;

(k) "Nontraditional age students" means students between t he ages of twenty-five

(25) and sixty-four (64);

(l) "Performance fund" means the postsecondary education performance fund

established in subsection (13) of this section;

(m) "Research universities" means the University of Kentucky and the University

of Louisville;

(n) "Stop-loss provision" means a provision included in the funding formulas as

described in subsection (9) of this section to limit reduction of an institution's

funding amount to a predetermined percentage, notwithstanding the amounts

calculated by operation of the formula; and

(o) "University allocable resources" means the formula base amount net of any

small school adjustment as described in subsection (5)(c) of this section, any

amount protected by a hold -harmless provision, and any applicabl e increase

or decrease in general fund appropriations.

(2) The General Assembly hereby finds that improving opportunity for the

Commonwealth's citizens and building a stronger economy can be achieved by its

public college and university system focusing its efforts and resources on the goals

of:

(a) Increasing the retention and progression of students toward timely credential

or degree completion;

(b) Increasing the number and types of credentials and degrees earned by all types

of students;

(c) Increasing the number of credentials and degrees that garner higher salaries

upon graduation, such as science, technology, engineering, math, and health,

and in areas of industry demand;

(d) Closing achievement gaps by increasing the number of credentials and

degrees earned by low -income students, underprepared students,

underrepresented students, and nontraditional age students; and

(e) Facilitating credit hour accumulation and transfer of students from KCTCS to

four (4) year postsecondary institutions.

(3) (a) The General Assembly hereby declares these goals can best be accomplished

by implementing a comprehensive funding model for the allocation of state

general fund appropriations for postsecondary institution operations that

aligns the Commonwealth's investments in postsecondary education with the

Commonwealth's postsecondary education policy goals and objectives.

(b) The General Assembly further recognizes that priority for state general fund

appropriations for postsecondary institutions should be given to each

institution's funding floor over appropriations to the performance fund. For

purposes of this section, "funding floor" means an institution's fiscal year

2020-2021 general fund appropriation included in 2020 Ky. Acts ch. 92, plus

any fiscal year 2020 -2021 distribution from the performance fund, and minus

fiscal year 2020-2021 debt service on bonds and appropriations for mandated

programs.

(4) This section establishes a comprehensive funding model for the public

postsecondary education system to be implemented by the Council on

Postsecondary Education. The funding model shall include a public university

sector formula and a KCTCS sector formula, and shall not include any race -based

metrics or targets in the formulas.

(5) The funding formula for the public university sector shall:

(a) Recognize differences in missions and cost structures between research

universities and comprehensive universities to ensure that neither are

advantaged or disadvantaged during the first full year of implementation;

(b) Distribute one hundred percent (100%) of the university allocable resources

for all universities in the sector, based on rational criteria, including student

success, course completion, and operational support components, regardless

of whether state funding for postsec ondary institution operations increases,

decreases, or remains stable;

(c) Include an adjustment to minimize impact on smaller campuses as determined

by the council; and

(d) Be constructed to achieve equilibrium, at which point the funding formula

rewards rates of improvement above the sector average rate.

(6) Funding for the public university sector shall be distributed as follows:

(a) Forty percent (40%) of total university allocable resources shall be distributed

based on each university's share of total student success outcomes produced,

including but not limited to:

1. Bachelor's degree production;

2. Numbers of students progressing beyond thirty (30), sixty (60), and

ninety (90) credit hour thresholds;

3. Science, technology, engineering, math, and hea lth bachelor's degree

production; and

4. Bachelor's degrees earned by low-income students and underrepresented

students;

(b) Thirty percent (30%) of total university allocable resources shall be

distributed based on each university's share of sector total student credit hours

earned, excluding dual credit enrollment, weighted to account for cost

differences by academic disciplin e and course level, such as lower and upper

division baccalaureate, master's, doctoral research, doctoral professional, and

nontraditional age students; and

(c) Thirty percent (30%) of total university allocable resources shall be

distributed in support of vital campus operations as follows:

1. Ten percent (10%) shall be distributed based on each university's share

of Category I and Category II square feet, net of research, nonclass

laboratory, and open laboratory space, to support maintenance and

operation of campus facilities and may include a space utilization factor

as determined by the council in collaboration with the working group

established in subsection (11) of this section;

2. Ten percent (10%) shall be distributed based on each university's share

of total instruction and student services spending, net of maintenance

and operation, to support campus administrative functions; and

3. Ten percent (10%) shall be distributed based on each university's share

of total full -time equivalent student enrollme nt to support academic

support services such as libraries and academic computing.

(7) The funding formula for the KCTCS sector:

(a) Shall distribute one hundred percent (100%) of KCTCS institution allocable

resources for all KCTCS colleges based on rationa l criteria, including student

success, course completion, and operational support components, regardless

of whether state funding for postsecondary institution operations increases,

decreases, or remains stable;

(b) May include an adjustment to account for community economic disadvantage

in some regions of the Commonwealth as determined by the council; and

(c) Shall be constructed to achieve equilibrium, at which point the funding

formula rewards rates of improvement above the sector average rate.

(8) Funding for the KCTCS sector shall be distributed as follows:

(a) Thirty-five percent (35%) of total KCTCS institution allocable resources shall

be distributed based on each college's share of total student success outcomes

produced, including but not limited to:

1. Certificate, diploma, and associate degree production, weighted to

provide a premium for credentials that are aligned with the economic

needs of the state;

2. Numbers of students progressing beyond fifteen (15), thirty (30), and

forty-five (45) credit hour thresholds;

3. Credentials earned by low -income students, underprepared students,

underrepresented students, and nontraditional age students; and

4. Transfers to four (4) year institutions;

(b) Thirty-five percent (35%) of total KCTCS institution al locable resources shall

be distributed based on each college's share of total student credit hours

earned, weighted to account for cost differences by academic discipline; and

(c) Thirty percent (30%) of total KCTCS institution allocable resources shall be

distributed in support of vital campus operations as follows:

1. Ten percent (10%) shall be distributed based on each college's share of

Category I and Category II square feet, net of research, nonclass

laboratory, and open laboratory space, to support ma intenance and

operation of campus facilities and may include a space utilization factor

as determined by the council in collaboration with the postsecondary

education working group established in subsection (11) of this section;

2. Ten percent (10%) shall be distributed based on each college's share of

total instruction and student services spending, net of maintenance and

operation, to support campus administrative functions; and

3. Ten percent (10%) shall be distributed based on each college's share of

total full -time equivalent student enrollment to support academic

support services such as libraries and academic computing.

(9) (a) The funding formula for both sectors shall include:

1. A hold -harmless provision for fiscal year 2018 -2019 preventing a

reduction in an institution's funding amount based solely on the formula

calculation, and allowing a hold -harmless amount determined by the

formula in fiscal year 2018 -2019 to be deducted from an institution's

formula base amount in whole or in part in fiscal y ears 2019-2020 and

2020-2021, as determined by the council;

2. A hold -harmless provision for fiscal year 2021 -2022, and every fiscal

year thereafter, preventing a reduction in an institution's funding amount

based solely on the formula calculation;

3. A stop-loss provision for fiscal year 2019 -2020 limiting the reduction in

funding to any institution to one percent (1%) of that institution's

formula base amount;

4. A stop-loss provision for fiscal year 2020 -2021 limiting the reduction in

funding to any institution to two percent (2%) of that institution's

formula base amount; and

5. A stop -loss provision for fiscal year 2021 -2022, and every fiscal year

thereafter, li miting the reduction in funding to any institution to zero

percent (0%) of that institution's formula base amount.

(b) Paragraph (a) of this subsection shall not be construed to limit the level of a

budget reduction that may be enacted by the General Assem bly or

implemented by the Governor.

(10) (a) By May 1 each year, the council shall certify to the Office of the State Budget

Director the amount to be distributed to each of the public universities and

KCTCS as determined by the comprehensive funding model created in this

section, not to exceed the available balance in the performance fund.

(b) The Office of the State Budget Director shall distribute the appropriations in

the performance fund for that fiscal year to the institutions in the amounts the

council has certified. The adjusted appropriations to each institution shall be

allotted as provided in KRS 48.600, 48.605, 48.610, 48.620, and 48.630.

(c) 1. The certified amounts distributed from the performance fund to the

institutions are nonrecurring funds that shall not be included in the

institutions' base budget amounts submitted in their biennial budget

requests.

2. The certified amounts distributed from the performance fund in the

previous fiscal year shall be included in the performance fund's base

budget amount submitted by the council in the biennial budget request.

(d) For fiscal year 2017 -2018, the Office of the State Budget Director shall

distribute to the public postsecondary education institutions, except for

Kentucky State University, those fun ds appropriated to the performance fund

by the General Assembly in 2016 Ky. Acts ch. 149, Part I, K., 12., in

accordance with the comprehensive funding model created in this section.

(11) (a) The Council on Postsecondary Education is hereby directed to est ablish a

postsecondary education working group composed of the following:

1. The president of the council, who shall serve as chairperson of the

working group and a nonvoting member;

2. The president or designee of each public postsecondary institution,

including the president of KCTCS;

3. The Governor or designee;

4. Five (5) members of the House of Representatives appointed based on

proportional political affiliation in the House, with members of the

majority appointed by the Speaker of the House and memb ers of the

minority appointed by the Minority Floor Leader of the House; and

5. Five (5) members of the Senate appointed based on proportional

political affiliation in the Senate, with members of the majority

appointed by the President of the Senate and me mbers of the minority

appointed by the Minority Floor Leader of the Senate.

(b) Beginning in calendar year 2026 and every four (4) calendar years thereafter,

the postsecondary education working group shall convene to determine if the

comprehensive funding model is functioning as expected, identify any

unintended consequences of the model, and recommend any adjustments to

the model. The council may call the working group to convene prior to the

start of the required calendar year to allow sufficient time for the group to

complete its work.

(c) The results of the review and recommendations of the working group shall be

reported by the council to the Governor, the Interim Joint Committee on

Appropriations and Revenue, and the Interim Joint Committee on Educatio n

by December 1 of each year the working group convenes.

(12) The council shall promulgate administrative regulations under KRS Chapter 13A to

implement the provisions of this section.

(13) (a) The postsecondary education performance fund is hereby establi shed as an

appropriation unit to support improvement in the operations of the public

postsecondary institutions and achievement of the Commonwealth's education

policy goals and workforce development priorities. General fund moneys may

be appropriated by th e General Assembly to this fund for distribution to the

public postsecondary institutions in amounts determined through the

comprehensive funding model created in this section.

(b) Any balance in the performance fund at the close of any fiscal year shall n ot

lapse but shall be carried forward to the next fiscal year and be continuously

appropriated for the purposes specified in this section. A general statement

that all continuing appropriations are repealed, discontinued, or suspended

shall not operate to repeal, discontinue, or suspend this fund or to repeal this

action.