For the first time in Ohio history, half of the taxpayer money that goes to public universities could be tied to whether their students actually graduate — a change called “bold” by Gov. John Kasich and a group of college presidents.

The recommendation is at the heart of an effort to improve the rate at which Ohioans are earning college degrees. Currently, less than half of the nearly 438,000 students who enter public colleges in Ohio graduate. Kasich in September challenged college and university presidents to dramatically redesign the funding formula for higher education to hold schools more accountable for graduating students instead of tying money to how many students are enrolled.

The final recommendations were unveiled in Columbus on Friday, but no funding amounts were presented for individual schools. Kasich said he will use the report to divvy up the $1.75 billion in state funding for higher education for each year of his two-year budget when he submits it in February. Lawmakers will also need to approve the new formula. If implemented, Ohio would be unique in the country for its funding approach.

“There is no one else in this country doing what we’re doing right now,” said Ohio State University President E. Gordon Gee, who led effort of the Ohio Higher Education Funding Commission, which was made up of college presidents and presidents of the Inter-University Council and Ohio Association of Community Colleges.

“We collectively have made a historic decision. We’re going to lead this nation. There’s no doubt about that,” Gee said, adding this announcement may be the most important moment in his 32-year career in higher education.

The proposed formula would place Ohio at the forefront nationally for how much money is tied to performance, said Kevin Corcoran, of the Lumina Foundation, the country’s largest nonprofit dedicated to higher education that has piloted with Ohio to improve graduation rates. Kasich also vowed he will not cut money to higher education in his budget, which will begin in July.

The governor called the work by the commission “just amazing… This isn’t easy. It has to be implement and executed, and we’re not done.”

‘Significant change’

The proposed formula also affects community colleges, and in the first year it would tie 25 percent of their funding to course completion, 25 percent to success points and 50 percent to enrollment. Community colleges will make additional changes to the formula for the second year of the budget.

“We have a very significant change in the first year. We’re asking for the opportunity to then improve it,” said Sinclair Community College President Steve Johnson. He said community colleges will examine what kind of credit they should get for students who transfer to four-year universities or earn certificates.

Previously, Ohio had a plan to slowly grow how much community college funding is tied to performance from its current 7.5 percent to 10 percent. “We were already moving on that pathway, but this creates a much quicker pathway,” said Clark State Community College President Karen Rafinski.

Wright State University President David Hopkins said the commission’s effort represents educators coming together and committing to do what is best for students and families in Ohio by building a formula that focuses on the goals higher education cares about the most.

“We care deeply about the success of our students,” said Hopkins, who served on the commission. “I think it’s really challenging us to think of more innovative ways to get people to the finish line.”

“The winners here are definitely the citizens of Ohio and every student who goes to college,” said Central State University President Cynthia Jackson-Hammond.

‘Different mission’

For universities, the new formula will negatively impact institutions who admit students and do not do everything they can to graduate them, said Bruce Johnson, president of the Inter-University Council.

Corcoran said controls can be built into performance-based funding to monitor issues, such as grade inflation. He added about half of U.S. states have some sort of performance funding, but most tie about 10 percent of money to graduation. In Ohio’s case, it is significant that every college and university president signed onto the report, he said. The Lumina Foundation supports performance funding.

“We believe that money drives behavior,” Corcoran said. “That incentives matter. And if institutions have incentives to care about whether students graduate or not, that they will care about that and they’ll actually start to think about what they can do differently.”

Bruce Johnson said it is important for Ohio to focus on graduating more students because 60 percent of new jobs will require a degree in 10 years.

“And if we currently produce degrees at the prevailing rate, we’re going to come up several hundred thousand short,” he said. “We’re going to have job openings that are not being filled by people who are qualified and that’s a huge economic development crisis for the state.” Only about 36 percent of working-age Ohioans currently have a college degree, according to Lumina.

The new formula also recognizes the need to serve different students, and rewards institutions that serve “at-risk” students, as well as those pursuing a science, technology, engineering or math degree, and students who come from other states but stay in Ohio after graduation.

“What we’ve done in the formula is to recognize that we have a lot of different universities with a lot of different missions,” said Miami University President David Hodge, who served on the commission.

University of Cincinnati President Santa Ono said he does not expect UC’s state funding to decrease with the new formula. He noted he is diversifying UC’s revenue stream, and state funding this year makes up about $170 million of his $1.2 billion. Ono said the effort has put forth a new vision for higher education that others should emulate.

Kasich’s report is the second major higher education initiative announced this month. On Nov. 13, the Ohio Board of Regents released a new report, Complete College Ohio, that offers 20 key recommendations that include getting high school students ready for college, helping all students graduate on time and ensuring they earn degrees that connect them directly to jobs.