Limit Formula Funding to 80 Credit Hours for Doctoral Students

The Legislature should eliminate formula funding for graduate students who accumulate more than 80 credit hours beyond their master s degrees.

More than 50 years ago, Texas pioneered the use of funding formulas in higher education. Today, more than 30 states use some variation of formula funding. 1

Before Texas adopted this system, higher education institutions appropriations were determined primarily by intense legislative lobbying. 2 Formula allocation is de signed to distribute state dollars equitably among colleges and universities based on quantifiable cost factors. The formulas are adopted by the Texas Higher Education Coordinating Board before each biennial legislative session, and used by the Legislature as a basis for setting appropriations. However, the Legislature maintains a degree of flexibility within this process; the formulas are rarely funded at 100 percent.

Texas formula system is based on many factors, the most important of which is semester credit hours (SCHs) of instruction. SCHs drive 83 percent of all funding formulas for Texas senior colleges and universities (other formulas are based on factors such as square footage and employee wages). These formulas, in turn, determine 78 percent of Texas total higher education appropriations.

The formula system rewards institutions for enrolling as many students in as many courses as possible. However, while this may be an appropriate goal in some cases, it may also prompt institutions to enroll s tudents in unnecessary courses and to delay their graduation.

The most important single item paid through formulas is faculty salaries, which are differentiated by level of instruction (undergraduate, masters, professional and doctoral) and by program area (for example, liberal arts). Table 1 presents recommended fo rmula amounts per SCH for the 1994-95 biennium. Based on the recommended amounts, an undergraduate enrolled in a three-credit liberal arts course would generate $148 for the institution, while a doctoral level optometry student would generate $2,082 for enrollment in a three-credit course. This differential is based on higher costs for graduate students. The formula is designed to compensate for the fact that undergraduates are often taught by i nstructors or assistant professors, while doctoral and professional students are generally taught by full professors, who are paid considerably more. Also, class sizes for doctoral programs are generally much smaller than for undergraduates, which further increases instructional costs.

While the formula-funding system rewards institutions for enrolling students, it does not reward colleges for graduating students in a timely manner. In this sense, a doctoral student who completes his or her course of study in 60 credit hours is less valu able to an institution than someone who takes 150 or 200 credit hours to complete their work. Similarly, undergraduates who change majors several times generate more money for colleges than students who complete a degree pro gram in what was considered a standard four-year plan.

Most doctoral programs require about 60 semester credit hours beyond the masters degree, including about 40 hours of organized course work and about 20 hours of dissertation research. However, some students accumulate many more than the required number of credits because of repeated registration for research, dissertation and individual studies courses.

Table 1 - Recommended Rates for Faculty Salaries per Semester Credit Hour
Public Senior Colleges and Universities
Fiscal 1995

Two Year
Four Year Upper-Level Special Program Institutions Institutions Masters Professional Doctoral

Liberal Arts $ 49.54 $ 86.20 $140.26 $437.74 Science 60.96 116.98 242.18 565.24 Fine Arts 99.93 136.81 214.33 487.46 Teacher Education 49.02 51.91 115.93 362.44 Practice Teaching 100.39 100.39 Agriculture 88.50 88.50 221.52 456.22 Engineering 116.06 139.26 288.48 663.77 Home Economics 67.42 67.42 154.99 405.56 Law $135.74 Social Service 72.93 83.78 235.03 499.61 Library Science 48.61 48.61 162.13 427.01 Vocational training 57.91 57.91 Physical Training 48.03 Health Services 145.05 145.05 233.28 463.20 Nursing 147.81 147.81 252.38 496.84 Pharmacy 156.01 269.15 574.19 Business Administration 57.83 65.34 161.35 527.01 Optometry 157.55 157.55 694.27 Technology 81.50 105.14 212.94

Source: Texas Higher Education Coordinating Board, Board Meeting Minutes, July 1992.

Students are required to maintain continuous enrollment as they work on their doctoral degree. Continuous enrollment, however, is not well defined and practices vary widely. Some colleges require students to enroll for three credit hours, while others require students to enroll for six, nine or even 12 to 15 credit hours. These requirements, in turn, drive up formula funding amounts. In addition, universities often employ these same students to teach undergraduates, generating undergraduate SCHs for formula funding. In some respects, then, doctor al students have become cash cows for institutions. It actually becomes profitable to keep students from getting their degree and undercuts any effort, such as performance-based budgeting, to reward colleges for graduating students in a reasonable time frame.

The Coordinating Board has found a significant amount of variation in the number of hours presented for formula funding. There are numerous cases in which students accumulate in excess of 200 SCHs. At $600 per credit hour, a student with this many credits would accrue $120,000 in formula costs to the state for his or her doctoral degree. The average number of hours accumulated by doctoral students at some schools is nearly twice as high as those accumulated at other institutions. (See Table 2.) Also , there is significant variation in the number of hours accumulated by students in the same discipline in different schools.

Table 2 - Semester Credit Hours Attempted by Doctoral Students With Credit Hours
in Excess of 80 and 160, by Institution, 1991-92 Academic Year

Institution 81+SCHs 161+ SCHs

East Texas State University 805 71
Lamar University 137 24
Sam Houston State University 3 0
Texas A&I University 65 0
Texas A&M University 10,754 1,126
Texas Southern University 444 39
Texas Tech University 6,459 1,013
Texas Women s University 1,507 56
University of Houston 12,797 3,810
University of North Texas 4,454 284
University of Texas at Arlington 2,324 373
University of Texas at Austin 14,962 1,070
University of Texas at Dallas 3,041 344
University of Texas at El Paso 109 12

Source: Texas Higher Education Coordinating Board, Division of Research, Planning and Finance.

Eliminate formula funding for any doctoral student who has accumulated more than 80-credit hours beyond a master s degree.

This can be accomplished by reducing general revenue appropriations to doctoral-granting institutions by the formula-genera ted amount produced by these students. Institutions could continue to serve these students, however, they must be supported from local funds.

Limiting formula funding for students with excessive credits may provide schools with an incentive to graduate students in a timely manner. It also enhances equity among institutions, since colleges that require students to enroll for fewer credits to rema in continuing students will not be punished. It should result in more uniform practices regarding requirements for continuous enrollment.

This recommendation would reduce general revenue support for doctoral granting institutions. In effect, when students exceed the 80-credit hour limit, the cost of serving these students would be excluded from the formula calculations. To that extent, the f ormula would not reflect true costs. Also, additional administrative duties will be required to determine which students have exceeded the 80-credit maximum.

Fiscal Impact
The Texas Higher Education Coordinating B oard estimated that an 80-credit cap for formula-funding purposes would have reduced the formula generated amounts for faculty salaries by $27.1 million, based upon data collected for the 1991-92 academic year.

Since the formula was funded at 88.8 percent in fiscal 1992, the actual general revenue savings from faculty salaries would have been $24.1 million (88.8 percent of $27.1 million), representing a decrease of 3.3 percent in total appropriations for faculty salaries.

Other formulas which are based upon SCHs are General Institutional Expense, Departmental Operating Expense and Library. If a similar reduction were made in appropriations for these formula elements, an additional $7.0 million would be saved. Therefore, the estimated savings from this po licy based upon 1992 spending is $31.1 million annually. If the formula amounts for faculty salaries are increased by the Legislature, additional savings would be realized.

Savings to the
Fiscal General Revenue Change
Year Fund 001 FTEs

1994 $31,100,000 0
1995 31,100,000 0
1996 31,100,000 0
1997 31,100,000 0
1998 31,100,000 0

1 Mary P. McKeown, Funding Formulas, in American Education Finance Association, Values in Conflict: Funding Priorities for Higher Education , Mary P. McKeown and Kern Alexander editors (Cambridge, Massachusetts: Ballinger Publishing Company, 1986), p. 73.
2 Texas Research League, An Analysis of the Texas Higher Education Formula System, Report to the Select Committee on Higher Education (Austin, Texas, November 1986), p. 5.