Changes may be in store for the way North Dakota’s colleges and universities get paid for their completed credit hours, but those changes mean different things for different campuses.

First approved during the 2013 legislative session and similar to the K-12 formula, the higher education funding formula pays colleges and universities based on the number of credit hours each campus completes, rather than on a per-student basis.

The funding formula as a whole offers predictability for campuses, said Jed Shivers, vice president for finance and operations at the University of North Dakota.

“You know what's going to happen,” he said. “If you produce more credits, you eventually get more money. You produce fewer credits, and, eventually, you’ll get less money.”

While rather complex in nature, the funding formula includes a couple of variables:

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  • The number of credits produced and completed by an institution.

  • The type of course and its relative cost to provide, or its weighting. For example, an English or history course, which is typically cheaper for an institution to provide, would be weighted at a lower rate than an engineering course.

Generally, the campuses with fewer students receive more dollars per credit hour completed than larger institutions, such as UND and North Dakota State, which complete a larger amount of credits but at a lesser dollar amount, said Tammy Dolan, chief financial officer for the North Dakota University System.

While the funding formula has been performing well for campuses, a couple of flaws have been identified. So, legislators, in particular state Rep. Mark Sanford, R-Grand Forks, and higher ed leaders in North Dakota spent part of the interim session studying ways to improve the formula. The result was Senate Bill 2031.

“The formula was in pretty good shape, kind of like a pencil, and the interim committee sharpened that pencil,” said Peter Johnson, director of government relations and public affairs at UND’s alumni foundation.

The major changes include giving a greater weight to career and technical education courses, also known as CTE courses, including computer science courses. It also fixes a flaw that caused at least one institution to see fewer dollars coming in, despite producing more credits.

“The changes that were made really do help where everybody needs help,” Dolan said.

Overall, the changes, without taking into account any potential cuts to the system, would give institutions an extra combined $15.4 million.

Changes for campuses

What do the changes mean for campuses? It depends.

According to information presented during a recent legislative hearing on the changes, UND would see another $2.2 million in the next biennium.

While the changes being made for CTE courses likely won’t have a major impact on UND, changes to the weighting of computer science-related courses may, according to Shivers.

Dolan noted that, in 2013, computer science courses were a part of the core disciplines — English, social studies and history — meaning they were seen, at the time, as one of the the least expensive courses to produce. But a lot has changed since then: There is a continued focus and expansion on those courses, resulting in more expensive, Dolan said.

“Every institution puts on the computer science courses, so everybody, to some extent, will be getting more money for those courses,” she said.

For smaller institutions that provide a greater number of CTE courses, such as Bismarck State and North Dakota State College of Science, the change to the funding formula also means more dollars.

“Many of these programs are in high demand by the private sector to prepare the individuals that are needed to advance the economy here in North Dakota,” Bismarck State President Doug Jensen said.

Under the changes, BSC would get around $3.7 million, not including any state proposed cuts.

BSC is moving forward as North Dakota’s only polytechnic school, a move supported and approved by the State Board of Higher Education, which means a greater focus on hands-on and applied learning opportunities for students, while also pairing in the “soft skill sets” in the humanities.

Having more dollars for CTE, while also integrating the humanities, will allow schools, such as BSC, to respond to community needs, said Jensen, adding that having the legislators’ support is critical.

North Dakota State College of Science President John Richman said the impact would be favorable for NDSCS and would allow that school to keep the CTE courses it has been offering for more than 100 years.

Richman said he hopes that changes to the funding formula don’t become a regular occurrence.

“We just want to protect the production, and we want to protect the planning,” he said.

Shivers said UND also is supportive of a mechanism in the funding formula that protects campuses from large decreases in credit production. The so-called “96 percent rule” gives institutions more time to plan and respond to operational losses if their credit production drops by more than 4% a year, Dolan said. Two institutions, Bismarck State and North Dakota State College of Science, would be impacted by the 96% rule, as they are facing a 10% and a 5% reduction, respectively, without the rule being in place, according to Dolan.

When a school is dealing with a large decline in credit hours, that means it’s also losing tuition revenue in real time, Shivers said.

“That's a very difficult thing for any institution to deal with because we all have tenured faculty, and we want to protect those faculty,” said Shivers, adding institutions also want to protect students who are in different stages of their learning.

Potential for cuts

Does an increased weight on CTE and computer science courses leave core courses at a greater risk of being cut during a decline of state appropriations? If institutions just based their decisions on numbers alone, maybe, Dolan said.

But institutions have a lot to consider when it comes to their budgets and educating students.

“If the institution's decisions were driven only by the formula and the weighting, I could see that happening,” she said. “However, our institutions really have focused on the whole student. All of those core discipline courses, they're called core disciplines for a reason ... so they're still essential to the education of our students.”

Student demand and the job market are much bigger drivers of what courses UND offers rather than the amount of dollars the institution is appropriated during a biennium, according to Karla Stewart, associate vice president for finance at UND.

Additionally, the individual programs aren’t allocated dollars based on credit production. That money is allocated to the college or university as a whole, then divided up based on the institution’s individual budget, she said.

Shivers added that skills, such as reasoning and logic, which are learned in the humanities, are just as important as the technical aspects of an education.

“I think it is fundamental to our nature to provide the highest quality education that we can to the students,” Shivers said. “If you don't have the key liberal arts, I personally think you are not as competitive in your professional life as you are with them.”

Amid all of the potential changes to the funding formula, higher ed leaders may be facing a cut in state appropriations. Gov. Doug Burgum called for a 7.5% reduction in the funding formula amid declining enrollment across the system. Burgum noted during his budget address that higher education’s proportion of general fund spending is still higher in the 2021-23 biennium than it was eight years ago.

State appropriations also only make up about 25% of a university’s budget; the rest is made up of tuition, federal funding, grants and other dollars.

But there’s still a long way to go before institutions receive their funding, especially if the proposed funding formula changes and the proposed cuts go through.

The final funding formula and overall budget for the university system is still months out. The university system’s budget, which is one of the largest, is typically approved in the final days of the legislative session.