Alabama Legislature

Universities See Significant Increases; ‘Peer-Gap’ Formula to Continue

Denny Chimes at the University of Alabama. UA would get the biggest windfall if peer gap increases are approved by the Legislature. (Source:

Alabama’s public four-year universities will receive funding increases of between about 6% and more than 12% under the 2020 education budget recently approved by lawmakers.

“I think all of higher education is happy with where we ended up,” Alabama Commission on Higher Education Executive Director Jim Purcell said Wednesday.

During the budgeting process, some university officials and lawmakers had expressed frustration over how this year’s proposed budget included additional money for a few institutions that had previously been underfunded. Purcell had said ACHE was attempting to fix “egregious inequities in funding.”

A “peer-gap adjustment formula” this year attempted to compare universities’ funding to others nationwide with similar missions and student bodies and attempted to make adjustments, giving some schools additional bumps in funding. The biggest winners were the University of Alabama Tuscaloosa campus, Athens State University, the University of North Alabama, Jacksonville State University, Troy University, the University of Montevallo, the University of South Alabama and the University of West Alabama.

Universities’ Proposed 2020 Education Trust Fund Allocations
(Source: Alabama Commission on Higher Education)

That money represented less than half a percent of universities’ total allocations, but the process was enough to give some leaders pause.

Auburn University was one of several institutions that in Gov. Kay Ivey’s original budget proposal only saw a 5% increase in funding and no peer-gap bump. Campus officials and local lawmakers objected, saying some of the peer institutions used to formulate funding were no peers at all.

In the final budget, Auburn’s total funding increase is 6.5%, according to ACHE. The university saw a 9% increase in its operations and maintenance funding, Auburn public affairs executive director Brian Keeter said.

“Throughout this process, our message was and continues to be about equitable funding for higher education in the state, and we’re confident it was ultimately achieved,” Keeter said Wednesday.

“Moving forward, we’re grateful that legislative leadership and budget chairs have committed to including Auburn in discussions on alternative budget models for the future.”

In the end, lawmakers set aside a $5 million pot of money that could be allocated to universities that show their peer-gap comparisons weren’t accurate or fair.

Senate education budget committee member Sen. Rodger Smitherman, D-Birmingham, also raised concerns about the peer-gap process in April, but on Wednesday he said he was comfortable with the $5 million equalization fund.

“I do think the process needs to be reviewed,” Smitherman said.

Purcell said six or seven schools have asked for “tweaks” in the pool of universities’ in their peer groups. Those changes would mean more funding for them.

Purcell said the process would be reviewed before ACHE makes funding recommendations for the 2021 budget. He said ACHE plans to continue the additional funding in future budgets for universities that have been underfunded.

Several lawmakers have agreed that, historically, higher education funding has been based less on need and more on a school’s ability to lobby in Montgomery.

Purcell also said funding since the recession hasn’t kept up with enrollment at some universities.

Of the 14 public universities, six have seen enrollment declines since 2009, according to ACHE. They are Alabama State University, Athens State University, Auburn University Montgomery, Jacksonville State University, Troy University and the University of Montevallo.

 Performance-Based Funding

Some lawmakers want to go beyond peer-review to a system in which at least some state funding is based on universities’ performances, including graduation rates.

“The plan is to get the universities all on the same level based on their peers around the country, and then from there move to outcome-based funding,” Senate education budget committee chairman Sen. Arthur Orr, R-Decatur, said Wednesday.

He said universities would help decide what criteria they’re judged on and that a “bonus pot” of money could be used to encourage them to hit performance targets.

“We don’t want to penalize schools, but we certainly don’t want to keep rewarding them through the budget process,” Orr said.

Smitherman, a trustee at the University of Montevallo, questions how to get apples-to-apples comparisons of universities’ performances, especially when some serve more low-income and first-generation students.

“You need to have the same tools to work with if you’re going to test them equally for the same results,” Smitherman said.

Other lawmakers have pushed for performance-based funding for years.

“I’d personally like to see it move faster, but starting off with peer groups was a small step,” Sen. Larry Stutts, R-Tuscumbia said. His district includes the University of North Alabama.

As of Wednesday afternoon, Gov. Kay Ivey’s office was still reviewing the $7.1 billion 2020 education budget and she hadn’t signed it.

Purcell said he hopes the additional money in the upcoming fiscal year means universities won’t have tuition cost increases. Several have already said they will not.