The Organizational Impact of Credit-Based Subsidy Formulas

Article excerpt


In what ways might credit-based state subsidy formulas affect the organizational behavior of a community college? To the degree that such formulas create an administrative bias in favor of credit as opposed to non-credit instruction, how might this bias manifest itself in college-level planning and other activities? Using the state of Ohio as a case study, this article examines the impact of credit-based subsidies on college-level executive decision-making and organizational behavior. Based on extensive interview data, the article outlines six specific college practices that reflect a preference for credit rather than noncredit course offerings. We conclude by discussing the policy implications of the study.

Rationale and Formula for State Subsidy in Ohio

Since 1965, the state of Ohio, through the Ohio Board of Regents (OBR), has offered an instructional subsidy to public institutions, with funding distribution based upon enrollment in credit courses. The basis of the formula has evolved substantially since then, and is currently a system of complex sub-formulas grounded in historical cost-to-deliver instructional information (OBR, 1998). The funding is treated as unrestricted, which means that colleges are permitted to spend the funding in any fashion they choose that is consistent with their mission.

The subsidy policy is intended to support the state's higher education goals, which are reflected in the 1996 OBR master plan. The plan expressed the following core values:

* Affordable access to higher education for all Ohio citizens

* High quality learning experiences that help students develop to their fullest extent

* Basic and applied research that meets regional and state-wide needs

* Services that help citizens, communities, regions and the state meet their goals

* Effective, efficient use of limited resources and accountability for the use of public funds

Because state support offsets the educational costs borne by the student, the subsidy policy particularly affirms OBR's first core value of affordable access to higher education. Note, however, that none of the core values specifically identifies credit instruction (instruction leading to a degree) as preferred over non-credit instruction.

This article examines the question of whether and how state subsidy might influence Ohio's two-year colleges to offer credit instruction because of its eligibility for subsidy revenues. If such an influence exists, then colleges may be offering more credit instruction than is required to meet student demand. The result may be inefficiencies that require limited state funding to be spread over the excess provision of credit instruction. Thus, the last value stated in the OBR master plan, effective and efficient use of limited resources, may not be fully realized. In addition, if the state support is not being used effectively, then the costs passed onto the student would be higher and the state's core value of affordability would be affected. In short, the possibility exists that the State, in attempting to achieve the goals of the OBR master plan, has inadvertently provided an incentive for colleges to make curricular and other decisions in response to the subsidy as opposed to community needs.


In 2000-2001, a comprehensive analysis was conducted of the impact of the credit-based subsidy formula on Ohio's two-year colleges (Beverage 2001 ). The study analyzed a sample of the 23 state-supported two-year colleges that have the autonomy to make decisions locally through their presidents and boards. A multivariate linear regression analysis was utilized to achieve comparability among the various colleges. The model predicted each institution's non-credit job-related training activities as a function of level of urbanization of the service district; potential demand for job-related training in the service district; and overall financial strength of the college. …