Louisiana is also failing to properly use its colleges and universities to assist the state in developing industry sectors that are expected to grow in the future. In addition, more and more workforce participants will be required to possess some level of education beyond high school. According to the State Higher Education Officers, the United States will have 3 million more jobs in the coming years requiring a bachelor's degree and not enough graduates to fill them. Additionally, 90 percent of the fastestgrowing jobs, 60 percent of new jobs and 40 percent of manufacturing jobs will require some form of postsecondary education.

While these statistics provide a glimpse of the future job market, Louisiana's current model for funding higher education fails to incentivize growth in alignment with workforce needs, research in alignment with economic development potential, or achievement of overall state eduation priorities. The model actually creates disincentives to innovation and responsiveness, focusing on institutions instead of outcomes such as graduation, research, and training to meet our priority workforce needs. In addition, university research has not been effectively used as a means to build economic capacity and develop technology that might be commercialized within the state and foster regional growth.

The SolutionLouisiana must begin now to build and position its economy to grow and thrive in the years and decades ahead. This involves two steps: (1) shift to performance-based funding for postsecondary education – to reward the results we need to transform our economy; and (2) make investments in research that will lead to technology development and commercialization in Louisiana. In today's world, economic development and postsecondary education must be directly linked.

Performance-based funding will reward our postsecondary institutions as they meet the state's and their students' needs. Through this new funding formula, Louisiana will increase the number of degrees and certificates awarded, expand research activity, and better address the state's priority
workforce needs.

All four of the presidents of the state's postsecondary systems have signed on to the new formula. For some that was no doubt a difficult proposition, but CABL believes this new method of funding higher education is a positive step in the right direction. We hope it will lead not only to greater fairness and more equitable funding among institutions, but also greater performance in achieving specified goals, some of which CABL has advocated for years.

Council for a Better Louisiana
February 2009

1. Utilize a performance-based formula to fund higher education.
   In keeping with House Concurrent Resolution 114 of the 2008 regular session requiring the integration of performance standards in higher education funding, the State Legislature should fund Louisiana's higher education enterprise utilizing the performance-based model developed by the Board of Regents in consultation with the presidents of the four higher education management systems, including the Louisiana Community and Technical College System, Southern University System, University of Louisiana System, and Louisiana State University System. This new funding formula will reward student outcomes. The goal is to increase by 10,000 Louisiana's annual production of degrees and certificates – a necessity for Louisiana and its students to compete in the 21st century.
   
   This new performance-based funding model does recognize and support enrollment growth, but it places considerable emphasis on increasing the number of students who acquire a degree or certificate. The new model also provides incentives for colleges and universities to produce degrees in high-demand workforce fields. Additionally, performance incentives are available for increasing degrees/certificates to low-income and minority students. The formula also rewards our higher education systems for their success in securing external research dollars. Finally, this new funding model recognizes the real cost differences between disciplines... and allocates funding accordingly (for example: accepting the reality that engineering programs are more expensive than liberal arts programs).

Economic strategy was somewhat easier in past generations. The destiny of states was largely shaped by their natural assets: a pleasant climate, abundant natural resources, availability of land, coastal locations, and so on. Though these continue to be important factors for the states, it has become abundantly clear that 21st century places will succeed because of assets they create, not assets they inherit.

Innovation America: A Final Report
National Governors Association, July 2007

This new funding formula places a much-needed priority on the benefits to the state and to individuals who obtain a degree or certificate. It will help Louisiana meet the challenge of competing and succeeding in a global, knowledge-based economy.

Investment in our future: A phased-in approach (up to 36 months) of the performance-based funding formula is reasonable, establishing the needed, systemic reform while recognizing the challenging fiscal conditions that have signaled cuts to higher education funding. Ideally, performance-based funding formulas are implemented on a "go forward" basis, meaning that funding allocations based upon the formula are initiated at some reasonable period after the formula is finalized and adopted. Such an implementation strategy allows for higher education institutions to thoughtfully adjust to the incentives embedded in the formula.

2. Create a Louisiana Research Alliance (modeled after highly successful research alliance organizations in other states) to guide state investments to support diversification and growth of Louisiana's economy.
   States throughout the country are using their colleges and universities to create and support knowledge-based industry sectors that will build a 21st century economy. Unfortunately, Louisiana lags behind. The most successful states are selecting niche research areas that have long-term commercial potential and where they have existing expertise or important state needs. Despite the risk, these states are investing substantial funds in talent, research, and infrastructure to build capacity in these targeted research areas, and they are investing in people and programs to move technology developed by these researchers from their labs into local companies. The result: they are creating thousands of homegrown jobs for the long-term.
   
   The approach taken by the Georgia Research Alliance (GRA) is attractive because it has proven extremely successful. Basically, the GRA directs state investments in university research and development based on quality and relevance, not politics, with the overall goal of maximizing returns on the state's investments. In other words, creating new jobs. Over the last 16 years, GRA has invested approximately $467 million (about $30 million a year) in targeted research areas in Georgia universities, research centers, and commercialization activities. Using these funds, Georgia has recruited more than 60 eminent scholars, leveraged an additional $2 billion in federal and private funding, established more than 150 new companies, and created more than 5,500 new science and technology jobs. In addition to these state investments, Georgia's private sector also has provided consistent funding for GRA's administration and operations.
   
   In 2007, the Board of Regents and the Louisiana Recovery Authority funded a plan to envision what an organization similar to GRA might look like for Louisiana. This plan outlined key issues and recommended a plan of action. The plan has yet to be acted on, but Louisiana can no longer wait to establish such an organization. A promising economic future depends on it. Over the next year, Louisiana must develop an institutionalized innovation strategy for our state. That strategy must include ways of attracting and recruiting top-flight faculty, enhancing research in focused technology areas at Louisiana's research universities, and growing technology-based companies by commercializing university technology and supporting company development.
   
   The creation of a Louisiana Research Alliance would be an important addition to Louisiana's economic development initiatives. It can help elevate the importance of research and development, technology and innovation to Louisiana's economic future.
   
   Investment in our future: $500,000 startup costs gearing up to $30-$40 million a year to be invested in research and development, entrepreneurship and technology commercialization to transform Louisiana's economy.