Legislative analysts explain higher-education funding formula: weighted credits, base rate and completion factor

BISMARCK — Legislative Council analyst Alex Kronquist presented a detailed explanation of North Dakota’s higher-education funding formula to the Higher Education Funding Review Committee, describing the three-part calculation that determines base appropriations for each public campus. The formula: Kronquist told the committee that the appropriation starts with “adjusted student credit hours,” which are raw student credit hours multiplied by an Instructional Program Classification (IPC) weighting factor that reflects program cost differences, then multiplied by a credit completion factor that accounts for institutional economies of scale. The product is multiplied by an institutional base rate; base rates are equalized within categories (research universities, regional universities, two‑year colleges). The law sets different clusters and weights for program areas such as engineering, health care, career and technical education (CTE) and professional programs. Context and recent changes: Committee discussion reiterated reforms enacted in recent sessions: increases in CTE weightings, reclassification of some programs (for example pharmacy, law, wind energy and law enforcement credits moved into CTE for Lake Region), and a change in 2025 to stop averaging base-rate adjustments across institutions (the 2025 action moved institutions to the highest calculated rate rather than an average to avoid reducing any campus’ funding). The committee also discussed the credit growth protection enacted in 2021: when a campus grows credit production, only incremental credits above the historical base may be treated at the lower scale instead of resetting all credits to the new level — a rule designed to protect growing institutions from a funding drop. Key technical issues identified: Analysts and members flagged a set of recurring problems committee members asked staff to investigate further: (1) the lag in the data used (the formula historically uses prior biennium credit production, meaning growing institutions wait two years to see budget effects); (2) the treatment of institutional size and square‑footage measures that were previously part of the calculation but were removed; (3) whether the IPC clusters and weights still reflect current program costs; and (4) the mechanics and policy effects of the “hold-harmless/minimum payable” provision (currently limits reductions to about 96% of prior entitlement). Alex Kronquist told the group the credit completion factor ranges from 1.0 (largest institutions) to 1.8 (smallest), and that thresholds such as 240,000 weighted credits determine where an institution’s factor sits. Why it matters: Small technical decisions in weightings, equalization and the timing of credit data can produce large redistribution effects between campuses. Chair Sorvaugh directed business officers and analysts to prepare specific, evidence-based proposals for weighing, timing and transition rules for the committee’s next meeting. Ending: The Legislative Council and system office will provide additional spreadsheets and worked examples comparing alternative approaches for how to treat growth, averaging, and the timing of credit counts so the committee can evaluate trade-offs at its next meeting.