BILL REQ. #:  H-4897.1 

READ FIRST TIME 02/06/04.   

     AN ACT Relating to performance contracts with institutions of higher education; adding a new chapter to Title 28B RCW; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   (1) The legislature finds that the higher education system in Washington state has historically provided opportunities for advanced study for thousands of residents, produced high quality scholars and graduates, and facilitated world class research and innovation. But the new global economy demands even more from our colleges and universities in terms of highly trained and skilled workers and research to fuel future economic growth.
     (2) The legislature further finds that, since 1997, public institutions of higher education have developed and maintained a system of performance measures to monitor progress in improving graduation efficiency, faculty productivity, student achievement of degrees and certifications, and other topics. However, the current performance measurement system is too limited in scope and scale. Only a few measures reflect the unique role and mission of an institution. There is little dialog between state policymakers and institution leaders regarding the challenges facing our colleges and universities and the outcomes expected by the public and the state.
     (3) The legislature further finds that procedures for operating budgets, enrollment management, and strategic planning for higher education are not adequately coordinated. The state and institutions must jointly discuss and establish clear priorities and acknowledge potential trade-offs of funding decisions.
     (4) Therefore, the legislature intends to explore a new relationship between the state and public institutions of higher education that includes dialog and negotiation over goals, priorities, performance, and resources, and also includes explicit commitments made by each party aimed at achieving agreed-upon outcomes. The mechanism to implement this relationship is a performance contract, to be initiated on a pilot basis with selected institutions beginning in 2004.

NEW SECTION.  Sec. 2   As used in this chapter, a performance contract:
     (1) Is an agreement reached between the governor and the governing board of an institution of higher education, or in the case of community or technical colleges the state board for community and technical colleges, as provided in section 3 of this act and approved by the legislature as provided in section 6 of this act;
     (2) Addresses statewide goals and priorities of the legislature;
     (3) Addresses resident undergraduate enrollment levels;
     (4) Contains goals and commitments from both the institution and the state;
     (5) Includes quantifiable performance measures and benchmarks; and
     (6) Reflects the unique role and mission of the institution within the state's higher education system.

NEW SECTION.  Sec. 3   (1) The governor's office with assistance from the higher education coordinating board shall enter into negotiations with the governing boards of one state research university and one state regional university, as defined in RCW 28B.10.016, to create a performance contract on a pilot basis with each institution. A governing board of a four-year institution may nominate its institution for the pilot performance contract by communicating to the governor and higher education coordinating board that it is ready and willing to participate in the contract process. If more than one research and one regional university are nominated, the governor's office with assistance from the higher education coordinating board shall select those institutions that offer the best opportunity for a pilot test of the feasibility of performance contracts.
     (2) The governor's office with assistance from the higher education coordinating board shall enter into negotiations with the state board for community and technical colleges to create performance contracts on a pilot basis with one state community or technical college, as defined in RCW 28B.10.016. A governing board of a community or technical college may nominate its college for the pilot performance contract by communicating to the state board that it is ready and willing to participate in the contract process. If more than one college is nominated, the state board shall select the college that offers the best opportunity for a pilot test of the feasibility of a performance contract.
     (3) In developing a contract, the negotiating team from an institution of higher education must involve student and faculty representatives.
     (4) The term of a performance contract negotiated under this section is six years, beginning with the 2005-06 academic year and ending with the 2010-11 academic year.
     (5) During the contract negotiation process, the governor's office shall consult with the contract evaluator under section 7 of this act to ensure the contract terms and indicators are suitable for evaluation by 2008.
     (6) The institutions shall report all data necessary to implement, evaluate, and monitor each performance contract to the office of financial management, the legislature, and the higher education coordinating board.

NEW SECTION.  Sec. 4   (1) Performance contracts shall contain:
     (a) Indicators that measure outcomes concerning cost, price, quality, improvements in faculty salaries and faculty ratios, and timeliness of student progress toward degrees and certifications;
     (b) Indicators that measure the efficiency and effectiveness of institutional processes; and
     (c) Strategies, actions, and results committed to by the institution in order to achieve statewide goals.
     (2) Examples of possible topics that could be addressed in a performance contract include student retention, graduation, and completion rates; graduation efficiency; student learning outcomes; postgraduation employment in field of study; faculty productivity; facilities stewardship; efficient and effective fiscal and management practices; cost of degrees; and research productivity.
     (3) The governor and institutional negotiating teams shall identify indicators and levels of performance that are clearly linked to the role, mission, and strategic plan of the institution.

NEW SECTION.  Sec. 5   (1) Performance contracts shall include grants to the institution, under the terms of the contract, of flexibility or waivers from state controls or regulations.
     (2) The higher education coordinating board and institutional negotiating teams shall identify areas where statutory change is necessary to grant an institution flexibility or waivers of state regulations. The governor shall submit legislation necessary to implement a performance contract to the higher education committees of the senate and house of representatives for the 2005 legislative session.
     (3) The following areas may not be included in a performance contract:
     (a) Flexibility or waivers of requirements in a collective bargaining agreement negotiated under chapter 28B.52, 41.56, 41.59, 41.76, or 41.80 RCW;
     (b) Flexibility or waivers of administrative rules or processes governed by chapter 28B.52, 41.56, 41.59, 41.76, or 41.80 RCW;
     (c) Rules, processes, duties, rights, and responsibilities of the academic faculty as contained in the faculty codes of the four-year institution;
     (d) Flexibility or waivers of requirements under chapter 39.12 RCW;
     (e) Flexibility or waivers of administrative rules or other regulations that address health and safety, civil rights, and nondiscrimination laws that apply to institutions of higher education; and
     (f) State laws covering terms and conditions of employment, including but not limited to salaries, job security, and health, retirement, unemployment, or any other employment benefits.
     (4) Unlimited authority for institutions to establish tuition for resident undergraduate students under the terms of a contract may not be a subject of negotiation. The terms of a contract must include assurance that the proportion of tuition revenue allocated to institutional financial aid for needy students will be maintained or increased. In turn, it is the legislature's intent to maintain state support for higher education during the term of the contract and not have students bear a disproportionate share of any increase in tuition.
     (5) Under the terms of the contract with the research university, return from technology transfer shall be maximized to generate increased investment in undergraduate and graduate instruction.

NEW SECTION.  Sec. 6   (1) The governor shall present a preliminary draft of the performance contracts at a joint meeting of the higher education committees of the senate and house of representatives in December 2004 for their review and input. The governor shall submit the completed performance contracts to the legislature by January 15, 2005. Following public hearings, the legislature shall have the opportunity, by concurrent resolution, to approve or reject each performance contract as a whole.
     (2) If the legislature rejects a submission, the performance contract shall be returned to the parties for renegotiation. If the legislature fails to act on a submission, the performance contract shall be terminated and the pilot process concluded for that institution.
     (3) All cost items contained within a performance contract shall be subject to legislative appropriation.

NEW SECTION.  Sec. 7   (1) Beginning September 2005, the higher education coordinating board shall provide annual progress reports to the higher education committees of the senate and house of representatives on implementation of the performance contracts and any short-term outcomes. The overall purpose of the progress reports is to focus attention on key measures of institution performance and gain an improved understanding of the causes of success or lack of success in making progress in achieving the goals in the contract.
     (2) The Washington state institute for public policy shall conduct an evaluation of the pilot performance contracts and make recommendations regarding change, continuation, or expansion of the contract process to include additional colleges and universities. The evaluation shall be submitted to the governor and higher education committees of the senate and house of representatives by January 15, 2008.

NEW SECTION.  Sec. 8   Sections 1 through 7 of this act constitute a new chapter in Title 28B RCW.

NEW SECTION.  Sec. 9   This act expires July 1, 2011.