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Tennessee colleges and universities are staring at state funding that would be $20 million short of the level recommended to carry out a plan that's supposed to reward schools based on performance.

That could trigger tuition hikes at some campuses for the 2014-15 year greater than the 2 to 4 percent increases suggested last fall.

The Tennessee Higher Education Commission in November recommended that the state allocate $29.6 million more funds to carry out an outcomes-based funding formula that came from the 2010 Complete College Tennessee Act.

Gov. Bill Haslam's proposed 2014-15 budget would deliver just $9.3 million in additional higher education dollars, enough to cover only 1 percent salary increases required for employees.

"One of the things that we've been worried about is if we ran into a circumstance where the outcomes formula wasn't fully funded that this coalition could fall apart," University of Tennessee System President Joe DiPietro told representatives of Tennessee's colleges and universities, gathered in Nashville on Thursday. "I would rue the day that happens.

"So, I would ask all of you to have some patience. There are institutions that are going to have rosier budgets while others won't quite be so rosy."

His remarks came during a panel talk with Haslam and Tennessee Board of Regents Chancellor John Morgan as part of a college summit sponsored by the Tennessee Business Roundtable. The governor has a goal of raising the state's college graduation rate to 55 percent by 2025.

The outcomes-based formula funds universities on meeting benchmarks — graduation rates and progress toward a degree, for example — instead of enrollment.

"The immediate challenge for us is always going to be around funding ... so we can make certain that we're actually rewarding that behavior that we're incentivizing," Haslam said. "The challenge on the flip end of that obviously is the state's budget."

Tennessee this year allocated $825.7 million for operating budgets of its higher education institutions, which include both the UT system and the Tennessee Board of Regents' six universities, 13 community colleges and 27 technical centers.

Haslam plans to introduce a budget amendment next week that addresses tax revenue that came in below projections. He's also seeking the legislature's approval of a plan to pay for community college tuition by tapping Hope Scholarship reserves.

Since the early 1990s, Tennessee has shifted away from a majority taxpayer-based system to fund its universities and community colleges to one in which roughly 70 percent comes from tuition.

Even under a fully funded budget, THEC had recommended tuition increases between 2 and 4 percent.

DiPietro last month said it's the university's goal to stay "within the single-digit range." The Commercial Appeal reported last month that TBR officials were now considering increases as large as 8 percent at some of its schools. The University of Memphis has said it won't increase its rate.

Long term, there are concerns about the outcomes-based funding formula itself. "If there's no reasonable expectation that funding will come along, then it makes it very difficult to plan and manage going forward," Morgan said.

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