Kentucky’s higher education institutions would compete for a portion of their state funding under the Senate’s budget proposal, which will be fully unveiled later this week.

The competition would be based on degrees produced, graduation rates, retention rates and closing “achievement gaps” among low-income students and underrepresented minorities.

“Whoever’s excelling deserves to be rewarded,” said Sen. David Givens, a Greensburg Republican and main architect of the policy, which he said would go into effect in 2018.

Schools would be separated into three tiers and compete for about 25 percent of their state funding.

The University of Kentucky and University of Louisville would compete in the first tier. The second tier would include the five regional universities: Eastern Kentucky, Western Kentucky, Northern Kentucky, Morehead State University and Murray State.

All 16 Kentucky Community and Technical College System institutions would be in the third tier; they would compete for 25 percent of the funding awarded to the system.

Givens said schools in each tier would work with the Council on Postsecondary Education to set goals every year.

“Whoever’s shown the best performance for the budget period we described would get 100 percent of their allocation,”  Givens said. “The other members in that sector would get a percentage relative to that 100 percent.”

Schools would be given more consideration for graduating students with degrees related to science, technology, engineering and math (STEM), and health. They would also be rewarded for the percentage of students currently seeking a degree and enrolled in more than 30 credit hours per year.

Kentucky State University, a historically black college in Frankfort, would be exempt from the performance funding policy because of financial problems.

The school will have to come up with a “plan of improvement” instead.

Earlier this year, KSU President Raymond Burse said in a newsletter that performance funding would undercut a years-long plan to improve the university. Enrollment at the university has dropped in recent years under more stringent admission standards and requirements for students to pay their bills to the university.

Gov. Matt Bevin brought up performance-based funding in his budget address in January, saying that by 2018, he wanted one-third of the state’s appropriation to state universities to be contingent on performance.

In his presentation to reporters, Bevin said universities wouldn’t be rewarded as much for graduating liberal arts majors.

“There will be more incentives to electrical engineers than French literature majors. There just will,” he said at the time. “All the people in the world that want to study French literature can do so, they are just not going to be subsidized by the taxpayer.”

During Tuesday’s budget presentation, Grayson Democratic Sen. Robin Webb said she worried institutions would exclude poor-performing students to keep performance rates from slipping.

“I do fear that the nonconventional workforce that we try to send [to college] is going to maybe fall and be a detriment to some of these institutions, and the enrollment policies will be prohibitive for them,” Webb said.

The Senate is revising the House’s version of the state budget, which restored about $215 million in higher education cuts proposed by Bevin.

On Tuesday morning, state Budget Director John Chilton called the House version structurally imbalanced, saying it budgeted $400 million in “one-time money” that the state won’t be able to generate again during the next budget cycle.

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Ryland Barton is the Capitol bureau chief for Kentucky Public Radio.