Consultants visited two Montana state college campuses this week to gather ideas for a new incentive plan that could divide up millions of dollars by rewarding campuses that boost student graduation rates and lower dropout rates.

The “performance-based funding” proposal has been endorsed by key legislators, Gov. Steve Bullock and the Montana Board of Regents.

If the full Legislature agrees, then as part of the Montana University System’s funding for the next two years, some $7.5 million or 5 percent of state support would be distributed between campuses according to their performance in raising graduation and retention rates.

It’s an incentive plan that’s gaining support in many states, Clay Christian, commissioner of higher education, wrote in a letter to the campuses. Christian added that Bullock supports it as part of his goal to raise from 40 to 60 percent the number of Montanans with higher education degrees or credentials. Christian stressed that it’s up to the University System to decide how performance-based funding will work.

“We pushed for the agreement to get students out in four years instead of five or six,” Rep. Roy Hollandsworth, chairman of the Joint Appropriations Education Subcommittee, told a Senate committee this week. “We figure it’s going to save us (the state) and the parents money.”

Roughly $2 million could be at stake for Montana State University, according to Tyler Trevor, associate commissioner for planning and analysis. Normally, MSU and the University of Montana, as the two largest state campuses, each get about 30 percent of state dollars and the smaller campuses share the rest.

Trevor heads a task force working out the crucial details of how the new system will work. How, for example, will performance be measured? How strict or lenient does the Board of Regents want to be in handing out or denying money if a campus gets part way, but not all the way to a goal?

In a recent task force conference-call meeting, MSU officials expressed concern about one idea Trevor floated — measuring graduates as a percentage of total enrollment — because MSU would be penalized for its recent “explosive” enrollment growth.

Trevor said he was leaning toward using simpler annual numbers of graduates and “retentions,” or numbers of freshmen who return as sophomores instead of dropping out.

Another question before the task force is if, for example, MSU and UM failed to meet targets set by the regents, would they get any of the $7.5 million? Some task force members have said it would be “illogical” if all the money went instead to a smaller campus.

The task force is working “fast and furious,” Trevor said, to come up with a proposal for the May meeting of the Board of Regents, but it also plans to spend a year developing a more refined, long-term performance formula.

Consultants from the nonprofit Public Agenda organization conducted focus groups this week with UM faculty and staff on the Montana Tech campus and with MSU faculty and staff in Bozeman. Alison Kadlec, senior vice president and director of public engagement programs, said Montana “is part of the national conversation now – everybody is going in this direction.”

Two years ago, MSU professors sounded highly skeptical of the performance-based idea, when a different consultant visited the Faculty Senate and laid out a complex formula, which would have directed more money to the UM campus and less to MSU.

Bob Rydell, an MSU history professor who participated in Thursday’s focus groups, said the faculty doesn’t yet know much about the current performance-based funding. The reaction at the meeting he attended was mixed, Rydell said, with some people sounding a bit worried and others positive.

John Neumeier, MSU Faculty Senate chair, said he has heard some concerns, but he also sees “some potential to use it to real advantage.”

“My hope would be this money would be targeted at students who are in jeopardy,” by improving tutoring or having more instructors in key classes like math, Neumeier said. “Improving student potential for success early on would be wonderful.”

Gail Schontzler can be reached at gails@dailychronicle.com or 582-2633.