(a) (1) (A) The Arkansas Higher Education Coordinating Board shall adopt policies developed by the Department of Higher Education necessary to implement a productivity-based funding model for state-supported institutions of higher education.

(B) The board shall adopt separate policies for two-year institutions of higher education and four-year institutions of higher education.

(2) The policies adopted to implement a productivity-based funding model for state-supported institutions of higher education shall contain measures for effectiveness, affordability, and efficiency that acknowledge the following priorities:

(A) Differences in institutional missions;

(B) Completion of students' educational goals;

(C) Progression toward students' completion of programs of study;

(D) Affordability through:

(i) On-time completion of programs of study;

(ii) Limiting the number of excess credits earned by students; and

(iii) Efficient allocation of resources;

(E) Institutional collaboration that encourages the successful transfer of students;

(F) Success in serving underrepresented students; and

(G) Production of students graduating with credentials in science, technology, engineering, mathematics, and high-demand fields.

(3) The productivity-based funding model shall not determine the funding needs of special units such as a medical school, division of agriculture, or system offices.

(b) The productivity-based funding model shall be:

(1) Used to align institutional funding with statewide priorities for higher education by:

(A) Encouraging programs and services focused on student success; and

(B) Providing incentives for progress toward statewide goals; and

(2) Built around a set of shared principles that:

(A) Are embraced by state-supported institutions of higher education;

(B) Employ appropriate productivity metrics; and

(C) Are aligned with goals and objectives for postsecondary education attainment in this state.

(c)

(1) The board shall use the productivity-based funding model as the mechanism for recommending funding for state-supported institutions of higher education.

(2) The board shall recommend funding for:

(A) State-supported institutions of higher education as a whole; and

(B) The allocation of funding to each state-supported institution of higher education.

(3) The board shall make separate recommendations for two-year institutions of higher education and four-year institutions of higher education.

(d) Funds unallocated to state-supported institutions of higher education due to productivity declines shall be reserved by the department to address statewide needs in higher education.

(e) The department shall review the policies every five (5) years to ensure the productivity-based funding model continues to respond to the needs and priorities of the state.

(f) In any fiscal year for which the aggregate general revenue funding forecast to be available for state-supported institutions of higher education is greater than two percent (2%) less than the amount provided for the immediate previous fiscal year, the department shall not further implement the productivity-based funding model until the following fiscal year.