State colleges would need to prove that their undergraduate students are getting ahead to receive full state funding under a new proposal making its way through the Ohio Board of Regents.

Now, state funding is based on a college's size. But within four years, more than 30 percent of the money for four-year schools could be based on their performance. For community colleges, a 30-70 split would happen in 2015.

"We're moving from rewarding schools for the number of students in their seats to the number of students completing courses, degrees and walking out the door to get jobs," said Bruce Johnson, president of the Inter-University Council, which represents the four-year schools.

The state distributed more than $1.8 billion to the public four- and two-year schools this fiscal year, which ends June 30. Next year's amount will be determined in the upcoming two-year budget.

Chancellor Eric D. Fingerhut said he expects to recommend a new funding formula to the governor early next year regardless of how much money will be available for colleges.

"We're going to fulfill and exceed our plans and be the driver of Ohio's rebirth," he said. "And we're going to do it with the resources we have."

State forecasts predict a $7.3 billion shortfall in the new two-year budget, which could translate into tuition and fee increases of nearly $2,000, on average, at state schools if there was a 25 percent cut in state support for colleges. Gov. Ted Strickland's administration rolled out that worst-case scenario yesterday but stressed that no decisions or recommendations have been made.

National education experts praised Ohio for wanting to tie funding to performance.

"It sounds like a very creative and forward-thinking way to finance higher education," said James Jacobs, a member of the advisory board at the Community College Research Center at Teachers College at Columbia University.

Different formulas for the four-year main campuses, regional campuses and community colleges would reflect their distinct missions and student bodies, said Richard Petrick, the regents' vice chancellor of finance. The university main campuses, for example, would receive their largest percentage of state money for students who pass a course. The cost of their programs would be factored in.

Main campuses also would be rewarded for graduating students, helping at-risk students and meeting goals set for each school by its leaders and the chancellor.

"Each institution will be able to set mission-specific goals that support its centers of excellence, its niche and its strengths," said William Decatur, senior vice president for finance and administration at Ohio University.

Community colleges would receive state money for enrollment, campus-specific goals and a series of educational milestones called "momentum points" modeled after an initiative in Washington state.

The momentum markers will be developed over the next year, but schools likely would earn points for students who complete remedial courses, 15 or 30 credit hours, college-level math or an associate degree. Community colleges also could receive points for students who are dual-enrolled in high school or at a university.

"It's cutting-edge," said Ronald Abrams, executive director of the Ohio Association of Community Colleges. "It would reward institutions based on success, need and begin to hold them accountable."

epyle@dispatch.com