Having finally resolved their years-long battle over K-12 school aid, at least for now, state officials have now graduated to the next funding formula challenge: a better way to help finance New Jersey’s public colleges and universities.

Direct funding to colleges has been stagnant for years, not keeping up with changes in student populations, let alone inflation. The planning now underway isn’t necessarily about finding more money to send to campuses as much as it use it to incentivize them to meet certain priorities.

“Outcomes-based funding” is used by more than half the states and ties money to meeting goals – such as for ensuring students graduate, for completing a program within a certain amount of time or for improving outcomes for low-income and minority students.

Kate Shaw, executive director of Research for Action, said institutions then become “pretty laser focused” on admitting and retaining more students.

“If all that works as intended, you’ll see increases in student outcomes. You’ll see students enroll. You’re see them stay in college instead of dropping out. And you’ll see them make good progress towards whatever credential or degree that they’re moving towards,” Shaw said.

Higher Education Secretary Zakiya Smith Ellis said possible changes are in development and should be part of the state budget adopted next June – but that they won’t simply be linked to the number of number of full-time equivalent students enrolled.

“It doesn’t really get to I think what you actually want, which is the students to graduate,” Ellis said. “So you don’t want to just think about them coming in but also them leaving.”

Ellis said New Jersey colleges have higher tuition than peers in other states because the share of funding schools derive from tuition has increased as state funding has remained unchanged despite rising costs.

Sen. Sandra Cunningham, D-Hudson, said she has noticed a change in how students in high schools and elementary schools respond when she talks about the need to go to college.

“A few years ago when I first started this, maybe about 10 years ago, people were more excited. Kids were more excited about it. More recently going out to schools, kids are not as excited about it,” Cunningham said.

Ellis said that’s in part because students know people who’ve racked up debt from college loans they struggle to pay off.

“The affordability challenge, it rings very large in their minds – especially now. And I think it’s not irrational,” Ellis said.

Tiffany Jones, director of higher education policy for The Education Trust, said a transition to outcomes-based funding that focuses on equity for low-income and minority students, whose college completion rates lag, is important because nearly all the jobs created in the recovery from the last recession went to workers with at least some college experience.

“As college degrees have become increasingly essential for accessing family wage sustaining jobs, funding for public college has declined, leaving degrees and job opportunities that come with them out of reach for many.”

Jones said New Jersey spends about 12 percent, or $1,600, more on white college students than black or Latino ones. She said that inequity is among the five biggest nationally.