The state Legislature is requiring the Arizona Board of Regents to submit a new funding formula this year for the three universities that would link state funding with gains in certain performance areas.

The formula is part of a national trend of performance-based funding. The performance metrics include things such as enrollment, graduation rates and research spending. On Thursday, the regents approved 33 metrics for growth and productivity as well as annual targets for each metric through 2020.

Sarah Harper, the regents’ director of public affairs, said that, as it currently stands, the funding model would provide universities with a stable base of funding along with “”new money”” if the universities meet the performance metrics.

She explained the model’s potential benefits are twofold because, with a stable funding base, the regents could keep rates from escalating to “”unsustainable points.”” In addition, she said, the model incentivizes the universities to operate more efficiently and become more productive.

Performance-based funding is a growing trend stemming from the recent recession. Already, seven states use performance-based goals in their funding formulas for higher education, and five other states, along with Arizona, are considering adopting the model.

In order for Arizona to move in this direction, however, the state’s universities and regents must focus on increasing the freshman retention rate.

Daniel Fitzgibbon, a director of the Arizona Students’ Association, said this begins with the issues developing in Arizona’s K-12 system, as well as the UA offering courses like remedial math.

“”It’s an issue when freshmen are coming (to the UA) if they come unprepared or underprepared,”” he said.

The percentage of freshmen that return as sophomores has decreased from 79.9 percent in 2007 to 77.2 percent in 2010, but must reach 90 percent by 2020, according to the plan.

Harper added that the universities continually explore and develop opportunities to enhance freshman retention rates, including mentoring, tutoring, advising, increasing the number of online courses and making more financial aid available.

Associated Students of the University of Arizona President James Allen said this new model could benefit the UA because it moves away from per-student funding, a system that has been significantly cut the past few years despite increased enrollment.

The only drawback, he said, is that certain metrics may not always illustrate the quality of an institution and that certain qualities may be overlooked or misunderstood, resulting in uncertain and unstable funding.

“”Generally, I think the model shows promise, and for our university specifically, it could be quite effective,”” Allen said.

The regents will review the recommendations for the new model at their board meeting in August. In September, the board is expected to approve a final recommendation to the state as part of its fiscal year 2013 budget request.