Arizona is doing something original in higher education and not just at, um, the University of Phoenix.

Arizona is beginning the process of creating a new state higher education system, focused on changing existing universities, and making it easier for Arizonians to get a degree using a focus on existing community colleges. According to an article in the Arizona Daily Star:

Arizona is getting a $1.5 million grant as the first step toward creating “no frills” programs within the university system where students can get degrees for less than what they now cost.

The plan is to have the first of those lower-cost baccalaureate degree programs in place in Maricopa County next year. Other campuses would follow, with a full system in place by 2020.

This $1.5 million is Arizona’s portion of a recent Lumina Foundation grant to seven states. Lumina gave a total $9.1-million to help the states—Arizona, Indiana, Maryland, Montana, Ohio, Tennessee, and Texas—improve their higher education systems in an effort to increase the number of Americans with college degrees. Different states have worked out different plans.

The most innovative part of the Arizona project has to do with the funding of state universities. State officials plan to use the money create money to, in the words of the article, “come up with — and persuade legislators to enact — a new method for funding higher education. It would specifically be geared to rewarding universities for the number of students who graduate, not simply the number who enroll.”

This is probably going to be difficult; funding for higher education is a long and treacherous road, but at last Arizona has acknowledged what is going on and dared to try and come up with a new funding scheme.

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Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer