States have traditionally provided funding for public colleges and universities based on a combination of the number of students enrolled and how much money they were allocated previously.
But, in the face of increasingly tight budgets and pressures to demonstrate their effectiveness to legislators, more and more states are tying at least some higher education funding to student outcomes.
As of 2015, 32 states have implemented a funding system that is based in part on students’ performance in at least some of their colleges. In such states, a portion of state funding is based on metrics such as the number of completed courses or the number of graduates.
Research shows that performance-based funding (PBF) has not moved the needle on degree completions in any substantial way. Our research focuses on the unintended consequences of such funding policies – whether colleges have responded to funding incentives in ways that could hurt disadvantaged students.
We find evidence that these systems may be reducing access for low-income students at public colleges…..
State Higher Education Performance Funding: Data, Outcomes, and Policy Implications
Source: David A. Tandberg, Nicholas W. Hillman, Journal of Education Finance, Volume 39 Number 3, Winter 2014
As states explore strategies for increasing educational attainment levels, attention is being paid to performance funding. This study asks, “Does the introduction of performance funding programs affect degree completion among participating states?” Utilizing a quasi-experimental research design we find limited evidence that performance funding significantly increases baccalaureate degree completions.