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SALT LAKE CITY -- In the last few years, 16 states have begun funding public colleges based at least partially on student outcomes like degree production and completion rates. That number soon will grow, according to Complete College America, bringing the total to 25 states.

“It’s sweeping across the country,” said Stan Jones, president of the nonprofit group, which is hosting its fourth annual meeting here this week.

Supporters of performance-based funding now include President Obama, who wants to link his planned college ratings system to federal financial aid.

Complete College America, which receives significant funding from the Bill and Melinda Gates Foundation, is a prominent and effective proponent of linking state funding to student outcomes. Attendees at this week's meeting include representatives from 33 states and the District of Columbia, all of which have signed on to elements of the group’s take on the national college completion "agenda."

On Monday Complete College America and the National Center for Higher Education Management Systems (NCHEMS) released a report that tracks how states are moving forward with performance-based funding.

There is a huge range in the proportion of funding that states funnel toward performance formulas. Less than 1 percent of state support in Illinois comes with performance strings, while virtually all of Tennessee's support does. But the report said even those on the low end are headed toward 25 percent performance-based.

Dennis P. Jones, NCHEMS’ president, wrote the new report. It builds on a previous paper of his, which sought to establish preferred principles for states to use while designing their performance-funding formulas.

The new report updates and expands on those 16 strategies. It also includes score cards showing whether states are using them.

States get credit in the report for trying to design formulas that reward colleges for serving underrepresented student populations. That can help prevent gaming of the system.

“One of the major concerns voiced about outcomes-based funding, especially when the goal is to produce more graduates,” the report said, “is that institutions will seek to enroll only those students most likely to succeed and ignore students who are at risk academically, economically or otherwise.”

Most states are trying to account for differences among students, according to the report. Of the 16 states with active performance funding formulas, 13 to some extent weigh the different missions of colleges. And 13 include measures based on institutional performance with underserved student populations.

Some are ahead of the curve, however.

Tennessee and Ohio get high marks for models that reward colleges for serving lower-income students. Others, like Tennessee and West Virginia, factor in the number of adult students colleges serve.

With those approaches, “institutions of all types can win without changing their missions,” said Jones of NCHEMS.

Academic Quality?

Tennessee scored the highest in the report. The state used 15 of 16 of the encouraged strategies, with the one exception being the lack of a “stop-loss” provision that would limit the amount of funding hits colleges can take based on their performance. The state is one of the first to get into performance-based funding, and currently allocates 95 percent of state support based on student outcomes.

Faculty groups and others, like the Association of American Colleges & Universities, have expressed concerns about the completion agenda and its focus on performance funding.

Gary Rhoades said the NCHEMS report confirms worries that the completion agenda is incomplete and even counterproductive. Rhoades, a professor of higher education at the University of Arizona, also directs a virtual think tank, the Center for the Future of Higher Education.

He said the report places “thoughput” – the production of graduates and degrees – over academic quality.

The report acknowledges that the lack of measures of academic quality in state-funding formulas is a weakness.

“The concern about quality is real and should be addressed head-on,” it said.

Some movement has begun, according to the report. Nevada and a few other states have created faculty-led processes that are intended to “produce a set of metrics to track quality levels over time and potentially be incorporated into the funding model.”

Missouri and Tennessee are the first to include measures of student learning into their funding mechanisms, the report said. And more states will likely follow.

Performance funding shouldn’t be all about graduation, according to Complete College America. The group pushes states to include shorter-term measures, including “momentum points” based on the number of students who complete remedial courses or a certain number of credits.

For example, Tennessee uses incentives based on the number of students at an institution who complete 24, 48 or 72 credits. And community colleges in Washington are measured in part by the number of students who complete 15 or 30 credits.

Rhoades remains skeptical, however.

“The fixation on narrow, reductionist measures of (undergraduate) completion underemphasizes professional and graduate education, knowledge creation and the preparation of citizens for a democratic knowledge-based society,” he said in an email. “That does not augur well for society, employers or for the students.”

Not so, according to the report. In the past funding formulas rewarded colleges based on student access, creating an incentive for colleges to just enroll more students. Student success and completion were not priorities. But that has changed, the report said.

Furthermore, it argues that performance-based funding is now ready for primetime.

“The field has advanced to the point that the knowledge base regarding ‘how’ to develop such systems is now in place,” the report said. “The issue now is one of political will, not technical know-how.”

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