Performance Funding Underperforms

Studies at meeting of higher education researchers suggest that state policies that link funds to outcomes don't increase degree completion.

November 18, 2013

ST. LOUIS -- Around the country, legislators have rushed (and continue to rush) to adopt systems that allocate funds to colleges based partly or heavily on performance indicators rather than enrollment, as has historically been the case.

A new round of research on such programs suggests that, to the extent states are trying to increase degree completion, the programs generally do not work.

Several papers presented here at the annual meeting of the Association for the Study of Higher Education explored what Michael McLendon of Southern Methodist University called the performance-based funding "craze," which has become a widely embraced and copied strategy for governors and legislators trying to improve the effectiveness and efficiency of their public higher education systems at a time when they lack either the money (or the will) to spend more on them. (As a side note, the session was one of many -- more than usual at a meeting long filled with handwringing about the policy-related relevance of their work -- focused on important issues that are topping policy agendas around the country.)

The session at which three of the papers were presented broadcast their overall findings in its title: "The Myth of Performance-Based Funding." One paper, by Tiffany Jones of the Southern Education Foundation, examined the extent to which historically black colleges are especially likely to be hurt by state policies that link funding to simple metrics (like graduation rates) that don't take into account the academic preparation of colleges' students and their levels of institutional funding.

Another, prepared by a group of scholars affiliated with the Community College Research Center at Columbia University's Teachers College, examined the goals and policy approaches of performance-based funding systems and concluded that they are sometimes ill-defined and overly narrow, and that they too rarely anticipate (and try to guard against) unintended consequences that can result.

A third paper looked much more directly at what the performance-based programs are accomplishing. The authors, David Tandberg and Mohamed Barakat of Florida State University and Nicholas Hillman of the University of Wisconsin at Madison, examined performance-based systems in 19 states and found that while those programs were largely designed to increase the number of students completing associate degrees, it did so in only four of them. In six states completions actually declined, and in nine others, the patterns were inconclusive.

Another study by the same authors uncovered similar results for bachelor's degree productivity, with a positive impact in four states, a negative effect in four, and no effect whatsoever in 12 others.

"There is no meaningful evidence of effectiveness, but we see a rush toward adoption," said Tandberg, an assistant professor of higher education at Florida State. "It seems as though there is something other than evidence at work here."

What may be at play, said Kevin J. Dougherty, an associate professor of higher education at Teachers College, is that states may be feeling pressure to "jump on the bandwagon" so as not to appear to be "laggards in the competition for effective policy."

That is especially true, he and others said, given that outside groups like Complete College America and the National Center for Higher Education Management Systems are aggressively advocating for performance funding, framing it as an "attractive policy that seems to fit this time of constrained finances."

Earlier analyses have suggested that one of the major limitations on the impact of performance-based funding is that many of the first major round of such programs were restricted to relatively small amounts of state appropriations to public colleges, and therefore may have been too constrained to change institutional behavior.

Tandberg said that many advocates for performance-based funding argue that the programs' effectiveness will grow as the state appropriations linked to them does, and that it was too early to gauge the success of the most recently enacted performance-funding systems, which tend to have higher stakes. "The jury's still out on Performance Funding 2.0," he said.

Added McLendon, Centennial Professor of Education Policy and Leadership and associate dean of SMU's School of Education and Human Development: "One response may be, 'Let's not give up on performance funding -- let's everywhere make this a really sharper-toothed program.' "

But for now, "if these authors have it all right, the weight of the evidence is against performance funding," McLendon said. At a time when policy makers are expressing a desire to make decisions based on data, and "increasingly asking researchers like those at ASHE to give them research that has real-world policy consequences, it will be an interesting collision of wills when research about the failure of performance funding meets the ideological commitment of states to move forward with it."

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Doug Lederman

Doug Lederman is editor and co-founder of Inside Higher Ed. He helps lead the news organization's editorial operations, overseeing news content, opinion pieces, career advice, blogs and other features. Doug speaks widely about higher education, including on C-Span and National Public Radio and at meetings and on campuses around the country, and his work has appeared in The New York Times and USA Today, among other publications. Doug was managing editor of The Chronicle of Higher Education from 1999 to 2003. Before that, Doug had worked at The Chronicle since 1986 in a variety of roles, first as an athletics reporter and editor. He has won three National Awards for Education Reporting from the Education Writers Association, including one in 2009 for a series of Inside Higher Ed articles he co-wrote on college rankings. He began his career as a news clerk at The New York Times. He grew up in Shaker Heights, Ohio, and graduated in 1984 from Princeton University. Doug lives with his wife, Kate Scharff, in Bethesda, Md.

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