Gaming the System

Performance-based funding is increasingly popular among both state and federal policy makers, who want public institutions to graduate more students, more efficiently. Yet colleges may cope with these funding formulas by using grade inflation or admitting fewer at-risk students.

That was the central finding of a survey of college administrators in Indiana, Ohio and Tennessee, all of which have substantial performance-funding policies in place.

In addition to unintended consequences such as weakened academic standards and tightened admissions policies, the survey’s respondents cited concerns about the costs of compliance with performance funding and damage to cooperation between institutions. Lower morale, a narrowing of the institutional mission, and threats to the faculty role in governance also made the list.

The Community College Research Center at Columbia University’s Teachers College conducted the survey and produced a report on its results, which the center released this week.

The study is based on phone interviews with 222 officials at nine community colleges and nine public universities in the three states. They included senior and mid-level administrators, academic deans and department chairs.

Quotes from respondents pepper the report. For example, a faculty member at an Ohio university cited concern about the “watering down” of course materials in response to the state’s funding formula.

“In an effort to promote student success, there is a substantial pressure to minimize the failure rates of the students in some of these undergraduate courses,” the faculty member said. “That would translate into inflation of grades.”

Researchers divided the survey responses into potential and observed impacts of performance-based funding. The mix was evenly divided.

“Reports of potential impacts could be testimony more to our respondents’ fears than to their understanding of processes actually unfolding,” the study said.

However, both categories are worth watching, according to the report.

Some fears will become a reality as performance-based funding is phased-in more fully. And even those that remain possibilities “testify to a widespread disquiet about performance funding among higher education administrators and faculty that needs to be sensitively addressed by the advocates of performance funding,” said the report.

Nick Hillman is an assistant professor of educational leadership and policy analysis at the University of Wisconsin at Madison. He has studied performance-based funding, which he said is “politically convenient” but “unfortunately has little empirical or theoretical grounding to justify it as a viable policy solution.”

Other experts, however, have cautioned against dismissing performance-based funding, which they said could be a valuable tool in helping to improve student success.

Community college leaders have cited worries about the funding formulas for some time, said David Baime, senior vice president for government relations and research at the American Association of Community Colleges. Yet as in this survey, he said those concerns largely remain hypothetical.

“A bigger concern is whether performance-based funding will produce its explicit goals,” Baime said via email, “or whether those goals can only be met through that funding structure."

Will Versus Resources

The survey is part of a broader series of research by the center on performance funding. The Lumina Foundation has funded much of that work.

One overview study, released last year, described the various facets of the strategy, pieces of which 27 states now use.

Most formulas seek to incentivize colleges to do better on student success measures such as student retention rates, milestones for credits earned, and graduation numbers. Sometimes “intermediate student outcomes,” such as success rates in remedial coursework, are used.

Another 2013 paper from the center examined the goals and policy approaches of performance-based funding systems. It concluded that some are ill-defined and overly narrow.

Ohio and Tennessee have among the most aggressive policies in place, according to the new report, with four-fifths of base support in the two states now being linked to performance indicators. Indiana, in contrast, ties just 6 percent of its funding to a performance formula.

Kevin Corcoran, a strategy director at the foundation, said the findings from the various reports should be considered together. He said the research has identified promising aspects of performance-based funding.

“It’s clear that it changes the conversation,” said Corcoran, citing an enhanced focus on student supports and academic success.

As for the newly released survey results, he said it was unclear how much weight to give respondents’ predictions, which may or may not prove true. And some of the cited concerns are hardly new or linked solely to funding formulas.

“Grade inflation has long been a problem,” he said.

The survey’s unintended consequences don’t appear uniformly across sectors and states. For example, university administrators were much more likely to mention tighter admission standards. Only one respondent from a community college mentioned that concern, which is probably a reflection of the open-door admissions policies of most two-year colleges.

Kevin J. Dougherty, an associate professor of higher education and education policy at Teachers College, has been a co-author on several of the center’s studies, including the new report. He said the researchers chose Indiana, Ohio and Tennessee for the survey because they have been careful and deliberate in creating their formulas.

“What these states are doing is very important,” he said.

Partially as a result, Dougherty said, the majority of the 222 respondents support the concept behind performance funding. “These people wanted it to work,” he said.

However, the policies appear to run into problems, Dougherty said, because colleges have “insufficient organizational capacity” to comply with them. For example, they may not be able to do enough institutional research or to pay for experimental programs, he said. And states typically aren’t helping to pay for that work.

The challenge for colleges, Dougherty said, “may not be will as much as knowledge and resources.”