Performance Funding and Certificate and Degree Production

October 8, 2018

State performance-funding policies that link a relatively high percentage of base funding for community colleges to student outcomes on average lead to more short-term certificate (instructional time of a year or less) completions and fewer associate-degree completions, according to a new study. These results suggest potentially damaging consequences for students, because short-term certificates tend to lead to negative or minimal wage gains, while associate degrees offer substantial wage gains.

The findings were described in a policy brief from the Wisconsin Center for the Advancement of Postsecondary Education. The study's authors are Amy Li, an assistant professor at the University of Northern Colorado, Alec Kennedy, a doctoral student at the University of Washington, and Margaret Sebastian, a doctoral student at Northern Colorado.

Performance funding policies are on the books in roughly 35 states. Policies that allocate at least 5 percent of base funding to outcomes produce increases in short-term certificate completions, the study found. Those that allocate at least a quarter of community colleges' base funding to outcomes and are active for at least two years produce increases in short-term certificates and declines in associate degrees.

"Many performance-funding policies offer equivalent funding allocations for completions of short-term certificates, medium-term certificates, and associate degrees. When designing performance-funding policies, policy makers may not have anticipated that this would encourage colleges to direct students into short-term certificate programs. Our research supports the notion that colleges focus on graduating more students from short-term certificate programs in pursuit of short-term funding rewards," the paper said. "We caution policy makers to consider whether increasing graduates of short-term programs is an intended higher education attainment goal."

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