Performance-Based Funding and Student-Centered Higher Education
Performance-based
funding models ensure public colleges and universities are still able
to operate, but reward the institutions that support student success
rather than those that pull in the most enrollees.
The
following Q&A is with Sean Tierney, a strategy associate at Lumina
Foundation. Tierney, who has experience with Maryland’s and Tennessee’s
Higher Education Commissions, spoke at this year’s SxSW EDU conference
on the capacity for outcomes-based funding to boost performance for
higher education institutions. In this interview, Tierney sheds light on
the benefits of the performance-based funding model and explores one of
its most significant critiques; that such a model would punish
institutions that serve mainly non-traditional and high-risk students.
1. Why is the performance-based funding model so promising for the advancement of public higher education?
Traditionally, most colleges and universities are funded based on how
well they perform on a single metric: enrollment. This encourages
higher education to enroll students and keep them enrolled, but not
necessarily to help them earn degrees, certificates or other meaningful
credentials. Under enrollment-based funding, institutions do not receive
additional funding if their students continue through
more-expensive-to-offer, upper-level coursework. In fact, they can even
lose some funding if their students earn credentials or graduate and
leave behind empty seats. This perverse incentive poses the greatest
harm to students from low-income families who most need support and can
least afford to enroll without later graduating.
Outcomes-based models fund institutions on how well they perform on
metrics related to how well they graduate students from all backgrounds.
These performance metrics create financial incentives for colleges and
universities to improve student supports and to help students,
particularly racial minorities and students from low-income families,
graduate with high-quality credentials. Outcomes-based funding
encourages higher education institutions to shift from prioritizing
college access to prioritizing both access and student outcomes.
2. What are the metrics that come into play when constructing a performance-based funding model?
Student progression, such as reaching certain credit milestones, and
completion, such as courses taken or certificates and degrees awarded,
are common among outcomes-based funding formulas. But there is
significant variety across the states when it comes to the use of input,
process and other outcomes metrics. These could include incentives to
serve underserved students, on-time completion, successful transfers,
etc. The metrics chosen should reflect state goals and objectives and
should support institutional missions. For example, community colleges
might be funded in part based on how effective their developmental
education courses are.
3. How is funding for public institutions impacted by the movement toward outcomes-based funding?
Enrollment-based funding rewards institutions for numbers of students
enrolled, regardless of outcomes. Over time, this has resulted in
achievement gaps and inequitable results for racial minorities,
first-generation students and students from low-income families.
Outcomes-based funding takes a share of overall funding and delivers a
policy message about the importance of student completion that’s tied
to state goals and objectives for increasing educational attainment.
Concerns about educational quality and unintended consequences, such as
institutions becoming increasingly selective in admissions, must be
taken seriously and mitigated. Strong evidence exists that
outcomes-based funding prompts serious discussions on campuses about how
to better serve students in ways that increase year-over-year graduate
totals, and early evidence suggests these totals are increasing.
However, deeper quantitative analyses are needed as the best-designed
systems mature during the next few years. It’s worth noting that, in
most states, outcomes-based funding represents only a portion of public
funding, and that much public money continues to support enrollments. In
states where this is not true, tuition and fees make up substantial,
growing shares of total institutional revenue and are themselves
incentives to increase enrollment and access.
4. What impact will outcomes-based funding have on
institutions that largely serve non-traditional and first-generation
students?
Well-designed outcomes-based models should create incentives for
colleges and universities to care more about whether students graduate
and do so on time. These financial incentives, over and above the normal
incentive for increasing the numbers of graduates, should enable
institutions to provide additional supports to non-traditional,
first-generation and other students who have been poorly served in the
past. Many outcomes-based models even provide extra funds for serving
such students.
Enrollment-based funding places no emphasis on these students, and
the results in terms of unfair educational outcomes run counter to the
moral and economic imperatives to provide real opportunity for all
students to achieve social mobility, prepare for further education and
employment and be active in their communities.
5. Considering the position on performance metrics of some
community college leaders, as well as leaders of institutions that
largely serve non-traditional students — especially when it comes to
graduation and retention rates — is there a need for these definitions
to be modified to better fit today’s postsecondary reality?
A well-designed outcomes-based funding model should reflect
differences in institutional capacity and student composition. No metric
or set of metrics is perfect, but a well-designed model can help wisely
allocate scarce resources. The combined metrics should reflect the full
student composition and student needs, even if no one metric does. For
example, the use of graduation rates without considering whether more
students are completing degrees and other credentials each year would be
inadequate. Moreover, institutions can “retain” students for quite some
time, but the real measure should be whether these students are making
steady progress, regardless of whether they are part-time or full-time,
and doing so at rates that make them likely to complete. The best
outcomes-based funding systems take these factors into account.
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Key Takeaways
- Performance-based funding pushes institutions to focus on retention, completion and success among their students.
- For most states, performance-based funding only makes up a portion of total public funding for higher education institutions.
- Well-designed performance-based funding models will account for the diversity of prospective students in the higher education ecosystem.
