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A new report from the Education Policy Center at the University of Alabama identifies several “lessons learned” based on a review of states’ experiences with performance-based funding (PBF) in higher education.
PBF programs are most likely to be effective if:
According to the report, 39 states are currently "active in PBF.” That includes 22 states that have PBF systems in place, seven states that have approved but not yet implemented PBF, and 10 states that have had “formal discussions” about PBF.
States trend toward performance funding
In the latter category, the state legislature has discussed PBF or the governor has appointed a group to explore the issue, but “there are no mandates or recommendations indicating they are going forward,” said co-author Janice Nahra Friedel, an associate professor in the Educational Policy and Leadership Studies Department at Iowa State University.
A chart in the report showing the status of PBF programs identifies seven states that have implemented PBF with separate metrics for community colleges: Arkansas, Illinois, Missouri, Ohio, Tennessee, Texas and Washington.
Other states have a single PBF system encompassing all of higher education (Indiana, Louisiana, Massachusetts, Minnesota, Nevada, North Dakota, Oklahoma and Utah), the chart shows, and some have systems that only apply to universities (Arizona, Michigan, Minnesota, New Mexico, Pennsylvania and South Dakota).
Friedel calls the report “a snapshot” and “point-in-time picture” of the national landscape of PBF, rather than in in-depth analysis.
Outcomes vs. progress
PBF systems have been around since the late 1970s, the report notes. Earlier models focused on outcome indicators, such as graduation rates, number of degrees/certificates awarded, job placement rates or student success on licensing exams.
The ups and downs of performance funding
As PBF systems have evolved in recent years, newer systems—what the report refers to as “PBF 2.0” —encompass progress outcome indicators, such as the number of students completing 12 or 24 credits, developmental course completion or the number of students who transfer to a four-year college.
Rather than just encouraging colleges to change their mission, the goal of PBF 2.0 is to “incentivize progress toward those components of the institutional mission that align with the state’s priorities and needs,” the report said.
Even though PBF has been around for a long time, “there’s very little evidence from the review of research that PBF results in improved performance,” Friedel said. That’s because many states have changed their focus over the years and because the amount of the funding incentives provided through PBF is small compared to the amount of funds colleges receive from other sources, including tuition and fees.
According to Friedel, the report is intended as a resource for policymakers, not a recommendation that states should adopt PBF systems. If states do go that route, she said, “they should be cautious, take their time and look at lessons learned from other states.”
PBF systems should be phased in gradually, involve stakeholders, consider the different types of community colleges and respond to their different missions—whether that is increasing the number of transfers or ensuring graduates secure jobs that pay gainful wages, Friedel said.
The report acknowledges the trend in community colleges to focus more on completion rather than just access as a factor in the PBF trend. It cites the American Association of Community Colleges' 21st Century Commission on the Future of Community Colleges report as calling for “a shift from funding tied to enrollment” to “funding tied to enrollment, institutional performance and student success.”
With state funding for community colleges declining, the PBF report suggests that aligning PBF with a state’s agenda for higher education may prompt legislators to avoid cuts to community college appropriations during tight budget years.
Copyright ©2012 American Association of Community Colleges