Public Tuition on the Rise: Estimating the Effects of Louisiana’s Performance-Based Funding Policy on Institutional Tuition Levels

Abstract

Louisiana’s performance-based funding (PBF) policy is one of the most recent implementations of performance funding established by a state for accountability purposes. Instead of examining direct academic outcomes, this study focuses on tuition increase as an (un)intended outcome of PBF implementation. We use data from multiple sources to create a panel dataset of public postsecondary institutions across the United States from 2005 to 2013. Applying Difference-in-Differences and propensity score analyses procedures to estimate the causal relationship between PBF implementation and tuition levels at public institutions in Louisiana, our results indicate that treated community colleges responded to PBF by increasing tuition levels statistically significantly above that of their counterfactual institutions. While in-state tuition and fees rose statistically significantly faster at public universities in Louisiana after PBF implementation, out-of-state tuition and fees charged by the treated 4-year institutions did not significantly differ from the increases experienced at counterfactual institutions in non-PBF states. We explore possible explanations for the findings and provide implications for practices and future research.