The Political Origins of Performance Funding 2.0 in Indiana, Ohio, and Tennessee: Theoretical Perspectives and Comparisons With Performance Funding 1.0

Abstract

Although performance funding for higher education has existed for many years, the details of particular performance funding programs have changed—sometimes dramatically—over time. A new form of performance funding often called performance funding 2.0 (PF 2.0) represents a major shift in performance funding and in higher education funding more generally. Unlike earlier forms of performance funding that took the form of a bonus on top of the base state funding for higher education, PF 2.0 is embedded into the base funding itself. PF 2.0 programs are seen as promising means to significantly improve institutional performance due to the fact that they typically tie a larger portion of state funding to performance indicators than do PF 1.0 programs. Additionally, PF 2.0 programs aim to be more stable than PF 1.0 programs, as PF 2.0 performance indicators are written into the regular state funding formula itself and are not separate programs that can be easily dropped. Despite the importance of this new development, little is known about the forces that are giving rise to PF 2.0 programs. This paper examines the political forces supporting the enactment of PF 2.0 in three leading states (Indiana, Ohio, and Tennessee) and compares these forces with those involved in the enactment of PF 1.0 performance funding programs. To understand this political process, we apply three theoretical perspectives within policy theory: the Advocacy Coalition Framework, Policy Entrepreneurship theory, and policy diffusion theory. These three perspectives powerfully illuminate different facets of the origins of PF 2.0 policies when treated as complementary rather than as mutually exclusive explanations.