Performance Funding In Higher Education Research Articles

New Evidence on the Evolution and Landscape of Performance Funding for Higher Education

ABSTRACT This study draws upon the first detailed longitudinal dataset on performance-based funding (PBF) to document the evolution and current landscape of PBF in American higher education. We show that while PBF has become increasingly common, states have experimented with adopting, abandoning, and re-adopting PBF over time. We also find a new wave of PBF adoption occurring in the 2010s following the Great Recession. However, PBF remains a relatively weak policy lever with a small share of funds at stake in most states and some states not funding PBF even when it exists in legislation. Equity considerations vary in the student groups they include and less than half of two-year and three-quarters of four-year PBF systems include race when allocating performance funds. Our findings complicate some common characterizations of PBF and offer new insight for researchers examining how PBF policy design shapes student and institutional outcomes.

Performance Funding and Management in Higher Education: The Autonomy Paradox and Failures in Accountability

Performance funding is a specific method to manage performance by tying public funding to performance rather than to inputs identified by the organization. Since the 1980s, many countries have adopted some version of performance funding in the higher education sector as part of marketization processes and in response to increased competition, making it a major issue in higher education policy. This paper develops a theoretical framework that utilizes a network-related principal-agent framework to detect the possible origins of the failures in most versions of performance funding in higher education. The framework specifies the conditions required for effective monitoring and effort maximization. Nevertheless, we show that such conditions rarely exist in most higher education systems. Thus, performance funding creates an “autonomy paradox” that ultimately explains the failures in accountability related to performance funding. This unexpected and unwelcome outcome calls for a reexamination of this approach. We recommend expanding the collection of performance information to include inputs and capabilities and creating various mechanisms that connect specific solutions to specific problems.

The Financial Benefits and Burdens of Performance Funding in Higher Education

Performance funding in higher education is intended to incentivize increased degree production at American colleges and universities by linking state funds directly to institutional outcomes. However, many critics suggest that such funding arrangements create systems of “winners and losers” by rewarding some institutions over others. Using a difference-in-difference methodology, this article explores the impact of performance funding on state appropriations and investigates the heterogeneous treatment effects across institution types. I find that performance funding consistently benefits high-resource institutions and imposes financial burdens on low-resource institutions. The theory of social construction and policy design illuminates the findings.

Performance Funding for Higher Education by Kevin J. Dougherty etal.

Reviewed by: Performance Funding for Higher Education by Kevin J. Dougherty etal. James Dean Ward Kevin J. Dougherty, Sosanya M. Jones, Hana Lahr, Rebecca S. Natow, Lara Pheatt, and Vikash Reddy. Performance Funding for Higher Education. Baltimore, MD: Johns Hopkins University Press, 2016. 276 pp. Paperback: $40.00. ISBN: 9781421420820 In Performance Funding for Higher Education, Dougherty and colleagues provide an in-depth examination of an increasingly common phenomenon: performance funding (PF). While PF policies have been part of the higher education funding landscape since Tennessee implemented its version in the 1970s, these policies have evolved, as well as come into and out of fashion. In initial PF 1.0 policies, performance metrics were used to allocate “bonus” funding to colleges and universities that were successful in given areas. These policies often comprised small levels of an institution’s total funding and were thus deemed ineffective. This allowed a new wave of PF 2.0 policies to rise over the last 15 years. These newer policies tie an institution’s base funding from the state to performance metrics. In some cases, these metrics comprised up to 90 percent of an institution’s total funding, thus making PF 2.0 more high stakes for colleges. This well-written book provides novel qualitative analyses of PF 2.0 policies, an important contribution given the significant role these policies play in how state colleges are funded. The authors seek to understand the policy instruments, immediate and intermediate effects of the instruments on institutional behavior and student outcomes, the process by which colleges decide on an organizational response to PF policies and the potential challenges faced with these responses, and the potential unintended consequences of PF policies. The breadth of research questions enables a holistic assessment of performance funding that avoids treating any singular outcome as an isolated effect. The comparison of three states—Tennessee, Ohio, and Indiana—allows for an analysis of variations of PF 2.0 policies. Dougherty and colleagues provide a thoughtful introduction in the first two chapters that outline the current research related to performance funding, the gaps in our collective knowledge, and the theoretical underpinnings of PF policies and their outcomes. While the review of performance policies in higher education is somewhat brief at the outset of the book, chapter six is dedicated to an indepth discussion of the current quantitative work discussing performance funding in higher education. That discussion puts a particular emphasis on studies involving Indiana, Ohio, and Tennessee, as well as those evaluating PF 2.0 policies. The authors also extensively review the literature, with a focus on the theoretical implications, related to performance funding policies in areas other than higher education. This discussion provides useful content to frame the reader’s understanding of PF policies and also supports the conceptual framework used in the book’s study. The authors rely on five theories to frame their analysis: performance management, policy design, organizational learning, policy implementation, and principal-agent theories. Although these theories span an array of phenomena, the authors aptly use these five theories in order to examine performance funding in a holistic manner. They argue that in order to fully understand the impacts of PF policies, one must consider the design and implementation of such policies, the organizational responses, and the policy tools used to control these responses. In order to provide an in-depth and comprehensive understanding of PF policies in the three states, the authors use qualitative methods and take advantage of triangulation from multiple sources to bolster the study’s trustworthiness. A total of 261 state- and institutional-level informants were interviewed, including state higher education officials, legislators and their staff, senior institutional administrators, and faculty. This range of interviewees provides an array of views that produce a well-articulated understanding of campus responses to PF policies. State-level officials were primarily asked “how did [they] envision that the performance funding would work… [and] how did the program actually work” (p. 39). Institutional administrators and faculty were asked about how their college responded to the policies, how any changes to institutional processes were decided upon, what impact these changes had on student outcomes, and any obstacle that may have arisen. As...

The Politics of Performance Funding for Higher Education: Origins, Discontinuations, and Transformations

The Politics of Performance Funding for Higher Education: Origins, Discontinuations, and Transformations

Looking Inside the Black Box of Performance Funding for Higher Education: Policy Instruments, Organizational Obstacles, and Intended and Unintended Impacts

For several decades, policymakers have been concerned about increasing the efficiency and effectiveness of postsecondary institutions. In recent years, performance funding—which directly connects state funding to an institution’s performance on indicators such as student persistence, credit accrual, and college completion—has become a particularly attractive way of pursuing better college outcomes. But even as states have made an enormous investment in performance funding, troubling questions have been raised about whether performance funding has the effects intended and whether it also produces substantial negative side effects in the form of restrictions in access for underrepresented students and weakening of academic standards. This paper addresses these troubling questions by drawing on data richer than heretofore available. In addition to drawing on the existing body of research on performance funding, it reports data from a study of the implementation of performance funding in three leading states (Indiana, Ohio, and Tennessee) and its impacts on three universities and three community colleges in each state.

An Examination of the (Un)Intended Consequences of Performance Funding in Higher Education

Previous studies have shown that state performance funding policies do not increase baccalaureate degree production, but higher education scholarship lacks a rigorous, quantitative analysis of the unintended consequences of performance funding. In this article, we use difference-in-differences estimation with fixed effects to evaluate performance funding in Indiana. We find that performance funding did not increase the number of graduates and instead led to declining admission rates and increased selectivity at Indiana’s public universities. When compared with surrounding states, we find limited evidence that the effects of performance funding could disproportionately limit college access for Indiana’s low-income and minority applicants.

Evaluating the Impacts of “New” Performance Funding in Higher Education

In 2007, Washington adopted the Student Achievement Initiative, a statewide performance accountability system designed to improve retention rates and degree productivity among community colleges. Using difference-in-differences analysis, we found that the policy change has had little immediate effect on retention rates or associate’s degree productivity. However, community colleges produced more short-term certificates after the policy reform. These results are robust across many alternative comparison groups. Considering that certificates yield less value in the labor market than associate’s degrees but are easier for colleges to produce, we discuss the unintended consequences of rewarding colleges based on the number of credentials they produce.

The impact of performance funding on institutional performance over time: evidence from South Korean universities

Performance funding for higher education has gained popularity in many countries, but its impact on institutional performance remains unclear. This study investigates the impact of performance funding on the institutional performance of Korean universities over time. The institutional performance indicators used include graduates’ employment rate, student retention rate, financial aid per student, expenditure per student, and faculty-to-student ratio. Using longitudinal data of 160 4-year universities from 2008 to 2013, we employed a multilevel growth modeling strategy. The results indicate that institutions with more funding through the Education Capacity Enhancement Program sustained higher employment rate, retention rate, and faculty-to-student ratio in 2013, while employment and retention rates of less-funded institutions grew faster over time after controlling for 2008 status and institutional characteristics. This evidence demonstrates that the performance funding program in Korea encouraged institutions to focus on the most important performance indicators, resulting in a funding effect and a motivational effect. We suggest policy implications for the future development of performance funding as well as appropriate use of performance indicators.

The politics of performance funding for higher education: origins, discontinuations, and transformations

The politics of performance funding for higher education: origins, discontinuations, and transformations

Performance Funding in Higher Education: Do Financial Incentives Impact College Completions?

In 2000, the Pennsylvania State System of Higher Education introduced a performance-based funding model aimed at increasing degree productivity among the state's public colleges. This study examines how the new policy affected undergraduate degree completions. Using a difference-in-differences estimation strategy, results suggest the policy has not systematically increased degree completions within the state. With limited evidence of the policy's effect, we conclude that this was an ineffective funding model in terms of its ability to increase college completions. Although we find modest impacts when compared against colleges in neighboring states, these impacts disappear when matched against similar colleges from other states.

Performance Funding for Higher Education

Since the 1970s, federal and state policy-makers have become increasingly concerned with improving higher education performance. In this quest, state performance funding for higher education has become widely used. As of June 2014, twenty-six states were operating performance funding programs and four more have programs awaiting implementation. This article reviews the forms, extent, origins, implementation, impacts (intended and unintended), and policy prospects of performance funding. Performance funding has become quite widespread with formidable political support, yet it has also experienced considerable implementation vicissitudes, with many programs being discontinued and even those that have survived encountering substantial obstacles and unintended impacts. Although evidence suggests that performance funding does stimulate colleges and universities to substantially change their policies and practices, it is yet unclear whether performance funding improves student outcomes. The article concludes by advancing policy recommendations for addressing the implementation obstacles and unintended side effects associated with performance funding.

Performance Funding in Higher Education: Do Financial Incentives Impact College Completions?

In 2000, the Pennsylvania State System of Higher Education introduced a performance-based funding model aimed at increasing degree productivity among the state’s public colleges. This study examines how the new policy affected undergraduate degree completions. Using a difference-in-differences estimation strategy, results suggest the policy has not systematically increased degree completions within the state. With limited evidence of the policy’s effect, we conclude that this was an ineffective funding model in terms of its ability to increase college completions. Although we find modest impacts when compared against colleges in neighboring states, these impacts disappear when matched against similar colleges from other states.

The “New” Performance Funding in Higher Education

Over the past several years, public higher education, both in the U.S. and internationally, has increasingly been required to explain, defend, and validate its performance and value to a wide variety of constituents, including governors, legislators, students, parents, employers, and taxpayers.

Accounting for Higher Education Accountability: Political Origins of State Performance Funding for Higher Education

Background/Context Performance funding finances public higher education institutions based on outcomes such as retention, course and degree completion, and job placement rather than inputs such as enrollments. One of the mysteries of state performance funding for higher education is that despite great interest in it for over 30 years, only half of all states have ever adopted it. Purpose/Objective/Research Question/Focus of Study This study examines the political forces that have driven the development of performance funding in some states but not others. To do this, the authors draw on theories of policy origins such as the advocacy coalition framework, the policy entrepreneurship perspective, and policy diffusion theory. Research Design This study contrasts the experiences of six states that established performance funding for higher education (Florida, Illinois, Missouri, South Carolina, Tennessee, and Washington) and two that have not (California and Nevada). These states differ considerably in their performance funding programs, higher education governance arrangements, and political and socioeconomic characteristics. Data Collection and Analysis Our study is qualitative, drawing on documentary records and extensive interviews with higher education officials, legislators and staff, governors and advisors, business leaders, and other actors. Findings and Results Our study finds that many of the actors and motives cited by the prevailing perspective on the origins of performance funding did operate in the six states that have established performance funding, including state legislators (particularly Republicans), governors, and business people pursuing performance funding in the name of greater effectiveness and efficiency for higher education. However, the prevailing perspective misses the major role of state higher education coordinating boards and individual higher education institutions (particularly community colleges) that pursued performance funding to secure new funds in an era of greater tax resistance and criticism of higher education. Our findings further move beyond the prevailing explanation by examining how policy entrepreneurs mobilized support for performance funding by finding ideological common ground among different groups, identifying policies that those groups could support, and taking advantage of political openings to put performance funding onto the decision agenda of state elected officials. Conclusions and Recommendations This examination of the origins of performance funding policies sheds light on factors that facilitate and frustrate the development of such policies. For example, our research highlights the important role of higher education opposition and the presence of certain political structures and political values in frustrating the development of performance funding.

Popular but Unstable: Explaining Why State Performance Funding Systems in the United States Often Do Not Persist

Background/ContextPerformance funding in higher education ties government funding to institutional performance on indicators such as retention, graduation, and job placement. Performance funding can also be found in state K-12 funding policies and higher education quality assurance programs abroad. One of the puzzles about higher education performance funding is that half of the states establishing it later abandoned it.Purpose/Objective/Research Question/Focus of StudyThis study examines the factors that have led many states to drop performance funding for higher education.Research DesignThis qualitative case study contrasts the experiences of three states that dropped performance funding in whole or in part (Missouri, Washington, and Florida) and a fourth (Tennessee) that has retained it more than 30 years.DiscussionOur analysis is based on documentary records and extensive interviews with higher education officials, legislators and staff, governors and advisors, business leaders, minority group leaders, researchers, and outside consultants. Our findings concur with but also go beyond prior analyses of the demise of state performance funding systems. We concur that higher education opposition played a key role in this demise, stimulated by a perception of inadequate consultation with higher education institutions, use of performance indicators that institutions found invalid, high implementation costs to institutions, and erosion of campus autonomy. At the same time, our analysis turned up other causes of higher education opposition to performance funding that were not discovered by previous studies. A major cause of higher education opposition was the downturn in state finances in the early 2000s, which led institutions to focus on preserving their core state funding and giving up performance funding. Higher education opposition was also provoked if performance funding took the form not of adding to existing state funding but instead holding back a portion of the state appropriation and requiring institutions to earn it back through improved performance. These findings agree and disagree with theories and findings in the research literatures on policy termination and program sustainability.Conclusions/RecommendationsIf its advocates are to create a sustainable basis for state performance funding, they must find ways to insulate its funding from the ups and downs of the state revenue cycle, better secure the support of public institutions, and expand its breadth of political support by reaching out, for example, to business and to social groups driven primarily by the values of educational equality rather than educational efficiency.

Performance Funding in Higher Education: The Effects of Student Motivation on the Use of Outcomes Tests to Measure Institutional Effectiveness

This study obtained data from 1,633 students who took the Collegiate Assessment of Academic Proficiency (CAAP) to evaluate whether the English, math, and critical thinking exams should be used as performance funding measures in the state. Analysis of Covariance (ANCOVA) was utilized to demonstrate that the use of the exams was problematic because students failed to give the assessments their best effort. Other variables in the analysis included level of English and math completed, grade point averages for English and math, cumulative grade point averages, and student characteristics. Policy implications for performance funding are also addressed in the study.

A Theory of Nonmarket Failure: Framework for Implementation Analysis

THE principal rationale for public policy intervention lies in the inadequacies of market outcomes. Yet this rationale is really only a necessary, not a sufficient, condition for policy formulation.1 Policy formulation properly requires that the realized inadequacies of market outcomes be compared with the potential inadequacies of nonmarket efforts to ameliorate them. The "anatomy" of market failure provides only limited help in prescribing therapies for government success.2 That markets may fail to produce either economically optimal or socially desirable outcomes has been elaborated in a well-known and voluminous