Performance Funding Policies Research Articles

Need-Based Promise Programs, Performance Funding Bonuses, and the Enrollment of Low-Income Students

Certain statewide promise programs require students to demonstrate financial need, while state performance funding policies sometimes incorporate a financial bonus that incentivizes colleges to enroll or graduate low-income students. We use data on public, 4-year colleges from 2007–2008 to 2019–2020, and incorporate difference-in-differences analyses and event studies. We find that colleges affected by promise programs in Louisiana, New York, and Washington observed no changes to the number and percent of first-time, full-time (FTFT) Pell grant recipients. Colleges in states subject to a performance funding bonus experienced no changes to the number and percent of FTFT Pell grants recipients, and colleges in Louisiana subject to both policies experienced no changes to either outcome.

The Impact of Performance Funding Policy Design on College Access and Selectivity

This study draws on a comprehensive performance-based funding (PBF) dataset and up-to-date difference-in-differences econometrics to examine the impacts of specific policy features (e.g., share of institutional revenue at stake and equity metrics) on college access and selectivity. We find suggestive evidence that increases in the share of revenue at stake are associated with decreases in racially minoritized student enrollment. Meanwhile, equity metrics may not be enough to boost enrollment among underserved students. Ultimately, however, our conclusions are limited due to various potential sources of bias, unconvincing pre-trends, and wide confidence intervals. While findings offer limited insight into the impacts of specific design features, they point to limitations of PBF—regardless of design—in expanding access and reducing inequities at 4-year colleges.

The effects of state performance funding policies on student loan debt

Performance-based funding (PBF) policies are an increasingly common way for states to tie funding for public colleges and universities to student outcomes. Yet amid growing concerns about student debt, the potential exists for PBF to affect student debt and ability to repay loans in both intended and unintended ways. In this paper, we use the first comprehensive dataset of PBF policies to examine the effects of PBF on student debt. We found no effects of PBF on student debt in the two-year sector and some evidence of increased debt among university students from more affluent families.

Challenges for higher education in the United States: The cost problem and a comparison of remedies

AbstractThe costs of attending four‐year colleges and universities in the United States have steadily increased over four decades leading to high levels of student debt and many obstacles for low‐income students. The analysis presented appraises the extent of the cost and affordability problems, debunking the sensationalistic claims that are common in mass media. It considers the sources of cost increases such as the growth of administration and the decline of state subsidies and their consequences for low‐income students, including growing income gaps in completion rates and declining enrolment in more expensive institutions. By reviewing and synthesizing the existing literature, possible remedies for the cost problem are examined. These possible remedies include cost containment strategies, the possibility that universities can pursue alternative revenue sources, performance funding policies to improve productivity, increased state investment in institutional support, and financial aid reforms. Financial aid reforms provide the most feasible solution to the cost problem. These reforms should include doubling the size of grants to low‐income students and the expansion of income‐contingent loan repayment plans.

An Overview of Performance Funding Policy in Missouri

An Overview of Performance Funding Policy in Missouri

Completion at the Expense of Access? The Relationship Between Performance-Funding Policies and Access to Public 4-Year Universities

Efforts to improve college-completion rates have dominated higher education policy agendas. Performance-based funding (PBF) intends to improve college completion and links state funding for public colleges and universities to performance measures. One critique of PBF policies is that institutions might restrict student access. This study uses a difference-in-differences design and institution-level data from 2001 to 2014 to examine whether 4-year, public institutions become more selective or enroll fewer underrepresented students under PBF. Our findings, supported by various robustness checks, suggest that institutions subject to PBF enroll students with higher standardized test scores and enroll fewer first-generation students. PBF models tied to institutions’ base funding are more strongly associated with increased standardized test scores and enrollment of Pell students.

Exploring the Relationship Between Performance-Based Funding Design and Underrepresented Student Enrollment at Community Colleges

Objective: An increasing number of states are adopting performance-based funding (PBF) systems for their public colleges, but there are concerns that PBF dissuades colleges from recruiting and enrolling students with a lower likelihood of success. Some states have attempted to address this concern by providing additional funds for successfully serving low-income, underrepresented minority, or adult students, but the effectiveness of these particular provisions has yet to be examined among 2-year colleges. I explore whether these provisions have affected historically underrepresented student enrollments at community colleges. Method: I use generalized difference-in-difference panel regression techniques combined with data from the Integrated Postsecondary Education Data System and information from states on their performance funding policies from the 2004-2005 to 2014-2015 academic years to address the research questions. I classified colleges based on whether they had a PBF system with equity provisions, a PBF system without equity provisions, or no PBF in a given year and compared these three groups of institutions. Results: I find little evidence that PBF policies, regardless of their design characteristics, have a relationship with traditionally underrepresented student enrollment levels. Contributions: Although there are concerns that PBF systems induce community colleges to selectively recruit students with a higher probability of success, I find no systemic evidence of that practice. However, as PBF systems become higher stakes and more ingrained in state higher education funding, this finding deserves further study.

Policy Adoption, Innovation, and Performance Management: The Case of Performance-funding Policies in State Postsecondary Education:

Since the 1980s, nearly every state government has implemented some form of performance management. This article turns to the context of public higher education where the use of performance managem...

Will the Tide Lift All Boats? Examining the Equity Effects of Performance Funding Policies in U.S. Higher Education

This study considers whether performance funding policies systematically tend to harm some types of institutions of higher education while helping others. Building on theories of deck stacking and institutional stratification, a formal theoretical model of the effects of performance funding policies on individual institutions is developed and discussed. We find two types of likely policy effects—one which serves to improve overall institutional performance and another which exacerbates unevenness among institutions in terms of quality. We then conduct an initial empirical test of our theory, analyzing a cross-sectional time-series dataset of colleges and universities in the U.S. Our findings are somewhat mixed. The adoption of performance funding policies appears to have the ability to boost overall average levels of degree production in some instances. However, performance funding 2.0 policies are also associated with larger variance in degree production rates. We find some evidence that 2.0 policies also have heterogeneous effects on graduation and retention rates, whereby the benefits of these policies disproportionately accrue to institutions already positioned to perform well.

Policy Adoption, Innovation, and Performance Management: The Case of Performance-funding Policies in State Postsecondary Education

Since the 1980s, nearly every state government has implemented some form of performance management. This article turns to the context of public higher education where the use of performance management has been popular but highly controversial and unstable. Using the Cox conditional gap time model for repeating events and state-level panel data, this article investigates the factors associated with the adoption and readoption of performance-based funding policies for public higher education. Results indicate that state higher education governing structures, increases in public tuition, and educational attainment are important predictors of whether a state adopts performance-based funding.

Does Evidence Matter? An Analysis of Evidence Use in Performance-Funding Policy Design

This paper reports on an analysis, using a comparative case study design, of the degree to which policy actors use evidence in designing performance-funding policies in Colorado and Texas. The analysis reveals that features of demanders of information—including their prior exposure to research, their attitudes toward evidence, and, in the case of campus representatives, their institutions' financial resources—as well as characteristics of the evidence itself, particularly its definitiveness and perceived relevance, were critical for fostering evidence use. The interaction between suppliers and demanders also facilitated but was not a necessary condition for evidence use.

Equity or Disparity: Do Performance Funding Policies Disadvantage 2-Year Minority-Serving Institutions?

Objective: We investigate whether performance funding—an increasingly prevalent state policy that allocates appropriations based on outcomes that prioritize retention and completion—places minority-serving institutions (MSIs) at a financial disadvantage due to these institutions serving a greater proportion of historically underrepresented students. Method: Using data from 2004-05 to 2014-15 within Texas and Washington, we compare state funding allocations to 2-year institutions designated as MSIs versus non-MSIs, before and after performance funding policies are implemented. We additionally compare funding allocations for each performance metric. Results: On average, MSIs in Texas and Washington are allocated the same or less in per-student state funding after performance funding compared to non-MSIs. MSIs in Texas are advantaged in performance metrics for transfers and for gateway courses in math (credit-bearing courses that serve as a “gateway” to continued study), and MSIs in Washington are advantaged in developmental education courses. However, MSIs are typically disadvantaged in metrics for degree completions. Conclusion: Our findings suggest that MSIs in Texas and Washington are not financially disadvantaged due to performance funding because the funding formulas in both states incentivize milestones in addition to outputs. We recommend that policy makers consider incorporating performance metrics for developmental education and gateway courses in addition to retention rates and degree completions, and tailor metrics to the student population of institutions to mitigate the potentially inequitable funding consequences of performance funding policies.

Performance Funding Policy Impacts on STEM Degree Attainment

Performance funding policies for higher education allocate appropriations to public institutions based on student outcomes such as degree completions. This study investigates whether a special science, technology, engineering, and mathematics (STEM) incentive in 13 state performance funding policies leads to greater undergraduate degree completions in STEM fields. This study applies a conceptual framework of principal–agent theory and anticipatory policy effects. Incorporating a panel data set on 551 public 4-year institutions from 2003-2004 to 2014-2015, results from difference-in-differences analyses suggest that the STEM incentive increases total STEM bachelor’s degrees completed as well as STEM bachelor’s degrees completed as a proportion of all bachelor’s degrees. Findings are robust to alternative specifications, suggesting that institutions are responding to the performance funding STEM incentive by graduating more students in these high-demand fields.

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...

Performance Funding Policy Effects on Community College Outcomes: Are Short-Term Certificates on the Rise?

Objective: Performance funding (PF) policies allocate a portion of state funding to colleges based on student outcomes. This study is the first to account for policy type and design differences, and explores the impact of performance funding on three levels of credential completions: short-term certificates, medium-term certificates, and associate’s degrees. Method: We create a panel dataset of 751 two-year colleges from years 1990 to 2013 using data from the Integrated Postsecondary Education Data System. We conduct a series of analyses using difference-in-differences with the inclusion of college- and state-level control variables. Results: We find that, on average, performance funding produces no significant changes in completions of any of the three credentials. Policy types characterized by a greater proportion of funding tied to the base budget, mission differentiation in performance metrics, inclusion of underrepresented student metrics, and longer periods of operating years produce an increase in short-term certificates, no significant change in medium-term certificates, and a decrease in associate’s degrees. Contributions: This study’s findings suggest that because awarding more short-term certificates is a relatively quick and cost-effective way to capture performance funds, colleges might be engaging in a path of least resistance by churning out short-term certificates and redirecting focus away from associate’s degrees, which is concerning given that short-term certificates generally offer limited labor market benefits compared to medium-term certificates and associate’s degrees. Our results also underscore the importance of policy designs in explaining differential impacts on credential completion.

Mitigating Unintended Impacts? The Effects of Premiums for Underserved Populations in Performance-Funding Policies for Higher Education

Performance funding is an increasingly prevalent policy state officials use to allocate a portion of state funds to public colleges and universities. Researchers have begun to evaluate the effect of these policies, finding bleak evidence of their effectiveness in yielding intended outputs and suggesting the policies may even result in limited college access for underserved students. There may also be differences in policy effects depending on performance-funding policy designs, which vary considerably across states. Of particular interest to this study are premiums—financial bonuses to institutions—for promoting access and success for specified underserved student groups. Using difference-in-differences models and an original dataset on premiums in funding models, this study evaluates the impact of premiums for underserved students in performance-funding models on selectivity and the enrollment of minority and low-income students at 4-year universities from 1993 to 2014. We find that the share of both low-income and Hispanic students increases in institutions with performance-funding premiums for underserved students compared to institutions subject to performance funding without such premiums. Effects vary depending on premium type and longevity. The findings also reveal unexpected, negative effects of premiums on Black student enrollments. Our findings suggest that, by incorporating premiums, performance-funding model designers might prevent, minimize, or reverse the negative consequences of performance funding on vulnerable student groups. However, given variation in premium effects across student groups, performance- funding model designs should be tailored to local contexts.

The creation of performance funding in Michigan: Partnership, promotion and points

While accountability in higher education has been a topic of debate for decades, in recent years the discussions have shifted to emphasize efficiency and economic measures of success. A prominent example of this accountability movement is the increase in popularity of performance funding policies. One of the most recent states to implement performance funding is Michigan, which began their performance funding policy in 2012. This study explored the creation and implementation of the state of Michigan’s performance funding policy. In particular, the decision making processes institutional administrators and state leaders engaged in while designing, promoting, and implementing the policy. Using a case study design and interviewing both higher education administrators and state leaders who were involved in the creation of the performance funding policy in Michigan yielded five large trends: 1) The importance of advocacy coalitions; 2) Securing support through a focus on higher education affordability; 3) Concerns with how to measure data and compare institutions; 4) Insufficient financial incentives; and 5) Limited impact on institutional decision making.

A Historical Mission in the Accountability Era

The case study is an analysis of a state performance funding policy at a public historically Black college and university (HBCU). The policy attaches state funding to HBCU performance on measures like graduation rates and equity measures like the reduction in achievement gaps between Black and non-Black students. Participants liked that the policy helped the institution to become more outcome minded, but were critical of the equity measures and their relationship with the state system of higher education. The article addresses how the HBCU’s mission was addressed in the policy and its plans for responding that includes focusing on Latino students.

The Point of the Point: Washington’s Student Achievement Initiative through the Looking Glass of a Community College

ABSTRACTFor 8 years Washington State has operated a performance funding policy, the Student Achievement Initiative (SAI). The policy allocates appropriations to the state’s 34 community and technical colleges based on points earned through student achievement of college-readiness, retention, and completion milestones. Grounded in a conceptual framework of principal-agent theory, this study explored one community college case to examine knowledge of, perspectives on, and responses to the SAI. Through semi-structured interviews with seven faculty, administrators, and staff, combined with document analysis, five themes emerged: information transmission, initiating the initiative, the point of the point, consequences of imperfect data, and faculty skepticism. This study concludes with implications and recommendations for practice and policy.

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.