Performance funding 2.0 in higher education
As tuition and student debt at public institutions of higher education have grown substantially over the last decade, state governments have looked increasingly to performance funding programs to incentivize the efficient delivery of higher education, particularly by decreasing time-to-degree. Even with hundreds of millions of dollars devoted to these efforts, however, it remains unclear whether the programs have a significant impact on an institution's operations and student outcomes or rather, for example, they simply reward those institutions which were already most able to meet the program's goals and which enroll the best prepared students. Initial performance funding systems that awarded institutions with additional funding for meeting outcomes goals have not been shown to be effective in impacting degree completions. In this paper I analyze whether new models of performance funding that tie performance to a portion of base formula funding, dubbed 2.0, are better at incentivizing institutions to increase degree completion. Considering the myriad influences on student success (and, consequently, graduation rates), it is questionable whether the incentives provided by these programs are sufficient alone to positively influence improvements to graduation rates. Accordingly, it may be more effective for states that desire increased graduation rates and reduced student loan debt to appropriate funds to direct measures of controlling tuition costs—such as increased financial aid tied to timely graduation—than to fund performance funding programs.
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