States continue to consider and implement performance funding plans, in an effort to boost the graduation and success rates of students. However, it is difficult to find evidence of an actual formula that has achieved impressive results. Public policy is filled with uncertainty, to be sure, but it's interesting that some states have discontinued the experiment because it got too complicated, or overall funding shortages made it harder to justify (see the passage from a new article below).
Also, just because grades go up in a particular state, it doesn't mean it's because of the funding scheme. The phenomenon could be due to other factors, such as summer bridge programs or increased selectivity in developmental education, just to name two. Researchers are always on the alert for "spurious" variables, and there may be plenty in this field.
Then there is the ugly spectre of outright grade inflation—an anecdotal gorilla among faculty these days.
Please examine this post if you haven't seen it. Notice in particular the emphasized text from an important survey of existing empirical literature on performance funding by the respected Community College Research Center. It is difficult to read this summary without at least raising an eyebrow. A link to the entire study in included in the post. The full report is a keeper for those interested in the subject.
A recent article in the Chronicle of Higher Education by Eric Kelderman (subscription may be required) also paints a murky picture. The piece is largely about funding shortages, but it contains the passage below on performance funding schemes around the country.
Indiana, the final state discussed in the passage, may be the one to watch, as its funding plan resembles the one being considered in Texas under HB 9, passed in 2011.
From the Chronicle:
…Julie Davis Bell, a higher-education analyst for the National Conference of State Legislatures, says that "productivity" will be the watchword for public colleges during the legislative sessions.
In many states, lawmakers are considering adopting or expanding performance-based models—giving more money to any college that improves its graduation numbers or credit-hour completions. As many as half of the states could consider such a measure this year, Ms. Bell says.
Performance-based systems have gone through similar periods of popularity during past economic downturns, but have often been dismissed as policies that have had a limited impact because of flaws in how they have been designed and carried out. In South Carolina, for example, a performance-based formula was abandoned because it was too complex to execute, according to a 2009 report from the Midwest Higher Education Compact. Missouri ended its previous performance-based plan because the state could no longer afford the increased spending on higher education, that same report said.
"There is a real desire among states to learn from what didn't work the last time" a performance-based system was tried, says Mr. Reindl. Conventional graduation rates can't be the only measure, he says, and the amount of money awarded through the measures has to be significant. Perhaps most important, he says, different kinds of institutions and missions should be treated differently under such a plan—one size doesn't fit all.
One state that has moved aggressively toward performance-based financing in recent years is Indiana. Five percent, or about $61-million, of the state's higher-education appropriation is based on a variety of performance measures, including credit-hour completion, the number of low-income students who graduate from an institution, and the number who earn degrees in science, technology, engineering, or mathematics, the so-called STEM fields. A state panel is now considering whether to increase the share of money awarded through such benchmarks to 6 percent of the state's appropriations for higher education.
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