Arguments
Performance-based funding (PBF) in higher education has a number of supporters and dissenters. The major concerns of those that do not support performance based funding include: that there is not a significant amount of empirical data supporting its effectiveness in creating positive change in higher education institutions; it provides incentives for more restrictive admissions criteria which would unfairly target vulnerable populations (Abdul-Alim, 2013; Kantrowitz, 2012); it narrows the institutional mission, may produce grade inflation; weakens academic standards; further diminishes faculty voice in academic governance; and provides opportunities to game the system (Dougherty, 2011). Supporters contend that performance-based funding provides incentives and accountability for a system that appears to be failing in the national goals of producing more graduates and spending money in efficient, productive ways after the Great Recession. PBF provides a way to link performance to funding by instituting measures for positive outcomes and rewarding those institutions who do well by increasing their funding (Carnevale, Johnson& Ruffner-Edwards, 1998, Banta, 1996). This paper will examine two of the most frequented arguments: that performance-based funding does not have sufficient data to support using it as a budgetary solution and that the performance indicators used may unfairly produce a negative effect on those students identified as “at risk,” using Tennessee as the primary example.
Pros
Lack of Empirical Research for Performance-Based Funding Despite the lack of research supporting performance-based funding there are some researchers and policymakers that say that there are plenty of examples of how the system has had positive effects on institutions.
In addition to these examples of success, many of the researchers who have found that the system is lacking in impacting institutional outcomes point out that there is a large difference between PBF 1.0 and PBF 2.0 models (Dougherty, 2011 & Sanford & Hunter, 2011). Specifically, the lack of funding in previous iterations of the funding model (PBF 1.0) may have impacted its effects, with many only allocating 2-6% of their state appropriations based on that model. Research on the effects of PBF 2.0 is limited and so it is difficult to say if the newer model, with larger amounts of funding will produce significant changes in higher education or not. Performance-based Funding and Diverse Populations Despite concerns, Tennessee’s PBF 2.0 has tried to stymie these unintended consequences through instituting a 40% “premium” for those institutions whose adult and low-income students meet success indicators, although there is no guarantee that this will be enough of an incentive (Alstadt, 2012). Miao (2012), from the Center for American Progress, cites this addition as a best practice saying that this is an element of their system that should be emulated by other states as a way to prevent a negative affect for the “at risk” population. Scott (2013) notes that schools would be rewarded for admitting students who are from lower socioeconomic statuses, definitely a step in the right direction. While focusing on retention and graduation rates could be dangerous, Tennessee is aware of the problem and is trying to do something about it. With the increased attention on retention and graduation, there will also be a greater focus on identifying those that are at risk at its institutions and a more collective effort to get those students the support they need to succeed. |
Cons
Lack of Empirical Research for Performance-based Funding Performance-based funding is a mechanism to ensure that higher education institutions are using state-funds to reach goals such as higher retention rates and increased graduation rates. Those institutions that perform well by increasing retention and graduation rates will be rewarded by receiving more funding from the state. There are few studies to confirm that performance-based funding has any impact at all on these goals, with some studies confirming the exact opposite.
All of the above research seems to substantiate the idea that PBF does not have the intended affect when it comes to impacting institutional performance. Performance-based Funding and Diverse Populations Performance-based funding has also had to answer to those who point out that when rewarding institutions for student success, there are those that may be negatively affected. Abdul-Alim (2013) notes that the PBF 2.0 model from Tennessee may encourage institutions to be more selective and move away from a more accessible admissions model. PBF 2.0 focuses very heavily on outcomes more easily measured like graduation rates and retention rates, which is in line with much of the calls for higher education improvement from the President and various non-profit organizations (Lumina Foundation for Education and Bill & Melinda Gates Foundation) who are asking for higher rates in these areas. If performance indicators stress the retention and graduation of students, there is not much incentive to admit students that are considered “at risk” students. These students are generally those that are from lower socio-economic statuses, nontraditional age, first-generation and attend class on a part-time basis (Kantrowitz, 2012). Dougherty (2011) points this out as a concern and notes that selectivity in admissions in the health sciences at a Florida community college took place after PBF was implemented. Kantrowitz acknowledges the unintended negative effects of this type of focus by noting that one of the easiest ways to increase graduation rates is to exclude high-risk students. Rhoades (2012), also brings this to bear on his discussion of the College Completion Agenda stating that “Performance-based funding in Arizona promises to accelerate this pattern, providing a financial incentive for universities to turn away from local students—especially first-generation, low-income, Latino, and immigrant students—leaving them to start and finish at community colleges” (p.4). The danger of excluding these students from the education system through PBF is a serious problem for all states that try to institute a funding model like this. |
As performance-based funding continues to grow in popularity in the U.S. and throughout the world, the question of its empirical validity as a funding option to increase institutional effectiveness, and its affect on the most vulnerable populations will continue to be questioned. Tennessee, as a leader in the area of performance-based funding, must continue to lead the way in entering into these conversations to ensure the success of their institutions and higher education in their state.
References
Abdul-Alim, J. (2013). The Price of Performance. Diverse: Issues In Higher Education, 29(26), 14-15.
Alstadt, D. (2012). Tying funding to community college outcomes: Models, tools and recommendations for states. Jobs for the Future. Retrieved from http://www.jff.org/publications/education/tying-funding-community-college-outcomes/1398
Banta, T.W., Rudolph, L.B., Van Dyke, J., & Fisher, H.S. (1996) Performance funding comes of age in Tennessee. The Journal of Higher Education, 67(1), 23-45.
Bradford, C. (2008). Significance of institutional factors in the allocation of state appropriations to public research universities. (Doctoral dissertation). Retrieved from EBSCO. UMI 3337342.
Carenevale, A.P., Johnson, N.C., & Ruffner Edwards, A.(1998). Performance-based appropriations: Fad or wave of the future. Chronicle of Higher Education. Retrieved from http://chronicle.com.mutex.gmu.edu/article/Performance-Based/98686
Center for American Progress. (2012). Performance-based funding of higher education: A detailed look at best practices in 6 states. Miao, K. Retrieved from http://www.americanprogress.org/issues/higher-education/report/2012/08/07/12036/performance-based-funding-of-higher-education/
Dougherty, K.J. & Reddy, V. (2011). The impacts of state performance funding systems on higher education institutions: Research literature review and policy recommendations. Working paper 37. Community College Research Center. http://ccrc.tc.columbia.edu/publications/impacts-state-performance-funding.html
Frolich, N. (2010). Funding systems for higher education and their impacts on institutional strategies and academia. International Journal of Educational Management, 24(1), 7-21.
Kantrowitz, M. (2012). The college completion agenda may sacrifice college access for low-income, minority and other at-risk students. Retrieved from http://www.finaid.org/educators/20120910completionagenda.pdf
Liefner, I. (2003). Funding, resource allocation, and performance in higher education systems. Higher Education, 46, 469-489.
Locker, R. (November 11, 2012). Tennessee’s outcomes-based college funding model already “changing the way our postsecondary instutions do business,” says Haslam. Retreived from http://www.politifact.com/tennessee/statements/2012/nov/11/bill-haslam/tennessees-outcomes-based-college-funding-model-al/
Rhoades, G. (2012). The incomplete completion agenda: Implications for academe and the academy. Liberal Education, 98(1). Association of American Colleges and Universities. Retrieved from http://www.aacu.org/liberaleducation/le-wi12/rhoades.cfm
Sanford, T. & Hunter, J. M. (2011) Impact of Performance-funding on Retention and Graduation Rates Education Policy Analysis Archives, 19(33). Retrieved May 26, 2013, from http://epaa.asu.edu/ojs/article/view/949
Scott, D. (February, 2013). Performance-based college funding is coming stateside. Governing. Retrieved from http://www.governing.com/topics/education/gov-performance-based-college-funding-coming-stateside.html
Shin, J.C. (2010) Impacts of performance-based accountability on institutional performance in the U.S. Higher Education, 60(1). 47-68.
Whissemore, T. (June 26, 2012). The ups and downs of performance funding. Community College Times, Retrieved from http://www.communitycollegetimes.com/Pages/Funding/The-ups-and-downs-of-performance-funding.aspx
References
Abdul-Alim, J. (2013). The Price of Performance. Diverse: Issues In Higher Education, 29(26), 14-15.
Alstadt, D. (2012). Tying funding to community college outcomes: Models, tools and recommendations for states. Jobs for the Future. Retrieved from http://www.jff.org/publications/education/tying-funding-community-college-outcomes/1398
Banta, T.W., Rudolph, L.B., Van Dyke, J., & Fisher, H.S. (1996) Performance funding comes of age in Tennessee. The Journal of Higher Education, 67(1), 23-45.
Bradford, C. (2008). Significance of institutional factors in the allocation of state appropriations to public research universities. (Doctoral dissertation). Retrieved from EBSCO. UMI 3337342.
Carenevale, A.P., Johnson, N.C., & Ruffner Edwards, A.(1998). Performance-based appropriations: Fad or wave of the future. Chronicle of Higher Education. Retrieved from http://chronicle.com.mutex.gmu.edu/article/Performance-Based/98686
Center for American Progress. (2012). Performance-based funding of higher education: A detailed look at best practices in 6 states. Miao, K. Retrieved from http://www.americanprogress.org/issues/higher-education/report/2012/08/07/12036/performance-based-funding-of-higher-education/
Dougherty, K.J. & Reddy, V. (2011). The impacts of state performance funding systems on higher education institutions: Research literature review and policy recommendations. Working paper 37. Community College Research Center. http://ccrc.tc.columbia.edu/publications/impacts-state-performance-funding.html
Frolich, N. (2010). Funding systems for higher education and their impacts on institutional strategies and academia. International Journal of Educational Management, 24(1), 7-21.
Kantrowitz, M. (2012). The college completion agenda may sacrifice college access for low-income, minority and other at-risk students. Retrieved from http://www.finaid.org/educators/20120910completionagenda.pdf
Liefner, I. (2003). Funding, resource allocation, and performance in higher education systems. Higher Education, 46, 469-489.
Locker, R. (November 11, 2012). Tennessee’s outcomes-based college funding model already “changing the way our postsecondary instutions do business,” says Haslam. Retreived from http://www.politifact.com/tennessee/statements/2012/nov/11/bill-haslam/tennessees-outcomes-based-college-funding-model-al/
Rhoades, G. (2012). The incomplete completion agenda: Implications for academe and the academy. Liberal Education, 98(1). Association of American Colleges and Universities. Retrieved from http://www.aacu.org/liberaleducation/le-wi12/rhoades.cfm
Sanford, T. & Hunter, J. M. (2011) Impact of Performance-funding on Retention and Graduation Rates Education Policy Analysis Archives, 19(33). Retrieved May 26, 2013, from http://epaa.asu.edu/ojs/article/view/949
Scott, D. (February, 2013). Performance-based college funding is coming stateside. Governing. Retrieved from http://www.governing.com/topics/education/gov-performance-based-college-funding-coming-stateside.html
Shin, J.C. (2010) Impacts of performance-based accountability on institutional performance in the U.S. Higher Education, 60(1). 47-68.
Whissemore, T. (June 26, 2012). The ups and downs of performance funding. Community College Times, Retrieved from http://www.communitycollegetimes.com/Pages/Funding/The-ups-and-downs-of-performance-funding.aspx