Performance-based funding of public universities and colleges has expanded drastically in recent years, but studying this trend has been hampered by lack of data: which states have implemented PBF policies; what metrics do they use to determine success; how much funding is tied to these metrics?
Researchers spent four years gathering PBF data and have released a working paper detailing their findings.
Our findings confirm prior research indicating two waves of PBF adoption, the first in the 1990s and a later wave in the mid-2000s (Dougherty et al., 2016). But these first two waves are much smaller than the number of PBF adoptions following the Great Recession in the 2010s. We also find that within this broader trend, individual states are experimenting with PBF much more than prior research has indicated, with states adopting, suspending, abandoning, reimplementing, and altering PBF systems over time.
Although PBF has undergone major changes over the last two decades, it has become a mainstay of state higher education funding for public colleges and universities. An important contribution of our analysis is that we are able to quantify the role PBF plays in funding public higher education across states. In 2020, states budgeted an estimated $6.1 billion for performance funding in higher education, linking around 9% of total general fund appropriations to performance outcomes. Forty-one states have had PBF systems at some point, and 32 states currently allocate a portion of funds based on student outcomes. Despite its increasing prevalence across states, we find performance funding is still a relatively weak policy lever in most states, with half of states tying less than 7% of funds for both the two- and four-year sector to performance in 2020 and states often including stop-loss or hold harmless provisions that prevent institutions from losing more than a small amount of funds based on performance.
Our findings show that equity bonuses existed in some early PBF policies and in some cases were stronger than current PBF systems. Equity metrics have become a common feature of PBF, with most PBF states including equity metrics; however, how states define equity varies considerably. Race-focused metrics are not included in equity provisions as often as metrics targeting low-income students, possibly reflecting policymakers’ hesitance to explicitly include race in higher education funding formulas (Gándara, 2020). Less than half of two-year PBF systems and 70% of four-year PBF systems link state funding to colleges’ enrollment and/or graduation of racially minoritized students.