The Paradox of Performance Funding

By  - 

Consider two public colleges.

College A performs well in categories like graduation rate, student retention, and strong academic standards, whereas College B falls short.

In an era of shrinking state funding support for higher education, which school should receive more money: the one already doing well, or the one that clearly needs stronger support?

Welcome to the paradoxical world of performance funding, a policy used in approximately three dozen states in which the allocation of funds is based on student performance — the better a school’s retention and graduation rates, the more it receives. Some say this policy helps schools focus on aiming higher, so their outcomes earn more public dollars. Others say it encourages institutions to manipulate the system, focusing on enrollment-based numbers and restricting admission of students who may need extra assistance but are less likely to help the state reach its goals.

[Above: Jackson State Community College students in a radiologic procedures class]

Susanna Jones
Susanna Jones

Sosanya Jones, EdD, an assistant professor at Howard University, calls the track record of performance funding decidedly mixed. She says the system was never designed to be punitive, but efforts to meet certain goals have the potential to hurt marginalized students. However, because various categories overlap — such as low-income or first-generation students or those of color — it’s hard to discern the actual effects on specific groups.

To work at its best, Jones says, performance funding must be carefully framed so that a state’s goals motivate institutions to help students succeed, not just score points to earn more dollars.

“It’s not necessarily a one-size-fits-all model,” she says. “It really depends on how thoughtfully it is designed. If you’re so focused on the results, people end up gaming the system, so they will concentrate on the outcomes but not necessarily [pursue] the goals and policies of the university.”

When little thought is given to the research and possible consequences, performance funding models “can hurt populations that tend to be the most at-risk, with the most need,” Jones says. “However, if … constructed with a focus on equity and protecting these groups, I think performance funding could spark some thoughtful conversations and collaboration between state policymakers and institutional leaders about not only how institutions can best serve these populations, but how the state can better support institutional efforts to serve students. Unfortunately, that is not necessarily the norm.”

As a result, performance funding can hurt the students it was originally designed to help, and those who may not be fully prepared for college can find the admissions door slammed shut. “You’re upping your outcomes because you’re letting in people who are more qualified,” Jones says, “but you’re closing access to people who might need it.”

That’s not to say this approach to funding has no redeeming qualities. According to Jones, it helps institutions sharpen their focus on critical areas. “It incentivizes more conversation and more reflection about what we are doing to promote better outcomes,” she says. “Whether or not that leads to the actual changes that are intended isn’t clear.”

Origins in Tennessee
Performance funding was first introduced in Tennessee in 1990. Twenty years later, the state changed the name to quality assurance funding — a difference that officials say was meant to signal a shift in philosophy.

Victoria Harpool
Victoria Harpool

“It was about the quality of programs, not just the number of graduates,” says Victoria Harpool, assistant executive director for academic affairs at the Tennessee Higher Education Commission. “Quality assurance makes sure that institutions are not just focusing on that academically prepared, white, 18-year-old student but are places that all students can come and get the support they need to be successful.”

Steven Gentile
Steven Gentile

According to Steven Gentile, MEd, the commission’s associate chief fiscal officer, Tennessee is also concentrating on helping historically black colleges and universities. Performance funding, he says, doesn’t operate in a vacuum. The state isn’t focusing on numbers but rather helping schools perform better.

Harpool and Gentile counter the argument that performance funding prompts colleges to ease up on academic requirements so they can meet state goals and that faculty members feel pressure to pass students who may not otherwise progress. 

“We certainly would not want to be in a situation where standards are watered down and faculty are disengaged because they feel they are being pressured to move students along,” Harpool says.

“Faculty members want better outcomes,” Gentile adds. “We are working with faculty, not against them.”

Allana Hamilton
Allana Hamilton

From a campus point of view, Allana Hamilton, EdD, who became president of Jackson State Community College in Jackson, Tenn., last year, says overall performance can improve when a school sets goals that are focused on measuring quality.

“When we first switched from an enrollment-based model to performance- based,” Hamilton says, “I was actually at a school that was low-performing. We were able to gain momentum, and as we started to improve and advance, we received more dollars as a result of our [better outcomes]. There was something motivational about that, and with those dollars, we could impact retention and persistence to graduation.”

Nicholas Hillman
Nicholas Hillman

Where the System Falls Short
While performance funding has become more common, not everyone is convinced of its success. In 2016, Nicholas Hillman, PhD, authored a study for The Century Foundation titled “Why Performance-Based College Funding Doesn’t Work.”

“While pay-for-performance is a compelling concept in theory, it has consistently failed to bear fruit in actual implementation, whether in the higher education context or in other public services,” wrote Hillman, who is an associate professor of educational leadership and policy analysis at the University of Wisconsin-Madison. “Despite the logic, research shows that tying financial incentives to performance measures rarely results in large or positive outcomes that are sustained over time.”

Hillman says the problem is that public education is too complex to be measured by rubrics used by performance funding systems. “The more complex the organization is,” he says, “the more complex the problem-solving is.”

In his study, Hillman encourages the adoption of a system based on need, adding that “… allocating scarce funds to colleges that are already performing well will only reproduce inequalities.”

Schools that have the most need but are not performing as well are likely to improve, Hillman wrote. “This,” he says, “would usher in a new era of state funding that prioritizes results by prioritizing equity — a radical proposition in a higher education landscape that has for too long rewarded inequality.”

Jones notes that such a shift could run counter to current political thinking. 

Many people feel public education should be run like a business, where success garners reward and laggards suffer financially.

“Performance funding aligns very closely to Republican values,” Jones says, “and people who are moderates also support it, because it lines up with the value of working hard and getting what you earn. But when we talk about inequity and marginalization and the history of oppression, people may want equity, but they don’t want to hear all that. It becomes very political.”

That outlook, combined with reduced public support for higher education, helps feed a growing sense that college is too expensive.

“We’re at a critical juncture right now in higher education,” Jones says. “People are questioning values. A degree is important, but people are questioning how colleges are run. They want more for their buck.”

“People are going to want more evidence that college is worth it,” she adds. “They’re frustrated. They’re skeptical, and they don’t trust higher education right now. I don’t see [that attitude] going away.”●

Dale Singer is a contributing writer for INSIGHT Into Diversity.