Performance Funding for Higher Education: What Are the Mechanisms What Are the Impacts

After first appearing in 1979 in Tennessee, performance funding for higher education went on to be adopted by another 26 states. This monograph reviews research on a multitude of states to address these questions:
• What impacts does performance funding have on institutional practices and, ultimately, student outcomes?
• What obstacles and unintended effects do performance funding encounter?
This monograph finds considerable impacts on institutional practices, weak impacts on student outcomes, substantial obstacles, and sizable unintended impacts. Given this, the monograph closes with a discussion of the implications for future research and for public policymaking on performance funding.

This is the 2nd issue of the 39th volume of the Jossey-Bass series ASHE Higher Education Report. Each monograph is the definitive analysis of a tough higher education issue, based on thorough research of pertinent literature and institutional experiences. Topics are identified by a national survey. Noted practitioners and scholars are then commissioned to write the reports, with experts providing critical reviews of each manuscript before publication.

Foreword xiii

Acknowledgments xv

Introduction 1

Performance Funding: Nature and Forms 5

Performance Funding versus Performance Budgeting and Reporting 5

Performance Funding 1.0 and 2.0 6

Types of Performance Indicators: Ultimate and Intermediate Student Outcomes 7

Conceptual Framework and Research Methods 9

Conceptualizing the Impacts of Performance Funding 9

Data Search 13

Data Analysis 14

Limitations 15

Description of State Performance Funding Programs 17

Which States Have Had Performance Funding Programs? 17

Florida’s Two Performance Funding Programs 19

Missouri’s Funding for Results Program 23

North Carolina’s Program for Community Colleges 24

Ohio’s Old and New Performance Funding Programs 25

Pennsylvania’s PF 2.0 Program 27

South Carolina’s Early PF 2.0 Program 28

Tennessee’s Old and New Performance Funding Programs 30

Washington’s Two Programs: One Abandoned, One Added Later 32

Policy Instruments and Their Immediate Institutional Impacts 35

Changing Funding Incentives 35

Increasing Awareness of State Priorities 37

Increasing Awareness of Institution’s Own Performance 39

Increasing Status Competition among Institutions 40

Building Capacity for Organizational Learning 41

Intermediate Institutional Impacts 45

Alterations to Academic Policies, Programs, and Practices 45

Changes in Developmental Education and Tutoring 48

Alterations to Student Service Policies, Programs, and Practices 49

Intended Student Outcomes 53

Graduation Numbers and Rates 53

Retention Rates 56

Remedial Education Completion Rates 56

Obstacles to the Effectiveness of Performance Funding 57

Inappropriate Performance Funding Measures 58

Instability in Performance Funding Levels, Indicators, and Measures 61

The Brief Duration of Many PF Programs 62

Inadequate State Funding of Performance Funding 63

Shortfalls in Regular State Funding 63

Uneven Knowledge about Performance Funding Within Colleges 64

Inequality of Institutional Capacity 67

Institutional Resistance to and Gaming of the System 68

Unintended Impacts of Performance Funding 71

Costs of Compliance 71

Narrowing of Institutional Missions 72

Grade Inflation and Weakening of Academic Standards 73

Restrictions of Student Admissions 75

Diminished Faculty Voice in Academic Governance 76

Summary and Conclusions 79

Main Findings 79

Research Implications 80

Implications for Practice 82

Concluding Thoughts 90

Appendix 91

Table A1: Data Analysis Categories: Number of Studies Where They Appear 91

Table A2: Multivariate Analyses of Impacts of Performance Funding on Graduation and Retention Numbers and Rates 96

Notes 103

References 109

References for Individual States 121

Name Index 125

Subject Index 128

About the Authors 133

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