Pennsylvania lawmaker and state higher education leaders’ recent nod to performance-based funding has brought the money allocation tool back to the forefront as Texas and Oregon have also agreed to enact similar models for their two-year institutions last summer. While the model has been adopted and discarded across the country since the 1970s, recent guidelines are ensuring its staying power.
Critics of performance-based funding cite its little published evidence of its effectiveness, its propensity to hurt those it intends to help the most and disregarding fundamental aspects of a postsecondary education. However, members of Pennsylvania’s Higher Education Working Group have conceded that the criticism over the past decade have helped guide the state—and others—into a more informed direction.
“That research has helped inform states across the country on how to create funding formulas that actually avoid those unintended consequences,” Kate Shaw, deputy secretary and commissioner of postsecondary and higher education for the Pennsylvania Department of Education, said at an education hearing before the state General Assembly in February.
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Implementing the model correctly
The most important consideration Shaw’s team is implementing in its model is to apply its performance-based model in the context of each institution. To do so, policymakers must consult with each of its institutions to understand its mission and tailor each metric to realistic, achievable goals.
“We know it’s not one-size-fits-all,” Shaw said. “The whole idea of a funding formula is to provide the resources that institutions need to do what we’re asking them to do and then reward them when they meet those goals.”
Secondly, policymakers must consider that under-resourced students require more support services to ensure completion. Hence, schools will need more financial assistance to increase their graduation rates. For example, a $1,000 increase in per-student funding for three years across California’s highest-poverty K12 districts has been found to correlate with a roughly full grade-level increase in math and reading achievements for students in grades eight through 11, according to the Learning Policy Institute.
Lastly, a report by HCM Strategists advise that implementing such models should be smooth enough that they do not result in disruptive shifts in funding, especially in the first few years. To prevent an institution from losing out on a dramatic amount of funding year over year, Ohio and Oregon use a stop-loss provision that prevents them from losing more than a certain percentage of prior-year funding.
