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Despite the popularity of performance funding among policymakers and policy advocates, only half of all states have ever created a performance funding system for higher education. State performance funding systems have also been surprisingly unstable. Nearly half of those states that established performance funding systems for higher education eventually discontinued these systems. This report examines the political forces that shaped performance funding policies in eight states. The report begins by analyzing the origins of performance funding, contrasting the experiences of six states that established performance funding systems for higher education (Florida, Illinois, Missouri, South Carolina, Tennessee, and Washington) and two states that did not establish such a system, although they considered it (California and Nevada). Second, the report analyzes the forces behind the demise of performance funding in four states that ended their systems at different times: Washington, Illinois, Missouri, and Florida (its Workforce Development Education Fund). Next, the report examines how and why two performance funding systems that have lasted to this day - Tennessee’s Performance Funding system and Florida’s Performance Based Budgeting system - have changed over time in funding levels and performance indicators. Finally, the report draws evidence-based recommendations for policymakers.

Abstract from CCRC website. Show less

Performance funding is a method of funding public institutions based not on inputs, such as enrollments, but on outcomes, such as retention, degree completion, and job placement. The principal rationale for performance funding has been that performance funding will prod institutions to be more effective and efficient, particularly in a time of increasing demands on higher education and increasingly straitened state finances. Critics of performance funding have warned that it could potentially provide state officials with an excuse to cut back on the regular state funding of higher education and at the same time provide college officials with an incentive to raise their retention and graduation rates by becoming more selective in their admissions. This report examines in detail the origins of state performance funding in six states: Florida, Illinois, Missouri, South Carolina, Tennessee, and Washington. These states were chosen for analysis because they have considerably different state performance funding systems and histories as well as higher education governance arrangements, political systems, political cultures, and social characteristics - all of which enables the authors to look at the formation of state performance funding systems from a wide variety of angles. Interestingly, analysis reveals that there are striking similarities among these six states, particularly in terms of who were the main supporters and opponents, what beliefs animated them, and what political openings allowed policy entrepreneurs to put performance funding on the decision making agendas of state governments. This analysis yields some important lessons for policymakers, which are discussed at the conclusion of this paper.

Published abstract reprinted by permission of the copyright owner. Show less