Performance-Based Funding: A Helping Hand for Higher Education Institutions

29 Oct

So far in my blog, I have discussed the rising cost of obtaining a post-secondary education and its’ impact on the United States people and economy.  In this post, I would like to turn your attention to the colleges and universities themselves and how they can be helped by their state governments through an alternative form of funding.  Since the beginning of the recession in 2007, the federal and state governments of the United States have all had to make numerous budget cuts.  As a result of these budget cuts, funding for higher education institutions suffered as government officials chose to spend their state’s limited amount of money in other areas.  I pointed out an example of higher education being negatively impacted by budget cuts by discussing the federal government’s decision to no longer provide subsidized loans to graduate students in my last post. It is because of the budget cuts by both the federal and state governments that institutions have had to hike up their tuition costs.  With the amount of student debt in the United States rapidly rising and accessibility of higher education being a hot topic in this year’s election, performance-based funding by state governments for higher education institutions is now being discussed as a solution for the lack of funding put towards colleges and universities. Performance-based funding is provided to colleges and institutions not on the basis of enrollment, as is typical, but on the basis of course completion, credit attainment, and degree completion.  Performance-based funding was experimented with by 26 states from 1979 until 2007, at which point 14 states had stopped using this funding system because of design flaws.  These early performance-based funding systems failed due to the state governments’ inability to recognize the differences between performance and completion standards for community colleges and large universities.  Today, what is being called “performance-based funding 2.0” is being adopted by states such as Ohio, Pennsylvania, Tennessee, Washington state, Louisiana, and Indiana.  The systems of performance-based funding provided by these states are avoiding the mistakes of the past by taking into account the differences in standards between community colleges and universities, rewarding institutions for not only degree completion but also progress, and providing incentives to institutions for different behaviors.  Performance-based funding 2.0 is still very new and a work in progress but has shown success in the state of Pennsylvania where the government set aside $36 million to reward schools for meeting certain targets.  In my opinion, performance-based funding is something that all states should consider implementing as more money put towards higher education will lead to lower tuition costs, greater degree completion, and more skilled workers for the US economy.  While this type of funding cannot solve all of the problems surrounding higher education costs right now, it is a possible solution that should be considered extensively by the federal and state governments of America.


2 Responses to “Performance-Based Funding: A Helping Hand for Higher Education Institutions”

  1. theironbaker October 31, 2012 at 6:05 pm #

    If a state decided to implement the “Performance Based Funding 2.0” plan, how long would it take to implement? Would graduate students immediately see it’s benefits? Will it affect current graduate students, or only help future graduate students?

    • mixedupmind November 1, 2012 at 8:31 pm #

      The amount of time it would take for a state to implement Performance Based Funding 2.0 would depend directly on when the specific state government chooses to regulate the funding they provide to colleges. For example, if a state government decided on a performance-based funding policy for the 2013-2014 school year, then at the end of that school year is when implementation would occur and state governments would reward the colleges and universities who met their performance criteria. The impact performance-based funding would have on graduate students would not be seen immediately. Performance-based funding will benefit the institutions themselves immediately by providing them with more money to cover costs which will allow costs for undergraduate and graduate students to be lowered OVER TIME. How the students are impacted will also depend on how much the institution is given by the state government based on their performance. If a state chose to implement performance-based funding today, current graduate students may be impacted but this is highly unlikely since performance-based funding 2.0 is a fairly new program and is not widely spread yet. If performance-based funding were implemented widely enough though and many colleges were able to lower their costs, future graduate students would not have to pay as much and possibly would not have to take out as many of those loans that are no longer subsidized by the government.

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