Outcomes Based Funding
Over the last decade, higher education has become more entrenched in a movement that holds colleges and universities more accountable to its supporters. Similar to K12 accountability, there are pressures to answer questions about student outcomes and performance, the value of education, the effectiveness of instructors, and the ability of existing leaders to manage efficiently and effectively. It is within this climate that states have adopted Performance or Outcomes Based Funding (OBF) policies. Through OBF, public colleges and universities receive state funding through formulas that no longer rely solely on student enrollment, but are instead based on student outcomes. This means, lower student outcomes, like graduation rates, results in less funding for the college or university. So far, over half of all states have adopted a funding formula that takes student outcomes and institutional performance into account.
In some cases, OBF has resulted in stagnant or lower completion rates, and increased certificates rather than degree attainment to reach completion goals at community colleges. These findings have been met with controversy as some have called into question the lack of consideration of how diverse the policies are in each state. For example, HCM Strategists reports that only three states base more than 5% of their funds on student outcomes and the student outcome metrics vary, thus it is unfair to characterize the policies collectively as having a negative, or no impact on student outcomes. Further, it is also necessary to consider what OBF policies mean for students of color, low income students, and colleges and universities largely that primarily serve these student populations, such as Minority-Serving Institutions (MSIs).
Institutional Effort & MSIs
One cannot fully understand the impact of, and responses to OBF at MSIs without first considering the historical relationship between the state and the campus. In the case of South Carolina State University, the state legislature described a 2015 decision to close a public HBCU for two years as based on financial difficulties; however, this decision is colored by a history that includes the lack of land grant matching, permitting academic program duplication at neighboring Predominately White Institutions, and underfunding. The aim is not to use historical context as an excuse for what some characterize as poor outcomes; however, threatening an institution’s base funding as a means to spur innovation and improvement assumes that campuses have the resources they need to operate more effectively, but lack the incentives to do so. Thus, low resourced institutions, including many MSIs and their advocates, have challenged this assumption and the merits of any higher education accountability and rankings system, to accurately rate the performance of these institutions.
Rewarding Equitable College Experiences
Many OBF and other higher education accountability systems include equity related measures that credit institutions that create college access for underserved groups like, low income students and students of color. However a critical piece missing from the equity measures is what actually happens in regards to race and equity, during the college experience. Many would suggest that providing a healthy campus racial climate for students of color is key to this population’s long term success, and may be what MSIs do well, and some otherwise seemingly successful non-MSIs don’t do as well. Without moving beyond the enrollment of students of color to include measures of campus climate, institutional racism, and the experiences of students of color, it is difficult to determine which campuses are doing well and how to reward them.
States are actually well positioned to influence campuses because of how dependent public MSIs are on state funding. Over one-third of funding is based on state and local appropriations at four-year MSIs, only 17% for non-MSIs. The question is how can states leverage their influence to support MSI effectiveness? Also, if the funding formulas result in the same “winners” and “losers” in regards to who gets what funding, then do the policies have the ability to inspire change and innovation at any college or university? Even when agreeing that we should increase institutional effectiveness and improve student outcomes, it will be difficult to secure buy-in for OBF at MSIs if the metrics are not inclusive of the benefits and strengths of MSIs. Many institutions will respond to OBF policies because they can’t afford to ignore the even five percent of funding. Consequently, I challenge policy makers, higher education scholars, and practitioners to engage in a discussion about how to design incentives that reward institutions for cultivating college access, outcomes, and supportive college experiences for students of color.
Tiffany Jones is the Program Director for Higher Education Research and Policy at the Southern Education Foundation (SEF).