Vikash T. Reddy

Performance Funding for Higher Education

Since the 1970s, federal and state policy-makers have become increasingly concerned with improving higher education performance. In this quest, state performance funding for higher education has become widely used. As of June 2014, twenty-six states were operating performance funding programs and four more have programs awaiting implementation. This article reviews the forms, extent, origins, implementation, impacts (intended and unintended), and policy prospects of performance funding. Performance funding has become quite widespread with formidable political support, yet it has also experienced considerable implementation vicissitudes, with many programs being discontinued and even those that have survived encountering substantial obstacles and unintended impacts. Although evidence suggests that performance funding does stimulate colleges and universities to substantially change their policies and practices, it is yet unclear whether performance funding improves student outcomes. The article concludes by advancing policy recommendations for addressing the implementation obstacles and unintended side effects associated with performance funding.

The Impacts of State Performance Funding Systems on Higher Education Institutions: Research Literature Review and Policy Recommendations

Over the past three decades policymakers have been seeking new ways to secure improved performance from higher education institutions. One popular approach has been performance funding, which involves use of a formula to tie funding to institutional performance on specified indicators. This report reviews findings from studies on performance funding programs in a multitude of states. The studies suggest that tying funding to outputs has immediate impacts on colleges in the form of changes in funding, greater awareness by institutions of state priorities and of their own institutional performance, and increased status competition among institutions. Because of these immediate impacts, performance funding produces intermediate institutional changes in the form of greater use of data in institutional planning and policymaking and in changes in academic and student service policies and practices that promise to improve student outcomes. However, claims that performance funding does indeed increase ultimate outcomes—in the form of improved rates of retention, completion of developmental education, and graduation—are not validated by solid data. In the face of this finding, this report identifies obstacles to the effective functioning of performance funding, as well as unintended impacts. The report closes by providing recommendations for overcoming the many obstacles to the effective functioning of performance funding and addressing the unintended impacts documented by the studies reviewed.

Unintended Impacts of Performance Funding on Community Colleges and Universities in Three States

This paper identifies and analyzes the types and numbers of unintended impacts— actual or potential—of state performance funding policies on higher education institutions. These impacts—which were not intended by the framers of the performance funding policy—were ones mentioned in the course of telephone interviews with over two hundred college personnel at nine community colleges and nine public universities in three states: Indiana, Ohio, and Tennessee. The respondents were senior administrators, middle-level administrators, academic deans, and department chairs at these institutions. This paper discusses each type of these reported impacts, making a distinction between impacts that we judge as actually occurring and ones that were stated as possibilities. The unintended impacts most frequently mentioned by interviewees were restrictions in admissions to college and a weakening of academic standards. Besides describing overall patterns, the paper also analyzes how interviewee responses varied by state, by type of institution (community college or university), by college capacity to respond to the demands of performance funding, and by position the interviewee held in the institution. The paper closes by providing policy recommendations to address these unintended impacts.

Envisioning Performance Funding Impacts: The Espoused Theories of Action for State Higher Education Performance Funding in Three States

This study reviews the theories of action espoused by state-level performance funding advocates and implementers in Indiana, Ohio, and Tennessee. The study found that these espoused theories of action are incompletely articulated, with significant gaps in the specification of policy instruments, desired institutional changes, and possible obstacles and unintended impacts that need to be countered. Performance funding is conceived largely as stimulating changes in institutional behavior and student outcomes by providing financial inducements and securing institutional buy-in. Less attention is paid to other policy instruments, such as providing information on institutional performance to the colleges and building up the capacity of institutions to engage in organizational learning and change. The states’ espoused theories of action for performance funding are, thus, narrower than those for state and federal K-12 accountability programs, which put much more emphasis on information provision and capacity building. Moreover, the espoused theories of action for performance funding in the three states miss important possible obstacles to and unintended impacts of performance funding. This report argues that insufficiently articulating the theories of action for performance funding makes it less likely that it will be successful and avoid undue harm.

Organizational Learning by Colleges Responding to Performance Funding: Deliberative Structures and Their Challenges

This paper identifies and analyzes the deliberative structures used by colleges and universities to respond to performance funding demands and the factors that aid and hinder their working. Our investigation found that colleges use a variety of deliberative structures, including both their general administrative structures and more specialized and evanescent structures such as strategic planning committees and accreditation review committees, to engage in organizational learning. The aids and hindrances to effective deliberation that colleges encounter principally involve organizational commitment and leadership, effective communication and collaboration, timely and relevant data, and enough time for deliberation. Our data come from telephone interviews with over 200 college personnel at nine community colleges and nine public universities in three states: Indiana, Ohio, and Tennessee. The respondents were senior administrators, middle-level administrators, academic deans, and department chairs at these institutions.

Implementing Performance Funding in Three Leading States: Instruments, Outcomes, Obstacles, and Unintended Impacts

In recent years, performance funding has become a particularly attractive way of pursuing better college outcomes in higher education. This paper summarizes findings from a large study on the implementation and impacts of performance funding through the lens of three states that are regarded by many as leaders in that movement: Indiana, Ohio, and Tennessee. Based on extensive interviews with state officials and with staff of 18 colleges and universities in those three states, we describe the policy instruments used by those states to implement performance funding, the impact of performance funding on institutional policies and programs and eventually on student outcomes, the obstacles institutions encountered in responding to performance funding demands, and the unintended impacts that ensued. We found that while performance funding clearly spurred institutions to make changes to improve student outcomes—particularly in developmental education, course articulation and transfer across twoand four-year colleges, and counseling and advising services—it is difficult to gauge the importance of performance funding because it was only one of several concurrent initiatives aimed at improved outcomes occurring at the colleges. Our interviewees reported obstacles that hindered efforts to respond to performance funding demands or perform well on state performance measures; these included the academic and demographic composition of student bodies, inappropriate metrics, and insufficient institutional capacity. They also frequently reported observed and potential impacts that were not intended by the designers of performance funding policies; the most commonly mentioned were restrictions in college admissions and the weakening of academic standards.

Policy Instruments in Service of Performance Funding: A Study of Performance Funding in Three States

This study examines the primary policy instruments through which state performance funding systems in Indiana, Ohio, and Tennessee influence higher education institutions. The authors interviewed 110 community college personnel at nine community colleges (three in each state) and 112 university personnel at nine universities (three in each state). Their inquiries focused on four policy instruments: (1) financial incentives, (2) communication of the importance of selected goals and intended outcomes, (3) communication highlighting the performance of individual institutions on student outcomes indicators, and (4) enhancement of colleges’ capacities to improve student outcomes. The authors examine the immediate impacts each of these instruments has had on individual college budgets, campus awareness of performance funding goals and institutional performance, and institutional capacity, as well as their impacts on institutional efforts to improve student outcomes. Analyses indicate that all four policy instruments came into play to varying degrees. Policymakers in all three states relied mainly on financial incentives to induce change at both community college and university campuses. State officials in all three states made efforts to educate campus leaders about new performance funding programs in their states, though these efforts varied in their intensity and their level of campus penetration. State officials also made efforts to communicate with campus officials about institutional performance, but again, the nature and intensity of these efforts varied. The authors find very limited evidence of state efforts to build campus-level capacity for organizational learning and change.

Institutional Changes to Organizational Policies, Practices, and Programs Following the Adoption of State-Level Performance Funding Policies

In this paper, we describe findings from a large, qualitative case study of the implementation of performance funding for higher education in Indiana, Ohio, and Tennessee. Specifically, we address ways that universities and community colleges of varying levels of institutional capacity in those states have altered their academic and student services policies, practices, and programs to improve student outcomes and to achieve the goals of their states’ higher education performance funding programs. We also examine how the adoption of such campus-level changes differed by state, performance funding program, institutional type, and institutional capacity level; and we describe how perceptions of these changes differed by the professional position of the institutional representative describing the changes. Recognizing that there were multiple external forces that prompted institutions to make changes designed to improve student outcomes, we also discuss the extent to which performance funding was perceived as having influenced campus-level changes. Most of the academic changes identified concerned developmental education programs, course articulation, and ease of transfer. Most of the identified student services changes related to advising, tutoring and supplemental instruction, orientation and firstyear programs, tuition and financial aid policies, registration and graduation procedures, and departmental organization. Although evidence indicates that performance funding did have an impact on institutional behavior, so did other external influences seeking to improve higher education institutional outcomes that were implemented either before or around the same time as performance funding. These included initiatives by regional accrediting associations and national policy initiatives such as Achieving the Dream and Complete College America. It is difficult, if not impossible, to disaggregate the influence of performance funding from that of these other initiatives.

The Political Origins of Performance Funding 2.0 in Indiana, Ohio, and Tennessee: Theoretical Perspectives and Comparisons With Performance Funding 1.0

Although performance funding for higher education has existed for many years, the details of particular performance funding programs have changed—sometimes dramatically—over time. A new form of performance funding often called performance funding 2.0 (PF 2.0) represents a major shift in performance funding and in higher education funding more generally. Unlike earlier forms of performance funding that took the form of a bonus on top of the base state funding for higher education, PF 2.0 is embedded into the base funding itself. PF 2.0 programs are seen as promising means to significantly improve institutional performance due to the fact that they typically tie a larger portion of state funding to performance indicators than do PF 1.0 programs. Additionally, PF 2.0 programs aim to be more stable than PF 1.0 programs, as PF 2.0 performance indicators are written into the regular state funding formula itself and are not separate programs that can be easily dropped. Despite the importance of this new development, little is known about the forces that are giving rise to PF 2.0 programs. This paper examines the political forces supporting the enactment of PF 2.0 in three leading states (Indiana, Ohio, and Tennessee) and compares these forces with those involved in the enactment of PF 1.0 performance funding programs. To understand this political process, we apply three theoretical perspectives within policy theory: the Advocacy Coalition Framework, Policy Entrepreneurship theory, and policy diffusion theory. These three perspectives powerfully illuminate different facets of the origins of PF 2.0 policies when treated as complementary rather than as mutually exclusive explanations.

How and Why Higher Education Institutions Use Technology in Developmental Education Programming. A CAPR Working Paper.

As postsecondary institutions increasingly integrate technology into developmental education, it becomes important to understand how technology is used in these programs, what challenges institutions have encountered relating to the technology, and what considerations institutional leaders take into account when deciding whether and how to integrate technology in developmental education. This study explores these questions drawing from semi-structured interviews with key personnel from 31 open-access twoyear public colleges, 11 broad-access four-year public colleges, and 41 state-level organizations overseeing such colleges. We find that institutions are integrating a variety of instructional, course management, and student support technologies into developmental education. In doing so, institutions have encountered a number of challenges, particularly with regard to end-user difficulties with technology. We also find that evidence of effectiveness of technology for improving educational outcomes was considered by a number of organizations in our sample when making decisions about technology use in developmental education; however, other considerations — particularly those based on costs and resources — were also quite influential. Indeed, such economic considerations were described to us more often than evidence of effectiveness by respondents discussing reasons for using technology in developmental education.