2011 Higher Education Government Relations Conference

1. 2011 Higher Education Government Relations Conference Performance-Based Funding (PBF): A Re-Emerging Approach to Boosting Institutional Outcomes San Diego, CA December 1, 2011 Thomas L. Harnisch Policy Analyst American Association of State Colleges and Universities Washington, D.C.

2. Observations Performance funding is being revisited A mixed history of success, failure Approaches vary considerably by state Has both promise and pitfalls Process and design are key to successful programs

3. What is Performance-Based Funding ? • State funding (partially) linked with campus outcomes • Theories: Resource dependency; incentives • Models: Output, Contracts, Set Asides • Components: Goals, Measurements and Incentives • Shifts discussions from inputs to outcomes

4. Metrics/Outcomes • Variety of metrics and weights in PBF systems • Credit milestones (48, 72, etc.); retention rates • Graduation Rates • STEM Degrees • Weights applied toward enrolling nontraditional/underserved populations • Some systems allow for a “menu” of metrics

5. PBF has returned • Not a new solution, but popular again • Lessons learned from previous approaches • Why now? Workforce requires more graduates + less state money=improved performance required • Promotion from major players---Lumina & Gates Foundations, College Board, NGA, ECS, Obama Administration

6. Promises • Clarifies, reinforces institutional mission • A true statement of priorities • More transparency and accountability • Potential for productivity gains

7. Pitfalls • Limited portrait of performance • Mission distortion/student access concerns • Threats to quality, objections by faculty • History of program failure, abandonment

8. Getting Started-Process Establish state goals Look for legislative champions Earn institutional support Stakeholder “Buy In” Commit to PBF for up and down budget cycles

9. Design Key Issues: Funds, Measures, Performance Consider starting small, yet relevant Ensure institutional flexibility to meet goals Respect institutional differences Anticipate efforts to “game” the system Evaluate outcomes, recognize success

10. Sources Arthur Hauptman, “Performance-Based Funding in Higher Education,” Financing Reforms for Tertiary Education in the Knowledge Economy (2005), Brenda Norman Albright, “Higher Education Performance Funding 2.0 Tip Sheet,” Lumina Foundation for Higher Education (2009), Doug Lederman, “Performance Funding 2.0,” Inside Higher Ed, December 17, 2008, http://www.insidehighered.com/news/2008/12/17/perform (accessed May 9, 2011). Joseph Burke and Associates, Funding Public Colleges and Universities for Performance Kevin Carey, “Truth without Action: The Myth of Higher Education Accountability,” Change Magazine (2007), Kevin J. Dougherty and Esther Hong, “Performance Accountability as Imperfect Panacea: The Community College Experience,” Kevin J. Dougherty and Rebecca S. Natow, “The Demise of Higher Education Performance Funding Systems in Three States,” Community College Research Center Brief (2009) http://ccrc.tc.columbia.edu/Publication.asp?UID=693 (accessed May 9, 2011). 23M. Crellin and others, “Catalyst for Completion: Performance-based Funding in Higher Education” New England Board of Higher Education Policy and Research (2011), http://www.nebhe.org/info/pdf/PerformanceFunding_NEBHE.pdf (accessed April 17, 2011)

11. Thomas L. Harnisch Policy Analyst American Association of State Colleges and Universities Washington, D.C. harnischt@aascu.org ~ 202.478.4660 aascu.org/policy