What Performance-Based Funding Could Mean For At-Risk Students

Finance
Posted By Donna Fuscaldo on March 30, 2016 at 10:35 am
What Performance-Based Funding Could Mean For At-Risk Students
Illinois Governor Bruce Rauner visits with students hoping to attend college during a visit to Southeast High School in Springfield, Ill., on Feb. 24, 2016, where he discussed his higher education agenda. Gov. Rauner is proposing performance-based funding to reduce state spending for higher education (AP Photo/Seth Perlman)

States looking for ways to cut budgets and increase the outcomes at their colleges and universities are increasingly turning to performance-based funding. Instead of allocating money to schools based on enrollment numbers, more money goes to those schools that perform well.

And while the idea is a seemingly good intentioned way to lower expenditures and hold schools accountable, in some cases, it can actually hurt the students that many colleges and universities serve.

“When you cut spending on the colleges, you are not actually improving things,” says Mark Kantrowitz, publisher and vice president of strategy at Cappex.com. “The students who are at the greatest risk, whether it’s low-incomes or first in family to go to college, require the most money to get to the finish line.”

Illinois Governor Bruce Rauner calls for performance-based funding

When announcing plans to increase funding to the top performing schools, what isn’t highlighted is the fact that funding to other colleges and universities gets reduces in some cases. Take Illinois Governor Bruce Rauner’s proposal to earmark $50 million for performance-based funding, for example. He’s also calling for a 20 percent cut in guaranteed state support. Performance-based funding would account for 5 percent of the $1.01 billion Rauner proposes should go to state universities. Schools would have to meet certain standards to compete for the performance-based funding.

But Illinois isn’t the only state embracing performance-based funding more. According to the National Conferences of State Legislatures, 37 states already allocate money to performance-based funding or are in the process of doing so with differing standards that determine if a school is top performing. Florida, for instance, looks at employment and salary one year after graduation, among other things, while Arkansas looks at STEM credits earned in its evaluation. The lack of uniformity in what is deemed a top performing school is what critics contend creates problems.

“It sounds good to fund something that is working,” says Mark Smith, senior policy analyst—higher education at the National Education Association. “The fact is very few agree on the metrics that define what is working.” Smith points to graduation rates as an example. That seems like something to measure but it may or may not indicate the quality of the education. It could be that the students are full-time workers and take longer to graduate than a school that attracts a younger student body.

At-risk students could get hurt by performance-based funding

Students with lower incomes and those who are the first in their family to attend college could suffer the most if states adopt performance-based funding more. That’s because they typically take longer to graduate and would hurt a school’s score if that was a metric. Just like female students, which are a minority in STEM fields, could hurt another school’s funding if STEM credits was the metric it was looking at. Schools in need of funding wouldn’t get it and could become more selective in who they admitted as a result.

“Ivy League institutions all have great outcomes, but when you have 98 percent graduation rate, there’s not much room for improvement,” says Kantrowitz. “A college that has a 25 percent graduation rate has a lot more room for improvement.” The schools that need it the most could see state support reduced, making it hard to provide the services necessary to graduate at-risk groups.

Whether performance-based funding hurts or helps is in the details

While there are a lot of knocks against performance-based funding, there are also success stories. Take Ohio, which has been at the forefront of the resurgence in rewarding the schools that have better student outcomes. Ohio created a limited set of measures that can be defined and are used across institutions when evaluating the school’s success. What’s more, there is a focus on student completion and an incentive to ensure underserved, at-risk student populations are having success in college. Ohio included this in its criteria to prevent schools from restricting access to students whose success is less certain.

“In theory, performance-based funding can be very good for students, but it all depends on the details,” says Tom Allison, deputy director of policy and research at Young Invincibles, the non-profit focused on empowering young Americans. “If you look under the hood in Ohio, they do have weights in their scoring system for succeeding with hard-to-reach students.” Still, Allison cautions that not every state has special weights for at-risk student populations, and for schools that have a mission of serving unrepresented students, they could get hit significantly, he says.

“Performance-based funding can be a very good incentive for student success because it holds public dollars accountable,” says Allison. “The details in the formulas are absolutely critical.”

Donna Fuscaldo
Donna Fuscaldo is a freelance journalist hailing out of Long Island, New York. She has also written for Bankrate.com, Glassdoor.com, SigFig.com, FoxBusiness.com, Business Insider, Dow Jones Newswires and the Wall Street Journal.

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