Many States Now Demanding Colleges Prove Their Effectiveness

by | July 31, 2015

By Sophie Quinton


Yet last fall, New College opened a flashy new career center on its Sarasota campus. It needed to prove to the state that it was helping students find jobs and graduate on time, or risk losing $1.1 million in state aid. "That's a big deal for us," David Gulliver, media relations coordinator for New College, said of the money.



The idea of using outcomes _ not enrollments _ to guide public funding of higher education has so much bipartisan backing that both President Barack Obama and Florida's Republican Gov. Rick Scott support it. Just last week, the Florida Board of Education approved a performance-funding system for state colleges, adding to its existing system for state universities.

It's too early to say whether performance-based funding will drive the changes lawmakers want. But the policy so aligns with national concerns about the cost and payoff of a college education that it's likely here to stay.



College became less affordable even as Obama and governors emphasized how important it was for Americans to go. "Education is an economic issue when nearly 8 in 10 new jobs will require workforce training or a higher education by the end of the decade," Obama said in 2010.

To get the economic benefit of a college degree, the president emphasized, students have to graduate. Fifty-nine percent of first-time college students, studying full time, who started a bachelor's degree program in 2007 graduated in six years from that institution, according to federal statistics.


The men and women who oversee Florida's 12 state universities started developing a performance funding model in 2012. "We knew we needed to come up with a different approach to get additional state support (for state universities)," said Tim Jones, a vice chancellor for the Florida State University System Board of Governors.


Here's the formula they came up with: Starting in 2014, a small portion of every university's base funding _ plus any additional state money _ has to be distributed according to the university's performance on 10 metrics. Metrics include the average wages of graduates, the six-year graduation rate, the second-year retention rate and the share of undergraduates who come from families with incomes low enough to qualify for a federal Pell Grant. In 2012-13, the vast majority of Pell Grant recipients had a family income of $40,000 a year or less, according to an analysis of federal data by the nonprofit College Board.


Other states have put much more money at stake and have built much more comprehensive formulas. While performance-based funding made up 8.8 percent of Florida's spending on state universities this year, Tennessee allocates almost 100 percent of its higher education funding _ for both community colleges and universities _ through an outcomes-based formula. "For every degree you award, it counts. For every student that accumulates 12 hours, they count. And we just simply count those up, and those are your outcomes for that funding year," said Crystal Collins, a director at the Tennessee Higher Education Commission. "You don't have to perform at a higher rate than you did last year; you just have to perform."

The formula involves multiple calculations (you can check them out on the commission's website). But basically, the state decides how much it wants to spend on higher education and parcels the money based on certain factors. A big one is whether students are progressing and graduating. Tennessee's model also takes into account basic operating costs and adjusts its formula based on each institution's mission. Research universities are rewarded for spending money on research, for example, while community colleges are rewarded for connecting students with jobs.

So is performance funding making a difference? "Yes _ incredibly, actually," said Joe DiPietro, the president of the University of Tennessee. The university system has beefed up academic advising and started stressing that students take a full course load each semester, he said.

Graduation rates have risen across the university system since the outcomes-based formula was implemented in 2010. And they're improving across the state, Collins said.

Yet researchers say it's unclear whether performance funding is pushing up graduation rates. "We do not have as yet conclusive evidence that performance funding does indeed improve student outcomes in any significant way," Columbia University researchers wrote last year in a working paper that reviewed models in Indiana, Ohio and Tennessee.


So far, studies haven't found a strong link between performance funding and graduation rates. A recent analysis of Washington state's model for community colleges found that it hadn't much affected retention or the number of associate's degrees awarded. Institutions were awarding more short-term certificates, credentials that don't always have much labor market value.

The results suggest, the researchers wrote, that it may be more difficult for institutions to retain students from year to year than the designers of Washington's formula thought.
