Mitigating Unintended Impacts? The Effects of Premiums for Underserved Populations in Performance-Funding Policies for Higher Education
Performance funding is an increasingly prevalent policy state officials use to allocate a portion of state funds to public colleges and universities. Researchers have begun to evaluate the effect of these policies, finding bleak evidence of their effectiveness in yielding intended outputs and suggesting the policies may even result in limited college access for underserved students. There may also be differences in policy effects depending on performance-funding policy designs, which vary considerably across states. Of particular interest to this study are premiums—financial bonuses to institutions—for promoting access and success for specified underserved student groups. Using difference-in-differences models and an original dataset on premiums in funding models, this study evaluates the impact of premiums for underserved students in performance-funding models on selectivity and the enrollment of minority and low-income students at 4-year universities from 1993 to 2014. We find that the share of both low-income and Hispanic students increases in institutions with performance-funding premiums for underserved students compared to institutions subject to performance funding without such premiums. Effects vary depending on premium type and longevity. The findings also reveal unexpected, negative effects of premiums on Black student enrollments. Our findings suggest that, by incorporating premiums, performance-funding model designers might prevent, minimize, or reverse the negative consequences of performance funding on vulnerable student groups. However, given variation in premium effects across student groups, performance- funding model designs should be tailored to local contexts.
KeywordsHigher education Finance Policy Performance funding Outcomes-based funding College access
- Adams, S. J., Heywood, J., & Rothstein, R. (2009). Teachers, performance pay, and accountability. Washington, DC: Economic Policy Institute.Google Scholar
- Bell, D. (2005). Changing organizational stories: The effects of performance-based funding on three community colleges in Florida (Doctoral dissertation). ProQuest Dissertations and Theses database. (UMI No. 3210509).Google Scholar
- Berne, R., & Stiefel, L. (1984). The measurement of equity in school finance: Conceptual, methodological and empirical dimensions. Baltimore, MD: Johns Hopkins University Press.Google Scholar
- Boilard, S. D. (2016). Connecting state and institutional finance policies for improved higher education outcomes. Indianapolis, IN: Lumina Issue Papers, Lumina Foundation for Education.Google Scholar
- Colbeck, C. L. (2002). State policies to improve undergraduate teaching: Administrator and faculty responses. Journal of Higher Education, 73(1), 3–25.Google Scholar
- Dougherty, K. J., & Hong, E. (2006). Performance accountability as imperfect panacea: The community college experience. In T. Bailey & V. Morest (Eds.), Defending the community college equity agenda (pp. 51–86). Baltimore, MD: Johns Hopkins University Press.Google Scholar
- Dougherty, K. J., & Natow, R. S. (2015). The politics of performance funding for higher education: Origins, discontinuations, and transformations. Baltimore, MD: JHU Press.Google Scholar
- Dougherty, K. J., & Reddy, V. (2013). Performance funding for higher education: What are the mechanisms? What are the impacts? (ASHE Higher Education Report). San Francisco, CA: Jossey-Bass.Google Scholar
- Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.Google Scholar
- Friedel, J. N., Thornton, Z. M., D’Amico, M. M., & Katsinas, S. G. (2013). Performance-based funding: The national landscape. Tuscaloosa, AL: Education Policy Center.Google Scholar
- Gándara, D. (2016). Constructing “winners and losers” [electronic resource]: An analysis of higher education performance funding policy designs in Colorado and Texas (Doctoral dissertation). University of Georgia Electronic Theses and Dissertations database (Call No. Internet LXC16 2016 Gandara, D.).Google Scholar
- Hillman, N. (2016). Why performance-based college funding doesn’t work. New York, NY: The Century Foundation.Google Scholar
- Howlett, M. (2005). What is a policy instruments? Tools, mixes and implementations styles. In F. P. Eliadis, M. M. Hill, & M. Howlett (Eds.), Designing government: From instruments to governance (pp. 31–50). Montréal: McGill-Queen’s University Press.Google Scholar
- Jenkins, D., Ellwein, T., & Boswell, K. (2009). Formative evaluation of the student achievement initiative “learning year” (Report to the Washington State Board of Community and Technical Colleges and College Spark Washington). New York, NY: Community College Research Center.Google Scholar
- Jones, T. (2014). Performance Funding at MSIs: Considerations and possible measures for public minority-serving institutions. Atlanta, GA: Southern Education Foundation. Retrieved from http://www.southerneducation.org/Our-Strategies/Research-and-Publications/Performance-Funding-at-MSIs.aspx.
- Kelchen, R., & Stedrak, L. J. (2016). Does performance-based funding affect colleges’ financial priorities? Journal of Education Finance, 41(3), 302–321. Retrieved from https://muse.jhu.edu/article/613777.
- Lahr, H., Pheatt, L., Dougherty, K. J., Jones, S. M., Natow, R. S., & Reddy, V. (2014). Unintended Impacts of performance funding on Community Colleges and Universities in three states [working paper no. 78]. Community College Research Center.Google Scholar
- Li, A. Y., & Zumeta, W. (2016). Performance funding on the ground: Campus responses and perspectives in two states. Research Dialogue. New York, NY: TIAA.Google Scholar
- Miller, T. (2016). Higher education outcomes-based funding models and academic quality. Lumina issue papers. Indianapolis, IN: Lumina Foundation.Google Scholar
- National Conference of State Legislatures. (2014). Performance-based funding for higher education. Retrieved from http://www.ncsl.org/research/education/performance-funding.aspx.
- Ness, E. C. Deupree, M., & Gándara, D. (2015). Campus responses to Tennessee’s 2010 Complete College Tennessee Act and outcomes-based funding formula. Retrieved from https://www.tn.gov/assets/entities/thec/attachments/FordFoundationPaper.pdf.
- Sanford, T., & Hunter, J. M. (2011). Impact of performance-funding on retention and graduation rates. Education Policy Analysis Archives, 19(33), 33. Retrieved from http://epaa.asu.edu/ojs/article/view/949.
- Snyder, M. (2015). Driving better outcomes: Typology and principles to inform outcomes-based funding models. Washington, D.C.: HCM Strategists.Google Scholar
- Stone, D. A. (2002). Policy paradox: The art of political decision making (p. 448). New York: Norton.Google Scholar
- Tandberg, D. A., & Hillman, N. W. (2014). State higher education performance funding: Data, outcomes, and policy implications. Journal of Education Finance, 39(3), 222–243.Google Scholar
- Tandberg, D. A., Hillman, N., & Barakat, M. (2014). State higher education performance funding for community colleges: Diverse effects and policy implications. Teachers College Record, 116(12), 1–31.Google Scholar
- Tennessee Higher Education Commission. (2015). 2015-20 Outcomes Based Funding Formula. Nashville, TN: Tennessee Higher Education Commission. Retrieved from https://www.tn.gov/thec/article/2015-20-funding-formula.
- Tierney, S. (2014). Performance-based funding and student-centered higher education. The Evolllution. Retrieved from http://evolllution.com/opinions/performance-based-funding-student-centered-higher-education/.
- Umbricht, M. R., Fernandez, F., & Ortagus, J. C. (2015). An examination of the (un) intended consequences of performance funding in higher education. Educational Policy, 0895904815614398.Google Scholar
- Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.Google Scholar