Mitigating Unintended Impacts? The Effects of Premiums for Underserved Populations in Performance-Funding Policies for Higher Education

Article

Abstract

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.

Keywords

Higher education Finance Policy Performance funding Outcomes-based funding College access 

References

  1. Adams, S. J., Heywood, J., & Rothstein, R. (2009). Teachers, performance pay, and accountability. Washington, DC: Economic Policy Institute.Google Scholar
  2. Banta, T., Rudolph, L., Dyke, J. Van, & Fisher, H. (1996). Performance funding comes of age in Tennessee. The Journal of Higher Education, 67(1), 23–45. doi: 10.2307/294390.CrossRefGoogle Scholar
  3. 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
  4. 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
  5. Bevan, G., & Hood, C. (2006). What’s measured is what matters: Targets and gaming in the English public health care system. Public Administration, 84(3), 517–538.CrossRefGoogle Scholar
  6. 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
  7. Colbeck, C. L. (2002). State policies to improve undergraduate teaching: Administrator and faculty responses. Journal of Higher Education, 73(1), 3–25.Google Scholar
  8. 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
  9. Dougherty, K. J., Jones, S. M., Lahr, H., Natow, R. S., Pheatt, L., & Reddy, V. (2014). Performance funding for higher education: Forms, origins, impacts, and futures. Annals of the American Academy of Political and Social Science, 655, 163–184.CrossRefGoogle Scholar
  10. 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
  11. 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
  12. Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.Google Scholar
  13. 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
  14. 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
  15. Gerrish, E. (2016). The impact of performance management on performance in public organizations: A Meta-Analysis. Public Administration Review, 76(1), 48–66.CrossRefGoogle Scholar
  16. Heckman, J. J., Heinrich, C., & Smith, J. (2002). The performance of performance standards. The Journal of Human Resources, 37(4), 778–811.CrossRefGoogle Scholar
  17. Hillman, N. (2016). Why performance-based college funding doesn’t work. New York, NY: The Century Foundation.Google Scholar
  18. Hillman, N. W., Tandberg, D. A., & Fryar, A. H. (2015). Evaluating the impacts of “new” performance funding in higher education. Educational Evaluation and Policy Analysis, 37(4), 501–519.CrossRefGoogle Scholar
  19. Hillman, N., Tandberg, D., & Gross, J. (2014). Performance funding in higher education: Do financial incentives impact college completions? The Journal of Higher Education, 85(6), 826–857. doi: 10.1353/jhe.2014.0031.CrossRefGoogle Scholar
  20. Hood, C. (1995). Contemporary public management: A new global paradigm? Public Policy and Administration, 10(2), 104–117.CrossRefGoogle Scholar
  21. 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
  22. Jacob, B. A. (2005). Accountability, incentives and behavior: The impact of high-stakes testing in the Chicago Public Schools. Journal of Public Economics, 89(5–6), 761–796.CrossRefGoogle Scholar
  23. 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
  24. 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.
  25. 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.
  26. Kivistö, J. (2008). An assessment of agency theory as a framework for the government–university relationship. Journal of Higher Education Policy and Management, 30(4), 339–350. doi: 10.1080/13600800802383018.CrossRefGoogle Scholar
  27. Kramer, D. A., Holcomb, M. R., & Kelchen, R. (2017). The costs and consequences of excess credit hours policies. Educational Evaluation and Policy Analysis. doi: 10.3102/0162373717709968.Google Scholar
  28. 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
  29. 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
  30. Liu, V. Y. T., Belfield, C. R., & Trimble, M. J. (2015). The medium-term labor market returns to community college awards: Evidence from North Carolina. Economics of Education Review, 44(C), 42–55.CrossRefGoogle Scholar
  31. McDonnell, L. M., & Elmore, R. F. (1987). Getting the job done: Alternative policy instruments. Educational Evaluation and Policy Analysis, 9(2), 133–152. doi: 10.3102/01623737009002133.CrossRefGoogle Scholar
  32. McKeown-Moak, M. P. (1999). Higher education funding formulas. New Directions for Higher Education, 107, 99–107.CrossRefGoogle Scholar
  33. McKinney, L., & Hagedorn, L. S. (2017). Performance-based funding for community colleges: Are colleges disadvantaged by serving the most disadvantaged students? The Journal of Higher Education, 88(2), 159–182.CrossRefGoogle Scholar
  34. Miller, G. J. (2005). The political evolution of principal-agent models. Annual Review of Political Science, 8, 203–225.CrossRefGoogle Scholar
  35. Miller, T. (2016). Higher education outcomes-based funding models and academic quality. Lumina issue papers. Indianapolis, IN: Lumina Foundation.Google Scholar
  36. Moe, T. M. (1984). The new economics of organization. American Journal of Political Science, 28(4), 739–777.CrossRefGoogle Scholar
  37. National Conference of State Legislatures. (2014). Performance-based funding for higher education. Retrieved from http://www.ncsl.org/research/education/performance-funding.aspx.
  38. 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.
  39. Rutherford, A., & Rabovsky, T. (2014). Evaluating impacts of performance funding policies on student outcomes in higher education. The ANNALS of the American Academy of Political and Social Science, 655(1), 185–208. doi: 10.1177/0002716214541048.CrossRefGoogle Scholar
  40. 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.
  41. Schneider, A., & Ingram, H. (1990). Behavioral assumptions of policy tools. The Journal of Politics, 52(2), 510. doi: 10.2307/2131904.CrossRefGoogle Scholar
  42. Shen, Y. (2003). Selection incentives in a performance-based contracting system. Health Services Research, 38(2), 535–552.CrossRefGoogle Scholar
  43. Shin, J. C. (2010). Impacts of performance-based accountability on institutional performance in the U.S. Higher Education, 60(1), 47–68.CrossRefGoogle Scholar
  44. Shin, J. C., & Milton, S. (2004). The effects of performance budgeting and funding programs on graduation rate in public four-year colleges and universities. Education Policy Analysis Archives, 12, 1–26.CrossRefGoogle Scholar
  45. Snyder, M. (2015). Driving better outcomes: Typology and principles to inform outcomes-based funding models. Washington, D.C.: HCM Strategists.Google Scholar
  46. Stone, D. A. (2002). Policy paradox: The art of political decision making (p. 448). New York: Norton.Google Scholar
  47. Tandberg, D. A. (2010). Politics, interest groups and state funding of public higher education. Research in Higher Education, 51(5), 416–450.CrossRefGoogle Scholar
  48. 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
  49. 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
  50. 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.
  51. Thomas, S. L., & Zhang, L. (2005). Post-baccalaureate wage growth within four years of graduation: The effects of college quality and college major. Research in Higher Education, 46(4), 437–459.CrossRefGoogle Scholar
  52. 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/.
  53. 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
  54. Van Slyke, D. M. (2007). Agents or stewards: Using theory to understand the government-nonprofit social service contracting relationship. Journal of Public Administration Research and Theory, 17(2), 157–187.CrossRefGoogle Scholar
  55. Volkwein, J. F., & Tandberg, D. A. (2008). Measuring up: Examining the connections among state structural characteristics, regulatory practices, and performance. Research in Higher Education, 49(2), 180–197.CrossRefGoogle Scholar
  56. Werner, R. M., Kolstad, J. T., Stuart, E. A., & Polsky, D. (2011). The effect of pay-for-performance in hospitals: Lessons for quality improvement. Health Affairs, 30(4), 690–698.CrossRefGoogle Scholar
  57. Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.Google Scholar
  58. Zhang, L. (2005). Advance to graduate education: The effect of college quality and undergraduate majors. The Review of Higher Education, 28(3), 313–338.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Education Policy and LeadershipSouthern Methodist UniversityDallasUSA
  2. 2.School of Public and Environmental AffairsIndiana UniversityBloomingtonUSA

Personalised recommendations