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.
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One author tracked news articles relating to performance funding between November of 2013 and September of 2016 using Google Alerts. The Alerts sent an e-mail notice when an article that mentioned performance- or outcomes-based funding for higher education, postsecondary education, colleges, or universities appeared online.
Our starting point is 1993 since that was the first year in which we identified a premium (for minority students in Tennessee).
One possible limitation of this study is whether there is any anticipatory effect that is a result of the policy being considered but not yet passed. We chose to focus on policy operationalization because: (1) there is sometimes a significant lag between policy adoption and operationalization, (2) policy adoption (at the legislative level) is separate from the adoption of a model design, and (3) recent research has found that at least some campus actors speculate that a performance-funding policy will not become operationalized after adoption. For the aforementioned reasons, we cannot assume that campus officials will respond to a policy’s adoption (at the legislative level).
More specifically, this variable as reported in IPEDS refers to all students who identify as a person of Mexican, Puerto Rican, Cuban, Central or South American or other Spanish culture or origin, regardless of race.
The College Scorecard data also include information on the percent of undergraduates who received a Pell Grant each year. However, this variable is only available from 2008 to 2014, which would leave out over half of the time period we are interested in reviewing.
Though not shown here, we also ran parallel models for White students and Asian students. While there is a significant negative effect for White students in the case of low-income premiums as well as any type of premium (driven by the low-income finding), there is also a small positive effect for the duration variable in the low-income premium model. There also appears to be a small negative effect on White students over time where minority student premiums are in place, as compared to institutions with performance funding and no premium. Immediate effects are largely insignificant for Asian students, though some p-values are strong. Like White students, Asian student enrollment also gains over time in the case of low-income student premiums. As such, it appears low-income premiums are positively related to the enrollment of all student groups via the duration variable; only the coefficient for Black enrollment does not meet standard levels of significance at p = 0.13.
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Gándara, D., Rutherford, A. Mitigating Unintended Impacts? The Effects of Premiums for Underserved Populations in Performance-Funding Policies for Higher Education. Res High Educ 59, 681–703 (2018). https://doi.org/10.1007/s11162-017-9483-x
- Higher education
- Performance funding
- Outcomes-based funding
- College access