The Equity Implications of Paying for Performance in Higher Education

The performance-based funding (PBF) model ties state funding for higher education to measurable outputs to create incentives for colleges to improve degree completion.  Each state using the PBF model design their unique policy and implementation process.  This study examines whether minority-serving institutions (MSIs) experience changes in state funding levels due to PBF. MSIs traditionally serve students of color, students who attended inequitable K-12 school systems, and students that come from families facing generations of labor market discrimination.  The history of inequity in funding for MSIs has impacted their ability to provide services to students of color.  As a result, state and federal efforts that support MSIs have been put in place to increase equity and access to higher education for students of color.  Research shows that the degree completion rate of MSIs and non-MSI institutions are very similar. 
 
The study uses a quantitative methodology to create a data set of 4-year public institutions from 2005 through 2015, identifying and coding 114 MSIs by the U.S. Department of Education's 2014-2015 College Scorecard designations. Several key findings of the research include the following:

• PBF does not significantly impact the rate of state investment or divestment.
• MSIs lost funding in states that implement aggressive PBF policies.
• PBF could impact MSIs' ability to serve students of color and first-generation college students, forcing them to abandon their mission.
• Because states create their unique PBF policies, some designs could negatively impact MSIs.
• PBF rewards institutions that already admit students that are more likely to graduate.

 
Personal Reaction
 
I was surprised that there is not a specific design for PBF. For the PBF model to work for MSIs, it needs to be implemented in the same way across all states for all institutions.  Otherwise, there is potential for MSIs to be negatively impacted, and the inequity in access to higher education will continue to grow. PBF also incentivizes institutions to admit more students and marginally qualified students to be rewarded.  Increasing enrollment can impact the success of these students because the necessary infrastructure to support them may not be in place.  More students of any kind mean more services.  Institutions need to ensure they have programs in place for these students to be successful and to graduate.  This need for programs is especially true for MSIs.  These students need equal access to higher education and additional support once they are admitted making their transition more manageable and for them to be successful.
 
Hillman, N. & Corral, Daniel. (2018). The equity implications of paying for performance in higher education. American Behavioral Scientist, 61 (14), 1757-1772.

Questions:

• Do any states that currently use the PDF model, also have incentives in place for students of color to attend college?
• Many states have transfer agreements with community colleges that allow students to automatically enroll in specific 4-year institutions if they meet GPA and program requirements.  Do states with these agreements use the PDF model?  How have those agreements impacted the PDF model?