More States Attaching Strings to College Aid

A raft of incentive programs in states across the country have failed to produce hoped-for results.

Focus of states: College students.  
National Journal
Dec. 5, 2013, 4 p.m.

Aware that a grow­ing num­ber of jobs re­quire a col­lege de­gree, more states are ty­ing their fund­ing levels for state col­leges and uni­versit­ies to wheth­er stu­dents com­plete courses and gradu­ate. Six­teen states base at least some of their high­er-edu­ca­tion al­loc­a­tions on per­form­ance, and nine oth­ers are mov­ing in that dir­ec­tion, ac­cord­ing to Com­plete Col­lege Amer­ica, a non­profit group.

This fall, Ohio began link­ing 50 per­cent of its fund­ing of four-year col­leges to the num­ber of stu­dents they gradu­ate. Next year, 100 per­cent of state fund­ing for two-year col­leges will hinge on a set of per­form­ance meas­ures, in­clud­ing course com­ple­tion.

On the sur­face, the tough-love re­quire­ments make per­fect sense. When stu­dents flounder, they waste both their own time and fin­an­cial-aid dol­lars. When they drop out, they lose earn­ing po­ten­tial, and their states lose po­ten­tial eco­nom­ic growth. The pub­lic money in­ves­ted in their edu­ca­tion goes down the drain.

The prob­lem is, in­de­pend­ent stud­ies that try to isol­ate the ef­fects of per­form­ance fund­ing on out­comes, such as de­gree com­ple­tion, have found little evid­ence that the pro­grams ac­tu­ally work. A re­cent stat­ist­ic­al ana­lys­is by re­search­ers at Flor­ida State Uni­versity and the Uni­versity of Wis­con­sin (Madis­on) ex­amined data from 1990 to 2010, and it con­cluded that the ex­ist­ence of a per­form­ance fund­ing pro­gram had, on av­er­age, no sig­ni­fic­ant ef­fect on stu­dents’ de­gree com­ple­tion. In fact, after five years, states with per­form­ance fund­ing ac­tu­ally ex­per­i­enced a de­crease in as­so­ci­ate-de­gree com­ple­tion.

Two-year col­leges would seem to be prime tar­gets for per­form­ance for­mu­las, be­cause they of­ten at­tract stu­dents at risk of drop­ping out — and, in­deed, many who en­roll fail to com­plete their de­gree. Four-year state uni­versit­ies serve high­er num­bers of af­flu­ent and white stu­dents who, stat­ist­ics show, are more likely to gradu­ate than the low-in­come, first-gen­er­a­tion, and minor­ity stu­dents who tend to be dis­pro­por­tion­ately rep­res­en­ted at com­munity col­leges.

But many com­munity col­leges aren’t able to in­vest in the tools, such as ad­visers and tu­tor­ing pro­grams, that can keep stu­dents on track to gradu­ate. “They can’t real­loc­ate re­sources in the way that a flush re­search uni­versity can,” says Dav­id Tand­berg, an as­sist­ant pro­fess­or at Flor­ida State Uni­versity and a coau­thor of the ana­lys­is. Pub­lic re­search uni­versit­ies spend about three times as much per stu­dent as com­munity col­leges do and can draw on mul­tiple rev­en­ue streams, from alumni dona­tions to re­search grants.

Pro­ponents of per­form­ance-based fund­ing say states are get­ting sav­vi­er about us­ing fin­an­cial in­cent­ives to change the way col­leges serve stu­dents. The policies that Tand­berg and his col­leagues re­viewed re­flec­ted the ef­forts of 25 states, many of which ad­op­ted and then dropped — and in some cases later re­vived — per­form­ance-fund­ing policies dur­ing the peri­od. States most of­ten offered bo­nuses to in­sti­tu­tions on top of reg­u­lar, en­roll­ment-based ap­pro­pri­ations.

Ohio star­ted ty­ing a por­tion of its base ap­pro­pri­ations to per­form­ance fund­ing in the late 1990s. From 2002 to 2009, re­wards for spe­cif­ic suc­cesses — such as award­ing more de­grees, at­tract­ing re­search dol­lars, and provid­ing job train­ing — ac­coun­ted for 8 to 10 per­cent of high­er-edu­ca­tion fund­ing in the state. Ohio’s new pro­gram links more money to per­form­ance and of­fers a nu­anced set of met­rics. “If you’ve de­clared that you’re no longer fund­ing en­roll­ments and are only fund­ing course and de­gree com­ple­tions, that is much more likely to change cam­pus activ­ity,” says Richard Pet­rick, a former vice chan­cel­lor of the Ohio Board of Re­gents.

Yet the Ohio As­so­ci­ation of Com­munity Col­leges wor­ries that per­form­ance in­cent­ives will send some col­leges in­to a death spir­al in which poor ini­tial per­form­ance means less fund­ing, and less fund­ing fur­ther di­min­ishes a col­lege’s abil­ity to serve stu­dents. Ac­cord­ing to the as­so­ci­ation’s cur­rent mod­els, a small col­lege that has worked with a na­tion­al non­profit on per­form­ance-based mech­an­isms for years will likely see a 25 per­cent in­crease in fund­ing next year. A large urb­an cam­pus will likely see a 12.5 per­cent cut.

The as­so­ci­ation helped design the met­rics, which are still be­ing tweaked, for two-year schools. It will likely re­com­mend that the state set aside ad­di­tion­al money to help schools im­prove. The cur­rent struc­ture has col­leges fight­ing for a share of a fixed pot of money. “By nature, if you have a fi­nite pot, there will al­ways be win­ners and losers,” says Kar­en Raf­in­ski, in­ter­im pres­id­ent of the as­so­ci­ation.

Crit­ics say it’s not enough to pre­sume that put­ting more money at stake will force col­leges to do a bet­ter job edu­cat­ing their stu­dents. “That as­sumes that the fun­da­ment­al obstacle to re­sponse is simply kind of an in­sti­tu­tion­al in­at­ten­tion or lack of mo­tiv­a­tion. But a lot more could be in­volved,” says Kev­in Dougherty, an as­so­ci­ate pro­fess­or of high­er edu­ca­tion and edu­ca­tion policy at Columbia Uni­versity’s Teach­ers Col­lege.

For am­bi­tious per­form­ance-fund­ing pro­grams to work, states need to make sure col­leges have the ca­pa­city to re­spond. In­sti­tu­tions that don’t know how, or can’t af­ford, to le­git­im­ately im­prove stu­dent out­comes could eas­ily turn to quick fixes: lower­ing de­gree re­quire­ments, be­com­ing more se­lect­ive in their ad­mis­sions, or pres­sur­ing fac­ulty to give every­one a passing grade. The pur­suit of more out­come-based money might in­deed change cam­pus activ­ity, but it might also drive big­ger un­in­ten­ded con­sequences.

Des­pite Ohio’s long-stand­ing com­mit­ment to per­form­ance fund­ing, today just 53 per­cent of stu­dents in state-fun­ded four-year col­leges and uni­versit­ies earn bach­el­or’s de­grees in six years, be­low the 59 per­cent na­tion­al av­er­age. For state-fun­ded com­munity col­leges, the rate for two-year de­gree com­ple­tion for first-time, full-time stu­dents — ad­mit­tedly a minor­ity of the stu­dent pop­u­la­tion — is 13 per­cent, also be­low the na­tion­al av­er­age. In this case, the re­cord of gov­ern­ments try­ing to af­fect be­ha­vi­or sug­gests that money, re­gard­less of wheth­er it’s spent or with­held, is rarely the only an­swer.

UP­DATE: Richard Pet­rick notes that Ohio’s old per­form­ance fund­ing for­mula didn’t ex­pli­citly re­ward col­leges for in­creas­ing the num­ber of bac­ca­laur­eate or as­so­ci­ates de­grees. Ac­cord­ing to Ohio Board of Re­gents data, Ohio saw gains in what it did in­centiv­ize: de­creas­ing time to de­gree for uni­versity stu­dents, in­creas­ing de­gree com­ple­tion for at-risk uni­versity stu­dents, in­creas­ing third-party-fun­ded re­search activ­ity, in­creas­ing non­cred­it re­lated job train­ing, and in­creas­ing en­roll­ment at com­munity col­leges. Tand­berg’s team didn’t ac­count for the dif­fer­ences between state for­mu­las; it simply looked for a re­la­tion­ship between the ex­ist­ence of a per­form­ance-fund­ing pro­gram and de­gree com­ple­tion. Re­gard­less of a state’s stated goals, Tand­berg says, it’s hard to be­lieve that poli­cy­makers wouldn’t want more stu­dents to gradu­ate. 

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