December 6, 2023

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Diving overview:

  • The more a public college’s revenue is tied to performance, the more the SAT scores of its students in the bottom quartile increase, according to peer-reviewed research recently published in Educational Evaluation and Policy Analysis, an academic journal of SAGE.
  • The researchers linked each percentage point increase in performance-based funding across all types of public colleges to a 0.9-point increase in the 25th percentile of SAT scores. According to the study, there is no significant relationship between the funding model and the 75th percentile of SAT scores. The acceptance rate also remained unchanged.
  • But moderately selective colleges — defined as those with an average 75th percentile SAT score of about 1,200 and an acceptance rate of around 70% — also saw a decline in the number of students who are racial minorities because more of their funding depended on performance.

Diving statistics:

Under the performance-based funding model, states allocate their higher education budgets based on college performance instead of focusing solely on enrollment. Weighted metrics may include credit earned and degree completion.

From fiscal year 1997 to 2019, 33 states used a performance-based funding model for their public four-year colleges, according to new research. Implementation varies between states and in some cases between colleges within the same state. For example, in Pennsylvania, institutions within the Pennsylvania State System of Higher Education are subject to performance-based funding, while other state colleges are not.

The researchers studied 581 public four-year colleges, including bachelor’s, master’s, and doctoral institutions. Tribal colleges, military colleges, and institutions with special focus were excluded from the data set.

Performance-based funding did not significantly affect the enrollment of Pell Grant recipients, adult students, or first-generation college students, according to the research. And only moderately selective colleges saw declines in racial minority enrollment.

The findings showed that performance-based funding has limited ability to address inequities in public universities. And states’ attempts to adjust for systemic disparities in outcomes across marginalized groups have not led to enrollment increases in target populations.

The funding model has also come under fire for perpetuating systemic inequities in public colleges.

There are six students at Florida A&M University sue the university and the state, which instituted performance funding in 2014. Four years later, Florida A&M was one of three institutions in the state to receive no funding from the performance system. The lawsuit alleges, in part, that the funding model “unfairly compares schools that serve students” from different socioeconomic backgrounds.

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