More States Start Funding Colleges Based on Outcomes

Under a new state law, Rhode Island’s public colleges won’t get additional state funding simply for enrolling more students. They will have to prove that they’re making progress on goals such as increasing graduation rates.

Over 30 states now partially—or in Tennessee’s case, almost completely—fund higher education based on metrics such as graduation rates, course completions and the share of low-income students enrolled.  States have applied these formulas only to two-year colleges, only to four-year colleges, or to all their public institutions.

It’s not yet clear whether such funding incentives will lead to progress on the goals lawmakers have identified.  Some critics worry that outcomes-based funding models will just pressure colleges to become more selective in admissions, for example.

Earlier this year the Century Foundation, a progressive think tank, released a report that summarized the mixed research and concluded that higher education institutions are simply too complex to be reformed by a funding tweak.

Yet the idea of funding college based on outcomes has an irresistible, bipartisan appeal, particularly as lawmakers try to rein in the cost of college and ensure that students’ tuition dollars pay off.

Alabama is among the states currently considering adopting an outcomes-based funding formula. Other states that have already adopted formulas are deepening their commitment to this kind of funding. Wisconsin’s Republican Gov. Scott Walker plans to propose allocating any additional university funding according to performance criteria in his next budget (Wisconsin already partly funds its two-year colleges based on performance).