Abstract:

Universities in the United States are funded through state, federal, tuition and gifts or grants. Since 2002, the share from each source has shifted considerably, with state and local sources decreasing from 40% in 2002 to 26% in 2013 while over the same period, tuition sources increased from 26% in 2002 to 40% in 2013. The share from federal sources and gifts or grants has remained almost constant. Concurrently, states have adopted outcomes-based funding (OBF) models. There are numerous implications of these simultaneous shifts, most notably for low income or minority students. In this session I will explore some implications for the US higher education sector in general, then give specific examples from my own institution in Ohio, which was one of the earliest adopters of outcomes-based funding.

State funding models have traditionally been focused on inputs, such as how many students were enrolled on a particular date, plant maintenance etc. Then in 2007, starting in Tennessee and expanding quickly, outcomes-based funding (OBF) models have become commonplace, with over 30 states now using some form of OBF model. Private advocacy groups supported by foundations such as the Bill and Melinda Gates Foundation and the Lumina Foundation provide services to states considering the introduction of outcomes-based funding. Non-profit organizations like Complete College America provide technical assistance to states trying to improve outcome measures and thus increase their state funding.

Most OBF models include measures such as graduation rates, course completion rates and retention rates. Tennessee bases as much 85% of the state’s allocations on these measures.

Implications and reactions:
Some research (Rutherford & Rabovsky, 2016) has shown that OBF models do not lead to better student outcomes, and may in fact lead to worse outcomes, although it is too early to make generalizable conclusions due to the limited number of studies completed.

Unintended impacts include the restriction of enrollment in both 2- and 4-year colleges of less prepared students and the lowering of academic standards across the board in order to increase course completion rates.

In Ohio, universities that can improve their performance relative to others can increase their SSI, but one university increasing SSI allocation means another will suffer decreases. Courses with low enrollment, low graduation rates or low job placement rates being placed on notice to be eliminated. Courses not required for graduation or considered road blocks are being dropped, diminishing choice for all students.

Student success centers staffed with professional advisors are popping up, and include intrusive advising, extensive tutoring and monitoring to ensure retention from first to second year.

Bigger universities with deeper pockets are paying consulting firms to analyze enrollment data to provide insight into factors that impact outcome measures.

While the stated goal of OBF is to encourage universities to act to improve student outcomes, actions taken including those listed above and many others, have had variable impacts. As faculty senate president for three years while many of these actions were being implemented, I gained a unique perspective. Subsequently, as an American Council on Education Fellow, I was able to visit many campuses across the US and compare experiences, giving me particular insight into this phenomenon, which I will share in this session.

Keywords:

Higher education funding, equity, outcomes-based funding, performance funding.