Performance-based funding linked to higher SAT scores in bottom quarter

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Dive Brief:

• The more a public college’s revenue is tied to performance, the more their students’ SAT scores in the bottom quarter increase, according to peer-reviewed research published recently in Educational Evaluation and Policy Analysis, a SAGE academic journal. 
• 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. No significant relationship exists between the funding model and the 75th percentile of SAT scores, according to the study. Acceptance rates 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 around 70% — also saw enrollment decreases among students who are racial minorities as more of their funding depended on performance.

Dive Insight:

Under a performance-based funding model, states allocate their higher education budgets based on colleges’ outcomes instead of solely focusing on enrollment. Weighed metrics can include credit attainment and degree completion.

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

Researchers studied 581 public four-year colleges, including baccalaureate, master’s and doctoral-granting institutions. Tribal colleges, military colleges and special focus institutions were excluded from the data set.

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

The findings indicated that performance-based funding is limited in its abilities to address inequities at public colleges. And attempts by states to adjust for systemic imbalances in outcomes across marginalized groups haven’t led to enrollment gains in the targeted populations.

The funding model has also come under fire for perpetuating systemic inequity at public colleges.

Six students at Florida A&M University are suing the university and the state, which put performance-based funding in place in 2014. Four years later, Florida A&M was one of three state institutions that didn’t receive any funding from the performance system. The lawsuit, in part, alleges the funding model “unfairly compares schools that serve student populations” from different socioeconomic backgrounds.