First appearing in 1979, performance funding for higher education has been adopted by nearly four-fifths of all US states at one or another time. This has caused a revolution in how states – the main funding source for public higher education in the United States – finance their universities and community colleges.
Rather than relying on enrolment-based formulas or past spending with inflation correction, performance funding takes state funding in a very new direction. State appropriations for public higher education are now tied to a greater or lesser degree to performance metrics such as student retention, student progress in accruing credits, and student graduation.
For example, in leading states such as Ohio and Tennessee, 85 to 90 per cent of state appropriations for public higher education are tied to performance metrics, accounting for about a quarter of all institutional revenue.
This presentation addresses three conundrums about performance funding. Why has it been so widely accepted, even by higher educational institutions? Why despite this wide acceptance, do states frequently discontinue performance funding, if only for a while? Given this history of frequent discontinuations, what is the likely future of performance funding – continued growth, stagnation or decline, or transformation? To answer these questions, this presentation draws on extensive qualitative and quantitative research on US performance funding.