Performance-Based Funding in Higher Education: An Emerging State-Based Approach

Performance-based funding has become a buzzword in American higher education, particularly among foundations and state policy makers. State legislators, anticipating significant reductions in budgets, have reduced budgets for higher education, often across the board, regardless of institution type. Often cited as a means for maximizing the investment into institutions of higher education, this funding mechanism keeps funding at a set level but requires institutions to meet certain benchmarks in order to receive full funding.

What is performance-based funding?

Performance-based funding consists of an established formula by which an institution operates in order to receive funding, largely based on “the output-side of universities and colleges. Funding then is tied to the ‘products’ of the teaching and research activities of higher education institutions.” Outputs typically consist of variables such as credits awarded, retention and graduation rates, employment outcomes of graduates, and research production of institutions. Most prominently, it is the production of credentials that drives recent discussions on performance-based funding, as states, funding agencies, and even the federal government emphasize a ‘completion agenda’ fixated on credentialing more students, and reducing the time-to-degree. (Note: the links provided are only a few examples. There are many others.)

Although performance-based funding is nothing new, it has been emerging as an alternative method for funding institutions, particularly within higher education, compared to a more traditional model of funding. Jongbloed and Vossensteyn describe the traditional approach as “a negotiations-based approach, in which a budget request drawn up by an institution is decided upon after negotiations between the budget authorities and the higher education institution.” Typically at the fore of these negotiations are the inputs of higher education institutions: enrollments, demographics, and academic preparation. While an institution’s performance may be cited during the negotiation process, the funding is decided based on an institution’s budget and the negotiated funding. In recent years, this has presented an issue, as some states have struggled to come up with promised funding. My state, Illinois, is no exception. There are several times the state underpaid its agreed-upon funding (also here and here).

Where is performance-based funding being used and discussed?

According to the National Conference of State Legislatures (NCSL), 10 states have some sort of performance-based funding in place, with five more states in the process of transitioning to that sort of funding mechanism. 18 states have had formal legislative discussions around the use of performance-based funding in higher education, though no formal policies have yet been developed. Many of the 10 states with current performance-based funding measures have done so only recently, having passed legislation or implemented policies in 2011 or later.

One thing that seems prominent among most of these states is that performance-based funding accounts for a small percentage of total funding to institutions. In Tennessee, where performance-based funding can be traced back to the 1970s, having such a small level of funding contingent upon institutions’ production goals had no discernible impact. As a result, the state began moving toward using a much larger proportion of funding as part of the performance-based metrics. Kysie Miao, from the Center for American Progress, also emphasized that “enough of an institution’s funding should be determined by performance to compel actions that would significantly change institutional behavior.” Jobs for the Future (JFF) published a report in April 2012 to highlight the changing trend toward performance-based funding through the case of Ohio’s implementation. In their executive report, they suggest a number of recommendations for those considering changes to their funding structure, including: consideration of both educational progress in addition to college completion, taking into account the institutions that focus on nontraditional students, and ensuring the appropriate level of buy-in from key stakeholders.

It is no surprise that discussions of performance-based funding have come up in my research with the Office of Community College Research and Leadership (OCCRL), as two of the projects I work on revolve around institutional and state policies that encourage production of more credentials and helping students receive degrees in a timely way. In one such project, where OCCRL provides the research component to the Credit When It’s Due (CWID) initiative, funded by several foundations, states have received support to produce reverse transfer degrees, wherein students who have transferred may transfer credits back to a two-year institution in order to fulfill requirements of an associate degree. Several of the states funded by this initiative have indicated already-existing systems of performance-based funding that could be further informed and refined using CWID policies.

There is little doubt that performance-based funding will become one standard means in which state policy bodies encourage growth and policy change of higher education institutions in the future. The overarching suggestions from multiple reports and sources seem to suggest that performance-based funding may be an effective means for encouraging the appropriate priorities and foci in higher education, provided they are executed in a deliberate and meaningful way. What is yet to be seen is how effective such funding mechanisms can be, in large-scale implementation.

By: Collin Ruud

Does increasing school autonomy lead to more equitable educational options?

“Autonomy” has become kind of a buzzword in recent years.  It’s treated with reverence by charter school advocates… almost as a panacea that will fix nearly any problems facing public schools.  The belief is that, given greater autonomy, schools are better able to sense and respond to families’ preferences for schooling, and to the competitive incentives of the emerging education market.

This all sounds quite appealing, and makes sense in a lot of ways.  After all, school leaders are indeed better positioned than are bureaucrats in faraway offices to understand the needs of the local families they serve in areas such as curriculum, hours, or allocating resources to various programs.  Especially in a choice system such as with charter schools, autonomy allows school leaders to compete in shaping their services in ways that will attract and retain students.  And this is particularly important if we want to provide an increased number of high quality options for disadvantaged students trapped in failing public schools.  But, in responding to increasing competition for students, do they use this autonomy to advance their school at the expense of other important societal goals for public education?

Many school choice systems have been associated with inequitable access, and segregative patterns in many cases (also look here, here, here, and here).  Much of the research on these patterns has focused on self-sorting — such as “white flight” — by families as parents make school choices based on social characteristics of students at a given school.  Little attention has been paid to the role of schools in shaping those patterns, even though, with the increasing importance of choice and competition, many schools often have the autonomy to improve equitable access for disadvantaged students.

To study this issue, we looked to the choice system in New Zealand, where policymakers have been encouraging family choice of schools, and school autonomy, since the “Tomorrow’s Schools” reforms over two decades ago.  By essentially eradicating local education authorities, policymakers devolved power to schools as autonomous, “self-managing” entities.  This has led to a system of comprehensive choice for families, and considerable competition between schools for students, particularly in urban areas.  In Auckland, the largest city in the country, upwards of one-third of traffic congestion is due to parents shuffling their kids to the schools of their choice.

But, of course, schools have a finite amount of space.  So, when a school has more applicants than seats, it can implement an “enrolment scheme” to manage the demand, through measures such as randomized “ballots” (lotteries), and/or specifying their own zones in which residents have priority access to the school. 

Previous research has shown that schools in more affluent areas are more likely to be in greater demand, and thus more likely to have enrolment schemes.  The question we asked was whether these self-managing schools were using their autonomy to draw their zones in order to improve or restrict access for disadvantaged students.  To do this, we simply compared the level of affluence in a walkable radius around each school to the level of affluence in the boundaries that the schools themselves had drawn.  Certainly, school zones are not perfects circles, as their creators have to consider traffic patterns, geographic barriers, and the boundaries of competitors.  But, all things being equal, we could expect that deviations in those boundaries from a geometric radius around a school would be more or less equally likely to include or exclude more affluent neighborhoods. 

But that is not what we found.  Instead, there is evidence of rampant gerrymandering to exclude children from more disadvantaged neighborhoods.  In the cases where there is a statistically significant difference in the “deprivation level” of the population in a school’s drawn zone compared to its immediate area, over three-quarters of these self-managing school had drawn a zone that was significantly more affluent than their immediate vicinity.

Moreover, as if to add insult to injury, more affluent schools are not only drawing boundaries to keep poor kids out, but in their promotional materials are bragging about their success in doing this.  A review of school websites shows that more affluent schools are much more likely to include official information about the number of disadvantaged students they serve.  In the US, this would be akin to school leaders boasting about how few of their students are eligible for free-reduced lunch.

While we might find these types of practices to be distasteful for public schools that are funded by taxpayers to serve all students, in some ways, such actions are predictable (if indefensible).  After all, policymakers are creating education markets where schools recognize competitive incentives to shape their enrollments.  It should be no surprise that, given such autonomy and such incentives, they find creative ways to do just that.

The full paper is available at the Forum on the Future of Public Education.

By: Chris Lubienski

Student Debt

Today it is almost impossible to discuss college affordability without also considering the impact of affordability on the level of student indebtedness. This blog post considers recent data from the College Board and the Project on Student Debt about current student debt levels and offers links to relevant articles and policy proposals about student debt.

Figure 1 shows average total indebtedness of students who graduated with a bachelor’s degree from a public four-year institution. In 1999-2000, bachelor’s degree recipients had $11,100 on average in student loan debt. However, not all students take out loans and, in 1999-2000, 54% of bachelor’s graduates had debt. Of those with debt, the average borrower left school with $20,500 in student loans. By 2010-11, there was an increase in the average indebtedness of bachelor’s degree recipients such that the average debt level was $13,600. There also was an increase in the percentage of students who borrowed, which increased to 57%. Among bachelor’s degree recipients who borrowed, average indebtedness was $23,800 in 2010-11 – an increase of $3,300 of average debt since 1999-2000.

Figure 1: Average Total Debt Levels of Bachelor’s Degree Recipients, Public Four-Year Colleges and Universities, in 2011 Dollars, 1999-2000 to 2010-11

Source: The College Board, Trends in Student Aid 2012, Figure 12A

These average debt levels vary by state and Figure 2 shows average debt levels among students who have debt by state. In 2011, average debt levels ranged from a low of $17,227 in Utah to a high of $32,440 in New Hampshire. Twenty-two states had average debt levels over $25,000 and five states had average debt levels under $20,000. There is also variance in the percentage of graduates who have debt as shown in Figure 3. In 2011, Hawaii had the lowest percentage of graduates with debt (38%) and North Dakota had the highest (83%). Over 70% of students borrow in six states, but there is only one state (Hawaii) with fewer than 40% of students borrowing. 

Figure 2: Average Debt of Those with Loans, by State, Class of 2011

Source: Project on Student Debt (2012). NR = Not Reported.

Figure 3: Percentage of Graduates with Debt, by State, Class of 2011

Source: Project on Student Debt (2012). NR = Not Reported.

These trends towards increasing both the number of borrowers and levels of indebtedness have made student debt an issue of public concern that both federal and state policy will need to address. The shift to the direct lending system has made it possible for all students to now opt-in to alternative repayment plans that can help to ensure manageable student loan debt levels for borrowers. However, more policy work needs to be done. For instance, eliminating the need to opt-in to alternative repayment options and making a repayment plan like the income contingent option the default option for all borrowers would help ensure that borrowers are able to manage their debt loads and are better able to avoid defaulting on their loans. In addition, the higher debt levels and larger student loan default rates of students who attend for-profit institutions needs to be addressed as a public policy issue (see for instance #10 on the American Association of State Colleges and Universities’ Top 10 Higher Education State Policy Issues for 2013). Likewise, a new bill [H.R. 6674] introduced by Tom Petri (WI-R) in the U.S. House would enable the Internal Revenue Service to directly collect student loan payments. This idea has the potential to streamline the debt collection process, to lower the costs of loan servicing, and to provide borrowers with a reasonable way of avoiding student loan default. Allowing a tax collection agency to manage student debt repayment has been in operation in other countries for years. For instance, Australia has always used The Australian Taxation Office to collect debts from the Higher Education Contribution Scheme. A similar debt collection process deserves careful consideration in the United States. In addition, student loan debt does not impact all students equally and can constitute a special hardship for certain groups of students, such as those who drop out before completing their degrees. These special populations need particular attention in policy changes regarding student loans. Finally, the issue of student loans in bankruptcy needs to be addressed. Student loans are one of the few types of debt that are not dischargeable in bankruptcy and more consumer protections are needed. Overall, the need for thoughtful policy is pressing because the increased reliance on student loans coupled with the increase in student loan levels is already restricting educational access and limiting opportunity to learn for countless individuals.
By: Jennifer A. Delaney

Whose Opinions Count in Educational Policymaking?

Currently in the U.S., major educational reforms are being incentivized, which has effectively created pressure to innovate.  For instance, Race to the Top, a four-plus billion dollar federal competition sponsored by the U.S. Department of Education, has been designed to advance major, specific policies across the states (Race to the Top Fund, 2012).  Related, a narrative of U.S. educational crisis, whether or not it is overstated or dubious, continues to hold sway in many circles.  A crisis, real or manufactured, presents opportunity for would-be reformers.  As such, some individuals and organizations may be advancing their policy agendas by engaging media through individuals who possess little or no educational expertise. 

With this in mind, we (Malin and Lubienski, in review) became interested in assessing the relationship between expertise and media impact. To do so, we made use of two educational expert lists (Hess, 2012; and Welner, Mathis, and Molnar, 2012).  We treated educational press mentions, blog mentions, and newspaper mentions in combination as a dependent variable representing “media impact.”  Likewise, we treated four criteria— educational attainment, Google Scholar-listed publications, book points, and highest Amazon rankings— in combination as an independent variable measuring “expertise.”  We used linear regression to assess the strength and direction of relationships between these variables.

When these expert lists were combined, we found a non-significant positive relationship between our measure of expertise and our measure of educational impact (see figure below).  When we constrained our analysis to the NEPC list, however, expertise significantly predicted media impact.

We conclude that media impact is at best loosely related to expertise, which is troubling and points to the responsibility of the media to vet experts before citing them or their work.  Certainly, future research should be aimed at exploring and better understanding these relationships.  Perhaps most importantly, we join the growing chorus of individuals who seek to re-establish tighter relations between research, policy, and practice.  Education is immensely important and policy changes should be carefully discussed and weighed prior to implementation.  This is most likely to occur when individuals with educational expertise are positioned to inform the process.

By: Joel Malin

Family background matters, so measure it better.

A few months ago, the Census Bureau released data based on a relatively new, more sophisticated measure of poverty.   The old measure had been in place since the 1960’s and did not account for the realities of today’s living expenses.  The new measure considers housing, medical, and child care costs and does a much better job adjusting for support received through federal assistance programs.   In areas with high costs of living like California and Hawaii, the new measure classified substantially more residents as poor, while the reverse was often true in areas with lower costs of living. 

This new measure is by no means perfect, and it certainly does not do anything directly to help poor families in the U.S.  But this measure may allow policy analysts to better assess the needs of American families and the relative effectiveness of safety net programs.  The change is solely on paper, but it is an important change nonetheless.

The K-12 education sector is long overdue for improvements in how it routinely measures the social background of children.  More often than not, a student’s participation in the free and reduced school lunch program and his or her LEP status are the only available indicators of family background.  Although additional indicators are sometimes collected for research or special programs and assessments, free/reduced lunch and LEP tend to be the only measures that are available for all schools in regular enrollment data.

Free/reduced lunch is a lousy indicator of socioeconomic status for a couple of reasons.  First, it classifies all students into just one of three categories (free lunch, reduced lunch, no lunch support), losing valuable detail in the process.  With this approach, a family of four making $28,000 per year will be indistinguishable from a family of four making $14,000 per year, as both would be classified as free lunch.  Second, free/reduced lunch is based on income primarily, and income by itself is not a very good indicator of social class.  In Class and Schools, Richard Rothstein points out how the use of income via free/reduced lunch as the primary measure of socioeconomic status can lead to the misrepresentation of some schools’ populations.   One school that was nationally recognized as being both high poverty and high performing was actually a public school where many Harvard and MIT graduate students sent their children.  True, graduate students don’t make much money, but few sociologists would regard this group as a high needs population. 

Social scientists have used hundreds if not thousands of different indicators to measure class and socioeconomic status, and the measures will often vary depending on available data.   However, a handful of variables emerge more often than the rest, due to both availability and their quality as predictors of outcomes in the social sector.  If I had to pick a single variable to add alongside family income, parental educational attainment would be a good choice.  A common way of representing SES in richer datasets is to combine information on income, parent education, and occupational status or occupational prestige (e.g.).  While converting occupational status into a number can be tricky, it’s a bit more straightforward for parental education levels. In many cases, measures of parent education are even reduced to maternal educational attainment due to the prevalence of single-parent households.  Thinking back to the Boston public school that enrolls the children of Harvard and MIT Ph.D. students, it is easy to see how a combination of income and parental education levels would give you a much more accurate sense of the average socioeconomic status of some families. 

I am not a lawyer, and I don’t know what legal justification the feds or states would need to collect additional personal information from parents; but, from a researcher’s perspective, the case is easy to make.  The link between social background and academic achievement is well established, but the debate over the extent to which these links should influence educational policy continues.  Achievement gaps between racial and socioeconomic groups remain large, and school segregation along these lines may be getting worse.  Meanwhile, wage, wealth, and income inequality in the U.S. continues to worsen, as it has been doing since the mid 1970’s.  In this context, there is substantial need for better measures of students’ social background, particularly given the shortcomings of current measures. 

Moreover, the weaknesses of free/reduced lunch as a socioeconomic indicator are not just an inconvenience for researchers these days.  For better or worse, many states and districts are now using statistical models to influence the retention, tenure, and promotion decisions of teachers.  Better background variables on students may help improve these models.  With all of these factors in mind, one could make the case that looking beyond free/reduced lunch is not only in the best interest of federal and state departments of education but also that it is their responsibility to do so. 

By: Peter Weitzel 

Talking about teacher evaluation: An introduction

What comes to mind when you hear the phrase ‘teacher evaluation’? Value-added modeling? The Charlotte Danielson Framework for Teaching? Chicago Public School teachers on strike?  Pay-for-performance? Without a doubt, teacher evaluation is a contentious issue in public education today. The Huffington Post argued that teacher evaluation was a root cause of the Chicago Public School teachers’ strike. Esteemed scholars, including, Diane Ravitch and Bruce Baker vocalize strong opinions about the ways teacher evaluation should and should not be conducted and used. President Obama touted the political rhetoric of teacher evaluation in his 2012 State of the Union Address claiming that schools need flexibility to implement evaluation systems that “reward the best [teachers]” and “replace teachers who just aren’t helping kids learn.” Let’s face it – the issue of teacher evaluation is not going anywhere anytime soon, and at the heart of it all are three fundamental questions:

1) Why do we evaluate teachers?

2) How do we evaluate teachers?

3) What purposes do these evaluations serve?

Let’s look at an example. Newark, NJ has a 62% graduation rate and over 90% of its graduates requiring remedial English and math upon entering college.  Yet, under the current teacher evaluation system, 95% of its teachers are rated as “effective.” Something is not right here. One problem might be the way the teachers are being evaluated. Another problem might be the ways in which the other factors (like school conditions, home life, and community) that affect a child’s behavior and performance at school are taken into account in teacher evaluation. Yet, another issue might be that Newark’s current evaluation system does not inform teacher professional development. Simply put, teacher evaluation should help teachers improve their teaching; yet, many times the methods by which we evaluate teachers do not provide information that teachers can use to improve practice. 

Drawing on recent attention in politics, research, and the media and examining some high profile examples including Newark, New York City, and Chicago, I plan to deliver a series of blogs over the next few months that discuss the quarrelsome and interdependent issues underlying the necessity of identifying “effective teachers.”  First, I will examine the question of why evaluate teachers, drawing on the political rhetoric around teaching, public rights to accountability, and the assumptions of teacher efficacy. Following, the merits and controversy of teacher evaluation methods will be examined including value-added modeling, observations, checklists, peer evaluation, and others. At the conclusion of the series, the uses of teacher evaluation will be discussed, touching on issues of merit pay, tenure, and teacher professional development.  

Along the way, I welcome your questions, comments, critiques, and stories of your own. What is your take on the fundamental issues underlying teacher evaluation? How can teacher evaluation serve the needs of both teachers and students? What matters and what doesn’t? Please join this conversation with me! 

By: Nora Gannon-Slater